<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) July 31, 1997
-------------------------------
HALIS, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 0-16288 58-1366235
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
9040 Roswell Road, Suite 470, Atlanta, Georgia 30350
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 641-5555
-----------------------------
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to an Agreement and Plan of Merger and Reorganization, dated
as of July 31, 1997 (the "Merger Agreement"), by and among HALIS, Inc. (the
"Company"), PhySource Ltd., an Illinois corporation ("PhySource"), PhySource
Acquisition Co., a newly-formed Georgia corporation and a wholly-owned
subsidiary of the Company (the "Subsidiary"), and the shareholders of
PhySource, on July 31, 1997 (the "Closing Date") the merger of PhySource with
and into the Subsidiary (the "Merger") was consummated. Immediately after
consummation of the Merger, the corporate name of the Subsidiary was changed to
"PhySource Ltd." PhySource is a provider of management services and related
services to physician practices. It is anticipated that the Subsidiary will
continue Physicians' business of providing information technology and services
to the healthcare industry.
Upon consummation of the Merger, the shareholders of PhySource were
issued an aggregate of 1,502,963 shares of the Company's Common Stock in
exchange for their shares of PhySource common stock. In connection with the
Merger, the Company has also agreed to issue to Mitchell C. Andrews, Mark C.
Kendall, Priscilla Lopez and Joseph Maschek, Jr. (shareholders of PhySource)
an aggregate of 61,175 shares of Common Stock and options to purchase an
aggregate of 37,742 shares of Common Stock in full and complete satisfaction of
all deferred compensation and expense advances obligations of PhySource to such
persons as of the Closing Date as well as in consideration for the advancement
of certain expenses by such persons. The Company further agreed to issue to
(i) Priscilla Lopez and Joseph Maschek, Jr. an aggregate of 27,328 shares of
Common Stock in full and complete satisfaction of each of such person's
employment agreements with PhySource and (ii) Mitchell C. Andrews, Gerry
Forsythe, Walter R. Fawcett (a shareholder of PhySource) and certain affiliated
entities of Walter R. Fawcett an aggregate of 1,041,145 shares of Common Stock
in full and complete satisfaction of all outstanding debt of PhySource to each
such person. In connection with the Merger, the Subsidiary and the Company
entered into an employment agreement with Theodore M. Homa, M.D. providing for
the employment of Dr. Homa as the Medical Director of the Subsidiary for a
term of two years at an annual base salary of $144,000 for the initial 12
months of the Employment Agreement plus incentive compensation determined in
accordance with the provisions of the Employment Agreement.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired:
At the present time, it is impractical to provide the required
financial statements for Physicians as required by this Item 7 of Form 8-K.
The Company will file such required financial statements under cover of Form
8-K/A as soon as practicable, but not later than October 14, 1997 (60 days
after this Report is required to be filed).
(b) Pro Forma Financial Information:
At the present time, it is impractical to provide the pro forma
financial information relative to the Physicians acquisition as required by
Item 310 of Regulation S-B and this Item 7 of Form 8-K. The Company will file
such pro forma financial information under cover of Form 8-K/A as soon as
practicable, but not later than October 14, 1997 (60 days after this Report is
required to be filed).
(c) Exhibits:
2.1 Agreement and Plan of Merger and Reorganization, dated as of
July 31, 1997 among HALIS, Inc., PhySource Acquisition Co.,
PhySource Ltd. and the Shareholders of PhySource Ltd.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
HALIS, INC.
By: /s/ Larry Fisher
--------------------------------------
Larry Fisher, Executive Vice President,
Chief Administrative Officer and
Secretary
Dated: August 11, 1997
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EXHIBIT INDEX
Exhibit Sequential
Number Description of Exhibit Page No.
- ------- ---------------------- ----------
2.1 Agreement and Plan of Merger and Reorganization, dated as
of July 31, 1997 among HALIS, Inc., PhySource Acquisition
Co., PhySource Ltd. and the Shareholders of PhySource Ltd.
<PAGE> 1
EXHIBIT NUMBER 2.1
<PAGE> 2
================================================================================
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
HALIS, INC., a Georgia corporation,
PHYSOURCE ACQUISITION CO., a Georgia corporation,
PHYSOURCE LTD., an Illinois corporation,
and
THE SHAREHOLDERS OF PHYSOURCE LTD.
_________________________
Dated as of July 31, 1997
_________________________
================================================================================
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TABLE OF CONTENTS
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SECTION 1. DESCRIPTION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Merger of PhySource into the Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Closing; Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation and Bylaws; Directors and Officers . . . . . . . . . . . . . . . . . . . . . 2
1.5 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Closing of PhySource Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.10 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF PHYSOURCE, THE SHAREHOLDERS OTHER THAN HOMA, AND HOMA . . . . . . . 5
2.1 Representations and Warranties of PhySource and the Shareholders Other Than Homa . . . . . . . . . . . 5
2.1.1. Due Organization; Subsidiaries; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1.2 Articles of Incorporation and Bylaws; Records . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1.3 Capitalization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1.5 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1.6 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1.7 Bank Accounts; Receivables; Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1.8 Equipment; Leasehold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.9 Proprietary Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.11 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.12 Compliance with Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.13 Governmental Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.14 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.15 Employee and Labor Matters; Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.1.17 Sale of Products; Performance of Services . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.1.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.1.19 Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.1.20 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.1.21 Authority; Binding Nature of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.1.22 Non-Contravention; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.1.23 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2 Representations and Warranties of Homa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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2.2.1. Due Organization; Subsidiaries; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2.2 Articles of Incorporation and Bylaws; Records . . . . . . . . . . . . . . . . . . . . . . . 22
2.2.3 Capitalization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.2.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2.5 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2.6 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.2.7 Bank Accounts; Receivables; Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.2.8 Equipment; Leasehold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.2.9 Proprietary Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.2.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.2.11 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.2.12 Compliance with Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.2.13 Governmental Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.2.14 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.2.15 Employee and Labor Matters; Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.2.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.2.17 Sale of Products; Performance of Services . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.2.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.2.19 Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.2.20 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.2.21 Authority; Binding Nature of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.2.22 Non-Contravention; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.2.23 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3. REPRESENTATIONS AND WARRANTIES OF HALIS AND THE SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . 38
3.1 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2 Due Organization; Authority; Binding Nature of Agreement . . . . . . . . . . . . . . . . . . . . . . 38
3.3 Valid Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4. CERTAIN COVENANTS OF PHYSOURCE AND THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 39
4.1 Access and Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.2 Operation of PhySource's Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.3 Notification; Updates to Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.4 No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.1 Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.2 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.3 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.4 Employment and Non-Solicitation Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.5 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.6 Termination of Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.7 FIRPTA Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.8 Payment of Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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5.9 Termination of Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.10 Termination of HALIS Letter Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF HALIS AND
THE SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.4 Agreements and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.5 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.6 Termination of Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.7 FIRPTA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.8 Rule 506 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.9 No Restraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.10 No Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.11 Completion of Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.12 Shareholder Investment Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.13 Termination of Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.14 Termination of Shareholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.15 Termination of HALIS Letter Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PHYSOURCE
AND THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.4 Agreements and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.5 No Restraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.6 Payment of Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 8. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.2 Termination Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9. INDEMNIFICATION, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.2 Shareholders' Indemnity Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.2.1 Shareholders Other Than Homa Indemnity Agreement . . . . . . . . . . . . . . . . . . . . . 48
9.2.2 Homa's Indemnity Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.3 Indemnity Agreement of HALIS and the Surviving Corporation . . . . . . . . . . . . . . . . . . . . . 50
9.4 Indemnification Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.5 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.6 Limitations on Liability of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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9.6.1 Limitations on Liability of Shareholders Other Than Homa. . . . . . . . . . . . . . . . . . 52
9.6.2 Limitations on Liability of Homa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.7 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10. REGISTRATION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.1 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.3 Delay of Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.4 Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 11. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.1 Shareholders' Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.4 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.6 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.7 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.10 Governing Law; Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.11 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.12 Remedies Cumulative; Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.13 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.14 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.16 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.17 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
v
<PAGE> 7
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit A - Shareholders
Exhibit B - Certain definitions
Exhibit C - Directors and officers of Surviving Corporation
Exhibit D - Forms of Employment Agreement and Non-Solicitation Agreement
Exhibit E - Form of Release
Exhibit F - Persons to execute estoppel certificates
Exhibit G - Form of Shareholder Investment Certification
</TABLE>
The Company hereby agrees to furnish supplementally a copy of any
omitted exhibit to the Commission upon request.
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<PAGE> 8
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of July 31, 1997, by and among: HALIS, INC., a Georgia
corporation ("HALIS"); PHYSOURCE ACQUISITION CO., a Georgia corporation and a
wholly owned subsidiary of HALIS (the "Subsidiary"); PHYSOURCE LTD., an Illinois
corporation ("PhySource"); and the parties identified on Exhibit A, who are all
the shareholders of PhySource (the "Shareholders"). Certain capitalized terms
used in this Agreement are defined in Exhibit B.
RECITALS
A. HALIS, PhySource and the Subsidiary intend to effect a merger of
PhySource into the Subsidiary in accordance with this Agreement and the Georgia
Business Corporation Code and the Illinois Business Corporation Act (the
"Merger"). Upon consummation of the Merger, PhySource will cease to exist, and
the Subsidiary will continue to exist as the surviving corporation of the
Merger.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
C. This Agreement has been adopted and approved by the respective
boards of directors of HALIS, PhySource and the Subsidiary.
D. The capitalization of PhySource consists of 12,000 shares of the
voting common stock, no par value per share, of which 6,000 shares are issued
and outstanding (the "PhySource Common Stock").
E. Immediately prior to the Merger, Theodore M. Homa, M.D., S.C., an
Illinois corporation ("Homa S.C."), will be merged with and into PhySource, with
PhySource as the surviving corporation (the "Homa Merger"). PhySource will issue
an aggregate of 788 shares of PhySource Common Stock to the Homa, sole
shareholder of Homa S.C., in connection with the Homa Merger, which will result
in an aggregate of 6,788 shares of PhySource Common Stock outstanding
immediately prior to the Merger.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF PHYSOURCE INTO THE SUBSIDIARY. Upon the terms and subject
to the conditions set forth in this Agreement, at the Effective Time (as defined
in Section 1.3), PhySource
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shall be merged with and into the Subsidiary, and the separate existence of
PhySource shall cease. The Subsidiary will continue as the surviving corporation
following the Merger (the "Surviving Corporation").
1.2 EFFECT OF MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Georgia Business
Corporation Code and the Illinois Business Corporation Act.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Smith, Gambrell & Russell, 3343 Peachtree Road, Suite 1800, Atlanta, Georgia
30326, at 10:00 a.m. local time on July 31, 1997 or at such other time and date
during the period from July 31, 1997 through August 31, 1997, as the parties
shall designate (the "Scheduled Closing Time"). (The date on which the Closing
actually takes place is referred to in this Agreement as the "Closing Date.").
Contemporaneously with or as promptly as practicable after the Closing, and
following the filing of the articles of merger with the Secretary of State of
the State of Illinois to effect the Homa Merger, or as soon thereafter as is
practicable, a properly executed certificate of merger for the merger of
PhySource into the Subsidiary, conforming to the requirements of the Georgia
Business Corporation Code, shall be filed with the Secretary of State of the
State of Georgia and properly executed articles of merger for the merger of
PhySource into the Subsidiary, conforming to the requirements of the Illinois
Business Corporation Act, shall be filed with the Secretary of State of the
State of Illinois. The Merger shall take effect at the time such certificate of
merger is filed with the Secretary of State of the State of Georgia and the
Secretary of State of the State of Illinois (the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless the parties agree otherwise prior to the Effective Time:
(a) the Articles of Incorporation of the Subsidiary shall
continue as the Articles of Incorporation of the Surviving Corporation;
(b) the Bylaws of the Subsidiary shall continue as the Bylaws
of the Surviving Corporation;
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals
identified on Exhibit C; and
(d) the Surviving Corporation shall change its named to
PhySource Ltd. promptly after the Closing.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.7(b), at the Effective Time, by
virtue of the Merger and without any further action on the part of HALIS,
PhySource, the Subsidiary or any Shareholder, each share of PhySource Common
Stock outstanding immediately prior to the Effective Time shall
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<PAGE> 10
be canceled and retired and converted into the right to receive a pro rata share
of the aggregate Merger Consideration described in Section 1.8.
(b) If any shares of PhySource Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under any restricted
stock purchase agreement or other agreement with PhySource, then the shares of
HALIS Common Stock issued in exchange for such shares of PhySource Common Stock
will be unvested and subject to the same repurchase option, risk of forfeiture
or other condition, and the certificates representing such shares of HALIS
Common Stock may accordingly be marked with appropriate legends.
1.6 CLOSING OF PHYSOURCE TRANSFER BOOKS. At the Effective Time,
the holders of certificates representing shares of PhySource Common Stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as Shareholders of PhySource, other than the right to receive their pro
rata share of the Merger Consideration, and the stock transfer books of
PhySource shall be closed with respect to all shares of such PhySource Common
Stock outstanding immediately prior to the Effective Time. No further transfer
of any such shares of PhySource capital stock shall be made on such stock
transfer books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of PhySource Common Stock
(a "PhySource Stock Certificate") is presented to HALIS, such PhySource Stock
Certificate shall be canceled and shall be exchanged as provided in Section 1.7.
1.7 EXCHANGE OF CERTIFICATES.
(a) At the Closing, each Shareholder shall surrender its
respective PhySource Stock Certificate(s) to the Surviving Corporation, together
with such transmittal documents as the Surviving Corporation may reasonably
require, and the Surviving Corporation shall deliver to such Shareholder such
Shareholder's pro rata share of the aggregate Merger Consideration to be paid at
Closing pursuant to Section 1.8.
(b) No fractional shares of HALIS Common Stock shall be issued
in connection with the Merger, and no certificates for any such fractional
shares shall be issued. In lieu of such fractional shares, any Shareholder who
would otherwise be entitled to receive a fraction of a share of HALIS Common
Stock (after aggregating all fractional shares of HALIS Common Stock issuable to
such holder) shall, upon surrender of such Shareholder's PhySource Stock
Certificate(s), be paid in cash at a rate of $2.20 per share in lieu of such
fractional shares.
(c) Until surrendered as contemplated by this Section 1.7,
each PhySource Stock Certificate shall be deemed, from and after the Effective
Time, to represent only the right to receive a pro rata share of the Merger
Consideration. If any PhySource Stock Certificate shall have been lost, stolen
or destroyed, HALIS may, in its discretion and as a condition precedent to the
issuance of any certificate representing HALIS Common Stock, require the owner
of such lost, stolen or destroyed PhySource Stock Certificate to provide an
appropriate affidavit and to deliver a bond (in
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<PAGE> 11
an amount that is commercially reasonable) as indemnity against any claim that
may be made against HALIS with respect to such PhySource Stock Certificate.
(d) The shares of HALIS Common Stock to be issued in the
Merger shall be characterized as "restricted securities" for purposes of Rule
144 under the Securities Act, and each certificate representing any of such
shares shall bear a legend identical or similar in effect to the following
legend (together with any other legend or legends required by applicable state
securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(e) HALIS shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable to any holder or former holder of
PhySource Common Stock pursuant to this Agreement such amounts as HALIS may be
required to deduct or withhold therefrom under the Code or under any provision
of state, local or foreign tax law. To the extent such amounts are so deducted
or withheld, such amounts shall be treated for all purposes under this Agreement
as having been paid to the Person to whom such amounts would otherwise have been
paid.
(f) HALIS shall not be liable to any holder or former holder
of PhySource Common Stock for any shares of HALIS Common Stock (or dividends or
distributions with respect thereto), or for any cash amounts, delivered to any
public official pursuant to any applicable abandoned property, escheat or
similar law.
1.8 MERGER CONSIDERATION. The aggregate merger consideration to be paid
by HALIS to the Shareholders in consideration of the Merger ("Merger
Consideration") shall consist of shares of HALIS Common Stock having an
aggregate value, based on a per share price equal to the average of the bid and
asked price of HALIS Common Stock for the ten trading days immediately prior to
the Closing Date, equal to $3,171,245. Certificates representing the Merger
Consideration shall be delivered to the Shareholders at Closing.
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
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<PAGE> 12
1.10 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by HALIS to be necessary or desirable to carry out
the purposes of this Agreement or to vest HALIS with full right, title and
possession of and to all rights and property of PhySource, the officers and
directors of HALIS shall be fully authorized (in the name of PhySource and
otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF PHYSOURCE, THE SHAREHOLDERS
OTHER THAN HOMA, AND HOMA
2.1 REPRESENTATIONS AND WARRANTIES OF PHYSOURCE AND THE
SHAREHOLDERS OTHER THAN HOMA. PhySource and the Shareholders other than Homa
jointly and severally represent and warrant, to and for the benefit of HALIS
and the Subsidiary, as follows as of the date hereof and as of the Closing
Date:
2.1.1. DUE ORGANIZATION; SUBSIDIARIES; ETC.
(a) PhySource is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois and has
all necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted; (ii) to own and use its assets
in the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Contracts listed in Part 2.1.10(a) of the
Disclosure Schedule.
(b) Except as set forth in Section 2.1.1.(e), PhySource has
not conducted any business under or otherwise used, for any purpose or in any
jurisdiction, any fictitious name, assumed name, trade name or other name.
(c) PhySource is not and has not been required to be
qualified, authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction other than the jurisdictions identified in Part
2.1.1(c) of the Disclosure Schedule, except where the failure to be so
qualified, authorized, registered or licensed has not had and will not have a
Material Adverse Effect on PhySource. PhySource is in good standing as a foreign
corporation in each of the jurisdictions identified in Part 2.1.1(c) of the
Disclosure Schedule.
(d) Part 2.1.1(d) of the Disclosure Schedule accurately sets
forth (i) the names of the members of the PhySource's board of directors, (ii)
the names of the members of each committee of PhySource's board of directors,
and (iii) the names and titles of PhySource's officers.
(e) PhySource has no subsidiaries. PhySource has never
owned, beneficially or otherwise, any shares or other securities of, or any
direct or indirect interest of any nature in, any other Entity.
2.1.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. PhySource has
delivered to HALIS accurate and complete copies of: (i) PhySource's articles of
incorporation and bylaws, including all amendments thereto; (ii) the stock
records of PhySource ; and (iii) the minutes and
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<PAGE> 13
other records of the meetings and other proceedings (including any actions taken
by written consent or otherwise without a meeting) of the shareholders of
PhySource, the board of directors of PhySource and all committees of the board
of directors of PhySource. There have been no meetings or other proceedings or
actions of the shareholders of PhySource, the board of directors of PhySource or
any committee of the board of directors of PhySource that are not fully
reflected in such minutes or other records. There has not been any violation of
any of the provisions of PhySource's articles of incorporation or bylaws or of
any resolution adopted by PhySource's shareholders, PhySource's board of
directors or any committee of PhySource's board of directors. The books of
account, stock records, minute books and other records of PhySource are
accurate, up-to-date and complete, and have been maintained in accordance with
prudent business practices and all applicable Legal Requirements.
2.1.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of PhySource consists of
12,000 shares of common stock, of which 6,000 shares have been issued and are
outstanding, and an additional 788 shares will be issued to Homa immediately
prior to the Closing. There are no shares of capital stock held in PhySource's
treasury. Part 2.1.3(a) of the Disclosure Schedule sets forth the names of
PhySource shareholders and the number of shares of PhySource common stock owned
of record by each of such shareholders. All of the outstanding shares of
PhySource common stock have been duly authorized and validly issued, and are
fully paid and non-assessable, and except as set forth in Part 2.1.3(a) of the
Disclosure Schedule, none of such shares is subject to any repurchase option or
restriction on transfer.
(b) Except as set forth in Part 2.1.3(b) of the Disclosure
Schedule, there is no: (i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire, or otherwise relating
to, any shares of the capital stock or other securities of PhySource; (ii)
outstanding security, instrument or obligation that is or may become convertible
into or exchangeable for any shares of the capital stock or other securities of
PhySource; (iii) Contract under which PhySource is or may become obligated to
sell or otherwise issue any shares of its capital stock or any other securities;
or (iv) condition or circumstance that may give rise to or provide a basis for
the assertion of a claim by any Person to the effect that such Person is
entitled to acquire or receive any shares of capital stock or other securities
of PhySource. Except as set forth in Part 2.1.3(b) of the Disclosure Schedule,
PhySource has never issued or granted any option, call, warrant or right to
acquire, or otherwise relating to, any shares of its capital stock or other
securities.
(c) All outstanding shares of PhySource Common Stock have been
issued in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts.
(d) Except as set forth in Part 2.1.3(d) of the Disclosure
Schedule, PhySource has never repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities. All securities so reacquired by
PhySource were reacquired in compliance with (i) the applicable
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<PAGE> 14
provisions of the Illinois Business Corporation Act and all other applicable
Legal Requirements, and (ii) any requirements set forth in applicable Contracts.
2.1.4 FINANCIAL STATEMENTS.
(a) PhySource has delivered to HALIS the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) the unaudited balance sheet of PhySource as of
December 31, 1996; and
(ii) the unaudited balance sheet of PhySource as of July
16, 1997 (the "Unaudited Balance Sheet"), and the related unaudited
statements of income of PhySource for the period then ended.
(b) The Company Financial Statements are accurate and complete
in all material respects and present fairly the financial position of PhySource
as of the respective dates thereof.
2.1.5 ABSENCE OF CHANGES. Except as set forth in Part 2.1.5 of the
Disclosure Schedule, since July 16, 1997:
(a) there has not been any material adverse change in
PhySource's business, condition, assets, liabilities, operations, financial
performance or prospects, and no event has occurred that will, or could
reasonably be expected to, have a Material Adverse Effect on PhySource;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of PhySource's
assets (whether or not covered by insurance);
(c) PhySource has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) PhySource has not sold, issued or authorized the issuance
of (i) any capital stock or other security, (ii) any option, call, warrant or
right to acquire, or otherwise relating to, any capital stock or any other
security, or (iii) any instrument convertible into or exchangeable for any
capital stock or other security;
(e) there has been no amendment to PhySource's articles of
incorporation or bylaws, and PhySource has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(f) PhySource has not formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
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<PAGE> 15
(g) PhySource has not made any capital expenditure which, when
added to all other capital expenditures made by PhySource since July 16, 1997,
exceeds $10,000 in the aggregate;
(h) PhySource has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Material Contract (as defined
in Section 2.1.10(a)), or (ii) amended or prematurely terminated, or waived any
material right or remedy under, any Material Contract to which it is or was
party or under which it has or has had any rights or obligations;
(i) PhySource has not (i) acquired, leased or licensed any
right or other asset from any other Person, (ii) sold or otherwise disposed of,
or leased or licensed, any right or other asset to any other Person, or (iii)
waived or relinquished any right, except for immaterial rights or other
immaterial assets acquired, leased, licensed or disposed of in the ordinary
course of business and consistent with PhySource's past practices;
(j) PhySource has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness;
(k) PhySource has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with PhySource's past practices;
(l) PhySource has not (i) lent money to any Person, or (ii)
incurred or guaranteed any indebtedness for borrowed money;
(m) PhySource has not (i) established, adopted or amended any
Employee Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar
payment to, or increased the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees, or (iii) hired any new employee;
(n) PhySource has not changed any of its methods of accounting
or accounting practices in any respect;
(o) PhySource has not made any Tax election;
(p) PhySource has not commenced or settled any legal
Proceeding;
(q) PhySource has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(r) PhySource has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(q)" above.
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<PAGE> 16
2.1.6 TITLE TO ASSETS.
(a) PhySource owns, and has good, valid and marketable title
to, all assets purported to be owned by it, including: (i) all assets reflected
on the Unaudited Balance Sheet; (ii) all assets referred to in Parts 2.1.7(b),
2.1.8 and 2.1.9 of the Disclosure Schedule and all of PhySource's rights under
the Contracts identified in Part 2.1.10(a) of the Disclosure Schedule; and (iii)
all other assets reflected in PhySource books and records as being owned by
PhySource. Except as set forth in Part 2.1.6(a) of the Disclosure Schedule, all
of said assets are owned by PhySource free and clear of any liens or other
Encumbrances, except for (i) any lien for current taxes not yet due and payable,
and (ii) minor liens that have arisen in the ordinary course of business and
that do not (in any case or in the aggregate) materially detract from the value
of the assets subject thereto or materially impair the operations of PhySource.
(b) Part 2.1.6(b) of the Disclosure Schedule identifies all
assets that are being leased or licensed to PhySource.
2.1.7 BANK ACCOUNTS; RECEIVABLES; CUSTOMERS.
(a) Part 2.1.7(a) of the Disclosure Schedule provides accurate
and complete information with respect to each account maintained by or for the
benefit of PhySource at any bank or other financial institution.
(b) Part 2.1.7(b) of the Disclosure Schedule provides an
accurate and complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of PhySource as of July 16, 1997. Except as set
forth in Part 2.1.7(b) of the Disclosure Schedule, all existing accounts
receivable of PhySource (including those accounts receivable reflected on the
Unaudited Balance Sheet that have not yet been collected and those accounts
receivable that have arisen since July 16, 1997 and have not yet been collected)
(i) represent valid obligations of customers of PhySource arising from bona fide
transactions entered into in the ordinary course of business, and (ii) are
current and will be collected in full, without any counterclaim or set off, when
due net of an allowance for doubtful accounts not to exceed $25,000 in the
aggregate.
(c) Part 2.1.7(c) of the Disclosure Schedule accurately
identifies, and provides an accurate and complete breakdown of the revenues
received from, each customer or other Person that (together with such Person's
affiliates) accounted for the net revenues of PhySource in 1997. PhySource has
not received any notice or other communication indicating that any customer or
other Person identified in Part 2.1.7(c) of the Disclosure Schedule intends or
expects to cease dealing with PhySource or to reduce the volume of business
transacted by such Person with PhySource below historical levels.
(d) Part 2.1.7(d) of the Disclosure Schedule provides an
accurate and complete breakdown of all pending and unfilled orders received by
PhySource for products, systems and services.
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<PAGE> 17
2.1.8 EQUIPMENT; LEASEHOLD.
(a) Part 2.1.8 of the Disclosure Schedule provides an accurate
and complete list of all material equipment, fixtures, leasehold improvements
and other tangible assets owned by or leased to PhySource. The assets identified
in Part 2.1.8 of the Disclosure Schedule are adequate for the uses to which they
are being put, are in good condition and repair (ordinary wear and tear
excepted) and are adequate for the conduct of PhySource's business in the manner
in which such business is currently being conducted.
(b) PhySource does not own any real property or any interest
in real property, except for the leasehold(s) created under the real property
lease(s) identified in Part 2.1.10(a) of the Disclosure Schedule.
2.1.9 PROPRIETARY ASSETS.
(a) Part 2.1.9(a)(1) of the Disclosure Schedule sets forth,
with respect to each Company Proprietary Asset that has been registered,
recorded or filed with any Governmental Body or with respect to which an
application has been filed with any Governmental Body, (i) a brief description
of such Company Proprietary Asset, and (ii) the names of the jurisdictions
covered by the applicable registration, recordation, filing or application. Part
2.1.9(a)(2) of the Disclosure Schedule identifies and provides a brief
description of all other Company Proprietary Assets owned by PhySource. Part
2.1.9(a)(3) of the Disclosure Schedule identifies and provides a brief
description of each Company Proprietary Asset that is owned by any other Person
and that is licensed to or used by PhySource (except for any Company Proprietary
Asset that is licensed to PhySource under any third party software license
generally available to the public at a cost of less than $500), and identifies
the license agreement or other agreement under which such Company Proprietary
Asset is being licensed to or used by PhySource. Except as set forth in Part
2.1.9(a)(4) of the Disclosure Schedule, PhySource has good, valid and marketable
title to all of the Proprietary Assets identified in Parts 2.1.9(a)(1) and
2.1.9(a)(2) of the Disclosure Schedule, free and clear of all liens and other
Encumbrances, and has a valid right to use all Proprietary Assets identified in
Part 2.1.9(a)(3) of the Disclosure Schedule. Except as set forth in Part
2.1.9(a)(5) of the Disclosure Schedule, PhySource is not obligated to make any
payment to any Person for the use of any Company Proprietary Asset. Except as
set forth in Part 2.1.9(a)(6) of the Disclosure Schedule, PhySource is free to
use, modify, copy, distribute, sell, license or otherwise exploit each of the
Company Proprietary Assets on an exclusive basis.
(b) PhySource has taken all commercially reasonable measures
and precautions necessary to protect and maintain the confidentiality and
secrecy of all Company Proprietary Assets (except Company Proprietary Assets
whose value would be unimpaired by public disclosure) and otherwise to maintain
and protect the value of all Company Proprietary Assets. Except as set forth in
Part 2.1.9(b) of the Disclosure Schedule, PhySource has not disclosed or
delivered or permitted to be disclosed or delivered to any Person, and no Person
(other than PhySource) has access to or has any rights with respect to, the
source code, or any portion or aspect of the source code, of any Company
Proprietary Asset.
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(c) To the best of the knowledge of PhySource and the
Shareholders, none of PhySource Proprietary Assets infringes or conflicts with
any Proprietary Asset owned or used by any other Person, and PhySource is not
infringing, misappropriating or making any unlawful use of, and PhySource has
not at any time infringed, misappropriated or made any unlawful use of, or
received any notice or other communication of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the best of the knowledge of
PhySource and the Shareholders, no other Person is infringing, misappropriating
or making any unlawful use of, and no Proprietary Asset owned or used by any
other Person infringes or conflicts with, any Company Proprietary Asset.
(d) Except as set forth in Part 2.1.9(d) of the Disclosure
Schedule: (i) each Company Proprietary Asset conforms in all material respects
with any specification, documentation, performance standard, representation or
statement made or provided to HALIS with respect thereto by or on behalf of
PhySource; and (ii) there has not been any material claim by any customer or
other Person alleging that any Company Proprietary Asset does not conform in all
material respects with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of PhySource, and,
to the best of the knowledge of PhySource and the Shareholders, there is no
basis for any such claim. PhySource has established adequate reserves on the
Unaudited Balance Sheet in accordance with United States generally accepted
accounting principles to cover all costs associated with any obligations that
PhySource may have with respect to the correction or repair of programming
errors or other defects in the Company Proprietary Assets.
(e) The Company Proprietary Assets constitute all the
Proprietary Assets necessary to enable PhySource to conduct its business in the
manner in which such business has been conducted. Except as set forth in Part
2.1.9(e) of the Disclosure Schedule, (i) PhySource has not licensed any of the
Company Proprietary Assets to any Person on an exclusive basis, and (ii)
PhySource has not entered into any covenant not to compete or Contract limiting
its ability to exploit fully any of its Proprietary Assets or to transact
business in any market or geographical area or with any Person.
(f) PhySource has never engaged or received services from any
consultant or independent contractor in connection with the design or
development of any Proprietary Asset.
2.1.10 CONTRACTS.
(a) Part 2.1.10(a) of the Disclosure Schedule identifies each
Company Contract that constitutes a "Material Contract." For purposes of this
Agreement, each of the following shall be deemed to constitute a "Material
Contract":
(i) any Contract relating to the employment or engagement
of, or the performance of services by, any employee, consultant or
independent contractor;
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(ii) any Contract relating to the acquisition, transfer, use,
development, sharing or license of any technology or any Proprietary
Asset;
(iii) any Contract imposing any restriction on PhySource's
right or ability (A) to compete with any other Person, (B) to acquire
any product or other asset or any services from any other Person, to
sell any product or other asset to or perform any services for any
other Person or to transact business or deal in any other manner with
any other Person, or (C) to develop or distribute any technology;
(iv) any Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(v) any Contract relating to the acquisition, issuance or
transfer of any securities;
(vi) any Contract creating or relating to the creation of any
Encumbrance with respect to any asset owned or used by PhySource;
(vii) any Contract involving or incorporating any guaranty,
any pledge, any performance or completion bond, any indemnity, any
right of contribution or any surety arrangement;
(viii) any Contract creating or relating to any partnership or
joint venture or any sharing of revenues, profits, losses, costs or
liabilities;
(ix) any Contract relating to the purchase or sale of any
product or other asset by or to, or the performance of any services by
or for, any Related Party (as defined in Section 2.1.19);
(x) any Contract to which any Governmental Body is a party or
under which any Governmental Body has any rights or obligations, or
involving or directly or indirectly benefiting any Governmental Body
(including any subcontract or other Contract between PhySource and any
contractor or subcontractor to any Governmental Body);
(xi) any Contract entered into outside the ordinary course of
business or inconsistent with PhySource past practices;
(xii) any Contract that has a term of more than 60 days and
that may not be terminated by PhySource (without penalty) within 60
days after the delivery of a termination notice by the Subject
Business; and
(xiii) any Contract that contemplates or involves (A) the
payment or delivery of cash or other consideration in an amount or
having a value in excess of $5,000
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in the aggregate, or (B) the performance of services having a value in
excess of $5,000 in the aggregate.
(b) PhySource has delivered to HALIS accurate and complete
copies of all Contracts identified in Part 2.1.10(a) of the Disclosure Schedule,
including all amendments thereto. Each Contract identified in Part 2.1.10(a) of
the Disclosure Schedule is valid and in full force and effect, and is
enforceable by PhySource in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
(c) Except as set forth in Part 2.1.10(c) of the Disclosure
Schedule:
(i) PhySource has not violated or breached, or committed
any default under, any Company Contract, and, to the best of the
knowledge of PhySource and the Shareholders, no other Person has
violated or breached, or committed any default under, any Company
Contract;
(ii) to the best of the knowledge of PhySource and the
Shareholders, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could
reasonably be expected to, (A) result in a violation or breach of any
of the provisions of any Company Contract, (B) give any Person the
right to declare a default or exercise any remedy under any Company
Contract, (C) give any Person the right to accelerate the maturity or
performance of any Company Contract, or (D) give any Person the right
to cancel, terminate or modify any Company Contract;
(iii) PhySource has not received any notice or other
communication regarding (A) any actual or possible violation or breach
of, or default under, any Company Contract, or (B) any actual or
possible termination of any Company Contract; and
(iv) PhySource has not waived any of its material rights
under any Contract.
(d) No Person is renegotiating any amount paid or payable to
PhySource under any Company Contract or any other term or provision of any
Company Contract.
(e) The Contracts identified in Part 2.1.10(a) of the
Disclosure Schedule collectively constitute all of the Material Contracts
necessary to enable PhySource to conduct its business in the manner in which its
business is currently being conducted.
(f) Part 2.1.10(f) of the Disclosure Schedule identifies and
provides a brief description of each proposed material Contract as to which any
pending bid, offer or proposal has been submitted or received by PhySource.
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2.1.11 LIABILITIES. PhySource has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (i)
liabilities identified as such in the "liabilities" column of the Unaudited
Balance Sheet; (ii) accounts payable or accrued salaries that have been incurred
by PhySource since July 16, 1997, in the ordinary course of business and
consistent with PhySource's past practices; and (iii) the liabilities identified
in Part 2.1.11(a) of the Disclosure Schedule.
2.1.12 COMPLIANCE WITH LEGAL REQUIREMENTS. PhySource is, and has at all
times since February 28, 1996 been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have in any individual case or in the aggregate, a
Material Adverse Effect on PhySource. Except as set forth in Part 2.1.12 of the
Disclosure Schedule, since February 28, 1996, PhySource has not received any
notice or other communication from any Governmental Body regarding any actual or
possible violation of, or failure to comply with, any Legal Requirement.
2.1.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.1.13 of the Disclosure
Schedule identifies each material Governmental Authorization held by PhySource,
and PhySource has delivered to HALIS accurate and complete copies of all
Governmental Authorizations identified in Part 2.1.13 of the Disclosure
Schedule. The Governmental Authorizations identified in Part 2.1.13 of the
Disclosure Schedule are valid and in full force and effect, and collectively
constitute all Governmental Authorizations necessary to enable PhySource to
conduct its business in the manner in which its business is currently being
conducted and in the manner in which its business is proposed to be conducted.
PhySource is, and at all times since February 28, 1996 has been, in compliance
with the material terms and requirements of the respective Governmental
Authorizations identified in Part 2.1.13 of the Disclosure Schedule. Since
February 28, 1996, PhySource has not received any notice or other communication
from any Governmental Body regarding (i) any actual or possible violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (ii) any actual or possible revocation, withdrawal,
suspension, cancellation, termination or modification of any Governmental
Authorization.
2.1.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of
PhySource with any Governmental Body with respect to any transaction occurring
or any taxable period ending on or before the Closing Date (the "Company
Returns") (i) have been or will be filed when due, and (ii) have been, or will
be when filed, accurately and completely prepared in compliance with all
applicable Legal Requirements. All amounts shown on the Company Returns to be
due on or before the Closing Date have been or will be paid on or before the
Closing Date. PhySource has delivered to HALIS accurate and complete copies of
all Company Returns filed since February 28, 1996.
(b) The Company Financial Statements fully accrue all actual
and contingent liabilities for Taxes with respect to all periods through the
dates thereof in accordance with generally accepted accounting principles.
PhySource will establish, in the ordinary course of business and
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consistent with its past practices, reserves adequate for the payment of all
Taxes for the period from July 16, 1997, through the Closing Date, and PhySource
will disclose the dollar amount of such reserves to HALIS on or prior to the
Closing Date.
(c) Except as set forth in Part 2.1.14(c) of the Disclosure
Schedule, there has been no examination or audit of any Company Return, and no
such examination or audit has been proposed or scheduled by any Governmental
Body. PhySource has delivered to HALIS accurate and complete copies of all audit
reports and similar documents (to which PhySource has access) relating to the
Company Returns. Except as set forth in Part 2.1.14(c) of the Disclosure
Schedule, no extension or waiver of the limitation period applicable to any of
the Company Returns has been granted (by PhySource or any other Person), and no
such extension or waiver has been requested from PhySource.
(d) Except as set forth in Part 2.1.14(d) of the Disclosure
Schedule, no claim or Legal Proceeding is pending or has been threatened against
or with respect to PhySource in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of deficiency
or similar document received by PhySource. There are no liens for Taxes upon any
of the assets of PhySource, except liens for current Taxes not yet due and
payable. PhySource has not entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code. PhySource has not been, and
PhySource will not be, required to include any adjustment in taxable income for
any tax period (or portion thereof) pursuant to Section 481 of 263A of the Code
or any comparable provision under state or foreign Tax laws as a result of
transactions or events occurring, or accounting methods employed, prior to the
Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of PhySource that, considered individually or considered
collectively with any other such Contracts, will, or could reasonably be
expected to, give rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 280G or Section 162 of the Code.
Except as set forth in Part 2.1.14(e) of the Disclosure Schedule, PhySource is
not, and has never been, a party to or bound by any tax indemnity agreement, tax
sharing agreement, tax allocation agreement or similar Contract.
2.1.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.1.15(a) of the Disclosure Schedule contains a list
of all salaried employees of PhySource as of the date of this Agreement, and
correctly reflects their salaries, any other compensation payable to them
(including compensation payable pursuant to bonus, deferred compensation or
commission arrangements), their dates of employment and their positions.
PhySource is not a party to any collective bargaining contract or other Contract
with a labor union involving any of its employees.
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(b) Part 2.1.15(b) of the Disclosure Schedule identifies each
employee of PhySource who is not fully available to perform work because of
disability or other leave, and sets forth the basis of such leave and the
anticipated date of return to full service.
(c) Part 2.1.15(c) of the Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical,
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (individually referred to as a "Plan" and
collectively referred to as the "Plans") sponsored, maintained, contributed to
or required to be contributed to by PhySource for the benefit of any current or
former employee of PhySource.
(d) PhySource does not maintain, sponsor or contribute to,
and, to the best of the knowledge of PhySource and the Shareholders, PhySource
has not at any time in the past maintained, sponsored or contributed to, any
employee pension benefit plan (as defined in Section 3(2)) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not
excluded from coverage under specific Titles or Merger Subtitles of ERISA) for
the benefit of employees or former employees of PhySource (a "Pension Plan").
(e) PhySource does not maintain, sponsor or contribute to any
employee welfare benefit plan (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of employees or former employees of PhySource (a "Welfare Plan")
except for those Welfare Plans described in Part 2.1.15(e) of the Disclosure
Schedule, none of which is a multiemployer plan (within the meaning of Section
3(37) of ERISA).
(f) With respect to each Plan, PhySource has delivered to
HALIS:
(i) an accurate and complete copy of such Plan (including
all amendments thereto);
(ii) an accurate and complete copy of the annual report (if
required under ERISA) with respect to such Plan for 1996;
(iii) an accurate and complete copy of (A) the most recent
summary plan description, together with each Summary of Material
Modifications (if required under ERISA) with respect to such Plan, and
(B) each material employee communication relating to such Plan;
(iv) if such Plan is funded through a trust or any third
party funding vehicle, an accurate and complete copy of the trust or
other funding agreement (including all amendments thereto) and accurate
and complete copies of the most recent financial statements thereof;
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(v) accurate and complete copies of all Contracts
relating to such Plan, including service provider agreements, insurance
contracts, minimum premium contracts, stop-loss agreements, investment
management agreements, subscription and participation agreements and
recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with
respect to such Plan (if such Plan is intended to be qualified under
Section 401(a) of the Code).
(g) PhySource is not required to be, and, to the best of the
knowledge of PhySource and the Shareholders, PhySource has never been required
to be, treated as a single employer with any other Person under Section
4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code. PhySource
has never been a member of an "affiliated service group" within the meaning of
Section 414(m) of the Code. To the best of the knowledge of PhySource and the
Shareholders, PhySource has never made a complete or partial withdrawal from a
"multiemployer plan" (as defined in Section 3(37) of ERISA) resulting in
"withdrawal liability" (as defined in Section 4201 of ERISA), without regard to
subsequent reduction or waiver of such liability under either Section 4207 or
4208 of ERISA.
(h) PhySource does not have any plan or commitment to create
any additional Welfare Plan or any Pension Plan, or to modify or change any
existing Welfare Plan or Pension Plan (other than to comply with applicable
law).
(i) No Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former employee of
PhySource after any such employee's termination of service (other than (i)
benefit coverage mandated by applicable law, including coverage provided
pursuant to Section 4980B of the Code, (ii) deferred compensation benefits
accrued as liabilities on the Unaudited Balance Sheet, and (iii) benefits the
full cost of which are borne by current or former employees of PhySource (or
their beneficiaries)).
(j) With respect to each of the Welfare Plans constituting a
group health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(k) Each of the Plans has been operated and administered in
all material respects in accordance with applicable Legal Requirements,
including ERISA and the Code.
(l) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination from the Internal
Revenue Service, and neither PhySource, nor any of the Shareholders are aware of
any reason why any such determination letter should be revoked.
(m) Except as set forth in Part 2.1.15(m) of the Disclosure
Schedule, neither the execution, delivery or performance of this Agreement, nor
the consummation of the Merger or any
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of the other transactions contemplated by this Agreement, will result in any
bonus payment, golden parachute payment, severance payment or other payment to
any current or former employee or director of PhySource (whether or not under
any Plan), or materially increase the benefits payable under any Plan, or result
in any acceleration of the time of payment or vesting of any such benefits.
(n) PhySource is in compliance in all material respects with
all applicable Legal Requirements and Contracts relating to employment,
employment practices, employee compensation, wages, bonuses and terms and
conditions of employment.
(o) PhySource has good labor relations, and neither PhySource
nor any of the Shareholders has any knowledge of any facts indicating that (i)
the consummation of the Merger or any of the other transactions contemplated by
this Agreement will have a material adverse effect on PhySource's labor
relations, or (ii) any of PhySource's employees intends to terminate his or her
employment with PhySource.
2.1.16 ENVIRONMENTAL MATTERS. PhySource is and has at all times been in
compliance, in all material respects, with all applicable Environmental Laws.
PhySource possesses all permits and other Governmental Authorizations required
under applicable Environmental Laws, and PhySource is and has at all times been
in compliance with the terms and requirements of all such Governmental
Authorizations. PhySource has not received any notice or other communication
(whether from a Governmental Body, citizens group, employee or otherwise) that
alleges that PhySource is not in compliance with any Environmental Law, and, to
the best of the knowledge of PhySource and the Shareholders, there are no
circumstances that could reasonably be expected to prevent or interfere with
PhySource compliance with any Environmental Law in the future. To the best of
the knowledge of PhySource and the Shareholders, no current or prior owner of
any property leased or controlled by PhySource has received any notice or other
communication (whether from a Governmental Body, citizens group, employee or
otherwise) that alleges that such current or prior owner or PhySource is not or
was not in compliance with any Environmental Law. All Governmental
Authorizations currently held by PhySource pursuant to Environmental Laws are
identified in Part 2.1.16 of the Disclosure Schedule.
2.1.17 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.
(a) Other than normal returns for refunds in the ordinary
course of business at levels consistent with past experience under PhySource's
standard return policy, PhySource will not incur or otherwise become subject to
any material liability arising from (i) any product, system, program,
Proprietary Asset or other asset designed, developed, manufactured, assembled,
sold, supplied, installed, repaired, licensed or made available by PhySource on
or prior to the Closing Date, or (ii) any consulting services, installation
services, programming services, repair services, maintenance services, training
services, support services or other services performed by PhySource on or prior
to the Closing Date.
(b) Except as set forth in Part 2.1.17(b) of the Disclosure
Schedule, no customer or other Person has, at any time since February 28, 1996,
asserted or threatened to assert any claim
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against PhySource (other than claims that have been resolved satisfactorily at
no material cost to PhySource) under or based upon (i) any warranty provided by
or on behalf of PhySource, or (ii) any services performed by PhySource.
2.1.18 INSURANCE. Part 2.1.18 of the Disclosure Schedule provides
accurate and complete information with respect to each insurance policy
maintained by, at the expense of or for the benefit of PhySource and with
respect to any claims made thereunder. PhySource has delivered to HALIS accurate
and complete copies of the insurance policies identified in Part 2.1.18 of the
Disclosure Schedule. Each of the insurance policies identified in Part 2.1.18 of
the Disclosure Schedule is in full force and effect. Since February 28, 1996,
PhySource has not received any notice or other communication regarding any
actual or possible (a) cancellation or invalidation of any insurance policy, (b)
refusal of any coverage or rejection of any claim under any insurance policy, or
(c) material adjustment in the amount of the premiums payable with respect to
any insurance policy.
2.1.19 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.1.19
of the Disclosure Schedule: (a) no Related Party has, and no Related Party has
at any time since February 28, 1996 had, any direct or indirect interest in any
material asset used in or otherwise relating to the business of PhySource; (b)
no Related Party is, or has at any time since February 28, 1996 been, indebted
to PhySource; (c) since February 28, 1996, no Related Party has entered into,
or has had any direct or indirect financial interest in, any material Contract,
transaction or business dealing involving PhySource; (d) no Related Party is
competing, or has at any time since February 28, 1996 competed, directly or
indirectly, with PhySource; and (e) no Related Party has any claim or right
against PhySource (other than rights to receive compensation for services
performed as an employee of PhySource). For purposes of this Section 2.1.19,
each of the following shall be deemed to be a "Related Party": (i) each of the
Shareholders; (ii) each individual who is, or who has at any time since February
28, 1996 been, an officer or director of PhySource; (iii) each individual who
is, or who at any time since February 28, 1996 has been, a member of the
immediate family of any of the individuals referred to in clauses "(i)" and
"(ii)" above; and (iv) any trust or other Entity (other than PhySource) in
which any one of the individuals referred to in clauses "(i)," "(ii)" and
"(iii)" above holds (or in which more than one of such individuals collectively
hold), beneficially or otherwise, a material voting, proprietary or equity
interest.
2.1.20 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.1.20(a) of the Disclosure
Schedule, there is no pending Legal Proceeding, and, to the best of the
knowledge of PhySource and the Shareholders, no Person has threatened to
commence any Legal Proceeding: (i) that involves PhySource or any of the assets
owned or used by PhySource; or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
the Merger or any of the other transactions contemplated by this Agreement. To
the best of the knowledge of PhySource and the Shareholders, except as set forth
in Part 2.1.20(a) of the Disclosure Schedule, no event has occurred, and no
claim, dispute or other condition or circumstance exists, that will, or that
could reasonably be expected to, give rise to or serve as a basis for the
commencement of any such Legal Proceeding.
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(b) Except as set forth in Part 2.1.20(b) of the Disclosure
Schedule, no Legal Proceeding has ever been commenced by, and no Legal
Proceeding has ever been pending against, PhySource.
(c) There is no order, writ, injunction, judgment or decree to
which PhySource, or any of the assets owned or used by PhySource, are subject.
Neither the Shareholders nor PhySource is subject to any order, writ,
injunction, judgment or decree that relates to PhySource business or to any of
the assets owned or used by PhySource. To the best of the knowledge of PhySource
and the Shareholders, no officer or other employee of PhySource is subject to
any order, writ, injunction, judgment or decree that prohibits such officer or
other employee from engaging in or continuing any conduct, activity or practice
relating to PhySource's business.
2.1.21 AUTHORITY; BINDING NATURE OF AGREEMENT. The Shareholders and
PhySource have the absolute and unrestricted right, power and authority to enter
into and to perform their respective obligations under this Agreement; and the
execution, delivery and performance by PhySource of this Agreement has been duly
authorized by all necessary action on the part of PhySource and its board of
directors and shareholders. This Agreement constitutes the legal, valid and
binding obligation of the Shareholders and PhySource, enforceable against the
Shareholders and PhySource in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
2.1.22 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.1.22
of the Disclosure Schedule, neither (i) the execution, delivery or performance
of this Agreement or any of the other agreements referred to in this Agreement,
nor (ii) the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will directly or indirectly (with or without
notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of PhySource's articles of incorporation or bylaws, or
(ii) any resolution adopted by PhySource's shareholders, or PhySource's board of
directors or any committee of PhySource's board of directors;
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which PhySource, or any of the assets owned or used by PhySource,
is subject;
(c) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by PhySource or that otherwise relates to PhySource's
business or to any of the assets owned or used by PhySource;
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(d) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any Company Contract,
or give any Person the right to (i) declare a default or exercise any remedy
under any Company Contract, (ii) accelerate the maturity or performance of any
Company Contract, or (iii) cancel, terminate or modify any Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by PhySource (except
for minor liens that will not, in any case or in the aggregate, materially
detract from the value of the assets subject thereto or materially impair the
operations of PhySource).
Except as set forth in Part 2.1.22 of the Disclosure Schedule, PhySource is not
and will not be required to make any filing with or given any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
2.1.23 FULL DISCLOSURE. This Agreement (including the Disclosure
Schedule) does not, and Shareholders' Closing Certificate (as defined in Section
6.4(f)) will not, (i) contain any representation, warranty or information that
is false or misleading with respect to any material fact, or (ii) omit to state
any material fact necessary in order to make the representations, warranties and
information contained and to be contained herein and therein not false or
misleading.
2.2 REPRESENTATIONS AND WARRANTIES OF HOMA. Homa represents and
warrants, to and for the benefit of HALIS and the Subsidiary, as follows as of
the date hereof and as of immediately prior to the closing of the Homa Merger:
2.2.1. DUE ORGANIZATION; SUBSIDIARIES; ETC.
(a) Homa S.C. is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois and has
all necessary power and authority: (i) to conduct its business in the manner in
which its business is currently being conducted and in the manner in which its
business is proposed to be conducted; (ii) to own and use its assets in the
manner in which its assets are currently owned and used and in the manner in
which its assets are proposed to be owned and used; and (iii) to perform its
obligations under all Contracts by which it is bound.
(b) Homa S.C. has not conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name, other than the name "Buffalo Grove
Internal Medical Associates, S.C."
(c) Homa S.C. is not and has not been required to be
qualified, authorized, registered or licensed to do business as a foreign
corporation in any jurisdiction other than the jurisdictions identified in Part
2.2.1(c) of the Disclosure Schedule, except where the failure to be so
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qualified, authorized, registered or licensed has not had and will not have a
Material Adverse Effect on Homa S.C.. Homa S.C. is in good standing as a foreign
corporation in each of the jurisdictions identified in Part 2.2.1(c) of the
Disclosure Schedule.
(d) Part 2.2.1(d) of the Disclosure Schedule accurately sets
forth (i) the names of the members of Homa S.C.'s board of directors, (ii) the
names of the members of each committee of Homa S.C.'s board of directors, and
(iii) the names and titles of Homa S.C.'s officers.
(e) Homa S.C. has no subsidiaries. Homa S.C. has never owned,
beneficially or otherwise, any shares or other securities of, or any direct or
indirect interest of any nature in, any other Entity.
2.2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. Homa S.C. has
delivered to HALIS accurate and complete copies of: (i) Homa S.C.'s articles of
incorporation and bylaws, including all amendments thereto; (ii) the stock
records of Homa S.C.; and (iii) the minutes and other records of the meetings
and other proceedings (including any actions taken by written consent or
otherwise without a meeting) of the shareholders of Homa S.C., the board of
directors of Homa S.C. and all committees of the board of directors of Homa
S.C. There have been no meetings or other proceedings or actions of the
shareholders of Homa S.C., the board of directors of Homa S.C. or any committee
of the board of directors of Homa S.C. that are not fully reflected in such
minutes or other records. There has not been any violation of any of the
provisions of Homa S.C.'s articles of incorporation or bylaws or of any
resolution adopted by Homa S.C.'s shareholders, Homa S.C.'s board of directors
or any committee of Homa S.C.'s board of directors. The books of account, stock
records, minute books and other records of Homa S.C. are accurate, up-to-date
and complete, and have been maintained in accordance with prudent business
practices and all applicable Legal Requirements.
2.2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of Homa S.C. consists of
20,000 shares of common stock, of which 1,000 shares have been issued and are
outstanding. There are no shares of capital stock held in Homa S.C.'s treasury.
Part 2.2.3(a) of the Disclosure Schedule sets forth the names of Homa S.C.
shareholders and the number of shares of Homa S.C. common stock owned of record
by each of such shareholders. All of the outstanding shares of Homa S.C. common
stock have been duly authorized and validly issued, and are fully paid and
non-assessable, and no par value of such shares is subject to any repurchase
option or restriction on transfer.
(b) There is no: (i) outstanding subscription, option, call,
warrant or right (whether or not currently exercisable) to acquire, or otherwise
relating to, any shares of the capital stock or other securities of Homa S.C.;
(ii) outstanding security, instrument or obligation that is or may become
convertible into or exchangeable for any shares of the capital stock or other
securities of Homa S.C.; (iii) Contract under which Homa S.C. is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities; or (iv) condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any Person to
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the effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of Homa S.C.. Except as set forth in Part
2.2.3(c) of the Disclosure Schedule, Homa S.C. has never issued or granted any
option, call, warrant or right to acquire, or otherwise relating to, any shares
of its capital stock or other securities.
(c) All outstanding shares of Homa S.C. Common Stock have been
issued in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts.
(d) Except as set forth in Part 2.2.3(d) of the Disclosure
Schedule, Homa S.C. has never repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities. All securities so reacquired by
Homa S.C. were reacquired in compliance with (i) the applicable provisions of
the Illinois Business Corporation Act and all other applicable Legal
Requirements, and (ii) any requirements set forth in applicable Contracts.
2.2.4 FINANCIAL STATEMENTS.
(a) Homa S.C. has delivered to HALIS the following financial
statements and notes (collectively, the "Homa S.C. Financial Statements"):
(i) the unaudited balance sheet of Homa S.C. as of
December 31, 1996, and the related unaudited statements of income of
Homa, S.C.; and
(ii) the unaudited balance sheet of Homa S.C. as of June
30, 1997 (the "Homa S.C. Unaudited Balance Sheet"), and the related
unaudited statement of income of Homa S.C. for the year then ended.
(b) The Homa S.C. Financial Statements are accurate and
complete in all material respects and present fairly the financial position of
Homa S.C. as of the respective dates thereof and the results of operations and
cash flows of Homa S.C. for the periods covered thereby. The Homa S.C. Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered.
2.2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.2.5 of the
Disclosure Schedule, and except for the Homa Merger, since June 30, 1997:
(a) there has not been any material adverse change in Homa
S.C.'s business, condition, assets, liabilities, operations, financial
performance or prospects, and no event has occurred that will, or could
reasonably be expected to, have a Material Adverse Effect on Homa S.C.;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any of Homa S.C.'s
assets (whether or not covered by insurance);
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(c) Homa S.C. has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) Homa S.C. has not sold, issued or authorized the issuance
of (i) any capital stock or other security, (ii) any option, call, warrant or
right to acquire, or otherwise relating to, any capital stock or any other
security, or (iii) any instrument convertible into or exchangeable for any
capital stock or other security;
(e) there has been no amendment to Homa S.C.'s articles of
incorporation or bylaws, and Homa S.C. has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(f) Homa S.C. has not formed any subsidiary or acquired any
equity interest or other interest in any other Entity;
(g) Homa S.C. has not made any capital expenditure which, when
added to all other capital expenditures made by Homa S.C. since June 30, 1997,
exceeds $10,000 in the aggregate;
(h) Homa S.C. has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Material Contract (as defined
in Section 2.2.10(a)), or (ii) amended or prematurely terminated, or waived any
material right or remedy under, any Material Contract to which it is or was
party or under which it has or has had any rights or obligations;
(i) Homa S.C. has not (i) acquired, leased or licensed any
right or other asset from any other Person, (ii) sold or otherwise disposed of,
or leased or licensed, any right or other asset to any other Person, or (iii)
waived or relinquished any right, except for immaterial rights or other
immaterial assets acquired, leased, licensed or disposed of in the ordinary
course of business and consistent with Homa S.C.'s past practices;
(j) Homa S.C. has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness;
(k) Homa S.C. has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with Homa S.C.'s past practices;
(l) Homa S.C. has not (i) lent money to any Person, or (ii)
incurred or guaranteed any indebtedness for borrowed money;
(m) Homa S.C. has not (i) established, adopted or amended any
Employee Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar
payment to, or increased the amount
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of the wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees, or (iii)
hired any new employee;
(n) Homa S.C. has not changed any of its methods of accounting
or accounting practices in any respect;
(o) Homa S.C. has not made any Tax election;
(p) Homa S.C. has not commenced or settled any legal
Proceeding;
(q) Homa S.C. has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(r) Homa S.C. has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(q)" above.
2.2.6 TITLE TO ASSETS.
(a) Homa S.C. owns, and has good, valid and marketable title
to, all assets purported to be owned by it, including: (i) all assets reflected
on the Homa S.C. Unaudited Balance Sheet; (ii) all assets referred to in Parts
2.2.7(b), 2.2.8 and 2.2.9 of the Disclosure Schedule and all of Homa S.C.'s
rights under the Contracts identified in Part 2.2.10(a) of the Disclosure
Schedule; and (iii) all other assets reflected in Homa S.C. books and records as
being owned by Homa S.C.. Except as set forth in Part 2.2.6(a) of the Disclosure
Schedule, all of said assets are owned by Homa S.C. free and clear of any liens
or other Encumbrances, except for (i) any lien for current taxes not yet due and
payable, and (ii) minor liens that have arisen in the ordinary course of
business and that do not (in any case or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair the operations
of Homa S.C..
(b) Part 2.2.6(b) of the Disclosure Schedule identifies all
assets that are being leased or licensed to Homa S.C..
2.2.7 BANK ACCOUNTS; RECEIVABLES; CUSTOMERS.
(a) Part 2.2.7(a) of the Disclosure Schedule provides accurate
and complete information with respect to each account maintained by or for the
benefit of Homa S.C. at any bank or other financial institution.
(b) Part 2.2.7(b) of the Disclosure Schedule provides an
accurate and complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of Homa S.C. as of June 30, 1997. Except as set
forth in Part 2.2.7(b) of the Disclosure Schedule, all existing accounts
receivable of Homa S.C. (including those accounts receivable reflected on the
Homa S.C. Unaudited Balance Sheet that have not yet been collected and those
accounts receivable that have arisen since June 30, 1997 and have not yet been
collected) (i) represent valid obligations of
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customers of Homa S.C. arising from bona fide transactions entered into in the
ordinary course of business, and (ii) are current and will be collected in full,
without any counterclaim or set off, when due net of an allowance for doubtful
accounts not to exceed $10,000 in the aggregate.
(c) Part 2.2.7(c) of the Disclosure Schedule accurately
identifies, and provides an accurate and complete breakdown of the revenues
received from, each customer or other Person that (together with such Person's
affiliates) accounted for more than 10% of the net revenues of Homa S.C. in
1996. Homa S.C. has not received any notice or other communication indicating
that any customer or other Person identified in Part 2.2.7(c) of the Disclosure
Schedule intends or expects to cease dealing with Homa S.C. or to reduce the
volume of business transacted by such Person with Homa S.C. below historical
levels.
(d) Part 2.2.7(d) of the Disclosure Schedule provides an
accurate and complete breakdown of all pending and unfilled orders received by
Homa S.C. for products, systems and services.
2.2.8 EQUIPMENT; LEASEHOLD.
(a) Part 2.2.8 of the Disclosure Schedule provides accurate
and complete information with respect to all material items of equipment,
fixtures, leasehold improvements and other tangible assets owned by or leased to
Homa S.C.. The assets identified in Part 2.2.8 of the Disclosure Schedule are
adequate for the uses to which they are being put, are in good condition and
repair (ordinary wear and tear excepted) and are adequate for the conduct of
Homa S.C.'s business in the manner in which such business is currently being
conducted and in the manner in which such business is proposed to be conducted.
(b) Homa S.C. does not own any real property or any interest
in real property, except for the leasehold(s) created under the real property
lease(s) identified in Part 2.2.10(a) of the Disclosure Schedule.
2.2.9 PROPRIETARY ASSETS.
(a) Part 2.2.9(a)(1) of the Disclosure Schedule sets forth,
with respect to each Homa S.C. Proprietary Asset that has been registered,
recorded or filed with any Governmental Body or with respect to which an
application has been filed with any Governmental Body, (i) a brief description
of such Homa S.C. Proprietary Asset, and (ii) the names of the jurisdictions
covered by the applicable registration, recordation, filing or application. Part
2.2.9(a)(2) of the Disclosure Schedule identifies and provides a brief
description of all other Homa S.C. Proprietary Assets owned by Homa S.C.. Part
2.2.9(a)(3) of the Disclosure Schedule identifies and provides a brief
description of each Homa S.C. Proprietary Asset that is owned by any other
Person and that is licensed to or used by Homa S.C. (except for any Homa S.C.
Proprietary Asset that is licensed to Homa S.C. under any third party software
license generally available to the public at a cost of less than $500), and
identifies the license agreement or other agreement under which such Homa S.C.
Proprietary Asset is being licensed to or used by Homa S.C.. Except as set forth
in Part 2.2.9(a)(4) of the Disclosure
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Schedule, Homa S.C. has good, valid and marketable title to all of the
Proprietary Assets identified in Parts 2.2.9(a)(1) and 2.2.9(a)(2) of the
Disclosure Schedule, free and clear of all liens and other Encumbrances, and has
a valid right to use all Proprietary Assets identified in Part 2.2.9(a)(3) of
the Disclosure Schedule. Except as set forth in Part 2.2.9(a)(5) of the
Disclosure Schedule, Homa S.C. is not obligated to make any payment to any
Person for the use of any Homa S.C. Proprietary Asset. Except as set forth in
Part 2.2.9(a)(6) of the Disclosure Schedule, Homa S.C. is free to use, modify,
copy, distribute, sell, license or otherwise exploit each of the Homa S.C.
Proprietary Assets on an exclusive basis.
(b) Homa S.C. has taken all measures and precautions necessary
to protect and maintain the confidentiality and secrecy of all Homa S.C.
Proprietary Assets (except Homa S.C. Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Homa S.C. Proprietary Assets. Except as set forth in Part 2.2.9(b) of the
Disclosure Schedule, Homa S.C. has not disclosed or delivered or permitted to be
disclosed or delivered to any Person, and no Person (other than Homa S.C.) has
access to or has any rights with respect to, the source code, or any portion or
aspect of the source code, of any Homa S.C. Proprietary Asset.
(c) None of Homa S.C.'s Proprietary Assets infringes or
conflicts with any Proprietary Asset owned or used by any other Person. Homa
S.C. is not infringing, misappropriating or making any unlawful use of, and Homa
S.C. has not at any time infringed, misappropriated or made any unlawful use of,
or received any notice or other communication of any actual, alleged, possible
or potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the best of the knowledge of Homa,
no other Person is infringing, misappropriating or making any unlawful use of,
and no Proprietary Asset owned or used by any other Person infringes or
conflicts with, any Homa S.C. Proprietary Asset.
(d) Except as set forth in Part 2.2.9(d) of the Disclosure
Schedule: (i) each Homa S.C. Proprietary Asset conforms in all material respects
with any specification, documentation, performance standard, representation or
statement made or provided with respect thereto by or on behalf of Homa S.C.;
and (ii) there has not been any material claim by any customer or other Person
alleging that any Homa S.C. Proprietary Asset does not conform in all material
respects with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of Homa S.C., and,
to the best of the knowledge of Homa, there is no basis for any such claim. Homa
S.C. has established adequate reserves on the Unaudited Balance Sheet to cover
all costs associated with any obligations that Homa S.C. may have with respect
to the correction or repair of programming errors or other defects in the Homa
S.C. Proprietary Assets.
(e) The Homa S.C. Proprietary Assets constitute all the
Proprietary Assets necessary to enable Homa S.C. to conduct its business in the
manner in which such business has been conducted and in the manner in which such
business is proposed to be conducted. Except as set forth in Part 2.2.9(e) of
the Disclosure Schedule, (i) Homa S.C. has not licensed any of the Homa S.C.
Proprietary Assets to any Person on an exclusive basis, and (ii) Homa S.C. has
not entered into
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any covenant not to compete or Contract limiting its ability to exploit fully
any of its Proprietary Assets or to transact business in any market or
geographical area or with any Person.
(f) Homa S.C. has never engaged or received services from any
consultant or independent contractor in connection with the design or
development of any Proprietary Asset.
2.2.10 CONTRACTS.
(a) Part 2.2.10(a) of the Disclosure Schedule identifies each
Homa S.C. Contract that constitutes a "Material Contract." For purposes of this
Agreement, each of the following shall be deemed to constitute a "Material
Contract":
(i) any Contract relating to the employment or engagement
of, or the performance of services by, any employee, consultant or
independent contractor;
(ii) any Contract relating to the acquisition, transfer,
use, development, sharing or license of any technology or any
Proprietary Asset;
(iii) any Contract imposing any restriction on Homa
S.C.'s right or ability (A) to compete with any other Person, (B) to
acquire any product or other asset or any services from any other
Person, to sell any product or other asset to or perform any services
for any other Person or to transact business or deal in any other
manner with any other Person, or (C) to develop or distribute any
technology;
(iv) any Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(v) any Contract relating to the acquisition, issuance or
transfer of any securities;
(vi) any Contract creating or relating to the creation of
any Encumbrance with respect to any asset owned or used by Homa S.C.;
(vii) any Contract involving or incorporating any guaranty,
any pledge, any performance or completion bond, any indemnity, any
right of contribution or any surety arrangement;
(viii) any Contract creating or relating to any partnership
or joint venture or any sharing of revenues, profits, losses, costs or
liabilities;
(ix) any Contract relating to the purchase or sale of any
product or other asset by or to, or the performance of any services by
or for, any Related Party (as defined in Section 2.2.19);
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(x) any Contract to which any Governmental Body is a party
or under which any Governmental Body has any rights or obligations, or
involving or directly or indirectly benefiting any Governmental Body
(including any subcontract or other Contract between Homa S.C. and any
contractor or subcontractor to any Governmental Body);
(xi) any Contract entered into outside the ordinary course
of business or inconsistent with Homa S.C. past practices;
(xii) any Contract that has a term of more than 60 days and
that may not be terminated by Homa S.C. (without penalty) within 60
days after the delivery of a termination notice by the Subject
Business; and
(xiii) any Contract that contemplates or involves (A) the
payment or delivery of cash or other consideration in an amount or
having a value in excess of $5,000 in the aggregate, or (B) the
performance of services having a value in excess of $5,000 in the
aggregate.
(b) Homa S.C. has delivered to HALIS accurate and complete
copies of all Contracts identified in Part 2.2.10(a) of the Disclosure Schedule,
including all amendments thereto. Each Contract identified in Part 2.2.10(a) of
the Disclosure Schedule is valid and in full force and effect, and is
enforceable by Homa S.C. in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
(c) Except as set forth in Part 2.2.10(c) of the Disclosure
Schedule:
(i) Homa S.C. has not violated or breached, or committed
any default under, any Homa S.C. Contract, and, to the best of the
knowledge of Homa, no other Person has violated or breached, or
committed any default under, any Homa S.C. Contract;
(ii) to the best of the knowledge of Homa, no event has
occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will, or could reasonably be expected
to, (A) result in a violation or breach of any of the provisions of any
Homa S.C. Contract, (B) give any Person the right to declare a default
or exercise any remedy under any Homa S.C. Contract, (C) give any
Person the right to accelerate the maturity or performance of any Homa
S.C. Contract, or (D) give any Person the right to cancel, terminate or
modify any Homa S.C. Contract;
(iii) Homa S.C. has not received any notice or other
communication regarding (A) any actual or possible violation or breach
of, or default under, any Homa S.C. Contract, or (B) any actual or
possible termination of any Homa S.C. Contract; and
(iv) Homa S.C. has not waived any of its material rights
under any Contract.
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(d) No Person is renegotiating, or has the right to
renegotiate, any amount paid or payable to Homa S.C. under any Homa S.C.
Contract or any other term or provision of any Homa S.C. Contract.
(e) The Contracts identified in Part 2.2.10(a) of the
Disclosure Schedule collectively constitute all of the Material Contracts
necessary to enable Homa S.C. to conduct its business in the manner in which its
business is currently being conducted and in the manner in which its business is
proposed to be conducted.
(f) Part 2.2.10(f) of the Disclosure Schedule identifies and
provides a brief description of each proposed Contract as to which any pending
bid, offer or proposal has been submitted or received by Homa S.C..
2.2.11 LIABILITIES.
(a) Homa S.C. has no accrued, contingent or other liabilities
of any nature, either matured or unmatured (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (i)
liabilities identified as such in the "liabilities" column of the Homa S.C.
Unaudited Balance Sheet; (ii) accounts payable or accrued salaries that have
been incurred by Homa S.C. since June 30, 1997, in the ordinary course of
business and consistent with Homa S.C.'s past practices; and (iii) the
liabilities identified in Part 2.2.11(a) of the Disclosure Schedule.
(b) Part 2.2.11(c) of the Disclosure Schedule provides an
accurate and complete breakdown of Homa S.C. "deferred support revenue" and all
related obligations and other liabilities of Homa S.C..
2.2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Homa S.C. is, and has at
all times since January 1, 1992 been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have in any individual case or in the aggregate, a
Material Adverse Effect on Homa S.C.. Except as set forth in Part 2.2.12 of the
Disclosure Schedule, since January 1, 1992, Homa S.C. has not received any
notice or other communication from any Governmental Body regarding any actual
or possible violation of, or failure to comply with, any Legal Requirement.
2.2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.2.13 of the Disclosure
Schedule identifies each material Governmental Authorization held by Homa S.C.,
and Homa S.C. has delivered to HALIS accurate and complete copies of all
Governmental Authorizations identified in Part 2.2.13 of the Disclosure
Schedule. The Governmental Authorizations identified in Part 2.2.13 of the
Disclosure Schedule are valid and in full force and effect, and collectively
constitute all Governmental Authorizations necessary to enable Homa S.C. to
conduct its business in the manner in which its business is currently being
conducted and in the manner in which its business is proposed to be conducted.
Homa S.C. is, and at all times since January 1, 1992 has been, in
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compliance with the material terms and requirements of the respective
Governmental Authorizations identified in Part 2.2.13 of the Disclosure
Schedule. Since January 1, 1992, Homa S.C. has not received any notice or other
communication from any Governmental Body regarding (i) any actual or possible
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (ii) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.
2.2.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of
Homa S.C. with any Governmental Body with respect to any transaction occurring
or any taxable period ending on or before the Closing Date (the "Homa S.C.
Returns") (i) have been or will be filed when due, and (ii) have been, or will
be when filed, accurately and completely prepared in compliance with all
applicable Legal Requirements. All amounts shown on the Homa S.C. Returns to be
due on or before the Closing Date have been or will be paid on or before the
Closing Date. Homa S.C. has delivered to HALIS accurate and complete copies of
all Homa S.C. Returns filed since January 1, 1992.
(b) The Homa S.C. Financial Statements fully accrue all actual
and contingent liabilities for Taxes with respect to all periods through the
dates thereof in accordance with generally accepted accounting principles. Homa
S.C. will establish, in the ordinary course of business and consistent with its
past practices, reserves adequate for the payment of all Taxes for the period
from June 30, 1997, through the Closing Date, and Homa S.C. will disclose the
dollar amount of such reserves to HALIS on or prior to the Closing Date.
(c) Each Homa S.C. Return relating to income Taxes that has
been filed with respect to any period ended on or prior to January 1, 1992 has
either (i) been examined and audited by all relevant Governmental Bodies, or
(ii) by virtue of the expiration of the limitation period under applicable Legal
Requirements, is no longer subject to examination or audit by any Governmental
Body. Except as set forth in Part 2.2.14(c) of the Disclosure Schedule, there
has been no examination or audit of any Homa S.C. Return, and no such
examination or audit has been proposed or scheduled by any Governmental Body.
Homa S.C. has delivered to HALIS accurate and complete copies of all audit
reports and similar documents (to which Homa S.C. has access) relating to the
Homa S.C. Returns. Except as set forth in Part 2.2.14(c) of the Disclosure
Schedule, no extension or waiver of the limitation period applicable to any of
the Homa S.C. Returns has been granted (by Homa S.C. or any other Person), and
no such extension or waiver has been requested from Homa S.C..
(d) Except as set forth in Part 2.2.14(d) of the Disclosure
Schedule, no claim or Legal Proceeding is pending or has been threatened against
or with respect to Homa S.C. in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of deficiency
or similar document received by Homa S.C.. There are no liens for Taxes upon any
of the assets of Homa S.C., except liens for current Taxes not yet due and
payable. Homa S.C. has not entered into or
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become bound by any agreement or consent pursuant to Section 341(f) of the Code.
Homa S.C. has not been, and Homa S.C. will not be, required to include any
adjustment in taxable income for any tax period (or portion thereof) pursuant to
Section 481 of 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions or events occurring, or accounting
methods employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of Homa S.C. that, considered individually or considered
collectively with any other such Contracts, will, or could reasonably be
expected to, give rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 280G or Section 162 of the Code.
Homa S.C. is not, and has never been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar Contract.
2.2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.2.15(a) of the Disclosure Schedule contains a list
of all salaried employees of Homa S.C. as of the date of this Agreement, and
correctly reflects their salaries, any other compensation payable to them
(including compensation payable pursuant to bonus, deferred compensation or
commission arrangements), their dates of employment and their positions. Homa
S.C. is not a party to any collective bargaining contract or other Contract with
a labor union involving any of its employees.
(b) Part 2.2.15(b) of the Disclosure Schedule identifies each
employee of Homa S.C. who is not fully available to perform work because of
disability or other leave, and sets forth the basis of such leave and the
anticipated date of return to full service.
(c) Part 2.2.15(c) of the Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical,
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (individually referred to as a "Plan" and
collectively referred to as the "Plans") sponsored, maintained, contributed to
or required to be contributed to by Homa S.C. for the benefit of any current or
former employee of Homa S.C..
(d) Homa S.C. does not maintain, sponsor or contribute to,
and, to the best of the knowledge of Homa, Homa S.C. has not at any time in the
past maintained, sponsored or contributed to, any employee pension benefit plan
(as defined in Section 3(2)) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), whether or not excluded from coverage under specific
Titles or Merger Subtitles of ERISA) for the benefit of employees or former
employees of Homa S.C. (a "Pension Plan").
(e) Homa S.C. does not maintain, sponsor or contribute to any
employee welfare benefit plan (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of employees or former employees of
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Homa S.C. (a "Welfare Plan") except for those Welfare Plans described in Part
2.2.15(e) of the Disclosure Schedule, none of which is a multiemployer plan
(within the meaning of Section 3(37) of ERISA).
(f) With respect to each Plan, Homa S.C. has delivered to HALIS:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report (if
required under ERISA) with respect to such Plan for 1995 and 1996;
(iii) an accurate and complete copy of (A) the most recent
summary plan description, together with each Summary of Material
Modifications (if required under ERISA) with respect to such Plan, and
(B) each material employee communication relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other
funding agreement (including all amendments thereto) and accurate and
complete copies of the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance contracts,
minimum premium contracts, stop-loss agreements, investment management
agreements, subscription and participation agreements and recordkeeping
agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with
respect to such Plan (if such Plan is intended to be qualified under
Section 401(a) of the Code).
(g) Homa S.C. is not required to be, and, to the best of the
knowledge of Homa, Homa S.C. has never been required to be, treated as a single
employer with any other Person under Section 4001(b)(1) of ERISA or Section
414(b), (c), (m) or (o) of the Code. Homa S.C. has never been a member of an
"affiliated service group" within the meaning of Section 414(m) of the Code. To
the best of the knowledge of Homa, Homa S.C. has never made a complete or
partial withdrawal from a "multiemployer plan" (as defined in Section 3(37) of
ERISA) resulting in "withdrawal liability" (as defined in Section 4201 of
ERISA), without regard to subsequent reduction or waiver of such liability under
either Section 4207 or 4208 of ERISA.
(h) Homa S.C. does not have any plan or commitment to create
any additional Welfare Plan or any Pension Plan, or to modify or change any
existing Welfare Plan or Pension Plan (other than to comply with applicable
law).
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(i) No Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former employee of Homa
S.C. after any such employee's termination of service (other than (i) benefit
coverage mandated by applicable law, including coverage provided pursuant to
Section 4980B of the Code, (ii) deferred compensation benefits accrued as
liabilities on the Homa S.C. Unaudited Balance Sheet, and (iii) benefits the
full cost of which are borne by current or former employees of Homa S.C. (or
their beneficiaries)).
(j) With respect to each of the Welfare Plans constituting a
group health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(k) Each of the Plans has been operated and administered in
all material respects in accordance with applicable Legal Requirements,
including ERISA and the Code.
(l) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination from the Internal
Revenue Service, and neither Homa S.C., nor any of the Shareholders are aware of
any reason why any such determination letter should be revoked.
(m) Except as set forth in Part 2.2.15(m) of the Disclosure
Schedule, neither the execution, delivery or performance of this Agreement, nor
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will result in any bonus payment, golden parachute payment,
severance payment or other payment to any current or former employee or director
of Homa S.C. (whether or not under any Plan), or materially increase the
benefits payable under any Plan, or result in any acceleration of the time of
payment or vesting of any such benefits.
(n) Homa S.C. is in compliance in all material respects with
all applicable Legal Requirements and Contracts relating to employment,
employment practices, employee compensation, wages, bonuses and terms and
conditions of employment.
(o) Homa S.C. has good labor relations, and Homa has no
knowledge of any facts indicating that (i) the consummation of the Merger or any
of the other transactions contemplated by this Agreement will have a material
adverse effect on Homa S.C.'s labor relations, or (ii) any of Homa S.C.'s
employees intends to terminate his or her employment with Homa S.C..
2.2.16 ENVIRONMENTAL MATTERS. Homa S.C. is and has at all times been
in compliance, in all material respects, with all applicable Environmental
Laws. Homa S.C. possesses all permits and other Governmental Authorizations
required under applicable Environmental Laws, and Homa S.C. is and has at all
times been in compliance with the terms and requirements of all such
Governmental Authorizations. Homa S.C. has not received any notice or other
communication (whether from a Governmental Body, citizens group, employee or
otherwise) that alleges that Homa S.C. is not in compliance with any
Environmental Law, and, to the best of the knowledge of Homa S.C. and the
Shareholders, there are no circumstances that could reasonably be expected to
prevent or interfere with Homa S.C. compliance with any Environmental Law in
the future. To the best of the
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knowledge of Homa, no current or prior owner of any property leased or
controlled by Homa S.C. has received any notice or other communication (whether
from a Governmental Body, citizens group, employee or otherwise) that alleges
that such current or prior owner or Homa S.C. is not or was not in compliance
with any Environmental Law. All Governmental Authorizations currently held by
Homa S.C. pursuant to Environmental Laws are identified in Part 2.2.16 of the
Disclosure Schedule.
2.2.17 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.
(a) Other than normal returns for refunds in the ordinary
course of business at levels consistent with past experience under Homa S.C.'s
standard return policy, Homa S.C. will not incur or otherwise become subject to
any material liability arising from (i) any product, system, program,
Proprietary Asset or other asset designed, developed, manufactured, assembled,
sold, supplied, installed, repaired, licensed or made available by Homa S.C. on
or prior to the Closing Date, or (ii) any consulting services, installation
services, programming services, repair services, maintenance services, training
services, support services or other services performed by Homa S.C.
on or prior to the Closing Date.
(b) Except as set forth in Part 2.2.17(b) of the Disclosure
Schedule, no customer or other Person has, at any time since January 1, 1992,
asserted or threatened to assert any claim against Homa S.C. (other than claims
that have been resolved satisfactorily at no material cost to Homa S.C.) under
or based upon (i) any warranty provided by or on behalf of Homa S.C., or (ii)
any services performed by Homa S.C..
2.2.18 INSURANCE. Part 2.2.18 of the Disclosure Schedule provides
accurate and complete information with respect to each insurance policy
maintained by, at the expense of or for the benefit of Homa S.C. and with
respect to any claims made thereunder. Homa S.C. has delivered to HALIS accurate
and complete copies of the insurance policies identified in Part 2.2.18 of the
Disclosure Schedule. Each of the insurance policies identified in Part 2.2.18 of
the Disclosure Schedule is in full force and effect. Since January 1, 1992, Homa
S.C. has not received any notice or other communication regarding any actual or
possible (a) cancellation or invalidation of any insurance policy, (b) refusal
of any coverage or rejection of any claim under any insurance policy, or (c)
material adjustment in the amount of the premiums payable with respect to any
insurance policy.
2.2.19 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.2.19
of the Disclosure Schedule: (a) no Related Party has, and no Related Party has
at any time since January 1, 1992 had, any direct or indirect interest in any
material asset used in or otherwise relating to the business of Homa S.C.; (b)
no Related Party is, or has at any time since January 1, 1992 been, indebted to
Homa S.C.; (c) since January 1, 1992, no Related Party has entered into, or has
had any direct or indirect financial interest in, any material Contract,
transaction or business dealing involving Homa S.C.; (d) no Related Party is
competing, or has at any time since January 1, 1992 competed, directly or
indirectly, with Homa S.C.; and (e) no Related Party has any claim or right
against Homa S.C. (other than rights to receive compensation for services
performed as an employee of Homa S.C.). For purposes of this Section 2.2.19,
each of the following shall be deemed to be a "Related Party":
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(i) Homa; (ii) each individual who is, or who has at any time since January 1,
1992 been, an officer or director of Homa S.C.; (iii) each individual who is,
or who at any time since January 1, 1992 has been, a member of the immediate
family of any of the individuals referred to in clauses "(i)" and "(ii)" above;
and (iv) any trust or other Entity (other than Homa S.C.) in which any one of
the individuals referred to in clauses "(i)," "(ii)" and "(iii)" above holds (or
in which more than one of such individuals collectively hold), beneficially or
otherwise, a material voting, proprietary or equity interest.
2.2.20 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.2.20(a) of the Disclosure
Schedule, there is no pending Legal Proceeding, and, to the best of the
knowledge of Homa, no Person has threatened to commence any Legal Proceeding:
(i) that involves Homa S.C. or any of the assets owned or used by Homa S.C.; or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement. To the best of the knowledge of
Homa, except as set forth in Part 2.2.20(a) of the Disclosure Schedule, no event
has occurred, and no claim, dispute or other condition or circumstance exists,
that will, or that could reasonably be expected to, give rise to or serve as a
basis for the commencement of any such Legal Proceeding.
(b) Except as set forth in Part 2.2.20(b) of the Disclosure
Schedule, no Legal Proceeding has ever been commenced by, and no Legal
Proceeding has ever been pending against, Homa S.C..
(c) There is no order, writ, injunction, judgment or decree to
which Homa S.C., or any of the assets owned or used by Homa S.C., are subject.
Neither Homa nor Homa S.C. is subject to any order, writ, injunction, judgment
or decree that relates to Homa S.C. business or to any of the assets owned or
used by Homa S.C.. To the best of the knowledge of Homa, no officer or other
employee of Homa S.C. is subject to any order, writ, injunction, judgment or
decree that prohibits such officer or other employee from engaging in or
continuing any conduct, activity or practice relating to Homa S.C.'s business.
2.2.21 AUTHORITY; BINDING NATURE OF AGREEMENT. Homa and Homa S.C.
have the absolute and unrestricted right, power and authority to enter into and
to perform their respective obligations under this Agreement; and the
execution, delivery and performance by Homa S.C. of this Agreement has been
duly authorized by all necessary action on the part of Homa S.C. and its board
of directors and shareholders. This Agreement constitutes the legal, valid and
binding obligation of Homa and Homa S.C., enforceable against Homa and Homa
S.C. in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
2.2.22 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part
2.2.22 of the Disclosure Schedule, neither (i) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in
this Agreement, nor (ii) the consummation of the Merger or any of the
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other transactions contemplated by this Agreement, will directly or indirectly
(with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of Homa S.C.'s articles of incorporation or bylaws, or
(ii) any resolution adopted by Homa S.C.'s shareholders, or Homa S.C.'s board of
directors or any committee of Homa S.C.'s board of directors;
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which Homa S.C., or any of the assets owned or used by Homa S.C.,
is subject;
(c) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by Homa S.C. or that otherwise relates to Homa S.C.'s
business or to any of the assets owned or used by Homa S.C.;
(d) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any Company Contract,
or give any Person the right to (i) declare a default or exercise any remedy
under any Company Contract, (ii) accelerate the maturity or performance of any
Company Contract, or (iii) cancel, terminate or modify any Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by Homa S.C. (except
for minor liens that will not, in any case or in the aggregate, materially
detract from the value of the assets subject thereto or materially impair the
operations of Homa S.C.).
Except as set forth in Part 2.2.22 of the Disclosure Schedule, Homa S.C. is not
and will not be required to make any filing with or given any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
2.2.23 FULL DISCLOSURE. This Agreement (including the Disclosure
Schedule) does not, and Homa's Closing Certificate (as defined in Section
6.4(h)) will not, (i) contain any representation, warranty or information that
is false or misleading with respect to any material fact, or (ii) omit to state
any material fact necessary in order to make the representations, warranties and
information contained and to be contained herein and therein not false or
misleading.
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SECTION 3. REPRESENTATIONS AND WARRANTIES OF HALIS AND THE SUBSIDIARY
HALIS and the Subsidiary, jointly and severally, represent and
warrant to PhySource and the Shareholders as follows:
3.1 SEC FILINGS; FINANCIAL STATEMENTS.
(a) HALIS has delivered to PhySource accurate and complete
copies (excluding copies of exhibits) of each report, registration statement (on
a form other than Form S-8) and definitive proxy statement filed by HALIS with
the SEC between January 1, 1997 and the date of this Agreement (the "HALIS SEC
Documents"). The HALIS SEC Documents constitute all of the documents (other than
preliminary material) that HALIS was required to file with the SEC since such
date. As of the time it was filed with the SEC (or, if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing):
(i) each of the HALIS SEC Documents complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act (as the case
may be); and (ii) none of the HALIS SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the
HALIS SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered, except as may be indicated in
the notes to such financial statements and (in the case of unaudited statements)
as permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to normal and recurring
year-end audit adjustments (which will not, individually or in the aggregate, be
material in magnitude); and (iii) fairly present the consolidated financial
position of HALIS as of the respective dates thereof and the consolidated
results of operations of HALIS for the periods covered thereby.
3.2 DUE ORGANIZATION; AUTHORITY; BINDING NATURE OF AGREEMENT.
Each of HALIS and the Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia. HALIS and
the Subsidiary each have the absolute and unrestricted right, power and
authority to perform their respective obligations under this Agreement; and the
execution, delivery and performance by HALIS and the Subsidiary of this
Agreement have been duly authorized by all necessary action on the part of
HALIS and the Subsidiary and their respective boards of directors. This
Agreement shall constitute the legal, valid and binding obligation of HALIS and
the Subsidiary, enforceable against each of them in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
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3.3 VALID ISSUANCE. The HALIS Common Stock to be issued as Merger
Consideration will, when issued in accordance with the provisions of this
Agreement, be validly issued, fully paid and nonassessable.
SECTION 4. CERTAIN COVENANTS OF PHYSOURCE AND THE SHAREHOLDERS
4.1 ACCESS AND INVESTIGATION. During the period from the date of
this Agreement through the Effective Time (the "Pre-Closing Period"), PhySource
shall, and shall cause its Representatives to: (a) provide HALIS and HALIS's
Representatives with reasonable access to PhySource's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to PhySource; and (b)
provide HALIS and HALIS's Representatives with such copies of the existing
books, records, Tax Returns, work papers and other documents and information
relating to PhySource, and with such additional financial, operating and other
data and information regarding PhySource, as HALIS may reasonably request.
Notwithstanding the provisions of Section 11.17, paragraph 7 of the letter
agreement between PhySource and HALIS dated April 1, 1997 ("Letter of Intent")
shall remain in effect through the Closing Date and shall bind HALIS with
respect to any Evaluation Material (as defined in the Letter of Intent)
provided to HALIS or its Representatives during the Pre-Closing Period.
4.2 OPERATION OF PHYSOURCE'S BUSINESS. During the Pre-Closing
Period, unless HALIS otherwise consents in writing, and except for matters
disclosed in Part 4.2 of the Disclosure Schedule:
(a) PhySource shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) PhySource shall use reasonable efforts to preserve intact
its current business organizations, keep available the services of its current
officers and key employees and maintain its relations and goodwill with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with PhySource;
(c) PhySource shall keep in full force all insurance policies
identified in Part 2.18 of the Disclosure Schedule;
(d) PhySource shall cause its officers to report regularly to
HALIS concerning the status of PhySource's business;
(e) PhySource shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities;
(f) PhySource shall not sell, issue or authorize the issuance
of (i) any capital stock or other security, (ii) any option, call, warrant or
right to acquire, or relating to, any capital
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stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(g) except for the transactions identified in Part 2.1.5 of
the Disclosure Schedule, neither PhySource, nor any of the Shareholders shall
amend or permit the adoption of any amendment to PhySource articles of
incorporation or bylaws, or effect or permit PhySource to become a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(h) except for the transactions identified in Part 2.1.5 of
the Disclosure Schedule, PhySource shall not form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(i) except for the transactions identified in Part 2.1.5 of
the Disclosure Schedule, PhySource shall not make any capital expenditure,
except for capital expenditures that, when added to all other capital
expenditures made on behalf of PhySource during the Pre-Closing Period, do not
exceed $25,000 in the aggregate;
(j) except for the transactions identified in Part 2.1.5 of
the Disclosure Schedule, PhySource shall not (i) enter into or become bound by,
or permit any of the assets owned or used by it to become bound by, any Material
Contract, or (ii) amend or prematurely terminate, or waive any material right or
remedy under, any Material Contract;
(k) PhySource shall not, other than in the ordinary course of
business consistent with past practice (i) acquire, lease or license any right
or other asset from any other Person, (ii) sell or otherwise dispose of, or
lease or license, any right or other asset to any other Person, or (iii) waive
or relinquish any right, except for immaterial assets acquired, leased, licensed
or disposed of by PhySource pursuant to Contracts that are not Material
Contracts;
(l) PhySource shall not (i) lend money to any Person, or (ii)
incur or guarantee any indebtedness, except that PhySource may make routine
borrowings in the ordinary course of business under its respective existing
lines of credit;
(m) PhySource shall not (i) establish, adopt or amend any
Employee Benefit Plan, (ii) pay any bonus or make any profit-sharing or similar
payment to, or increase the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees, or (iii) hire any new employee whose aggregate annual
compensation is expected to exceed $25,000;
(n) PhySource shall not change any of its methods of
accounting or accounting practices in any respect;
(o) PhySource shall not make any Tax election;
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(p) PhySource shall not commence or settle any Legal
Proceeding;
(q) except for the transactions identified in Part 2.1.5 of
the Disclosure Schedule, PhySource shall not enter into any material transaction
or take any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(r) except for the transactions identified in Part 2.1.5 of
the Disclosure Schedule, PhySource shall not agree or commit to take any of the
actions described in clauses "(e)" through "(q)" of this Section 4.2.
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, PhySource and the
Shareholders shall promptly notify in writing of:
(i) the discovery by PhySource or the Shareholders of
any event, condition, fact or circumstance that occurred or existed on
or prior to the date of this Agreement and that caused or constitutes
an inaccuracy in or breach of any representation or warranty made by
PhySource or any of the Shareholders in this Agreement;
(ii) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and that
would cause or constitute an inaccuracy in or breach of any
representation or warranty made by PhySource or any of the Shareholders
in this Agreement if (A) such representation or warranty had been made
as of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of
this Agreement;
(iii) any breach of any covenant or obligation of
PhySource or any of the Shareholders; and
(iv) any event, condition, fact or circumstance that
would make the timely satisfaction of any of the conditions set forth
in Section 6 or Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.3(a) requires any change in the
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Disclosure Schedule were dated as of the date
of the occurrence, existence or discovery of such event, condition, fact or
circumstance, then PhySource or the Shareholders shall promptly deliver to HALIS
an update to the Disclosure Schedule specifying such change. No such update
shall be deemed to supplement or amend the Disclosure Schedule for the purpose
of (i) determining the accuracy of any of the representations and warranties
made by PhySource or any of the Shareholders in this Agreement, or (ii)
determining whether any of the conditions set forth in Section 6 has been
satisfied.
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4.4 NO NEGOTIATION. Except with respect to the transactions
identified in Part 2.1.5 of the Disclosure Schedule, during the Pre-Closing
Period, neither PhySource nor any of the Shareholders shall, directly or
indirectly:
(a) solicit or encourage the initiation of any inquiry,
proposal or offer from any Person (other than HALIS) relating to a possible
Acquisition Transaction;
(b) participate in any discussions or negotiations or enter
into any agreement with, or provide any non-public information to, any Person
(other than HALIS) relating to or in connection with a possible Acquisition
Transaction; or
(c) consider, entertain or accept any proposal or offer from
any Person (other than HALIS) relating to a possible Acquisition Transaction.
PhySource shall promptly notify HALIS in writing of any inquiry, proposal or
offer relating to a possible Acquisition Transaction that is received by
PhySource or any of the Shareholders during the Pre-Closing Period.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given by
such party in connection with the Merger and the other transactions contemplated
by this Agreement, and (b) shall use his, its or their best efforts to obtain
each Consent (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger or any of the other transactions contemplated by this Agreement.
PhySource shall promptly deliver to HALIS a copy of each such filing made, each
such notice given and each such Consent obtained by PhySource during the Pre-
Closing Period. HALIS shall promptly deliver to PhySource a copy of each such
filing made, each such notice given and each such consent obtained by HALIS
during the Pre-Closing Period.
5.2 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, (a)
neither PhySource nor any of the Shareholders shall (and PhySource shall not
permit any of its Representatives to) issue any press release or make any
public statement regarding this Agreement or the Merger, or regarding any of
the other transactions contemplated by this Agreement, without HALIS's prior
written consent, and (b) HALIS will use reasonable efforts to consult with
PhySource prior to issuing any press release or making any public statement
regarding the Merger.
5.3 BEST EFFORTS. During the Pre-Closing Period, (a) PhySource
and the Shareholders shall use their reasonable best efforts to cause the
conditions set forth in Section 6 to be satisfied on a timely basis, and (b)
each of HALIS and the Subsidiary shall use its reasonable best efforts to cause
the conditions set forth in Section 7 to be satisfied on a timely basis.
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5.4 EMPLOYMENT AND NON-SOLICITATION AGREEMENTS. At the Closing, Homa
shall execute and deliver to HALIS an Employment Agreement in the form of
Exhibit D-1 (the "Employment Agreement"), and Mitchell C. Andrews, Mark C.
Kendall, Priscilla Lopez and Joseph Maschek, Jr. shall each execute and deliver
to HALIS a Non-Solicitation Agreement in the form of Exhibit D-2 (the
"Non-Solicitation Agreements").
5.5 RELEASE. At the Closing, each of the Shareholders shall execute and
deliver to HALIS a Release in the form of Exhibit E (the "Release").
5.6 TERMINATION OF EMPLOYEE PLANS. At the Closing, PhySource shall
terminate all bonus plans and other benefit plans under which any of its
employees or former employees may have any rights, and shall ensure that no
employee or former employee of PhySource has any rights thereunder and that any
liabilities of PhySource thereunder (including any such liabilities relating to
services performed prior to the Closing) are fully extinguished at no cost to
PhySource.
5.7 FIRPTA MATTERS. At the Closing, (a) PhySource shall deliver to
HALIS a statement (in such form as may be reasonably requested by counsel to
HALIS) conforming to the requirements of Section 1.897-2(h)(1)(i) of the United
States Treasury Regulations, and (b) PhySource shall deliver to the Internal
Revenue Service the notification required under Section 1.897-2(h)(2) of the
United States Treasury Regulations.
5.8 PAYMENT OF DEFERRED COMPENSATION. At the Closing, HALIS shall issue
and deliver to each of Mitchell C. Andrews, Mark C. Kendall, Priscilla Lopez and
Joseph Maschek, Jr. certificates representing HALIS Common Stock, and within 90
days of the Closing Date, HALIS shall execute and deliver to Messrs. Andrews,
Kendall and Maschek and Ms. Lopez Stock Option Agreements, all as specified in
Part 5.8 of the Disclosure Schedule in full and complete satisfaction of all
expenses advanced and deferred compensation obligations of PhySource to such
persons on the Closing Date. The shares of HALIS Common Stock issued pursuant
hereto shall be deemed, for purposes of Section 10 of this Agreement, to be
received by the aforementioned Shareholders in the Merger.
5.9 TERMINATION OF EMPLOYMENT AGREEMENTS. At the Closing, Priscilla
Lopez and Joseph Maschek, Jr. shall each terminate their existing employment
agreements with PhySource, and HALIS shall issue and deliver to Ms. Lopez a
certificate representing 11,848 shares of HALIS Common Stock and to Mr. Maschek
a certificate representing 15,480 shares of HALIS Common Stock. The shares of
HALIS Common Stock issued pursuant hereto shall be deemed, for purposes of
Section 10 of this Agreement, to be received by the Shareholders in the Merger.
5.10 TERMINATION OF HALIS LETTER AGREEMENT. At the Closing, Gerald R.
Forsythe, Walter R. Fawcett III, Priscilla Lopez, Joseph Maschek, Jr., Mitchell
Andrews and Mark Kendall shall have terminated that certain letter agreement
with HALIS dated November 20, 1996 (the "HALIS Letter Agreement").
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SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF HALIS AND THE SUBSIDIARY
The obligations of HALIS and the Subsidiary to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by PhySource and the Shareholders and by Homa in this Agreement
and in each of the other agreements and instruments delivered to HALIS in
connection with the transactions contemplated by this Agreement shall have been
accurate in all respects as of the date of this Agreement, and shall be accurate
in all respects as of the Scheduled Closing Time as if made at the Scheduled
Closing Time (without giving effect to any update to the Disclosure Schedule).
6.2 PERFORMANCE OF COVENANTS. Each covenant or obligation that
PhySource or any of the Shareholders is required to comply with or to perform at
or prior to the Closing shall have been complied with and performed in all
respects.
6.3 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this Agreement (including
the Consents identified in Part 2.22 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
6.4 AGREEMENTS AND DOCUMENTS. HALIS shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) the Employment Agreement, executed by Homa, and the
Non-Solicitation Agreements, executed by Mitchell C. Andrews, Mark C. Kendall,
Priscilla Lopez and Joseph Maschek, Jr.;
(b) a Release, executed by each of the Shareholders;
(c) the statement referred to in Section 5.7, executed by
PhySource;
(d) estoppel certificates, each dated as of a date not more than
five days prior to the Closing Date and satisfactory in form and content to
HALIS, executed by the Persons identified on Exhibit F;
(e) a legal opinion of Freeborn & Peters, dated as of the Closing
Date, satisfactory in form and substance to HALIS and its counsel;
(f) a certificate executed by PhySource and the Shareholders other
than Homa and containing the representation and warranty of PhySource and each
Shareholder other than Homa that each of the representations and warranties set
forth in Section 2.1 is accurate in all material respects as of the Closing Date
as if made on the Closing Date and that the conditions set forth in
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Sections 6.1, 6.2, 6.3, 6.4 and 6.5 have been duly satisfied (the "PhySource and
Shareholders' Closing Certificate");
(g) a legal opinion of Donald S. Lavin, Esq., dated as of the
Closing Date, satisfactory in form and substance to HALIS and its counsel; and
(h) a certificate executed by Homa and containing the
representation and warranty of Homa that each of the representations and
warranties set forth in Section 2.2 is accurate in all material respects as of
immediately prior to the closing of the Homa Merger as if made on such date and
that the conditions set forth in Sections 6.1, 6.2, 6.3, 6.4 and 6.5 have been
duly satisfied (the "Homa Closing Certificate").
6.5 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in PhySource's or Homa S.C.'s business, condition, assets,
liabilities, operations, financial performance or prospects since the date of
this Agreement.
6.6 TERMINATION OF EMPLOYEE PLANS. PhySource shall have provided HALIS
with evidence, satisfactory to HALIS, as to the termination of the plans
referred to in Section 5.6.
6.7 FIRPTA COMPLIANCE. PhySource shall have filed with the Internal
Revenue Service the notification referred to in Section 5.7.
6.8 RULE 506. All applicable requirements of Rule 506 under the
Securities Act shall have been satisfied.
6.9 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.10 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Merger or seeking to prohibit
or limit the exercise by PhySource of any material right pertaining to its
ownership of stock of the Surviving Corporation.
6.11 COMPLETION OF DUE DILIGENCE. HALIS shall have completed its due
diligence investigation of PhySource and Homa S.C. and shall have been satisfied
with the results thereof.
6.12 SHAREHOLDER INVESTMENT CERTIFICATIONS. Shareholder Investment
Certifications in the form of Exhibit G executed by each of the Shareholders
shall have been delivered to HALIS.
6.13 TERMINATION OF EMPLOYMENT AGREEMENTS. The Employment Agreements
between PhySource and Priscilla Lopez and Joseph Maschek, Jr. shall have been
terminated.
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6.14 TERMINATION OF SHAREHOLDERS AGREEMENT. The Shareholders Agreement,
dated as of February 28, 1996, by and among PhySource and the Shareholders,
shall have been terminated.
6.15 TERMINATION OF HALIS LETTER AGREEMENT. The HALIS Letter Agreement
shall have been terminated by the Shareholders specified in Section 5.10.
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PHYSOURCE AND THE
SHAREHOLDERS.
The obligations of PhySource and the Shareholders to effect the Merger
and otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or prior to the Closing, of the following
conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by HALIS and the Subsidiary in this Agreement and in each of the
other agreements and instruments delivered to PhySource in connection with the
transactions contemplated by this Agreement shall have been accurate in all
respects as of the date of this Agreement, and shall be accurate in all respects
as of the Scheduled Closing Time as if made at the Scheduled Closing Time.
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
HALIS is required to comply with or to perform at or prior to the Closing shall
have been complied with and performed in all respects.
7.3 CONSENTS. All Consents required to be obtained in connection with
the merger and the other transactions contemplated by this Agreement shall have
been obtained and shall be in full force and effect.
7.4 AGREEMENTS AND DOCUMENTS.
(a) The Subsidiary shall have entered into the Employment Agreement
described in Section 6.4(a);
(b) PhySource shall have received a legal opinion of Smith,
Gambrell & Russell in form and substance satisfactory to PhySource and its
counsel; and
(c) PhySource shall have received a certificate executed by HALIS
and the Subsidiary, and containing the representation and warranty of HALIS and
the Subsidiary that each of the representations and warranties set forth in
Section 3 are accurate in all material respects as of the Closing Date as if
made on the Closing Date and that the conditions set forth in Sections 7.1, 7.2,
7.3 and 7.4 have been duly satisfied (the "HALIS Closing Certificate").
7.5 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger by
PhySource shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal
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Requirement enacted or deemed applicable to the Merger that makes consummation
of the Merger by PhySource illegal.
7.6 PAYMENT OF DEFERRED COMPENSATION. HALIS shall have delivered to the
individuals identified in Section 5.8 shares of HALIS Common Stock as provided
in Section 5.8.
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by HALIS if HALIS reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of HALIS to comply with or
perform any covenant or obligation of HALIS set forth in this Agreement);
(b) by PhySource if PhySource reasonably determines that the timely
satisfaction of any condition set forth in Section 7 has become impossible
(other than as a result of any failure on the part of PhySource or any of the
Shareholders to comply with or perform any covenant or obligation set forth in
this Agreement or in any other agreement or instrument delivered to HALIS);
(c) by HALIS at or after the Scheduled Closing Time if any
condition set forth in Section 6 has not been satisfied by the Scheduled Closing
Time;
(d) by PhySource at or after the Scheduled Closing Time if any
condition set forth in Section 7 has not been satisfied by the Scheduled Closing
Time;
(e) by HALIS if the Closing has not taken place on or before August
31, 1997 (other than as a result of any failure on the part of HALIS to comply
with or perform any covenant or obligation of HALIS set forth in this
Agreement);
(f) by PhySource if the Closing has not taken place on or before
August 31, 1997 (other than as a result of the failure on the part of PhySource
or any of the Shareholders to comply with or perform any covenant or obligation
set forth in this Agreement or in any other agreement or instrument delivered to
HALIS);
(g) by the mutual consent of HALIS and PhySource; or
(h) by HALIS under the circumstances described in Section 4.3(b).
8.2 TERMINATION PROCEDURES. If HALIS wishes to terminate this Agreement
pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e), HALIS shall
deliver to PhySource a written notice stating that HALIS is terminating this
Agreement and setting forth a brief description of the basis on which HALIS is
terminating this Agreement. If PhySource wishes to terminate this Agreement
pursuant to Section 8.1(b), Section 8.1(d) or Section 8.1(f), PhySource shall
deliver to HALIS a
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written notice stating that PhySource is terminating this Agreement and setting
forth a brief description of the basis on which PhySource is terminating this
Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) no party shall be relieved of any
obligation or liability arising from any prior breach by such party of any
provision of this Agreement; (b) the parties shall, in all events, remain bound
by and continue to be subject to the provisions set forth in Section 11, as well
as paragraph 7 of the Letter of Intent.
SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of PhySource, the Shareholders other than Homa,
the Homa S.C., Homa, HALIS and the Subsidiary contained in this Agreement shall
survive the Closing and shall continue for a period of two years following the
Closing Date; except that representations and warranties contained in Sections
2.1.6, 2.1.9, 2.1.14, 2.1.15, 2.2.6, 2.2.9, 2.2.14 and 2.2.15 shall survive
until expiration of the applicable statutes of limitation for breach of such
representations and warranties. The expiration of any representation or warranty
shall not affect any party's right to claim indemnification for a breach of such
representation or warranty, provided such party gives notice of such claim in
accordance with the provisions of this Section 9 prior to the expiration of such
representation or warranty.
9.2 SHAREHOLDERS' INDEMNITY AGREEMENT.
9.2.1 SHAREHOLDERS OTHER THAN HOMA INDEMNITY AGREEMENT. Subject to the
provisions of Section 9.6.1 hereof, the Shareholders other than Homa, jointly
and severally, shall defend, indemnify and hold harmless HALIS and the Surviving
Corporation (and their respective directors, officers, employees, agents,
affiliates, successors and assigns) from and against any and all direct or
indirect requests, demands, claims, payments, defenses, obligations, recoveries,
deficiencies, fines, penalties, interest, assessments, actions, liens, causes of
action, suits, proceedings, judgments, losses, Damages (including without
limitation punitive, exemplary or consequential damages, lost income and
profits, interruptions of business and diminution in the value of the stock),
liabilities, costs, and expenses of any kind (including without limitation (i)
interest, penalties and reasonable attorneys' fees and expenses, (ii) attorneys'
fees and expenses necessary to enforce their rights to indemnification
hereunder, and (iii) consultants' fees and other costs of defending or
investigating any claim hereunder), and interest on any amount payable as a
result of the foregoing, whether accrued, absolute, contingent, known, unknown,
or otherwise as of the Closing Date or thereafter asserted against, imposed upon
or incurred by HALIS, the Surviving Corporation or any of their respective
directors, officers, employees, agents, affiliates, successors or assigns (a
"Loss of HALIS") by reason of, resulting from, arising out of, based upon,
awarded or asserted against or otherwise in respect of:
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(a) any period or periods of PhySource ending prior to the Closing
and which involve any claims against HALIS, PhySource, the Surviving Corporation
or their respective properties or assets, relating to actions or inactions of
PhySource or its respective officers, directors, shareholders, employees or
agents prior to Closing, or the operation of the business of PhySource prior to
the Closing unless such liability was disclosed on the Company Financial
Statements and adequate reserves were established therefor;
(b) any breach of any representation and warranty contained in this
Agreement or any misrepresentation in or omission on the part of PhySource or
the Shareholders contained in any certificate furnished or to be furnished to
HALIS by PhySource or any of the Shareholders pursuant to this Agreement;
(c) any breach or nonfulfillment on the part of PhySource or any of
the Shareholders of any covenant contained in this Agreement;
(d) the failure of PhySource or any of the Shareholders to obtain,
prior to the Closing Date, any consents, approvals and waivers of governmental
agencies or entities, lessors, landlords, suppliers, and other third parties as
may be necessary to permit the consummation of the Merger and to permit the
Surviving Corporation to continue to operate the business of PhySource in the
manner presently conducted after the Closing Date;
(e) the failure of the Surviving Corporation to collect any
accounts receivable of PhySource existing on the Closing Date, net of reserve
for doubtful accounts or bad debts set forth in the Financial Statements, within
180 days following the Closing Date; provided, however, that (i) the Surviving
Corporation shall use commercially reasonable efforts to collect any such
accounts receivable; and (ii) upon receipt of full payment from Shareholders,
the Surviving Corporation shall reassign to the Shareholders any such account
receivable;
(f) any federal, state, local or foreign taxes, including any
interest and penalties thereon, due from PhySource or the Shareholders with
respect to any period prior to the Closing Date, other than amounts accrued
therefor on the Financial Statements.
9.2.2 HOMA'S INDEMNITY AGREEMENT. Subject to the provisions of Section
9.6.1 hereof, Homa shall defend, indemnify and hold harmless HALIS and the
Surviving Corporation (and their respective directors, officers, employees,
agents, affiliates, successors and assigns) from and against any and all Losses
of HALIS by reason of, resulting from, arising out of, based upon, awarded or
asserted against or otherwise in respect of:
(a) any period or periods of Homa S.C. ending prior to the Closing
and which involve any claims against HALIS, Homa S.C., the Surviving Corporation
or their respective properties or assets, relating to actions or inactions of
Homa S.C. or its officers, directors, shareholders, employees or agents prior to
Closing, or the operation of the business of Homa S.C. prior to the Closing
unless such liability was disclosed on the Homa S.C. Financial Statements and
adequate reserves were established therefor;
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(b) any breach of any representation and warranty contained in this
Agreement or any misrepresentation in or omission on the part of Homa S.C. or
Homa contained in any certificate furnished or to be furnished to HALIS by Homa
S.C. or Homa pursuant to this Agreement;
(c) any breach or nonfulfillment on the part of Homa S.C. or Homa
of any covenant contained in this Agreement;
(d) the failure of Homa S.C. or Homa to obtain, prior to the
Closing Date, any consents, approvals and waivers of governmental agencies or
entities, lessors, landlords, suppliers, and other third parties as may be
necessary to permit the consummation of the Merger and to permit the Surviving
Corporation to continue to operate the business of Homa S.C. in the manner
presently conducted after the Closing Date;
(e) the failure of the Surviving Corporation to collect any
accounts receivable of Homa S.C. existing immediately prior to the closing of
the Homa Merger, net of reserve for bad debts set forth in the Homa S.C.
Financial Statements, within 180 days following the Closing Date; provided,
however, that upon receipt of full payment from Homa, the Surviving Corporation
shall reassign to Homa any such account receivable;
(f) any federal, state, local or foreign taxes, including any
interest and penalties thereon, due from Homa S.C. or Homa with respect to any
period prior to the Closing Date, other than amounts accrued therefor on the
Homa S.C. Financial Statements.
9.3 INDEMNITY AGREEMENT OF HALIS AND THE SURVIVING CORPORATION. HALIS
and the Surviving Corporation shall indemnify and hold harmless the Shareholders
(and their respective successors and assigns) from and against any and all
direct or indirect requests, demands, claims, payments, defenses, obligations,
recoveries, deficiencies, fines, penalties, interest, assessments, actions,
liens, causes of action, suits, proceedings, judgments, losses, Damages
(including without limitation punitive, exemplary or consequential damages and
lost income and profits and interruptions of business), liabilities, costs, and
expenses of any kind (including without limitation (i) interest, penalties and
reasonable attorneys' fees and expenses, (ii) attorneys' fees and expenses
necessary to enforce their rights to indemnification hereunder, and (iii)
consultants' fees and other costs of defending or investigating any claim
hereunder, and interest on any amount payable as a result of the foregoing)
whether accrued, absolute, contingent, known, unknown or otherwise as of the
Closing Date or thereafter asserted against, imposed upon or incurred by
Shareholders or its respective representatives or assigns, (a "Loss of
Shareholders") by reason of, resulting from, arising out of, based upon, awarded
or asserted against in respect of or otherwise in respect of:
(a) any period or periods of the Surviving Corporation beginning
after the Closing and which involve any claims against the Shareholders or their
respective assets relating to actions or inactions of HALIS or the Surviving
Corporation or their respective officers, directors, shareholders, employees or
agents after the Closing, or the operation of the Surviving Corporation
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after the Closing (except to the extent any of the foregoing arise from the acts
or omissions of the Shareholders); and
(b) any breach of any representation and warranty or nonfulfillment
of any covenant or agreement on the part of HALIS or the Subsidiary contained in
this Agreement, or any misrepresentation in or omission from or nonfulfillment
of any covenant on the part of the HALIS or the Subsidiary contained in any
certificate furnished or to be furnished to the Shareholders by HALIS or the
Subsidiary pursuant to this Agreement.
9.4 INDEMNIFICATION PROCEDURE.
(a) Upon obtaining knowledge thereof, the party to be indemnified
hereunder (the "Indemnitee") shall promptly notify the indemnifying party
hereunder (the "Indemnitor") in writing of any damage, claim, loss, liability or
expense or other matter which the Indemnitee has determined has given or could
give rise to a claim for which indemnification rights are granted hereunder
(such written notice referred to as the "Notice of Claim"). The Notice of Claim
shall specify, in all reasonable detail, the nature and estimated amount of any
such claim giving rise to a right of indemnification, to the extent the same can
reasonably be estimated. Any failure on the part of an Indemnitee to give timely
notice to the Indemnitor of a claim shall not affect the right of the Indemnitee
to obtain indemnification from the Indemnitor with respect to such claim unless
the Indemnitor is actually harmed by such failure to notify, and only to the
extent of such actual harm.
(b) With respect to any matter set forth in a Notice of Claim
relating to a third party claim the Indemnitor shall defend, in good faith and
at its expense, any such claim or demand, and the Indemnitee, at its expense,
shall have the right to participate in the defense of any such third party
claim. So long as Indemnitor is defending, in good faith, any such third party
claim, the Indemnitee shall not settle or compromise such third party claim. The
Indemnitee shall make available to the Indemnitor or its representatives all
records and other materials reasonably required by them for use in contesting
any third party claim and shall cooperate fully with the Indemnitor in the
defense of all such claims. If the Indemnitor does not defend any such third
party claim or if the Indemnitor does not provide the Indemnitee with prompt and
reasonable assurances that the Indemnitor will satisfy the third party claim,
the Indemnitee may, at its option, elect to defend any such third party claim,
at the Indemnitor's expense. An Indemnitor may not settle or compromise any
claim without obtaining a full and unconditional release of the Indemnitee,
unless the Indemnitee consents in writing to such settlement or compromise.
Notwithstanding the foregoing, if there is a reasonable probability that a third
party claim for which HALIS or the Surviving Corporation has indemnification
rights against the Shareholders hereunder will materially and adversely affect
HALIS or the Surviving Corporation other than as a result of money damages or
other payments, HALIS or the Surviving Corporation shall be entitled to conduct
the defense of such claim at the Shareholders' expense.
9.5 SET-OFF. HALIS and the Surviving Corporation shall have the right
to set-off and apply against any other amounts owing from HALIS or the Surviving
Corporation to the Shareholders under any other agreement between HALIS or the
Surviving Corporation and
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Shareholders, all sums in respect of which the Shareholders may be liable
pursuant to Section 9.2 hereof, such right of set-off to be in addition to and
not in lieu of or an election against any and all other remedies available to
HALIS and the Surviving Corporation under this Agreement or at law or in equity.
9.6 LIMITATIONS ON LIABILITY OF SHAREHOLDERS.
9.6.1 LIMITATIONS ON LIABILITY OF SHAREHOLDERS OTHER THAN HOMA.
Shareholders other than Homa shall have no liability with respect to Losses of
HALIS arising under subparagraphs (a), (b), or (d) of Section 9.2.1 until the
total of all Losses of HALIS with respect thereto exceeds $50,000. If the
aggregate Losses of HALIS exceed such $50,000 threshold, PhySource and the
Shareholders other than Homa shall be liable for all Losses of HALIS to the
extent (and only to the extent) Losses of HALIS exceed such $50,000 threshold.
The sole and exclusive recourse of HALIS and the Surviving Corporation for any
claim hereunder, whether in contract, tort or otherwise, shall be limited to the
shares of HALIS Common Stock received by a Shareholder in exchange for the
shares of PhySource Common Stock (valued at the greater of the per share price
calculated pursuant to Section 1.8 of the Agreement or the average of the bid
and asked price of HALIS Common Stock for the ten trading days immediately prior
to the payment of a claim hereunder), and, with respect to any shares of HALIS
Common Stock received by a Shareholder in connection with the Merger and
subsequently sold, the amount of gross cash proceeds from the sale thereof, less
any sales commissions or discounts. No Shareholder shall be liable for any
claims hereunder attributable to any act or omission of any other Shareholder
acting in his or her capacity as a Shareholder, and the aggregate liability of
the Shareholders under this Section 9 shall not exceed $2,000,000, except in the
case of any intentional misrepresentation or intentional breach. Any
indemnifiable liability under this Section 9 shall be limited to the amount of
actual damages subject to indemnification actually sustained, net of any
applicable insurance, third party payments or other reimbursement or tax benefit
received or realized.
9.6.2 LIMITATIONS ON LIABILITY OF HOMA. Homa shall have no liability
with respect to Losses of HALIS arising under subparagraph (a), (b) or (d) of
Section 9.2.2 until the total of all Losses of HALIS with respect thereto
exceeds $50,000. If the aggregate Losses of HALIS exceed such $50,000 threshold,
Homa S.C. and Homa shall be liable for all Losses of HALIS to the extent (and
only to the extent) the Losses of HALIS exceed such $50,000 threshold.
9.7 EXCLUSIVITY. After the Closing, the indemnities set forth in this
Section 9 shall be the exclusive remedies of HALIS and the Surviving Corporation
and their respective officers, directors, employees, agents and affiliates for
any misrepresentation, breach of warranty or nonfulfillment or failure to
perform any covenant or agreement contained in this Agreement, and the parties
shall not be entitled to a rescission of this Agreement or to any further
indemnification rights or claims of any nature whatsoever in respect thereof,
all of which are hereby waived.
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SECTION 10. REGISTRATION OF SHARES
10.1 REGISTRATION STATEMENT.
(a) After the Closing Date, HALIS shall (at its own expense)
prepare and file with the SEC a registration statement (the "Registration
Statement") with respect to resales of shares of HALIS Common Stock received in
the Merger by each Participating Holder (as defined in Section 10.1(c)). HALIS
shall use reasonable efforts: (a) to cause the Registration Statement to be
declared effective by the SEC as soon as practicable but in any event no later
than on or before the date that is six months after the Closing Date; and (b) to
cause the Registration Statement to remain effective until the earlier of (i)
the third anniversary of the Closing Date, or (ii) the date on which the
distribution described in the Registration Statement is completed as to all
Participating Holders (as defined in subsection (c) below). HALIS shall notify
the Shareholders' Agent at least ten business days prior to the filing of the
Registration Statement.
(b) HALIS shall (at its own expense):
(i) prepare and file promptly with the SEC such amendments to
the Registration Statement, and such supplements to the related
prospectus, as may be required in order to comply with the applicable
provisions of the Securities Act, including, without limitation, to
maintain the effectiveness or currency thereof;
(ii) furnish to the respective Participating Holders such
numbers of copies of a prospectus conforming to the requirements of the
Securities Act as they may reasonably request in order to facilitate
the disposition of the shares covered by the Registration Statement;
and
(iii) use reasonable efforts to register and qualify the
shares covered by the Registration Statement under the Securities laws
of such states as the respective Participating Holders may reasonably
request, provided, however, that HALIS shall not be required in
connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any of
such states.
(c) Notwithstanding anything to the contrary herein, no Person who
receives HALIS Common Stock in the Merger shall have any rights under this
Section 10 unless such Person executes and delivers to HALIS a written
agreement, reasonably satisfactory in form and content to HALIS, confirming that
such Person wishes to be allowed to sell HALIS Common Stock pursuant to the
Registration Statement and agrees to be bound by the provisions of this Section
10. (A Person who holds any of the HALIS Common Stock delivered in the Merger
and who executes and delivers such an agreement is referred to in this Section
10 as a "Participating Holder.") Any Participating Holder who delivers such an
agreement more than 30 days after the Closing Date may be required to pay, as a
condition to exercising rights under this Section 10, the amount of incremental
expenses incurred by HALIS in complying therewith. No Participating Holder shall
sell any HALIS Common Stock pursuant to the Registration Statement at any time
HALIS shall have furnished written notice
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that the Registration Statement is not then effective or the prospectus that
forms a part thereof is not current.
(d) Notwithstanding anything to the contrary contained herein, all
of HALIS's obligations under this Section 10 (including its obligation to file
and maintain the effectiveness of the Registration Statement) shall terminate
and expire as of the earliest date on which all of the shares of HALIS Common
Stock issued in the Merger can be sold without any restrictions as to volume or
manner of sale pursuant to subsection (k) of Rule 144 under the Securities Act.
10.2 INDEMNIFICATION.
(a) HALIS agrees to indemnify, to the extent permitted by law, each
Participating Holder against all Damages suffered by such Participating Holder
as a result of any untrue or alleged untrue statement of material fact contained
in the Registration Statement or in the related prospectus or preliminary
prospectus (or in any amendment thereof or supplement thereto) or as a result of
any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such untrue statement or omission or alleged untrue statement or
omission results from or is contained in any information furnished in writing to
HALIS by such Participating Holder for use therein or results from such
Participating Holder's failure to deliver a copy of a Registration Statement or
related prospectus (or any amendment thereof or supplement thereto) after HALIS
has furnished such Participating Holder with a sufficient number of copies
thereof. If the indemnification provided for herein is unavailable to a party,
then HALIS shall contribute to the amount paid or payable by such party an
amount that reflects the relative fault of HALIS with respect to such untrue
statement or omission.
(b) In connection with the Registration Statement, each
Participating Holder (i) shall furnish to HALIS in writing such information and
affidavits as HALIS reasonably requests for use in connection with such
Registration Statement or the related prospectus, and (ii) to the extent
permitted by law, will indemnify HALIS, its directors and officers and each
Person who controls HALIS (within the meaning of the Securities Act) against all
Damages resulting from any untrue or alleged untrue statement of material fact
contained in such Registration Statement or in the related prospectus or
preliminary prospectus (or in any amendment thereof or supplement thereto) or
from any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or omission or alleged untrue statement or
omission results from or is contained in any information or affidavit furnished
in writing by such Participating Holder.
(c) Any Person entitled to indemnification under this Section 10
will (i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification, and (ii) unless in the indemnified
party's reasonable judgment a conflict of interest exists between the
indemnified party and the indemnifying party with respect to such claim, permit
the indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any consent to
the entry of any judgment or any settlement made by the indemnified
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party without the indemnifying party's consent (but such consent will not be
unreasonably withheld). Any indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will pay the fees and expenses of only one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest exists between such indemnified party and any other
indemnified party with respect to such claim (in which case the indemnifying
party will pay the fees and expenses of additional counsel).
10.3 DELAY OF REGISTRATION. For a period not to exceed 90 days, HALIS
may delay the filing or effectiveness of the Registration Statement, or suspend
the use of the Registration Statement (and the Participating Holders hereby
agree not to offer or sell any shares of HALIS Common Stock pursuant to the
Registration Statement during such period), at any time when HALIS, in its
reasonable judgment (confirmed in writing if requested by any Participating
Holder), believes:
(a) that the filing of a Registration Statement or the offering or
sale of HALIS Common Stock pursuant thereto, or the making of any required
disclosure in connection therewith, could reasonably be expected to have a
material adverse effect upon (i) a pending or scheduled offering of HALIS's
securities, (ii) an acquisition, merger, consolidation, joint venture, equity
investment or other potentially significant transaction or event, or (iii) any
negotiations, discussions or proposal with respect to any of the foregoing; and
(b) that the failure to disclose any material information with
respect to any of the foregoing could result in a violation of the Securities
Act, the Exchange Act or any provision of any state securities law.
In the event HALIS reasonably believes that any of the foregoing circumstances
are continuing after such 90-day period, it may, with the consent of the holders
of a majority of the shares of HALIS Common Stock subject (or to be subject) to
the Registration Statement (which consent shall not be unreasonably withheld)
extend such 90-day period for one additional 30-day period.
10.4 COMPLIANCE WITH SECURITIES LAWS. Until termination of the period
specified in Section 10.1(d), HALIS shall take all actions necessary to permit
Shareholders to resell the shares of HALIS Common Stock received in the Merger
in accordance with Rule 144 under the Securities Act.
SECTION 11. MISCELLANEOUS PROVISIONS
11.1 SHAREHOLDERS' AGENT. The Shareholders hereby irrevocably appoint
Robert A. McWilliams as their agent for purposes of Sections 1.10, 9 and
11.10(c) (the "Shareholders' Agent"), and Robert A. McWilliams hereby accepts
this appointment as the Shareholders' Agent. HALIS shall be entitled to deal
exclusively with the Shareholders' Agent on all matters relating to Sections
1.10, 9 and 11.10(c), and shall be entitled to rely conclusively (without
further evidence of any kind whatsoever) on any document executed or purported
to be executed on behalf of any Shareholder by the Shareholders' Agent, and on
any other action taken or purported to be taken on
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behalf of any Shareholder by the Shareholders' Agent, as fully binding upon such
Shareholder. If the Shareholders' Agent shall die, become disabled or otherwise
be unable to fulfill his responsibilities as agent of the Shareholders, then the
Shareholders shall, within ten (10) days after such death or disability, appoint
a successor agent and, immediately thereafter, shall notify HALIS of the
identity of such successor. Any such successor shall become the "Shareholders'
Agent" for purposes of Sections 1.10, 9 and 11.10(d). If for any reason there is
no Shareholders' Agent at any time, all references herein to the Shareholders'
Agent shall be deemed to refer to the Shareholders.
11.2 FURTHER ASSURANCES. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
11.3 FEES AND EXPENSES. Subject to Section 9, all fees, costs and
expenses (including legal fees and accounting fees) that have been incurred or
that are incurred in the future by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) any
investigation and review conducted by such party of the other parties' business
(and the furnishing of information in connection with such investigation and
review), (b) the negotiation, preparation and review of this Agreement
(including the Disclosure Schedule) and all agreements, certificates, opinions
and other instruments and documents delivered or to be delivered in connection
with the transactions contemplated by this Agreement, (c) the preparation and
submission of any filing or notice required to be made or given in connection
with any of the transactions contemplated by this Agreement, and the obtaining
of any Consent required to be obtained in connection with any of such
transactions, and (d) the consummation of the Merger shall be paid: (i) by
HALIS, if incurred by HALIS or the Subsidiary; (ii) by PhySource, if incurred by
PhySource or the Shareholders other than Homa; and (iii) by Homa, if incurred by
Homa S.C. or Homa; provided, however, that neither PhySource nor Homa S.C. shall
incur any additional debt, defer the payment of any expenses, or take any other
action not in the ordinary course of business for the purpose of providing funds
for the payment of such expenses.
11.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
11.5 NOTICES. Any notice or other communication required or permitted
to be delivered to any party under this Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
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if to HALIS:
HALIS, Inc.
9040 Roswell Road, Suite 470
Atlanta, Georgia 30350
Attention: President
Facsimile: (770) 641-5559
with a copy to:
Smith, Gambrell & Russell
3343 Peachtree Road, N.E.
Suite 1800
Atlanta, Georgia 30326-1010
Attn: William L. Meyer, Esq.
Facsimile: (404) 264-2652
if to PhySource:
PhySource Ltd.
1110 Lake Cook Road, Suite 100
Buffalo Grove, Illinois 60089
Facsimile: (847) 419-9904
with a copy to:
Freeborn & Peters
311 South Wacker Drive, Suite 3000
Chicago, Illinois 60606-6677
Attn: Robert A. McWilliams
Facsimile: (312) 360-6570
if to any of the Shareholders other than Homa:
c/o Freeborn & Peters
311 South Wacker Drive, Suite 3000
Chicago, Illinois 60606-6677
Attn: Robert A. McWilliams
Facsimile: (312) 360-6570
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if to Homa:
Theodore M. Homa, M.D.
3295 Arlington Heights Road
Arlington Heights, Illinois 60004
Facsimile: (847) 222-9904
with a copy to:
Donald S. Lavin, Esq.
95 Revere Drive, Ste. C
Northbrook, Illinois 60062
Facsimile: (847) 564-9955
11.6 CONFIDENTIALITY. On and at all times after the Closing Date,
PhySource and each Shareholder shall keep confidential, and shall not use or
disclose to any other Person, any non-public document or other non-public
information in PhySource or such Shareholder's possession that relates to the
business of HALIS or the Subsidiary.
11.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
11.8 HEADINGS. The bold-faced Section headings contained in this
Agreement are for convenience of reference only, shall not be deemed to be a
part of this Agreement and shall not be referred to in connection with the
construction or interpretation of this Agreement.
11.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
11.10 GOVERNING LAW; VENUE.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of Georgia (without
giving effect to principles of conflicts of laws).
(b) Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement shall be brought
to or otherwise commenced in any state or federal court located in Fulton
County, Georgia. Each party to this Agreement:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in Fulton County,
Georgia (and each appellate court located in the State of Georgia) in
connection with any such legal proceeding;
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(ii) agrees that each state and federal court located in
Fulton County, Georgia shall be deemed to be a convenient forum; and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or
federal court located in Fulton County, Georgia, any claim that such
party is not subject personally to the jurisdiction of such court, that
such legal proceeding has been brought in an inconvenient forum, that
the venue of such proceeding is improper or that this Agreement or the
subject matter of this Agreement may not be enforced in or by such
court.
(c) The Shareholders irrevocably constitute and appoint the
Shareholders' Agent as their agent to receive notices hereunder and service of
process in connection with any legal proceeding relating to this Agreement or
the enforcement of any provision of this Agreement.
11.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon:
PhySource and its successors and assigns (if any); the Shareholders and Homa and
their respective personal representatives, executors, administrators, estates,
heirs, successors and assigns (if any); HALIS and its successors and assigns (if
any); and the Subsidiary and its successors and assigns (if any). This Agreement
shall inure to the benefit of: PhySource; the Shareholders; Homa; HALIS; the
Subsidiary; and the respective successors, heirs personal representatives and
assigns (if any) of the foregoing. Following the Merger, HALIS may freely assign
any or all of its rights under this Agreement (including its indemnification
rights under Section 9), in whole or in part, to any other Person without
obtaining the consent or approval of any other party hereto or of any other
Person.
11.12 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any breach or threatened
breach by any party to this Agreement of any covenant, obligation or other
provision set forth in this Agreement for the benefit of any other party to this
Agreement, such other party shall be entitled (in addition to any other remedy
that may be available to it) to (a) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (b) an injunction restraining such breach or threatened
breach.
11.13 WAIVER.
(a) No failure on the part of any party to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
party in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No party shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly
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executed and delivered on behalf of such party; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.
11.14 AMENDMENTS. Subject to Section 10.9, this Agreement may not be
amended, modified, altered or supplemented other than by means of a written
instrument duly executed and delivered on behalf of all of the parties hereto.
11.15 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
11.16 PARTIES IN INTEREST. Except for the provisions of Sections 9 and
10, none of the provisions of this Agreement is intended to provide any rights
or remedies to any Person other than the parties hereto and their respective
successors, heirs, personal representatives and assigns (if any).
11.17 ENTIRE AGREEMENT. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof, including without limitation the Letter
of Intent (other than paragraph 7 thereof, which shall survive to the extent
provided herein).
11.18 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
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The parties hereto have caused this Agreement to be executed and
delivered as of the date first above written.
"HALIS"
HALIS, INC., a Georgia corporation
By: /s/ Larry Fisher
--------------------------------------------
Larry Fisher, Executive Vice President
"SUBSIDIARY"
PHYSOURCE ACQUISITION CO.,
a Georgia corporation
By: /s/ Larry Fisher
--------------------------------------------
Larry Fisher, President
"PHYSOURCE"
PHYSOURCE LTD.
an Illinois corporation
By: /s/ Joseph Maschek, Jr.
--------------------------------------------
Joseph Maschek, Jr., President
"THE SHAREHOLDERS"
/s/ Mitchell C. Andrews (SEAL)
--------------------------------------------
Mitchell C. Andrews
/s/ Michelle R. Fawcett (SEAL)
--------------------------------------------
Michelle R. Fawcett
/s/ Walter R. Fawcett (SEAL)
--------------------------------------------
Walter R. Fawcett
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/s/ Melissa S. Forsythe (SEAL)
--------------------------------------------
Melissa S. Forsythe
/s/ Monica Forsythe (SEAL)
--------------------------------------------
Monica Forsythe
/s/ Marsha F. Fournier (SEAL)
--------------------------------------------
Marsha F. Fournier
/s/ Theodore M. Homa, M.D. (SEAL)
--------------------------------------------
Theodore M. Homa, M.D.
/s/ Mark C. Kendall (SEAL)
--------------------------------------------
Mark C. Kendall
/s/ Joseph J. Maschek, Jr. (SEAL)
--------------------------------------------
Joseph J. Maschek, Jr.
/s/ Priscilla Lopez (SEAL)
--------------------------------------------
Priscilla Lopez
SHAREHOLDERS' AGENT
This Agreement is executed by the undersigned
solely for purposes of Section 11.1 hereof.
/s/ Robert A. McWilliams
-------------------------------------------
Robert A. McWilliams
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EXHIBIT A
Shareholders of PhySource Ltd.
Name
Mitchell C. Andrews
Michelle R. Fawcett
Walter R. Fawcett
Melissa S. Forsythe
Monica Forsythe
Marsha F. Fournier
Theodore M. Homa, M.D.
Mark C. Kendall
Joseph J. Maschek, Jr.
Priscilla Lopez
<PAGE> 71
EXHIBIT B
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of PhySource's business or assets;
(b) the issuance, disposition or acquisition of (i) any
capital stock or other equity security of PhySource or HALIS, as the
case may be; (ii) any option, call, warrant or right (whether or not
immediately exercisable) to acquire, or otherwise relating to, any
capital stock or other equity security of PhySource or HALIS, as the
case may be; or (iii) any security, instrument or obligation that is or
may become convertible into or exchangeable for any capital stock or
other equity security of PhySource or HALIS, as the case may be; or
(c) any merger, consolidation, business combination, share
exchange, reorganization or similar transaction involving PhySource or
HALIS, as the case may be.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit B is attached (including the Disclosure
Schedule), as it may be amended from time to time.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which PhySource is a party; (b) by which PhySource or any of its assets are or
may become bound or under which PhySource has, or may become subject to, any
obligation; or (c) under which PhySource has or may acquire any right or
interest.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to PhySource or otherwise used by
PhySource.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan, or legally binding commitment or undertaking of
any nature.
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DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to HALIS on behalf of
PhySource and the Shareholders.
EMPLOYEE BENEFIT PLAN. "Employee Benefit Plan" shall have the meaning
specified in Section 3(3) of ERISA.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security), any restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
ENVIRONMENTAL LAW. "Environmental Law" means any federal, state, local
or foreign Legal Requirement relating to pollution or protection of human health
or the environment (including ambient air, surface water, ground water, land
surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean
any: (a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city, local or other political subdivision.
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HOMA S.C. CONTRACT. "Homa S.C. Contract" shall mean any Contract: (a)
to which Homa S.C. is a party; (b) by which Homa S.C. or any of its assets are
or may become bound or under which Homa S.C. has, or may become subject to, any
obligation; or (c) under which Homa S.C. has or may acquire any right or
interest.
HOMA S.C. PROPRIETARY ASSET. "Homa S.C. Proprietary Asset" shall mean
any Proprietary Asset owned by or licensed to Homa S.C. or otherwise used by
Homa S.C..
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitute, principle of common
law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Body.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "Material Adverse Effect" on PhySource if such violation or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in the Agreement or in the
Shareholders' Closing Certificate but for the presence of "Material Adverse
Effect" or other materiality qualifications, or any similar qualifications, in
such representations and warranties) would have a material adverse effect on
PhySource's business, condition, assets, liabilities, operations, financial
performance or prospects.
MATERIALS OF ENVIRONMENTAL CONCERN. "Materials of Environmental
Concern" include chemicals, pollutants, contaminants, wastes, toxic substances,
asbestos, PCBs, petroleum and petroleum products and any other substance that is
now or in the future regulated by any Environmental Law or that is otherwise a
danger to health, reproduction or the environment.)
PERSON. "Person" shall mean any individual, Entity or Governmental
Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, source code, computer program, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset; or (b) right to use or exploit
any of the foregoing.
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REPRESENTATIVES "Representatives" shall mean officers, directors,
employees, agents, attorneys, accounts, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
B-4
