<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): October 23, 1996
OCCUSYSTEMS, INC.
-----------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-24440 75-2543036
--------------- ---------------- ----------------
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) Number)
3010 LBJ Freeway
Suite 400
Dallas, Texas 75234
---------------------------------------- ----------------
(Address of Principal Executive Offices) (Zip Code)
(972) 484-2700
--------------
(Registrant's Telephone Number, Including Area Code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective October 23, 1996, OccuSystems, Inc. (the "Registrant) and
OccuCenters, Inc. ("OCI"), a wholly-owned subsidiary of the Registrant, entered
into a definitive agreement to acquire all of the outstanding shares of Prizm
Environmental & Occupational Health, Inc. a New Jersey corporation (the
"Purchased Entity") pursuant to that certain Stock Purchase Agreement (the
"Prizm Agreement") by and between Registrant, OCI, and Ardith Grandbouche,
Arthur Canario, M.D., Thomas Canario, Richard Machen, and Jeffery Kossack
(collectively the "Shareholders"). In consideration for the stock of the
Purchased Entity, the Registrant will issue to the Shareholders 625,000 shares
of the Registrant's Common Stock, par value $0.01 per share. Such transaction is
valued at $17,578,125 based on the value of the Registrant's common stock at
$28.125 per share (closing share price on the day the Prizm Agreement was
executed). A resale registration statement on Form S-3 has been filed with the
Securities and Exchange Commission. The transaction will be accounted for as a
pooling of interests.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
Prizm Environmental and Occupational Health, Inc.
Report of Independent Public Accountants
Balance Sheet as of December 31, 1995 and June 30, 1996
Statement of Operations for the year ended December 31, 1995 and the six
months ended June 30, 1995 and 1996
Statement of Stockholder's Equity for the year ended December 31, 1995
and the six months ended June 30, 1996
Statement of Cash Flows for the year ended December 31, 1995 and the six
months ended June 30, 1995 and 1996
Notes to Financial Statements
(b) Pro Forma Financial Information.
Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1995
Pro Forma Consolidated Statement of Operations for the six months ended
June 30, 1996
Pro Forma Consolidated Balance Sheet for the period ended June 30, 1996
(c) Exhibits
Exhibit 1.1 Stock Purchase Agreement among Registrant, OCI, and Ardith
Grandbouche, Arthur Canario, M.D., Thomas Canario,
Richard Machen, and Jeffery Kossack
<PAGE>
SIGNATURES
Pursuant to the requirements of the Security and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OCCUSYSTEMS, INC.
By:
Date: December 5, 1996 John K. Carlyle
--------------------------------------
John K. Carlyle
President and Chief Executive Officer
James M. Greenwood
--------------------------------------
James M. Greenwood
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)
<PAGE>
(a) Financial Statements
<PAGE>
(a) Financial Statements
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Prizm Environmental and Occupational Health, Inc.:
We have audited the accompanying combined balance sheet of Prizm
Environmental and Occupational Health, Inc. as of December 31, 1995, and the
related combined statements of operations, stockholders' deficit, and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Prizm Environmental and
Occupational Health, Inc. as of December 31, 1995, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
Dallas, Texas,
October 17, 1996
<PAGE>
PRIZM ENVIRONMENTAL AND OCCUPATIONAL HEALTH, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1995, AND JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1995 JUNE 30, 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 27,798 $ 16,004
Accounts receivable, net of allowances of
$1,643,000 at December 31, 1995, and June 30,
1996............................................. 2,931,511 2,997,117
Prepaid expenses and other current assets......... 73,183 94,010
----------- -----------
Total current assets............................ 3,032,492 3,107,131
Furniture, fixtures and equipment, net.............. 1,787,384 1,471,338
Other assets........................................ 116,775 166,775
----------- -----------
Total assets.................................... $ 4,936,651 $ 4,745,244
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.................................. $ 1,526,483 $ 428,826
Accrued expenses.................................. 2,714,188 2,529,912
Revolving credit note............................. -- 2,399,000
Notes payable--stockholders....................... 2,012,755 200,000
Notes payable..................................... 130,050 2,075,000
Capital lease obligations......................... 662,582 613,133
----------- -----------
Total current liabilities....................... 7,046,058 8,245,871
Notes payable--stockholders......................... 1,239,948 --
Capital lease obligations........................... 1,125,258 845,540
Other long-term obligations......................... 220,510 --
----------- -----------
Total liabilities............................... 9,631,774 9,091,411
Commitments and contingencies
Stockholders' deficit:
Common stock, no par value, 1,000 shares
authorized, 775 shares issued and outstanding at
December 31, 1995, and June 30, 1996............. 402,950 402,950
Additional paid-in capital........................ -- 1,108,180
Retained deficit.................................. (5,098,073) (5,857,297)
----------- -----------
Total stockholders' deficit..................... (4,695,123) (4,346,167)
----------- -----------
Total liabilities and stockholders' deficit..... $ 4,936,651 $ 4,745,244
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
PRIZM ENVIRONMENTAL AND OCCUPATIONAL HEALTH, INC.
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995,
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1995 1996
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Net revenues............................ $12,635,524 $6,160,703 $6,087,324
Costs and expenses:
Salaries, wages and benefits.......... 7,300,519 3,895,302 3,680,945
Other operating costs................. 4,259,794 1,922,857 2,403,127
Depreciation and amortization......... 1,515,880 902,862 337,844
----------- ---------- ----------
Total costs and expenses............ 13,076,193 6,721,021 6,421,916
----------- ---------- ----------
Operating loss.......................... (440,669) (560,318) (334,592)
Interest expense........................ (558,871) (245,211) (424,632)
----------- ---------- ----------
Net loss................................ $ (999,540) $ (805,529) $ (759,224)
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRIZM ENVIRONMENTAL AND OCCUPATIONAL HEALTH, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995,
AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
------ -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1994.................... 775 $402,950 $ -- $(4,098,533) $(3,695,583)
Net loss............... -- -- -- (999,540) (999,540)
--- -------- ---------- ----------- -----------
Balance, December 31,
1995.................... 775 402,950 -- (5,098,073) (4,695,123)
Conversion of notes
payable--
stockholders.......... -- -- 1,108,180 -- 1,108,180
Net loss............... -- -- -- (759,224) (759,224)
--- -------- ---------- ----------- -----------
Balance, June 30, 1996
(unaudited)............. 775 $402,950 $1,108,180 $(5,857,297) $(4,346,167)
=== ======== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRIZM ENVIRONMENTAL AND OCCUPATIONAL HEALTH, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995,
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1995 1996
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................... $ (999,540) $(805,529) $ (759,224)
Adjustments to reconcile net loss to
net cash provided by operating
activities--
Depreciation and amortization........ 1,515,880 902,862 337,844
Changes in assets and liabilities--
Accounts receivable................ 113,921 (49,179) (65,606)
Other assets....................... (31,750) 55,668 (86,277)
Accounts payable................... 116,868 425,832 (1,097,657)
Accrued expenses................... (117,722) (290,115) (199,690)
Other liabilities.................. 3,006 (32,511) (52,501)
---------- --------- -----------
Net cash provided by (used in)
operating activities............ 600,663 207,028 (1,923,111)
---------- --------- -----------
Cash flows from investing activities:
Purchases of furniture, fixtures and
equipment............................. (23,379) (23,379) (6,348)
---------- --------- -----------
Net cash used in investing
activities...................... (23,379) (23,379) (6,348)
---------- --------- -----------
Cash flows from financing activities:
Increase in revolving credit note...... -- -- 2,399,000
Proceeds from notes payable--
stockholders.......................... 62,715 62,715 --
Payments on notes payable--
stockholders.......................... -- -- (2,097,118)
Proceeds from notes payable............ -- -- 2,075,000
Payments on notes payable.............. (223,777) (110,460) (130,050)
Payments on capital lease obligations.. (524,949) (261,029) (329,167)
---------- --------- -----------
Net cash provided by (used in)
financing activities............ (686,011) (308,774) 1,917,665
---------- --------- -----------
Net decrease in cash..................... (108,727) (125,125) (11,794)
Cash, beginning of year.................. 136,525 136,525 27,798
---------- --------- -----------
Cash, end of year........................ $ 27,798 $ 11,400 $ 16,004
========== ========= ===========
Supplemental disclosure of cash flow
information:
Interest paid during the year.......... $ 381,454 $ 163,275 $ 532,269
Noncash financing activities:
Equipment acquired under capital
lease................................. $ 69,000 $ 69,000 $ --
Conversion of notes payable--
stockholders.......................... -- -- 955,585
Conversion of stockholder accrued
interest.............................. -- -- 152,595
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRIZM ENVIRONMENTAL AND OCCUPATIONAL HEALTH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
OPERATIONS
Prizm Environmental and Occupational Health, Inc. ("Prizm") is a multi-
location clinic system that provides environmental and occupational healthcare
services to New Jersey employers. Services include health and safety
compliance and surveillance, workers' compensation injury and illness
treatment, and independent medical exams. Pursuant to an agreement and plan of
merger dated February 20, 1996, Prizm acquired 100% of the issued and
outstanding shares of common stock of Jack G. Siegel M.D., PA ("Seigel") in
exchange for 200 shares of Prizm common stock. Siegel provides comprehensive
environmental and occupational health services. The merger of Prizm and Siegel
was accounted for as a combination of related entities in a manner similar to
a pooling of interests. The accompanying financial statements are presented on
a combined basis for all periods due to common ownership among the entities.
UNAUDITED FINANCIAL INFORMATION
The accompanying unaudited interim combined financial statements as of June
30, 1996, and for the six months ended June 30, 1996 and 1995, have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. The unaudited combined financial statements reflect, in the
opinion of management, all adjustments necessary for a fair presentation of
the unaudited combined financial statements. All such adjustments are of a
normal and recurring nature.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amount of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment are recorded at cost. Depreciation and
amortization is recorded using the straight-line method over the estimated
useful lives of the respective assets.
<TABLE>
<CAPTION>
CLASSIFICATION USEFUL LIVES
-------------- ------------
<S> <C>
Machinery and equipment.... 7 years
Furniture and fixtures..... 5 years
Leasehold improvements..... Remaining life of the lease
</TABLE>
Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for renewals or betterments are capitalized. The cost of property
replaced, retired, or otherwise disposed of is removed from the asset account
along with the related accumulated depreciation.
REVENUE RECOGNITION
Revenue is recorded at estimated net amounts to be received from employers,
third-party payors, and others for services rendered. Prizm operates in a
state which regulates the amounts which Prizm can charge for its services
associated with work-related injuries and illnesses and physical therapy.
<PAGE>
PRIZM ENVIRONMENTAL AND OCCUPATIONAL HEALTH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
S-CORPORATION--INCOME TAX STATUS
Prizm, with consent of its current stockholders, has elected to be an S-
corporation under the Internal Revenue Code. In lieu of corporate income
taxes, the stockholders of an S-corporation are taxed on their proportionate
share of Prizm's taxable income. No provision or liability for federal income
taxes has been included in the accompanying combined financial statements.
2. FURNITURE, FIXTURES AND EQUIPMENT:
Furniture, fixtures and equipment consist of the following as of December
31, 1995:
<TABLE>
<S> <C>
Machinery and equipment....................................... $ 203,623
Furniture and fixtures........................................ 59,312
Leasehold improvements........................................ 1,399,511
Equipment held under capital leases........................... 3,037,395
-----------
4,699,841
Less--Accumulated depreciation and amortization............... (2,912,457)
-----------
Furniture, fixtures and equipment, net...................... $ 1,787,384
===========
</TABLE>
3. NOTES PAYABLE:
Notes payable consist of the following as of December 31, 1995:
<TABLE>
<S> <C>
Unsecured notes payable to stockholders bearing interest at
rates ranging from 6% to 8% per annum, principal and accrued
interest due at varying intervals through 1998.............. $ 3,252,703
Unsecured notes payable to banks bearing interest at
approximately 10% per annum, principal and accrued interest
are payable in monthly installments through 1996............ 56,076
Notes payable to others...................................... 73,974
-----------
Total...................................................... 3,382,753
Less--Current maturities..................................... (2,142,805)
-----------
Notes payable, noncurrent.................................... $ 1,239,948
===========
</TABLE>
Principal payments subsequent to December 31, 1995, are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31,
--------------------------------
<S> <C>
1996.............................. $2,142,805
1997.............................. --
1998.............................. 1,239,948
----------
Total........................... $3,382,753
==========
</TABLE>
Total interest expense on all obligations for the year was $558,871.
On February 19, 1996, certain note holders who are also stockholders
contributed their notes plus accrued interest totaling $1,108,180 to the
additional paid-in capital of Prizm.
On February 20, 1996, Prizm borrowed approximately $5.6 million from a
commercial bank. Approximately $3.5 million represents a revolving credit
line. Interest on the credit line is payable monthly based on the bank's
<PAGE>
PRIZM ENVIRONMENTAL AND OCCUPATIONAL HEALTH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
prime rate plus 1.5%. The credit line expires in February 1998. The remaining
$2.1 million represents a five year term loan. Interest on the term loan is
payable monthly based on the bank's prime rate plus 2.5%. Beginning August 1,
1996, monthly principal payments of approximately $37,000 plus interest are
due, with final maturity in January 2001. The entire $5.6 million bank
financing is collateralized by all assets of Prizm and various amounts are
joint and severally guaranteed by the stockholders of Prizm. Prizm's
outstanding principal balance of $4.5 million plus accrued interest was
included in current liabilities at June 30, 1996, as Prizm was not in
compliance with the debt covenants outlined in the financing agreement.
In connection with the bank financing, the bank obtained common stock
warrants that allow the bank to purchase at its option up to 26 shares of
common stock of Prizm at an exercise price of $.000001 per share. These
warrants expire on February 20, 2006.
4. CAPITAL LEASES:
Prizm leases various equipment under capital lease agreements. Minimum lease
payments at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31,
--------------------------------
<S> <C>
1996.............................. $ 880,763
1997.............................. 649,096
1998.............................. 486,412
1999.............................. 186,541
2000.............................. 5,069
----------
Total........................... 2,207,881
Less--Interest portion............ (420,041)
----------
Present value of net minimum lease
payments......................... 1,787,840
Less--Current portion............. (662,582)
----------
Total noncurrent portion........ $1,125,258
==========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
Prizm leases office space and equipment under operating leases which expire
at various dates through 2008. Prizm paid rent expense of approximately
$1,311,000 in 1995. The minimum future rentals under the above leases at
December 31, 1995, are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDING DECEMBER 31,
--------------------------------
<S> <C>
1996.............................. $1,014,539
1997.............................. 1,016,730
1998.............................. 971,546
1999.............................. 940,873
2000.............................. 901,849
Thereafter........................ 2,654,943
----------
Total minimum future rentals.... $7,500,480
==========
</TABLE>
<PAGE>
PRIZM ENVIRONMENTAL AND OCCUPATIONAL HEALTH, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
CONTINGENCIES
Various suits and claims arising in the normal course of operations are
pending against Prizm. Such suits and claims are either specifically covered
by insurance or are not material. While the outcome of these suits cannot be
determined at this time, management believes that any loss which may arise
will not have a material adverse effect on the financial position or results
of operations of Prizm.
6. CONCENTRATION OF CREDIT RISK
As of December 31, 1995, there are no significant concentrations of credit
risk within Prizm's accounts receivable.
7. RELATED-PARTY TRANSACTIONS:
During 1995, Prizm entered into an agreement with a related entity whereby
consulting services were performed for Prizm in connection with the
development of an occupational health network in the Northeast. Prizm paid
approximately $54,000 in 1995 under this agreement.
8. SUBSEQUENT EVENT:
Prizm has entered into a letter of intent with OccuCenters, Inc., a wholly
owned subsidiary of OccuSystems, Inc., in a transaction where all shares of
Prizm will be exchanged for OccuSystems, Inc. shares. The transaction closed
effective November 1, 1996.
<PAGE>
(b) Pro Forma Financial Information
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited Pro Forma Consolidated Balance Sheet as of June 30,
1996 and the unaudited Pro Forma Consolidated Statements of Operations for the
year ended December 31, 1995 and the six months ended June 30, 1996 are based on
the historical consolidated financial statements of the Company (i) as
originally reported, (ii) as restated for the Recent Poolings and (iii) as
further adjusted to reflect the following events as if they had occurred on
January 1, 1995: (a) consummation of the Company's acquisitions (the "Recent
Acquisitions") of Austin Regional Clinic (ARC), Flagstaff Urgent Care, Medical
Plaza Industrial Clinic, Advanced Occupational Healthcare, Corporate Health
Services, Inc. and Deer Park Family Clinic.
The Company usually implements significant changes to the operations of the
practices that it acquires to enhance profitability. Accordingly, these pro
forma financial statements are not necessarily indicative of the operating
results that would have been achieved had the aforementioned transactions
occurred at the beginning of each period presented.
OccuSystems, Inc.
Pro Forma Consolidated Statement of Operations
Year ended December 31, 1995
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Historical Pooling Restated Recent
OccuSystems, Inc. Adjustments OccuSystems, Inc. Acquisitions As Adjusted
----------------- ----------- ----------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Net revenues $116,223 14,581 130,804 18,131(A) 148,935
Costs and expenses:
Operating expenses 101,577 13,511 115,088 14,393(A) 129,481
Depreciation and amortization 4,142 1,537 5,679 620(B) 6,299
-------- -------- -------- -------- --------
Total costs and expenses 105,719 15,048 120,767 15,013 135,780
Operating income 10,504 (467) 10,037 3,118 13,155
Other income (expense):
Interest expense, net 1,644 558 2,202 1,289(C) 3,491
Other, net 561 - 561 - 561
-------- -------- -------- -------- --------
Total other (income) expense 2,205 558 2,763 1,289 4,052
Net income (loss) before taxes 8,299 (1,025) 7,274 1,829 9,103
Provision for income taxes 3,659 - 3,659 640(D) 4,299
-------- -------- -------- -------- --------
Net income 4,640 (1,025) 3,615 1,189 4,804
======== ======== ======== ======== ========
Net income per common share $0.28 ($0.81) $0.21 $0.27
======== ======== ======== ========
Weighted average number of common shares
outstanding (in thousands) 17,855 1,260 19,115 297(E) 19,412
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the Pro Forma Consolidated
Financial Statements.
<PAGE>
OccuSystems, Inc.
Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 1996
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Historical Pooling Restated Recent
OccuSystems, Inc. Adjustments OccuSystems, Inc. Acquisitions As Adjusted
------------------ -------------- ------------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Net revenues $ 70,990 7,078 78,068 1,869(A) 79,937
Costs and expenses:
Operating expenses 59,608 6,934 66,542 1,567(A) 68,109
Depreciation and amortization 2,756 345 3,101 60(B) 3,161
-------- -------- -------- -------- --------
Total costs and expenses 62,364 7,279 69,643 1,627 71,270
Operating income 8,626 (201) 8,425 242 8,667
Other income (expense):
Interest expense 580 429 1,009 79(C) 1,088
Other, net 218 (3) 215 215
-------- -------- -------- -------- --------
Total other (income) expense 798 426 1,224 79 1,303
-------- -------- -------- -------- --------
Net income (loss) before extrardinary charge 7,828 (627) 7,201 163 7,364
Provision for income taxes 2,740 - 2,740 57(D) 2,740
-------- -------- -------- -------- --------
Net income $ 5,088 $ (627) $ 4,461 $ 106 $ 4,567
======== ======== ======== ======== ========
Net income per share $0.25 $0.22 $0.22
======== ======== ========
Weighted average number of common shares
outstanding (in thousands) 20,611 760 21,371 12(E) 21,383
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the Pro Forma Consolidated
Financial Statements.
<PAGE>
OccuSystems, Inc.
Pro Forma Consolidated Balance Sheet
June 30, 1996
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Historical Pooling Restated Recent
OccuSystems, Inc. Adjustments OccuSystems, Inc. Acquisitions As Adjusted
----------------- ----------- ----------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 4,886 87 4,973 (1,169)(F) 3,804
Accounts receivable, trade, net 30,388 3,464 33,852 282 (F) 34,134
Other current assets 4,937 94 5,031 5,031
-------- -------- -------- -------- --------
Total current assets 40,211 3,645 43,856 (887) 42,969
Property and equipment, net 23,772 1,531 25,303 50 (F) 25,353
Intangible assets 91,980 91,980 1,053 (F) 93,033
Other assets 3,731 168 3,899 3,899
-------- -------- -------- -------- --------
$159,694 $ 5,344 $165,038 $ 216 $165,254
======== ======== ======== ======== ========
Liabilities and Shareholders Equity
Current liabilities
Current portion of long-term debt $ 503 6,133 6,636 6,636
Accounts payable 1,476 479 1,955 1,955
Accrued expenses 14,246 2,965 17,211 17,211
-------- -------- -------- -------- --------
Total current liabilities 16,225 9,577 25,802 - 25,802
Long-term debt, net of current portion 13,930 123 14,053 14,053
Other liabilities 3,439 66 3,505 3,505
-------- -------- -------- -------- --------
Total liabilities 33,594 9,766 43,360 - 43,360
Stockholders' equity
Common stock 197 (64) 133 133
Additional paid-in capital 135,422 1,562 136,984 216 (F) 137,200
Accumulated deficit (9,519) (5,920) (15,439) - (15,439)
-------- -------- -------- -------- --------
Total stockholders' equity 126,100 (4,422) 121,678 216 121,894
-------- -------- -------- -------- --------
$159,694 $ 5,344 $165,038 $ 216 $165,254
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the Pro Forma Consolidated
Financial Statements.
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(A) Reflects the historical net revenues and operating expenses for the Recent
Acquisitions on a consolidated basis as if the Recent Acquisitions had
occurred on January 1, 1995. Gives effect to cost-saving measures
implemented subsequent to the acquisition date, totalling $725,000 for the
year ended December 31, 1995 and $75,000 for the six months ended June 30,
1996.
(B) Reflects incremental depreciation and amortization charges as a result of
the Recent Acquisitions.
(C) Reflects additional interest expense attributable to debt issued, assumed
or incurred as a direct result of the Recent Acquisitions.
(D) Represents an adjustment to reflect income tax expense at an assumed
effective tax rate of 35%.
(E) Represents shares issued in connection with the Recent Acquisitions.
(F) Reflects adjustments for the consummation of Recent Acquisitions.
<PAGE>
EXHIBIT 1.1
STOCK PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
AMONG
OCCUSYSTEMS, INC.,
OCCUCENTERS, INC.,
AND
ARDITH GRANDBOUCHE, ARTHUR CANARIO, M.D., THOMAS CANARIO,
RICHARD MACHEN, AND JEFFREY KOSSAK,
BEING ALL OF THE SHAREHOLDERS OF
PRIZM ENVIRONMENTAL AND OCCUPATIONAL HEALTH, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
Recitals.................................................................. 1
ARTICLE 1 - Definitions................................................... 2
ARTICLE 2 - Purchase of Assets............................................ 5
ARTICLE 3 - The Closing and the Effective Time............................ 8
ARTICLE 4 - Representations and Warranties................................ 8
ARTICLE 5 - Pre-Closing Covenants......................................... 20
ARTICLE 6 - Conditions Precedent to Closing............................... 22
ARTICLE 7 - Indemnification............................................... 26
ARTICLE 8 - Post-Closing Covenants........................................ 29
ARTICLE 9 - Termination................................................... 34
ARTICLE 10 - Miscellaneous................................................ 35
EXHIBITS
--------
Exhibit A Escrow Agreement
Exhibit B Landlord's Agreement
Exhibit C Employment Agreements
Exhibit D Registration Agreement
Exhibit E Sellers' Legal Opinion Matters
Exhibit F Buyer's Legal Opinion Matters
SCHEDULES
---------
Schedule 1 Sellers' Interests in the Corporation
Schedule 2 Clinic Names and Locations
Schedule 3 Real Property Ownership and Leases
Schedule 1.1(a) List of Tangible Personal Property
Schedule 1.1(d) Contracts and Purchase Orders
Schedule 2 .2(d) Assumed Loans
Schedule 4.1(d) Title to Shares
Schedule 4.1(f) Financial Statements
Schedule 4.1(g) Liabilities of the Corporation
Schedule 4.1(j) Real Property Leases
Schedule 4.1(l) Bank Accounts
Schedule 4.1(m) Tax Returns and Audits
Schedule 4.1(n) Litigation and Proceedings
Schedule 4.1(o) Compensation and Benefits of Employees
Schedule 4.1(p) Compliance With Law and Instruments
Schedule 4.1(q) Required Consents and Notices
Schedule 4.1(r) Permits and Licenses
Schedule 4.1(u) Employee Benefit Plans
Schedule 4.1(x) Real Property
Schedule 6.1(n) Physicians and Employees to Sign Agreements
Schedule 6.2(i) Assumed Loans to Be Paid at Closing
Schedule 8.7(b) Buyer's and Buyer's Affiliates' Current Facility
Locations
<PAGE>
STOCK PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
This Stock Purchase Agreement and Plan of Reorganization (the "Agreement") is
made and entered into as of the 24th day of October, 1996, by and among
OccuSystems, Inc., a Delaware corporation ("OccuSystems"), OccuCenters, Inc., a
Nevada corporation ("Buyer"), and Ardith Grandbouche, Arthur Canario, M.D.,
Thomas Canario, Richard Machen, and Jeffrey Kossak (collectively, "Sellers" and,
individually, a "Seller").
WITNESSETH:
WHEREAS, Sellers own all of the issued and outstanding capital stock
of Prizm Environmental and Occupational Health, Inc., a New Jersey corporation
(the "Corporation"); and
WHEREAS, Arthur Canario, M.D., and The Chase Manhattan Bank ("Chase
Manhattan") own certain warrants to purchase shares of the capital stock of the
Corporation (the "Prizm Warrants"), and (a) prior to or simultaneously with the
closing of the transactions contemplated by this Agreement, Arthur Canario,
M.D., will exercise his Prizm Warrants, and (b) simultaneously with the closing
of the transactions contemplated by this Agreement, Chase Manhattan will
surrender its Prizm Warrants pursuant to a Warrant Surrender Agreement more
fully described herein; and
WHEREAS, each Seller owns (including, with respect to Arthur Canario,
M.D., the shares to be issued upon the exercise of his Prizm Warrants") the
number of shares of capital stock in the corporation (such shares owned by the
Sellers being hereinafter referred to collectively as the "Shares"), as set
forth in SCHEDULE 1 attached hereto; and
----------
WHEREAS, the Corporation is engaged in the business of providing
occupational/industrial related medical services and independent medical
evaluations at the respective locations (the "Real Property") listed in SCHEDULE
--------
2 attached hereto; and
- -
WHEREAS, the Corporation leases the Real Property from the lessors
(the "Landlords") pursuant to the lease agreements (the "Real Property Leases")
between the respective Landlords and the Corporation identified in SCHEDULE 3
----------
attached hereto; and
WHEREAS, Buyer desires to purchase, and Sellers desire to sell, all of
the Shares in exchange for the issuance to Sellers of shares of the common
stock, par value $.01 per share ("OccuSystems Stock"), of OccuSystems (a public
corporation whose stock is currently traded on the Nasdaq National Market
System), which is Buyer's parent company, on the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, this Agreement contemplates that the transactions set forth
in this Agreement are intended to constitute a reorganization pursuant to
Section 368 of the Internal Revenue Code of 1986, as amended.
1
<PAGE>
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, OccuSystems, Buyer,
and Sellers agree as follows:
ARTICLE 1
----------
DEFINITIONS
-----------
1.1 "ASSETS" means all of the assets of the Corporation used or
------
useful in or relating to the operations of the Clinics, including, without
limitation, all of the Personal Property, Real Property Leases, Names, General
Intangibles, Accounts Receivable, Goodwill, and Transferred Cash (and excluding
only the Excluded Assets, as defined in Section 1.18)), which are defined as
follows:
(a) "PERSONAL PROPERTY" means all of the tangible personal property
-----------------
owned by the Corporation, including, without limitation, all office furniture,
fixtures, leasehold improvements, supplies, prepaids, deposits, Inventory,
Equipment, vehicles, Books and Records, medical instruments, materials, and
consumables, together with any and all warranties thereon (to the extent same
are assignable), including without limitation those described on SCHEDULE 1.1(a)
---------------
hereto.
(b) "REAL PROPERTY LEASES" shall have the meaning set forth on
--------------------
the first page of this Agreement.
(c) "NAMES" means all of the Corporation's right, title, and interest
-----
in and to the Clinic names set forth in SCHEDULE 2 attached hereto, the
----------
Corporation name, and any derivative or variation thereof.
(d) "GENERAL INTANGIBLES" means all of the Corporation's right, title,
-------------------
and interest in and to any and all general intangibles and other intangible
assets related to, or connected with, the business of the Clinics, including,
without limitation, all of the Contracts and Purchase Orders described on
SCHEDULE 1.1(d) hereto, all computer software (including computer software
- ---------------
licenses and any proprietary billing and management information system developed
or under development by the Corporation) and all permits and licenses (to the
extent the same are transferable under applicable Laws).
(e) "ACCOUNTS RECEIVABLE" means all of the Corporation's right, title,
-------------------
and interest in and to any and all accounts receivable, trade receivables, notes
receivable, and other receivables arising out of, related to, or connected with
the business of the Clinics.
(f) "GOODWILL" means the Purchase Price less the fair market value of
--------
the other Assets.
2
<PAGE>
(g) "TRANSFERRED CASH" means all of the Corporation's cash on hand as of
----------------
the Closing Date.
1.2 "ASSUMED LIABILITIES" AND "ASSUMED LOANS" shall have the meanings set
-------------------
forth in Section 2.2.
1.3 "BALANCE SHEET" AND "BALANCE SHEET DATE" shall have the meanings set
--------------------------------------
forth in Section 4.1(f).
1.4 "BOOKS AND RECORDS" means (i) the minute books containing the minutes of
-----------------
all meetings and written consents of the shareholders and directors (and all
committees thereof), shareholder register, stock certificate book, and corporate
seal of the Corporation and (ii) the books and records of the Corporation
relating to the Assets or to the development or business of the Clinics,
including, without limitation, all accounting records, medical records, files,
invoices, customer lists. and supply lists.
1.5 "CLAIM" means a claim pursuant to Article 7 that a party is entitled, or
-----
may become entitled, to indemnification under this Agreement.
1.6 "CLINICS" means the businesses of the Corporation conducted at the Real
-------
Property.
1.7 "CLOSING" means the closing of the transactions contemplated by this
-------
Agreement.
1.8 "CLOSING DATE" shall have the meaning set forth in Section 3.1.
------------
1.9 "CONTRACT" means a contract, commitment, lease, note, mortgage, or other
--------
agreement or instrument, but not including the Real Property Leases or the
Purchase Orders.
1.10 "EFFECTIVE TIME" means 12:01 a.m., on the Closing Date.
--------------
1.11 "EMPLOYEE BENEFIT LIABILITY" means any liability or obligation of the
--------------------------
Corporation (a) that is an accrued but unpaid monetary obligation to make a
contribution under any Employee Benefit Plan, (other than any amount payable or
other consideration that is due to any employee or physician as an incentive or
inducement to enter into a Physician Services Agreement or employment agreement
with Buyer pursuant to Section 6.1(n) hereof); (b) for accrued vacation pay or
accrued sick pay; (c) for accrued employee wages payable in the ordinary course
of business and payroll taxes with respect thereto; (d) that is due and owing to
independent contractors (including physician specialists); or (e) for other
employee fringe benefits, including without limitation insurance programs
(including COBRA obligations), expense reimbursement obligations, continuing
education stipends, and automobile allowances.
1.12 "EMPLOYEE BENEFIT PLANS" shall have the meaning set forth in Section
----------------------
4.1(u).
3
<PAGE>
1.13 "EMPLOYMENT AGREEMENTS" means the agreements substantially in the form
---------------------
of the respective Employment Agreements attached hereto as EXHIBIT C.
---------
1.14 "ENCUMBRANCE" means any security interest, lien, claim, condition,
-----------
restriction, or other encumbrance.
1.15 "EQUIPMENT" means the machinery, equipment, tools, molds, spare parts,
---------
furniture, vehicles, and other items of tangible personal property of any
kind (other than Inventory) which are used in the business or operations of the
Clinics.
1.16 "ESCROW AGENT" means the Escrow Agent named in the Escrow Agreement.
------------
1.17 "ESCROW AGREEMENT" means the form of Escrow Agreement attached hereto
----------------
as EXHIBIT A.
---------
1.18 "EXCLUDED ASSETS" means the personal effects of the Sellers, as
---------------
reasonably agreed to between Buyer and Sellers.
1.19 "EXCLUDED LIABILITIES" shall have the meaning set forth in Section 2.3.
--------------------
1.20 "INDEMNIFIED PARTY" shall have the meaning set forth in Section 7.3.
-----------------
1.21 "INDEMNIFYING PARTY" shall have the meaning set forth in Section 7.3.
------------------
1.22 "INVENTORY" means medical and office supplies, including but not
---------
limited to drugs, bandages, and office materials.
1.23 "LANDLORDS" shall have the meaning set forth on the first page of this
---------
Agreement.
1.24 "LANDLORD'S AGREEMENT" means the form of Landlord's Agreement attached
--------------------
hereto as EXHIBIT B.
---------
1.25 "LAW" means any law, ordinance, code, rule, or regulation of any
---
governmental unit or administrative or regulatory agency.
1.26 "LENDER" means any current holder of any Assumed Loan.
------
1.27 "LOSS" means any loss, damage, or expense (including, without
----
limitation, diminution in value, lost profits, attorneys' fees, and costs of
investigation and litigation).
1.28 "OBJECTION PERIOD" shall have the meaning set forth in Section 7.3.
----------------
1.29 "OCCUSYSTEMS STOCK" shall have the meaning set forth on the first page
-----------------
of this Agreement.
4
<PAGE>
1.30 "PURCHASE ORDER" means any order, contract, commitment, or agreement
--------------
for the purchase of supplies, equipment, services, or other items used in the
business or operations of the Clinics.
1.31 "REAL PROPERTY" shall have the meaning set forth on the first page of
-------------
this Agreement.
1.32 "REGISTRATION AGREEMENT" means the form of Registration Agreement
----------------------
attached hereto as EXHIBIT D.
---------
1.33 "RESOLUTION PERIOD" shall have the meaning set forth in Section 7.4.
-----------------
1.34 "SELLERS' AFFILIATES" means (a) any relative of any Seller or entity
-------------------
that is controlled by, or a majority of the equity interests of which are owned
by, a Seller or any relatives of a Seller, or for which a Seller or any relative
of a Seller serves as an officer or a member of the board of directors or other
governing body, or (b) any entity which controls, is controlled by, or is under
common control with any entity described in clause (a) of this Section 1.34. As
used in this Section 1.34, a "relative" of a person is any parent, child, spouse
or sibling of a person, or any parent, child, or sibling of a person's spouse.
1.35 "THIRD-PARTY SUIT" means a suit or proceeding by a third party with
----------------
respect to which a Claim is made.
1.36 "TRADE ACCOUNTS PAYABLE" means recurring trade obligations (a) that
----------------------
arise from the acquisition of merchandise, materials, supplies, and services
used in the provision of goods and services at the Clinics, (b) which are
directly related to the continuing operations of the Clinics, including, without
limitation, drug screens and medical supplies, and (c) except to the extent
described in Section 5.5 of this Agreement, legal fees due to Blumenthal &
Blumenthal or Crummy, Del Deo, Dolan, Griffinger & Vecchione. Trade Accounts
Payable shall be limited to amounts due third parties for goods and services and
shall not include any indebtedness or any Employee Benefit Liabilities, accrued
but unpaid interest (including interest on the Assumed Loans, which interest
shall be paid by the Corporation through the Effective Time), or real estate
taxes.
ARTICLE 2
----------
PURCHASE OF SHARES
------------------
2.1 PURCHASE PRICE; PAYMENT. Subject to the terms and conditions set forth
-----------------------
in this Agreement, each Seller agrees to sell, convey, transfer, and deliver the
Shares owned by such Seller to Buyer, and Buyer agrees to purchase and accept
the Shares from Sellers, at the Closing on the Closing Date. In full
consideration for the sale, conveyance, transfer, and delivery to Buyer of the
Shares at the Closing, Buyer shall cause OccuSystems to issue, and OccuSystems
agrees to issue to Sellers, certificates representing an aggregate of Six
Hundred Twenty-Five Thousand (625,000) shares of OccuSystems Stock, subject to
adjustment pursuant to the provisions of Section 8.6. The OccuSystems Stock to
be issued shall be allocated among the Sellers in accordance with their
respective percentage ownership interests in the Corporation, as
5
<PAGE>
reflected in SCHEDULE 1 attached hereto, and OccuSystems shall cause separate
----------
stock certificates to be issued to each of the Sellers representing the number
of shares of OccuSystems Stock to which they are entitled, rounded to the
nearest whole share of OccuSystems Stock; provided, however, that a total of
-----------------
Sixty-Eight Thousand Nine Hundred Sixty-One (68,961) shares of the OccuSystems
Stock issued as aforesaid shall, in lieu of being distributed to Sellers at the
Closing, be deposited with the Escrow Agent pursuant to the Escrow Agreement,
Fifty Thousand (50,000) of which shall be allocated among the Sellers in
accordance with their respective percentage ownership interests in the
Corporation, as reflected in SCHEDULE 1 attached hereto, to be held and released
----------
by the Escrow Agent pursuant to the Escrow Agreement, and the remainder of which
shall be held by the Escrow Agent, evidenced by two or more share certificates,
for sale (as and when permitted by this Agreement) and distribution of proceeds
to Chase Manhattan, as set forth in the Escrow Agreement, in accordance with the
Warrant Surrender Agreement referred to in Section 6.1(h) hereof.
2.2 ASSUMED LIABILITIES. The parties hereby acknowledge that the
-------------------
transactions contemplated by this Agreement are based on the assumption that, at
Closing, the liabilities and obligations of the Corporation shall consist only
of the following:
(a) All of the Corporation's executory obligations under the Real
Property Leases, Contracts, and Purchase Orders that are included in the Assets;
(b) All liabilities incurred by the Corporation in good faith and in the
ordinary course of the business after the Effective Time;
(c) All Trade Accounts Payable outstanding in the ordinary course of
business at the Effective Time;
(d) All non-past due payment obligations and other executory obligations
as of the Effective Time under the loans and other obligations described in
SCHEDULE 2.2(d) (the "Assumed Loans");
- ---------------
(e) All Employee Benefit Liabilities; and
(f) All liability for non-delinquent taxes imposed on and payable by the
Corporation relating to periods prior to the Effective Time, including,
without limitation, withholding and payroll taxes, state or federal gross
receipts or income tax, real estate and personal property taxes, and any sales
tax, transfer tax, or other similar tax or governmental charge associated with
or arising from the sale or transfer of the Shares to Buyer pursuant to this
Agreement.
The foregoing liabilities of the Corporation are hereinafter collectively
referred to as the "Assumed Liabilities."
2.3 DEFINITION OF EXCLUDED LIABILITIES. Pursuant to Section 4.1(g), Sellers
----------------------------------
have represented and warranted that the Corporation is not subject to any of the
following liabilities (together with the liabilities described in Section
4.1(g), collectively, the "Excluded
6
<PAGE>
Liabilities"), none of which Excluded Liabilities, as between Buyer and Sellers,
are hereby assumed by Buyer, and as to all of which Excluded Liabilities,
Sellers indemnify Buyer as set forth in Section 7.2 of this Agreement:
(a) Any liability for any delinquent taxes imposed on or payable by the
Corporation relating to periods prior to the Effective Time, including, without
limitation, all withholding and payroll taxes, any state or federal gross
receipts or income tax, real estate, and personal property taxes;
(b) Any liability under any litigation or administrative proceeding,
including, without limitation, workers' compensation claims, EEOC claims, age
discrimination or sexual harassment allegations, and other similar claims or
allegations by employees or former employees of the Corporation based upon acts
or events prior to the Effective Time;
(c) Any liability for personal injury, medical malpractice, or property
damage which relates to the Clinic business or operations of the Clinics and
relates to the period prior to the Effective Time or any liability for personal
injury, medical malpractice, or property damage which relates to any other
business or other medical practice, if any, of the Corporation;
(d) Any liability under products liability, strict liability, or implied
warranty claims relating to services rendered or products sold by the
Corporation prior to the Effective Time;
(e) Any liability to any third party under any theory arising as a result
of or related to services rendered by the Corporation or its employees or
independent contractors (including, without limitation, taxes, penalties, and
interest);
(f) Any debt or obligation (other than the Assumed Loans, if applicable)
owed by the Corporation to any Seller or any Sellers' Affiliate, including,
without limitation, any accrued but unpaid management fees owing to any Seller
or Sellers' Affiliate;
(g) Any indebtedness for borrowed money (other than the Assumed Loans);
(h) Any obligation or liability under or relating to any Employee
Benefit Plan, except for the Employee Benefit Liability, and any amount payable
or other consideration that is due to any employee or physician as an incentive
or inducement to enter into a Physician Services Agreement or employment
agreement with Buyer pursuant to Section 6.1(n) hereof;
(i) Any Medicare, Medicaid, or CHAMPUS contract or any other possible
governmental liabilities of the Corporation or any affiliate of the Corporation
related thereto, it being the clear intent of the parties to this Agreement that
any liability with regard to the foregoing is expressly rejected by Buyer and is
expressly not assumed by Buyer; or
7
<PAGE>
(j) Except as otherwise expressly provided herein, any fees and expenses
owed to Mille Capital Corporation or any other broker or finder, and the
Sellers' or the Corporation's costs and expenses associated with this Agreement,
as described in Section 5.5.
ARTICLE 3
---------
THE CLOSING AND THE EFFECTIVE TIME
----------------------------------
3.1 THE CLOSING. The Closing referred to in Section 2.1 hereof (the
-----------
"Closing") will take place at the offices of Crummy, Del Deo, Dolan, Griffinger
& Vecchione, One Riverfront Plaza, Newark, New Jersey, at 2:00 p.m., local time,
on November 1, 1996, or at such other place or at such other date and time as
the parties hereto shall agree. Such time and date are referred to herein as the
"Closing Date".
3.2 EFFECTIVE TIME. The Closing shall be effective as of the Effective Time,
--------------
and Buyer, Sellers, and Chase Manhattan agree to acknowledge and use said
Effective Time for all purposes, including for accounting and federal and state
tax reporting purposes.
3.3 EFFECT OF DELAYS. Except as provided in Article 9, failure to consummate
----------------
the Closing on the date and time and at the place selected pursuant to this
Article 3 shall not result in any termination of this Agreement and shall not
relieve any party to this Agreement of any obligation hereunder.
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
4.1 REPRESENTATIONS AND WARRANTIES BY SELLERS. As a material inducement for
-----------------------------------------
Buyer and OccuSystems to enter into this Agreement and to consummate the
transactions contemplated hereby, Sellers hereby jointly and severally make the
following representations and warranties as of the date hereof and as of the
Effective Time, each of which is relied upon by Buyer and OccuSystems regardless
of any investigation made or information obtained by Buyer or OccuSystems
(unless and to the extent specifically and expressly waived in writing by Buyer
and OccuSystems on or before the Closing Date):
(a) ORGANIZATION, STANDING, ETC. The Corporation is a duly and validly
---------------------------
organized and existing corporation in good standing under the laws of the State
of New Jersey, with full power and authority to carry on its business as
presently conducted. The Corporation does not have any direct or indirect
interest of any kind in any other corporation, partnership, limited liability
company, association, or business. The Corporation has never conducted any
business or engaged in any activity outside of the state of its incorporation.
(b) COMPLIANCE WITH INSTRUMENTS AND AGREEMENTS. The execution and
------------------------------------------
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not result in any breach or violation of any of the terms or
provisions of, or constitute a default under, (i) the articles of incorporation
or bylaws of the Corporation, (ii) any statute, order, rule, or regulation of
any court or governmental agency or body having jurisdiction over the
Corporation, or (iii) assuming that the required consents referred to in
SCHEDULE 4.1(q) attached
- ---------------
8
<PAGE>
hereto are obtained at or prior to the Closing Date, any agreement, instrument,
or commitment to which the Corporation is a party, by which it is bound, or to
which any of its property is subject.
(c) CAPITALIZATION AND INDEBTEDNESS FOR BORROWED MONEYS.
---------------------------------------------------
(i) CAPITALIZATION AND DIVIDENDS. The Shares to be conveyed to Buyer
----------------------------
pursuant to this Agreement constitute all of the issued and outstanding equity
interests in the Corporation. Sellers have delivered to Buyer true and complete
copies of the articles of incorporation and bylaws of the Corporation. Since
February 28, 1996, except for the exercise or surrender, as the case may be, of
the Prizm Warrants, the Corporation has not (A) paid any dividend to any of its
equity owners, (B) made any other distribution on or with respect to, or
redeemed or otherwise acquired, any equity interest in the Corporation, or (C)
made or permitted any change in the authorized, issued, or treasury shares of
its equity securities.
(ii) INDEBTEDNESS FOR BORROWED MONEYS. The Corporation does not have
--------------------------------
any outstanding indebtedness for borrowed moneys except as reflected in the
Balance Sheet included in SCHEDULE 4.1(f) pursuant to subsection (f) below. The
---------------
Assumed Loans can be prepaid at any time without penalty or premium. True and
complete copies of every instrument, agreement, and other document relating to
any such indebtedness have been delivered to Buyer. Immediately following the
Closing, the Corporation will not be indebted to or have any obligation to any
Seller or Sellers' Affiliate.
(iii) OPTIONS OR RIGHTS. Other than the Prizm Warrants (and the
-----------------
claim by Jeffrey Kossak that he is entitled to warrants from the Corporation),
there are no outstanding agreements, rights, subscriptions, options, warrants,
convertible securities, commitments, arrangements, or understandings of any
character under which the Corporation is or may be obligated to issue or
purchase any interest in the Corporation or under which any Seller is or may be
obligated to sell or transfer any Shares or other interest in the Corporation.
(d) TITLE TO SHARES. Except as described on SCHEDULE 4.1(d), each seller
--------------- ---------------
Seller has good and marketable title to all of the Shares set forth opposite
such Seller's name on SCHEDULE 1, free and clear of all Encumbrances and
----------
restrictions, legal or equitable, of every kind, except for restrictions on
transfer imposed by federal or state securities laws. Each Seller has full and
unrestricted legal right, power, and authority to sell, assign, and transfer the
Shares without obtaining the consent or approval of any other person, entity, or
governmental authority (other than the consents described in SCHEDULE 4.1(q)),
---------------
and the delivery of the Shares to Buyer pursuant to this Agreement will transfer
valid title thereto, free and clear of all Encumbrances, claims, and
restrictions of every kind, except for restrictions on transferability imposed
by federal and state securities laws. Each Seller hereby waives, as of the
Closing Date, all rights that exist pursuant to all shareholder agreements and
other contractual rights or charter document provisions relating to the
transferability of their respective Shares, as and to the extent necessary to
permit the consummation of the transactions provided for herein.
(e) ASSETS OF THE CORPORATION. The Corporation has good and marketable
-------------------------
title to all of the Assets (including leasehold interests as to such Assets
that are leased), subject to no Encumbrance or other charge, other than (i) the
interests of equipment
9
<PAGE>
lessors with respect to leased equipment, (ii) liens in favor of Lenders with
respect to the Assumed Loans, (iii) liens for taxes not yet due, and (iv) liens
created pursuant to the contracts listed on SCHEDULE 1.1(d). The assets owned or
---------------
leased by the Corporation constitute all of the assets currently in existence
which are being used in connection with the business of the Clinics.
(f) FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 4.1(f) are true,
--------------------
correct, and complete copies of the following financial statements of the
Corporation on an accrual basis (collectively, the "Financial Statements"):
(i) an unaudited balance sheet (the "Balance Sheet") of the
Corporation as of August 31, 1996 (the "Balance Sheet Date"), and the related
consolidated statement of income for the eight (8) months then ended; and
(ii) balance sheets of the Corporation and the related consolidated
statements of income, cash flow, and changes in stockholders' equity for the
fiscal years ended December 31, 1994, and December 31, 1995, including in each
case the notes thereto.
The Financial Statements (i) are in accordance with the books and
records of the Corporation, (ii) fairly present the financial condition and
results of operations of the Corporation at the respective dates and for the
periods therein specified, and (iii) have been prepared in accordance with
generally accepted accounting principles consistently applied (subject in the
case of the Balance Sheet to normal recurring year-end adjustments, the effect
of which will not, individually or in the aggregate, be materially adverse).
(g) LIABILITIES OF THE CORPORATION. Except for the liabilities reflected
------------------------------
in the Balance Sheet, the Real Property Leases, the documents described in
SCHEDULE 1.1(d), and all other obligations incurred in the ordinary course of
- ---------------
business since the Balance Sheet Date, the Corporation does not have and is not
subject to any liability of any nature, whether accrued, absolute, contingent,
or otherwise, other than liabilities or obligations of the Corporation which are
included in the Excluded Liabilities and are subject to indemnification by the
Sellers pursuant to Section 7.2 of this Agreement. There are no facts in
existence which might reasonably serve as the basis for any liability or
obligation of the Corporation which is not fully disclosed in this Agreement and
the Schedules hereto. Except as described in SCHEDULE 4.1(g), the Corporation is
---------------
and as of the Closing Date will be current in all payment obligations to which
it is subject, except as otherwise agreed by Buyer.
(h) NONCOMPETITION COVENANTS. Neither the Corporation, any Seller, nor
------------------------
any physician or other professional who provides services at any Clinic is
subject to any noncompetition covenant or other similar agreement restricting
the Corporation's, such Seller's, or such physician's or other professional's
ability to engage in competitive businesses and, following the Closing, Buyer
and its affiliates will not be subject to any such noncompetition covenant or
restrictive agreement by virtue of Buyer's acquisition of the Shares.
(i) ACCOUNTS RECEIVABLE. A true and complete list of all outstanding
-------------------
Accounts Receivable of the Corporation as of the Balance Sheet Date has been
delivered to
10
<PAGE>
Buyer. All of the Accounts Receivable held by the Corporation are valid and
enforceable claims for services rendered and/or goods supplied by the Company
and are not subject to any defenses, offsets, claims, or counterclaims of any
kind. Sellers do not know of any reason why such Accounts Receivable (net of
contractual discounts and any reserve for uncollectible accounts reflected on
the Balance Sheet) will not be collected on a timely basis consistent with past
experience. The allowances for doubtful accounts and contractual adjustments
reflected in the Balance Sheet are based upon historic collection activities of
the Corporation and have been determined in accordance with generally accepted
accounting principles. Sellers do not hereby warrant that all of the Accounts
Receivable will be collected by Buyer or the Corporation.
(j) REAL PROPERTY LEASES. Sellers have provided to Buyer true and
--------------------
complete copies of the Real Property Leases. The Corporation has not assigned,
subleased, or conveyed any interest in any Real Property Lease or the premises
covered thereby. Each Real Property Lease has been duly and validly executed by
the lessee and, except as set forth in SCHEDULE 4.1(j), is in full force and
---------------
effect and constitutes the valid and binding agreement of the parties thereto.
Except as described on SCHEDULE 4.1(j) hereto, neither the Corporation nor (to
---------------
the best of Sellers' knowledge) any other party is in default under any Real
Property Lease and no event or condition has occurred or exists which, with the
passage of time, the giving of notice or both, would cause either the
Corporation or (to the best of Sellers' knowledge) any other party to any Real
Property Lease to be in default thereunder.
(k) MATERIAL CONTRACTS. Sellers have delivered to Buyer an accurate
------------------
list (attached hereto as SCHEDULE 1.1(d)) of all material Contracts, leases
---------------
(other than the Real Property Leases), and instruments to which the Corporation
is a party or by which it or any of its assets are bound as of the date hereof.
For purposes hereof, the term "material Contracts" shall mean the following:
(i) all equipment leases where the aggregate rent required to be paid on or
after the Effective Time under the terms of such lease is at least $5,000; (ii)
all executory purchase agreements relating to the purchase of equipment,
supplies, or other goods where the amount that is payable after the Effective
Time is at least $5,000; (iii) all agreements with any Seller or any Sellers'
Affiliate, and SCHEDULE 1.1(d) sets forth the relationship (if any) of any party
---------------
to any agreement, lease, or other document listed in SCHEDULE 1.1(d) with any
---------------
Seller or Sellers' Affiliate; (iv) all agreements with any physician, physical
therapist, or professional association or corporation; (v) all employment and
consulting agreements, including all incentive compensation plans or
commitments; (vi) all agreements with employers, health maintenance
organizations, insurance companies, physician provider organizations, and other
managed care entities, or other contracts whereunder the Corporation is
committed to provide goods or services; (vii) all agreements with sales or
marketing representatives; (viii) all documents and instruments relating to any
indebtedness reflected on the Balance Sheet (except any such indebtedness that
pursuant to the terms of this Agreement is not an Assumed Liability); (ix) all
powers of attorney and agency agreements with third parties; and (x) all other
agreements and commitments (A) in which the financial obligation of the
Corporation as of the Effective Time is at least $5,000 or (B) which cannot be
canceled by the Corporation, without cause and without premium or penalty, upon
no more than thirty (30) days notice. Sellers have delivered to Buyer true and
complete copies of the documents and instruments described in SCHEDULE 1.1(d).
---------------
11
<PAGE>
(l) BANK ACCOUNTS. Set forth on SCHEDULE 4.1(l) attached hereto is an
------------- ---------------
accurate and complete list showing the name and address of each bank in which
the Corporation has an account or safe deposit box, the number of any such
account or safe deposit box, and the names of all persons and entities
authorized to draw thereon or to have access thereto.
(m) TAX RETURNS AND AUDITS. The Corporation has accurately prepared and
filed all federal, state, and local income, property, and employment related tax
returns and all information statements required to be filed prior to the date of
this Agreement. True and complete copies of each of the most recent of any such
material return or statement, and such other returns and statements requested by
Buyer, have been provided to Buyer. Any federal, state, and local taxes required
to be paid or withheld with respect to the periods covered by such returns and
statements have been paid or withheld. The liabilities for unpaid taxes shown on
the Balance Sheet are and will be sufficient to pay all taxes accrued through
the Balance Sheet Date and not reported on and paid with returns filed by the
Corporation prior to the Effective Time. No tax liability will be incurred by
the Corporation as a result of the transactions contemplated by this Agreement.
Except as described on SCHEDULE 4.1(m), the Corporation has not been delinquent
---------------
in the payment of any tax, assessment, or governmental charge or in the filing
of any tax return or information statement. Except as described on SCHEDULE
--------
4.1(m), the Corporation has never had any tax deficiency proposed or assessed
- ------
against it or has executed any waiver of any statute of limitations on the
assessment or collection of any tax. Except as described on SCHEDULE 4.1(m),
---------------
neither the federal income tax returns, any employment related returns, nor the
state income or franchise tax returns (if any) of the Corporation have ever been
audited by any governmental authority.
(n) LITIGATION AND PROCEEDINGS. Except as described in SCHEDULE 4.1(n)
-------------------------- ---------------
attached hereto, there are no outstanding legal claims, actions, suits,
arbitrations, or other legal, administrative, or governmental proceedings
pending or, to the knowledge of Sellers, threatened against the Corporation or
any properties, assets, or business of the Corporation, or any person at any
time employed, engaged, or otherwise associated by the Corporation with respect
to the services provided or period of such employment, engagement, or
association, and, to the knowledge of Sellers, no facts exist which have been or
should be reported under any professional liability insurance policy covering
the Corporation. The Corporation is not in default with respect to any judgment,
order, or decree of any court, governmental agency, or instrumentality. SCHEDULE
--------
4.1(n) contains a complete and accurate description of the status of any matter
- ------
covered thereby and the Corporation carries adequate insurance to cover the
costs, expenses, and damages of each of the matters described therein that
include allegations of medical malpractice. Except for normal collection efforts
relating to accounts receivable, the Corporation is not engaged in any legal
action to recover money due to or damages sustained by it.
(o) COMPENSATION AND BENEFITS. Attached hereto as SCHEDULE 4.1(o) is
------------------------- ---------------
an accurate and complete list setting forth the names, rates of compensation and
employee benefits of, and certain other information regarding all current
employees and consultants of the Corporation (including but not limited to
vacation time and pay, severance pay, physician malpractice insurance programs,
incentive compensation programs, sick time and pay, and group insurance and
other benefit plans, policies, and arrangements), whether such benefits are
12
<PAGE>
provided pursuant to contract, policy, custom, or informal understanding.
Sellers have delivered to Buyer true and complete copies of the Corporation's
written employee policies and practices (including, without limitation, any
employee handbook). The Corporation does not have any collective bargaining
agreement with any labor union and is not currently negotiating with a labor
union. No employee of the Corporation has ever petitioned for a representation
election. Except as described on SCHEDULE 4.1(o), no person has ever filed with
---------------
any governmental authority any claim asserting sexual harassment, age or racial
discrimination, or violation of OSHA by the Corporation or any officer,
director, employee, or agent of the Corporation.
(p) COMPLIANCE WITH LAW AND INSTRUMENTS. Except as described on
-----------------------------------
SCHEDULE 4.1(P), the business and operations of the Corporation have been and
- ---------------
are being conducted in compliance with all applicable Laws, including but not
limited to Laws relating to occupational safety, health care, zoning, or
environmental matters. The Corporation is not now operating in violation of any
Laws and has never received any notice from any governmental unit or
administrative or regulatory agency claiming any violation of any Law, which
violation has or could have a material adverse effect on the business or assets
of Buyer or the Corporation. The Corporation has complied with all applicable
federal and state securities Laws in connection with the sale or resale of all
equity interests in the Corporation. The Clinics have never participated in the
Medicare or Medicaid program. Any certificates of need required for the
construction or operation of the Clinics were duly obtained, and such
certificates of need, if any, will remain in full force and effect immediately
after the consummation of the transactions provided for herein. Neither the
U.S. Department of Health and Human Services nor any state agency has conducted
or has given the Corporation any notice that it intends to conduct any audit or
other review of the Corporation's participation in the Medicare or Medicaid
programs, and no such audit or review would result in any material liability by
the Corporation for any reimbursement, penalty, or interest with respect to
payments received by the Corporation thereunder. Provided that Buyer or the
Corporation, as the case may be, does not employ physicians, but, rather, all
physicians providing services at the Corporation's facilities in the State of
New Jersey are employed by a professional association, Sellers do not know of
any reason why the Corporation will not or may not be able to continue its
businesses, as presently conducted, after the Closing.
(q) NO CONSENT REQUIRED. Except for the consents and notice requirements
-------------------
described in SCHEDULE 4.1(q), the execution and delivery of this Agreement and
---------------
the consummation of the transactions provided herein will not require any
governmental consent, review, or other process or the consent of any party to
any lease (including the Real Property Leases), contract, agreement, or
instrument to which the Corporation is a party or by which any of its assets is
subject or may be bound.
(r) PERMITS AND LICENSES. SCHEDULE 4.1(r) attached hereto lists all of
-------------------- ---------------
the permits, licenses, approvals, and authorizations that the Corporation holds
in connection with its business. Except as otherwise set forth in
SCHEDULE 4.1(p), no other permit, license, approval, or authorization of any
- ---------------
governmental unit or administrative or regulatory agency is necessary for the
lawful conduct of the Corporation's businesses. Sellers have delivered to Buyer
copies of all permits, licenses, approvals, and authorizations listed on
SCHEDULE 4.1(r), as well as copies of all
- ---------------
13
<PAGE>
licenses and permits held by all licensed employees and independent contractors
of the Corporation.
(s) ABSENCE OF SPECIFIED CHANGES. Except for the transactions and
----------------------------
agreements provided for herein, since the Balance Sheet Date there has not been:
(i) any transaction by the Corporation except in the ordinary course of
business; (ii) any capital expenditure by the Corporation exceeding $5,000;
(iii) any material adverse change in the working capital, financial condition,
business, markets, properties, assets, results of operation, or prospects of any
Clinic, other than changes generally applicable to the occupational medicine
clinic business; (iv) any event which has materially affected or may materially
and adversely affect the Corporation, including, without limitation, any
material reduction in the Clinics' charge or fee schedule; (v) any material
destruction, damage to, or loss of any material asset of the Corporation,
whether or not covered by insurance; (vi) any indebtedness for borrowed money
incurred or the creation or imposition of any mortgage, pledge, or other
encumbrance on any asset of the Corporation, other than purchase money liens on
newly acquired assets; (vii) any increase in salaries or benefits to employees
or independent contractors of the Corporation, other than annual increases
implemented in accordance with the past practices of the Corporation; (viii) any
material amendment to any Real Property Lease or any material Contract listed in
SCHEDULE 1.1(d), other than in the ordinary course of business of the
- ---------------
Corporation and except as provided herein; (ix) any sale, transfer, or
disposition of any equipment that is material to any Clinic, other than
dispositions in the ordinary course of business where the equipment disposed of
is replaced by equipment of at least equal value and utility; (x) any
transaction with any Sellers' Affiliate; or (xi) any agreement by the
Corporation to do any of the things described in this subsection (s).
(t) INSURANCE POLICIES. Sellers have provided to Buyer complete and
------------------
accurate copies of all insurance policies or certificates of insurance under
which the Corporation is insured, including the coverage limits and deductibles
applicable thereto (the "Insurance Policies"). The Corporation's medical
malpractice insurance coverage (including the "tail" insurance coverage obtained
or to be obtained by Sellers at or prior to the Closing Date pursuant to Section
6.1(l)) and the medical malpractice coverage of each physician and other
healthcare professional who provides services in connection with the
Corporation's businesses has or will have coverage limits of at least $1,000,000
per occurrence and $3,000,000 in the aggregate. The Corporation is not in
default with respect to any provision contained in any of the Insurance Policies
and has not failed to give any notice or present any claim under any of such
Insurance Policies in a due and timely fashion. The Insurance Policies provide
coverage in such amounts and against such risks and losses as is customary for
persons or companies engaged in the Corporation's business. Neither the
Corporation nor any Seller has received any notification from any insurance
carrier denying or disputing any claim made by the Corporation, denying or
disputing the coverage for any claim, denying or disputing the amount of any
claim, or regarding the possible cancellation of any policies.
(u) RETIREMENT PLANS. Except for the employee benefit plans (the
----------------
"Employee Benefit Plans") described in SCHEDULE 4.1(u) attached hereto, the
---------------
Corporation does not maintain or participate in, and has never maintained or
participated in, any pension, profit sharing, or other retirement plan, any
multi-employer plan as defined in Section 400(a)(3) of the
14
<PAGE>
Employee Retirement Income Security Act of 1974 ("ERISA"), or any other employee
benefit, health, welfare, medical, disability, life insurance, stock, stock
purchase, or stock option plan, program, agreement, arrangement, or policy of
any kind. The written terms of the Employee Benefit Plans are, and each Employee
Benefit Plan has been administered, in compliance with the requirements of ERISA
and, where applicable, the Internal Revenue Code of 1986. Except to the extent
otherwise expressly set forth herein, neither Buyer nor the Corporation will
incur any obligation or liability under or relating to the Employee Benefit
Plans as a result of the transactions contemplated by this Agreement, or
otherwise.
(v) NO BROKERS OR FINDERS. Except only for the fee due to Mille Capital
---------------------
Corporation which, subject to the provisions of Section 8.6, may be paid at or
prior to the Closing from the funds of the Corporation, as a result of any act
or failure to act by any Seller, Sellers' Affiliate, or the Corporation, no
person or entity has, or as a result of the transactions contemplated hereby
will have, any right, interest, or valid claim against or upon Buyer,
OccuSystems, or the Corporation for any commission, fee, or other compensation
as a broker, finder, or any similar capacity.
(w) USE OF NAMES. The only names under which the Corporation has ever
------------
conducted business are the Names. The Corporation owns the entire right, title,
and interest in and to each and every Name, together with all derivatives
thereof, and no third party has ever notified the Corporation that the use of
any Name is in violation of the rights of such third party.
(x) THE REAL PROPERTY.
-----------------
(i) Except as described on SCHEDULE 4.1(x), the Corporation has never
---------------
received written notice of a violation of any applicable ordinance or other law,
order, regulation, or requirement which could have a material adverse effect on
Buyer or the Corporation, has received no written notice of any current
violation of any applicable ordinance or other law, order, regulation, and has
not received notice of any condemnation, lien, assessment, or the like, relating
to any part of the Real Property or the operation thereof, and, to the best of
Sellers' knowledge, there is not presently contemplated or proposed any
condemnation or similar action or zoning action or proceeding with respect to
the Real Property or the operation thereof;
(ii) The Real Property and the Clinics are in compliance with all
applicable zoning ordinances (including without limitation parking
requirements) (excepting only any noncompliance that would not, individually or
in the aggregate, have a material adverse effect on Buyer or the Corporation),
and the consummation of the transactions contemplated herein will not result in
a violation of any applicable zoning ordinance or the termination of any
applicable zoning variance now existing;
(iii) To Sellers' knowledge, the Real Property and all buildings,
improvements, and fixtures thereon or therein, and all parts thereof and
appurtenances thereto, including, without limitation, the plumbing, electrical,
mechanical, heating, ventilation, and air
15
<PAGE>
conditioning systems, are in good operating condition and in a reasonable state
of maintenance and repair, normal wear and tear excepted; and
(iv) To Sellers' knowledge, each Clinic has adequate parking
available to satisfy its current needs.
(y) TANGIBLE ASSETS. The tangible Personal Property used in the
---------------
Clinics is adequate to fully equip and operate the Clinics at their present
level of operation. Each material item of tangible Personal Property is in good
operating condition, normal wear and tear excepted.
(z) SUPPLIES. All of the Inventory carried on the Balance Sheet and
--------
which is still held by the Corporation on the date hereof is of a quality and
quantity usable in the ordinary course of business of the Corporation.
Inventory is properly stated in the Balance Sheet.
(aa) ENVIRONMENTAL MATTERS.
---------------------
(i) The Corporation is and at all times has been in compliance with
all Environmental Laws (as defined below), which compliance includes, without
limitation, the possession by the Corporation of all permits and other
governmental authorizations required under applicable Environmental Laws to
operate its businesses as currently operated, and the Corporation is and at all
times has been in compliance in all material respects with the terms and
conditions thereof;
(ii) No Hazardous Substances (as defined below) have been generated
or stored on, at, or adjacent to the Real Property by the Corporation, except in
compliance with applicable Environmental Laws;
(iii) No Hazardous Substances have been disposed of or released on,
from, or adjacent to the Real Property by the Corporation, except in compliance
with applicable Environmental Laws;
(iv) The Corporation has never received any written communication,
whether from a governmental authority, citizen's group, employee, consultant, or
otherwise, that alleges that any Clinic or the Real Property is not in full
compliance with Environmental Laws, and there is no Environmental Claim (as
defined below) pending or, to the best of Sellers' knowledge, threatened against
the Corporation or any Landlord or other owner of the Real Property; and
(v) To the best of Sellers' knowledge, the Real Property does not
contain asbestos in any form.
"Environmental Claim" means any claim, action, cause of action,
investigation, or notice by any person or entity alleging potential liability
(including without limitation potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on, or resulting
from (A) the presence, or release on or from the Real Property or any Clinic, of
Hazardous
16
<PAGE>
Substances or (B) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
"Environmental Laws" means the federal, state, regional, county, or local
environmental, health, or safety laws, regulations, ordinances, rules, and
policies and common law in effect on the date hereof and the Closing Date
relating to the use, refinement, handling, treatment, removal, storage,
production, manufacture, transportation or disposal, emissions, discharges,
releases, or threatened releases of Hazardous Substances, or otherwise relating
to protection of human health or the environment (including without limitation
ambient air, surface water, ground water, land surface, or subsurface strata),
as the same may be amended or modified to the date hereof and the Closing Date.
"Hazardous Substances" means any toxic or hazardous waste, pollutants,
or substances, including, without, limitation medical wastes, asbestos
containing materials or substances, any substance defined or listed as a
"hazardous substance," "toxic substance," "toxic pollutant," or similarly
identified substances or mixture, in or pursuant to any Environmental Law, and
medical or infectious wastes.
(bb) CORPORATE RECORDS. The minute books, stock certificate books, and
-----------------
stock transfer ledgers of the Corporation are in Sellers' possession, are
complete and accurate in all material respects, and reflect all those
transactions and corporate acts which properly should have been set forth
therein.
(cc) INVESTMENT REPRESENTATIONS. Each Seller represents, warrants, and
--------------------------
acknowledges that (i) such Seller is aware that the OccuSystems Stock to be
issued to such Seller pursuant to this Agreement will be issued pursuant to
applicable exemptions from registration under the federal Securities Act of
1933, as amended (the "1933 Act"), and applicable state securities laws, and the
rules and regulations promulgated thereunder; (ii) such OccuSystems Stock has
not been registered under the 1933 Act or any such state securities laws; (iii)
such Seller has such knowledge, sophistication, and experience in financial and
business matters as to be capable of evaluating the merits and risks of
receiving the OccuSystems Stock pursuant to this Agreement; (iv) such Seller is
an "accredited investor" as that term is defined in Regulation D under the 1933
Act; and (v) such Seller is acquiring the OccuSystems Stock pursuant to this
Agreement for his or her own account, not for the account of others, and not
with a view to the resale or distribution of such OccuSystems Stock, except for
sales made by such Seller pursuant to an effective registration statement or
applicable exemption under the 1933 Act and any applicable state securities
laws. Each Seller acknowledges and agrees that, notwithstanding the provisions
of the Registration Agreement, pursuant to which OccuSystems will agree to
register the OccuSystems Stock issued to such Seller pursuant hereto under the
1933 Act and certain state securities laws, no assurance has been given that
such registration can be effected or, if declared effective, that there will not
be times when such registration will not be available for sales of such
OccuSystems Stock by such Seller, whether due to developments or information
relating to the business of OccuSystems or due to circumstances beyond the
control of OccuSystems.
17
<PAGE>
(dd) OWNERSHIP OF OCCUSYSTEMS SECURITIES. No Seller or the Corporation
-----------------------------------
owns beneficially or of record any shares of OccuSystems Stock or other
securities of OccuSystems.
(ee) FULL DISCLOSURE. None of the representations, warranties, or
---------------
disclosures made to Buyer or OccuSystems by any Seller herein, or in any
exhibit, schedule, list, certificate, or memorandum furnished or to be furnished
to Buyer or OccuSystems by the Corporation or any Seller in connection herewith,
contains or will contain any untrue statement of a material fact or omits or
will omit any material fact, the omission of which would tend to make the
statements made herein or therein misleading in any material respect.
4.2 REPRESENTATIONS AND WARRANTIES BY OCCUSYSTEMS AND BUYER. As a material
-------------------------------------------------------
inducement for Sellers to enter into this Agreement and to consummate the
transactions contemplated hereby, Buyer and OccuSystems hereby jointly and
severally make the following representations and warranties as of the date
hereof and as of the Effective Time, each of which is relied upon by Sellers
regardless of any investigation made or information obtained by Sellers (unless
and to the extent specifically and expressly waived in writing by Sellers on or
before the Closing Date):
(a) ORGANIZATION AND GOOD STANDING. Buyer and OccuSystems have been
------------------------------
duly organized and are validly existing and in good standing under the laws of
the States of Nevada and Delaware, respectively, with all requisite power and
authority to carry on their businesses as presently conducted. Buyer is a
wholly-owned subsidiary of OccuSystems.
(b) DUE AUTHORIZATION. The execution, delivery, and performance of this
-----------------
Agreement by Buyer and OccuSystems have been duly authorized by all requisite
board of director and shareholder action of Buyer and OccuSystems, and no
further action is necessary to make this Agreement valid and binding upon Buyer
and OccuSystems in accordance with its terms.
(c) COMPLIANCE WITH INSTRUMENTS AND AGREEMENTS. The execution and
------------------------------------------
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not result in any breach or violation of any of the terms or
provisions of, or constitute a default under, the articles or certificate of
incorporation or bylaws of either Buyer or OccuSystems, any statute, order,
rule, or regulation of any court or governmental agency or body having
jurisdiction over Buyer or OccuSystems, or any agreement, instrument, or
commitment to which Buyer or OccuSystems is a party or by which it is bound or
to which any of its property is subject or may be bound.
(d) NO CONSENT REQUIRED. Except for the registration and qualifications
-------------------
described in the Registration Agreement, no authorization or consent of any
federal or state administrative or regulatory agency or other third party is
required for the execution, delivery, and performance of this Agreement by Buyer
and OccuSystems or for the performance by Buyer and OccuSystems of the
transactions contemplated by this Agreement.
18
<PAGE>
(e) SEC FILINGS. Buyer has previously furnished to Sellers a true and
-----------
complete copy of OccuSystems' Annual Report on Form 10-K for the year ended
December 31, 1995 and its Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1996, each as filed with the Securities and Exchange Commission
("SEC") pursuant to the Securities Exchange Act of 1934, as amended (the "1934
Act"). The balance sheets included in said 10-K and 10-Q Reports (including any
related notes and schedules) fairly present in all material respects the
consolidated financial position of OccuSystems as of their dates, and the other
financial statements included therein (including any related notes and
schedules) fairly present the consolidated results of operations or other
information included therein of OccuSystems for the periods or as of the dates
therein set forth, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved (except, as to the
interim unaudited statement included in such 10-Q Report, for normal year end
adjustments and only as such principles apply to interim unaudited statements).
(f) FORMS 8-K. OccuSystems has previously furnished to Sellers a true
---------
and complete copy of any Current Report on Form 8-K, including exhibits, filed
by OccuSystems with the SEC in 1996.
(g) 1934 ACT REPORTS. OccuSystems has filed all reports with the SEC
----------------
required to be filed with the SEC under the 1934 Act and the rules and
regulations thereunder, and each such report complied in all material respects
with such rules and regulations applicable thereto. All such reports required
to be filed with the SEC during the 12 months preceding the date hereof have
been filed by OccuSystems on a timely basis. None of the documents (as amended)
referred to in Section 4.2(e) or 4.2(f) or in this Section 4.2(g) contained as
of its date any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(h) STATUS OF OCCUSYSTEMS STOCK. Each share of OccuSystems Stock issued
---------------------------
to Sellers pursuant to this Agreement will be, when so issued, duly authorized,
validly issued, fully paid, and nonassessable.
(i) NO FINDERS OR BROKERS. As a result of any act or failure to act by
---------------------
Buyer, OccuSystems, or any of their affiliates, no person, firm, or corporation
has, or as a result of the transactions contemplated hereby will have, any
right, interest, or valid claim upon the Corporation or any Seller for any
commission, fee, or other compensation as a finder, broker, or in any similar
capacity.
(j) INVESTMENT INTENT. Buyer acknowledges that the Shares have been
-----------------
offered and will be sold to Buyer pursuant to an exemption from registration
under the 1933 Act and all applicable state securities laws. Buyer is
purchasing the Shares for investment purposes and has no present intent to
distribute, resell, pledge, or otherwise dispose of any of the Shares.
(k) FULL DISCLOSURE. None of the representations, warranties, or
---------------
disclosures made to Sellers by Buyer or OccuSystems herein, or in any exhibit,
schedule, list,
19
<PAGE>
certificate, or memorandum furnished or to be furnished to Sellers by Buyer or
OccuSystems in connection herewith, contains or will contain any untrue
statement of a material fact or omits or will omit any material fact, the
omission of which would tend to make the statements made herein or therein
misleading in any material respect.
ARTICLE 5
---------
PRE-CLOSING COVENANTS
---------------------
The parties agree that from the date hereof until the Closing Date or
the termination of this Agreement:
5.1 DUE DILIGENCE. The Corporation and Sellers will afford officers and
-------------
authorized representatives of Buyer with reasonable access to the financial,
operational, and statistical books and records of the Corporation and shall
permit Buyer to conduct physical inspections of the Real Property and the
Clinics at such time or times as will not disrupt customary delivery of care to
patients.
5.2 CONTINUATION OF BUSINESS. Sellers shall cause the Corporation to:
------------------------
(a) conduct its business only in the usual and ordinary course as it has
previously been conducted, including, without limitation, its policies and
practices relating to the collection of accounts receivable and the payment of
Trade Accounts Payable and other liabilities, and not introduce any new methods
of management, operations, or accounting, without Buyer's prior written consent
(which shall not be unreasonably withheld); (b) maintain the Assets in as good
working order and condition as at present, ordinary wear and tear excepted; (c)
perform all material obligations under material agreements and leases relating
to or affecting the Corporation; (d) keep in full force and effect present
insurance policies; and (e) use its best efforts to maintain and preserve the
business organizations of the Corporation intact, retain its present employees,
and maintain its relationships with employees, suppliers, patients, payors, and
others having business relations with the Corporation.
5.3 TRANSACTIONS REQUIRING CONSENT. From the date hereof until the Closing
------------------------------
Date, without Buyer's prior written consent (which shall not be unreasonably
withheld), except as required or permitted by this Agreement (including, without
limitation, the exercise or surrender, as the case may be, of the Prizm
Warrants, as described herein), Sellers shall not permit the Corporation to: (a)
other than normal Trade Accounts Payable, prepay any debt in excess of $5,000
prior to its stated maturity (except pursuant to an existing amortization
payment schedule) or enter into any contract or commitment or incur or agree to
incur any debt or make any capital expenditure requiring the payment of amounts
in excess of $5,000; (b) create or assume any mortgage, pledge, or other lien or
encumbrance upon any of its assets, whether now owned or hereafter acquired; (c)
make any loan; (d) incur any debt or other monetary obligation, other than
normal Trade Accounts Payable and other than borrowings in the ordinary course
of business pursuant to the Corporation's Revolving Credit Facility and Term
Loan with The Chase Manhattan Bank as it exists on the date of this Agreement;
(e) amend any Contract listed in SCHEDULE 1.1(d), except changes made in the
---------------
ordinary course of business, or change any employee compensation (except normal
annual salary increases implemented in accordance with past practices); (f) fail
to pay any obligation in a timely manner prior to delinquency, consistent
20
<PAGE>
with past practices; (g) declare, set aside, or pay any dividend or distribution
to its equity owners, or directly or indirectly purchase, redeem, or otherwise
acquire any outstanding equity interest in the Corporation; or (h) engage in any
transaction with any Sellers' Affiliate.
5.4 PERFORMANCE COVENANT. Each of the parties hereto covenants and agrees
--------------------
that it will take all action reasonably within its power and authority to duly
and timely carry out all of its obligations hereunder, to perform and comply
with all of the covenants, agreements, representations, and warranties hereunder
applicable to it, and to cause all conditions applicable to it to the
obligations of the other party to close the purchase and sale of the Shares
pursuant hereto to be satisfied as promptly as possible. Each party will
promptly notify the others in the event such party receives notice of the
institution or threat to institute any action that could cause the conditions
set forth in Section 6.1(b) or 6.2(b) not to be satisfied at the Closing Date.
5.5 COSTS OF AGREEMENT. Buyer and Sellers agree to bear all of their own
------------------
expenses incurred in preparing or complying with this Agreement, including,
without limitation, all legal, investment banker, and accounting expenses and
fees. None of such expenses, nor the expenses of Chase Manhattan in connection
with this Agreement, shall be an Assumed Liability or shall be charged to or
paid by the Corporation, either before or after the Closing Date. Anything
herein to the contrary notwithstanding, however, the fees and expenses of Chase
Manhattan relating to the transactions contemplated by this Agreement and the
fees and expenses of Mille Capital Corporation referred to in Section 4.1(v),
subject in all respects to the provisions of Section 7.2 and Section 8.6 of this
Agreement, may be paid by the Corporation on or prior to the Closing Date, and,
to the extent not so paid, shall be paid by the Corporation on or after the
Closing Date.
5.6 GOVERNMENTAL APPROVALS. Sellers shall assist and cooperate with Buyer
----------------------
and Buyer's representatives and counsel in obtaining all governmental consents,
approvals, and licenses which Buyer deems necessary or appropriate, and in the
preparation of any document or other materials which may be required by any
governmental agency, in connection with the transactions contemplated herein.
5.7 NO-SHOP CLAUSE. Neither Sellers nor the Corporation shall, without the
--------------
prior written consent of Buyer (which may be withheld by Buyer in its sole
discretion), (a) offer for sale any of the Shares or the Assets (or any material
portion thereof), (b) solicit offers to buy the Shares or any Assets (or any
material portion thereof), (c) hold discussions with any party (other than
Buyer) looking toward such an offer or solicitation or looking toward a merger
or consolidation of the Corporation, or (d) enter into any letter of intent or
agreement with any party (other than Buyer) with respect to the sale or other
disposition of any of the Shares or the Assets (or any material portion thereof)
or with respect to any merger, consolidation, or similar transaction involving
the Corporation.
5.8 AUDIT OF THE CORPORATION'S FINANCIAL STATEMENTS. Sellers acknowledge and
-----------------------------------------------
agree that OccuSystems, through its independent accountants, Arthur Andersen,
LLP, may conduct an audit of the Corporation's financial statements for one or
more periods ending on or prior to the Effective Time for purposes of
OccuSystems complying with its public reporting obligations under the 1933 Act
and the 1934 Act and, to the extent required, for inclusion in the
21
<PAGE>
registration statement to be filed pursuant to the Registration Agreement.
Sellers agree to cooperate and assist, and to cause the Corporation and the
employees of the Corporation to cooperate and assist, in such audit in all
respects reasonably requested by OccuSystems and its independent accountants,
including, without limitation, making employees of the Corporation available to
provide any information necessary or appropriate for such audits and signing
standard management representation letters to Arthur Andersen, LLP.
5.9 INTERIM OPERATING REPORTING. During the period from the date of this
---------------------------
Agreement to the Closing, Sellers shall cause the officers of the Corporation
and other management personnel of the Clinics designated by Sellers (a) to
confer on a regular and frequent basis with one or more representatives of Buyer
to report material operational matters relating to the Clinics and to report the
general status of on-going operations, (b) to notify Buyer in writing of any
material adverse change in the financial position or earnings of the Corporation
after the Balance Sheet Date, any unexpected emergency or other unanticipated
change in the business of the Corporation, any governmental complaint,
investigation or hearing, or adjudicatory proceeding (or communications
indicating that the same may be contemplated), or any litigation, arbitration,
or other such matter that has been filed or threatened against the Corporation,
(c) to assist Buyer in preparing for the transition in management, including,
without limitation, changes in employee benefit plans, that will take place
after the Closing Date, and (d) to keep Buyer fully informed of such events and
permit its representatives to participate in all discussions relating thereto.
Within fifteen (15) business days following any month-end which occurs on or
after the date of execution of this Agreement (but only, with respect to each
such month-end, if such fifteen (15) day period ends prior to the Closing Date),
Sellers shall cause the Corporation to provide Buyer with an unaudited balance
sheet and income statement of the Corporation which reflects its operations for
such month, which interim financial statements shall be prepared in a manner
consistent with the policies and practices used in the preparation of the
Balance Sheet.
5.10 REGISTRATION STATEMENT. OccuSystems shall file a registration
----------------------
statement with the SEC pursuant to the Registration Agreement as soon as is
practicable after the date of this Agreement.
ARTICLE 6
---------
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations of Buyer
--------------------------------------------
and OccuSystems hereunder are subject to the satisfaction, on or prior to the
Closing Date, of the following conditions (unless waived by Buyer):
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------------------
warranties of Sellers contained in this Agreement shall be true in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date. All of the
agreements of Sellers to be performed on or before the Closing Date pursuant to
the terms hereof shall have been performed in all material respects.
22
<PAGE>
(b) ACTION RESTRAINING OR AFFECTING TRANSACTION. No action or proceeding
-------------------------------------------
before a court or any other governmental agency or body shall have been
instituted or threatened to restrain or prohibit the transfer of any of the
Shares, and no third party or governmental agency or body shall have taken or
threatened any action with respect to this Agreement as a result of which Buyer
deems it inadvisable to proceed with the transactions contemplated herein.
(c) MATERIAL CHANGES. The Corporation shall not have suffered any
----------------
change, loss, or damage between the Balance Sheet Date and the Closing Date
which materially and adversely affects or impairs the financial condition
(including, without limitation, the working capital) of the Corporation or the
operations or prospects of the Corporation.
(d) GOVERNMENTAL PERMITS. Buyer, Sellers, and/or the Corporation, as
--------------------
appropriate, shall have obtained all licenses, certificates, permits, and
rulings of, and made all notices to, all governmental authorities that may be
required in connection with the acquisition of the Shares and the continuation
of the operation of the businesses of the Clinics by the Corporation following
the Closing, including, without limitation, compliance with any applicable
licensure, notification, and approval procedures of the state agencies that
regulate the Clinics.
(e) CONSENTS, APPROVALS, AND AUTHORIZATIONS. Sellers shall have
---------------------------------------
obtained all consents, approvals, and authorizations and given all notices
required in connection with the transactions provided for herein, including,
without limitation, all required consents from any of the Landlords and the
consents and notices described in SCHEDULE 4.1(q).
---------------
(f) LEGAL OPINION. Sellers shall have delivered to Buyer an opinion of
-------------
Crummy, Del Deo, Dolan, Griffinger & Vecchione, counsel to the Corporation
and Sellers (other than Jeffrey Kossak), dated the Closing Date, covering the
matters set forth in EXHIBIT E attached hereto and, otherwise, in form and
---------
substance satisfactory to Buyer and its counsel. In rendering such opinion,
such counsel may rely as to factual matters upon certificates of public
officials and upon certificates of officers of the Corporation.
(g) RESIGNATION OF OFFICERS AND DIRECTORS. Each of the elected and
-------------------------------------
acting directors and officers of the Corporation shall have submitted his or her
resignation, effective as of the Effective Time.
(h) PRIZM WARRANTS; TRANSFER OF SHARES AND BOOKS AND RECORDS. Arthur
--------------------------------------------------------
Canario, M.D., shall have exercised his Prizm Warrants. Each Seller shall have
delivered to Buyer a certificate or certificates representing such Seller's
Shares, duly endorsed in blank or accompanied by appropriate stock powers
endorsed in blank. Chase Manhattan shall have entered into a Warrant Surrender
Agreement providing, among other things, for: (i) the surrender of the Prizm
Warrants held by Chase Manhattan, and release of all obligations of the
Corporation related thereto, in exchange for the payment of cash in an amount
equal to the proceeds of the sale of Eighteen Thousand Nine Hundred Sixty-One
(18,961) shares of the OccuSystems Stock held by the Escrow Agent pursuant to
the Escrow Agreement, as and when permitted by this Agreement and the Escrow
Agreement; and (ii) reasonable representations and warranties by Chase Manhattan
regarding due organization, due authorization, and corporate authority. The
23
<PAGE>
Corporation shall have delivered to Buyer all of the Books and Records described
in Section 1.4(i) of this Agreement and shall have made available to Buyer all
of the other Books and Records.
(i) RELEASE OF LIENS. Buyer shall have received (or Sellers shall have
----------------
made arrangements satisfactory to Buyer to receive) properly executed documents
terminating any and all Encumbrances on any of the Assets (other than
Encumbrances securing any Assumed Loan or Contract that Buyer is not paying in
full at the Closing).
(j) PAYMENTS OF SELLERS' LIABILITIES TO THE CORPORATION. Any and all
---------------------------------------------------
payables owed by any Seller or Sellers' Affiliate to the Corporation shall have
been paid in full.
(k) LANDLORDS' AGREEMENTS. Sellers shall have used their best efforts
---------------------
to obtain and deliver to Buyer a duly executed Landlord's Agreement from each of
the Landlords.
(l) TAIL INSURANCE. Sellers shall have paid to Buyer an amount of cash
--------------
equal to any amount by which the cost to Buyer of "tail" malpractice insurance
coverage for any potential claims for business conducted by the Corporation and
all medical practitioners who have provided services at the Clinics prior to the
Closing Date (which "tail" insurance names the Corporation as an additional
insured, has a term of at least four years, and has coverage limits acceptable
to Buyer), exceeds Fifty Thousand Dollars ($50,000). Buyer shall have obtained
such "tail" insurance coverage.
(m) CERTIFICATE. Buyer shall have received a certificate, signed by
-----------
each of the Sellers and dated as of the Closing Date, certifying that (i) the
representations and warranties of Sellers set forth herein are true and correct
as of the Closing Date, and (ii) each Seller has performed all of the
obligations under this Agreement that were required to be performed prior to or
at the Closing (except as performance may have been waived by Buyer prior to or
at the Closing).
(n) EMPLOYMENT AGREEMENTS. Each of the physicians listed in SCHEDULE
--------------------- --------
6.1(n) attached hereto shall have entered into a physician services agreement
- ------
and each of the physical therapists and management personnel listed in SCHEDULE
--------
6.1(n) shall have entered into an employment agreement, in each case in form and
- ------
substance satisfactory to Buyer.
(o) CONSENT OF LENDERS. If required to avoid a default or acceleration
------------------
with respect to an Assumed Loan, each Lender shall have agreed to the
acquisition of the Shares by Buyer; provided, however, that prior to the Closing
-----------------
Date, Buyer shall notify Sellers of which Assumed Loans Buyer intends to pay in
full at the Closing, as to which Buyer shall have instead received the releases
referred to in Section 6.1(i) and (if necessary) acknowledgment by the Lender
that no prepayment premium or penalty will be payable in connection with Buyer's
payment in full of such Assumed Loan.
(p) TAX CLEARANCE CERTIFICATES. Sellers shall have delivered to Buyer
--------------------------
"tax clearance certificates" (or the functional equivalent thereof) from the
applicable New Jersey
24
<PAGE>
authorities, indicating that any and all tax obligations of the Corporation that
are due and payable have been paid in full.
(q) POOLING OF INTERESTS. OccuSystems' independent accountants, Arthur
--------------------
Andersen, LLP, shall have rendered an opinion to OccuSystems that the
transactions provided for herein will qualify for pooling of interests
accounting treatment in accordance with Financial Accounting Standards Board
Opinion No. 16.
(r) ESCROW AGREEMENT. Sellers and the Escrow Agent shall have executed
----------------
and delivered the Escrow Agreement to Buyer.
(s) REGISTRATION AGREEMENT. Sellers shall have executed and delivered
----------------------
the Registration Agreement to OccuSystems.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS. The obligations of
----------------------------------------------
Sellers hereunder are subject to the satisfaction, on or prior to the Closing
Date, of the following conditions (unless waived by Sellers):
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------------------
warranties of Buyer and OccuSystems contained in this Agreement shall be true in
all material respects as of the Closing Date as though such representations and
warranties had been made at and as of that time. All of the agreements of Buyer
and OccuSystems to be performed by Buyer or OccuSystems on or before the Closing
Date pursuant to the terms hereof shall have been duly performed in all material
respects.
(b) ACTION RESTRAINING OR AFFECTING TRANSACTION. No action or proceeding
-------------------------------------------
before a court or any other governmental agency or body shall have been
instituted or threatened to restrain or prohibit the transfer of any of the
Shares, and no third party or governmental agency or body shall have taken or
threatened any action with respect to this Agreement as a result of which
Sellers deem it inadvisable to proceed with the transactions contemplated
herein.
(c) RECEIPT OF CONSIDERATION. Buyer shall have delivered to Sellers
------------------------
and deposited with the Escrow Agent the OccuSystems Stock to be delivered in
accordance with Section 2.1, and Buyer and OccuSystems shall have executed and
delivered the Escrow Agreement to Sellers.
(d) LEGAL OPINION. Buyer shall have delivered to Sellers an opinion
-------------
of Richard A. Parr II, General Counsel to Buyer and OccuSystems, dated the
Closing Date, covering the matters set forth in EXHIBIT F hereto and, otherwise,
---------
in form and substance satisfactory to Sellers and Sellers' counsel. In
rendering such opinion, such counsel may rely as to factual matters upon
certificates of public officials and upon certificates of officers of Buyer and
OccuSystems.
(e) NASDAQ LISTING; EFFECTIVENESS OF REGISTRATION STATEMENT. The
-------------------------------------------------------
OccuSystems Stock to be issued in connection with this Agreement shall have been
listed, or
25
<PAGE>
approved for listing upon notification of issuance, with the Nasdaq System. The
registration statement referred to in Section 5.10 of this Agreement shall have
been filed with the SEC and shall have been declared effective.
(f) REGISTRATION AGREEMENT. OccuSystems shall have executed and
----------------------
delivered the Registration Agreement to Sellers.
(g) EMPLOYMENT AGREEMENTS. Buyer shall have entered into the Employment
---------------------
Agreements with Ardith Grandbouche, Thomas Canario, and Richard Machen; an
affiliate of Buyer shall have entered into an Employment Agreement with Arthur
Canario, M.D.
(h) CERTIFICATE. Sellers shall have received a certificate, signed by
-----------
an appropriate officer of Buyer and OccuSystems and dated as of the Closing
Date, certifying that (i) the representations and warranties of OccuSystems and
Buyer set forth herein are true and correct as of the Closing Date, and (ii)
OccuSystems and Buyer has each performed all of its obligations under this
Agreement that were required to be performed by it prior to or at the Closing
Date (except as performance may have been waived by Sellers prior to or at the
Closing).
(i) PAYMENT OF ASSUMED LOANS. Buyer shall have paid and/or satisfied
------------------------
in full (or made other arrangements with respect thereto acceptable to Sellers)
those Assumed Loans described on SCHEDULE 6.2(i) hereto, and any Encumbrance
---------------
with respect thereto shall have been released (or other arrangements with
respect thereto acceptable to Sellers shall have been made).
ARTICLE 7
----------
INDEMNIFICATION
---------------
7.1 INDEMNIFICATION BY OCCUSYSTEMS AND BUYER. Subject to the provisions of
----------------------------------------
Section 10.6, Buyer and OccuSystems jointly and severally covenant and agree
that they will indemnify and hold Sellers and their successors and assigns and
their respective affiliates and agents at all times harmless from and against
any Loss (including reasonable attorneys' fees and other costs of defense)
caused by or arising out of (a) any misrepresentation, breach of warranty, or
breach or nonfulfillment of any covenant or agreement on the part of Buyer or
OccuSystems under this Agreement, or (b) any activity of Buyer, OccuSystems, or
the Corporation on or after the Effective Time.
7.2 INDEMNIFICATION BY SELLERS. Subject to the provisions of Section 7.9 and
--------------------------
Section 10.6, the Principal Shareholders jointly and severally covenant and
agree, and the other Sellers severally covenant and agree to the extent of their
respective percentage interests (in accordance with the relative percentage
ownership interests of the Sellers set forth on SCHEDULE I) of any Loss (as
----------
hereinafter defined), that they will indemnify and hold Buyer and the
Corporation and their successors and assigns and their respective affiliates,
officers, directors, employees, stockholders, and agents at all times harmless
from and against any Loss (including reasonable attorneys' fees and other costs
of defense) caused by or arising out of or in connection with (a) any
misrepresentation, breach of warranty, or breach or nonfulfillment of any
covenant or agreement on the part of any Seller under this Agreement (including,
without limitation, the
26
<PAGE>
covenant of the Sellers set forth in Section 8.7), (b) any Excluded Liability
(as defined in Section 2.3), or (c) any liability which would have been a part
of the calculation pursuant to Section 8.6, but for the fact that it was
inadvertently omitted, did not arise, or did not become known to Buyer until
after such calculation was made; provided, however, that with respect to the
-----------------
covenants of the Sellers set forth in Section 8.7, the foregoing indemnification
shall only be effective as to each of the Sellers to the extent of any Loss
arising out of or in connection with such Seller's own breach of such covenants;
and provided further, that Buyer and OccuSystems shall name all Sellers in any
----------------
action brought by Buyer or OccuSystems pursuant to this Article 7 and shall use
commercially reasonable efforts to pursue each Seller with respect to such
Seller's pro rata portion of any indemnifiable Loss (in accordance with the
relative percentage ownership interests of the Sellers set forth on SCHEDULE I).
----------
As used herein, "Principal Shareholders" means Ardith Grandbouche and Arthur
Canario, M.D. Any Claim hereunder must be asserted (i) with respect to clause
(a) or clause (b) of this Section 7.2, within the applicable limitation period
described in Section 10.6 of this Agreement, and (ii) with respect to clause (c)
of this Section 7.2, within one (1) year after the Closing Date.
7.3 UNDISPUTED CLAIMS. A party (the "Indemnified Party") may assert a Claim
-----------------
that it is entitled to, or may become entitled to, indemnification under this
Agreement by giving notice of its Claim to the party or parties that are, or may
become, required to indemnify the Indemnified Party (the "Indemnifying Party,"
whether one or more), providing reasonable details of the facts giving rise to
the Claim and a statement of the Indemnified Party's loss, damage, or expense
(including attorneys' fees and costs) incurred, suffered, or paid (collectively,
the "Loss") in connection with the Claim, to the extent such Loss is then known
to the Indemnified Party and, otherwise, an estimate of the amount of the Loss
that it reasonably anticipates that it will incur or suffer. If the Indemnifying
Party does not object to the Claim during the twenty (20) day period following
the date of delivery of the Indemnified Party's notice of its Claim (the
"Objection Period"), the Claim shall be considered undisputed and the
Indemnified Party shall be entitled to recover the amount of its Loss. The fact
that a Claim is not disputed by the Indemnifying Party shall not constitute an
admission or create any inference that the asserted Claim is valid for any
purpose other than the indemnity obligation of the Indemnifying Party as to such
Claim pursuant to this Article 7.
7.4 DISPUTED CLAIMS. If the Indemnifying Party gives notice to the
---------------
Indemnified Party within the Objection Period that the Indemnifying Party
objects to the Claim, then (a) the parties shall attempt in good faith to
resolve their differences during the thirty (30) day period following the date
of delivery of the Indemnifying Party's notice of its objection (the "Resolution
Period"), and (b) if the parties fail to resolve their disagreement during the
Resolution Period, either party may unilaterally submit the disputed Claim for
binding arbitration in Newark, New Jersey, in accordance with the American
Arbitration Association's rules for commercial arbitration in effect at the
time. The award of the arbitrator or panel of arbitrators shall include
reasonable attorneys' fees to the prevailing party and may be entered in any
appropriate court.
7.5 THIRD PARTY SUITS. In the case of any Third Party Suit (including,
-----------------
without limitation, for the purposes of this Section 7.5 those third party suits
described in SCHEDULE 4.1(n)), the Indemnified Party shall control the defense
----------------
of the Third Party Suit, and the
27
<PAGE>
Indemnifying Party may, at its own expense, participate in (but not control) the
defense and employ counsel separate from the counsel employed by the Indemnified
Party; provided, however, that the Indemnified Party may demand that the
-----------------
Indemnifying Party assume control of the defense of the Third Party Suit at any
time during the course of the suit. If the Indemnifying Party assumes control of
the defense of a Third Party Suit, (a) the Indemnifying Party shall consult with
the Indemnified Party with respect to the Third Party Suit upon the Indemnified
Party's reasonable request for consultation, and (b) the Indemnified Party may,
at its expense, participate in (but not control) the defense and employ counsel
separate from the counsel employed by the Indemnifying Party. Regardless of
whether the Indemnifying Party assumes the defense of the Third Party Suit, all
parties shall cooperate in its defense.
7.6 SETTLEMENT OR COMPROMISE. If the Indemnified Party is conducting the
------------------------
defense of a Third Party Suit, the Indemnified Party shall give the Indemnifying
Party at least fifteen (15) days prior written notice of any proposed settlement
or compromise, during which time the Indemnifying Party may assume the defense
of the Third Party Suit and, if it does so (or if the Indemnifying Party has
already assumed control of such Third Party Suit), the proposed settlement or
compromise may not be made without the Indemnified Party's consent, which shall
not be unreasonably withheld. If the Indemnifying Party does not so assume the
defense of the Third Party Suit, the Indemnified Party may enter into the
proposed settlement. Any settlement or compromise of any Third Party Suit by
either the Indemnifying Party or the Indemnified Party entered into in
compliance with this Section 7.6 shall also be binding on the other party in the
same manner as if a final judgment or decree had been entered by a court of
competent jurisdiction in the amount of the settlement or compromise.
7.7 FAILURE TO ACT BY INDEMNIFIED PARTY. Any failure by the Indemnified
-----------------------------------
Party to defend a Third Party Suit shall not relieve the Indemnifying Party of
its indemnification obligations if the Indemnified Party gives the Indemnifying
Party at least thirty (30) days prior written notice of the Indemnified Party's
intention not to defend and affords the Indemnifying Party the opportunity to
assume the defense.
7.8 INSURED CLAIMS. In case any event shall occur which would otherwise
--------------
entitle either party to assert a Claim for indemnification hereunder, no Loss
shall be deemed to have been sustained by the Indemnified Party to the extent of
any proceeds received by the Indemnified Party from any insurance policies with
respect thereto.
7.9 MAXIMUM LIABILITY; THRESHOLD AMOUNT. Anything herein to the contrary
-----------------------------------
notwithstanding: (a) the maximum aggregate liability of Sellers to Buyer
pursuant to the provisions of Section 7.2 shall not exceed Eight Million Dollars
($8,000,000); (b) the maximum aggregate liability of each individual Principal
Shareholder shall not exceed the greater of (i) the actual proceeds from the
sale of such Seller's OccuSystems Stock, and (ii) the number of shares of such
Seller's OccuSystems Stock, multiplied by Twenty-Eight Dollars ($28.00); and (c)
Sellers shall have no liability to Buyer and OccuSystems pursuant to Section 7.2
with respect to any individual indemnifiable Loss in an amount less than Twenty-
Five Thousand Dollars ($25,000) unless and until the aggregate amount of all
indemnifiable Losses pursuant to Section 7.2 which individually total less than
Twenty-Five Thousand Dollars ($25,000) exceeds Fifty Thousand Dollars ($50,000),
in which event Sellers shall be liable to Buyer and OccuSystems for all such
28
<PAGE>
indemnifiable Losses, from and including the first dollar of such Losses,
without regard to any threshold or deductible amount.
ARTICLE 8
---------
POST-CLOSING COVENANTS
-----------------------
8.1 RESTRICTIONS ON TRANSFER OF OCCUSYSTEMS STOCK. In addition to any
---------------------------------------------
restrictions imposed by federal and state securities laws with respect to any
proposed resale of the OccuSystems Stock by any Seller, and notwithstanding the
provisions of the Registration Agreement or any registration of such shares of
OccuSystems Stock thereunder, each Seller hereby agrees that:
(a) Such Seller will not offer, sell, pledge or dispose of, or otherwise
reduce such Seller's risk of ownership of or investment in, any shares of
OccuSystems Stock acquired pursuant to this Agreement until such time as
OccuSystems has publicly released financial information (including combined
sales and net income) covering at least thirty (30) days of post-Closing
operations of OccuSystems; and
(b) In the event such Seller wishes to dispose of any shares of
OccuSystems Stock by gift, such Seller will obtain from the proposed recipient
of the gift his or her written agreement that such recipient will comply with
the requirements of this Section 8.1 and the Registration Agreement.
8.2 TERMINATION OF THE CORPORATION'S PARTICIPATION IN THE EMPLOYEE BENEFIT
----------------------------------------------------------------------
PLANS. As of the Effective Time, employees of the Corporation shall cease to
- -----
participate in or accrue benefits under the Employee Benefit Plans. Buyer agrees
that, to the extent allowed by applicable laws and regulations, as soon as
practicable following the Closing, at Buyer's expense, Buyer will take all steps
and make all filings necessary or appropriate in order to terminate the
participation of the employees of the Corporation in the Employee Benefit Plans,
and Buyer shall take any and all action necessary to authorize and direct the
administrators of the Employee Benefit Plans to take such actions; Sellers shall
assist Buyer to the extent reasonably requested by Buyer. Subject to the
provisions of Section 8.6, Buyer acknowledges and agrees that Buyer will assume
and retain responsibility for the funding, administration, and distribution of
benefits under the Employee Benefit Plans.
8.3 BOOKS AND RECORDS; PERSONNEL. For a period of three years after the
----------------------------
Closing Date:
(a) Buyer shall not dispose of or destroy any of the material Books
and Records of the Corporation relating to periods prior to the Effective Time
without first offering to turn over possession thereof to Sellers by written
notice to Sellers at least thirty (30) days prior to the proposed date of such
disposition or destruction.
(b) Buyer shall allow Sellers and their agents access to all Books and
Records during normal working hours at Buyer's principal place of business or at
any location where any Books and Records are stored, and Sellers shall have the
right, at their expense, to
29
<PAGE>
make copies of any Books and Records; provided, however, that any such access or
-----------------
copying shall be had or done in such a manner so as not to interfere with the
normal conduct of Buyer's and the Corporation's businesses.
(c) Buyer shall make available to Sellers upon written notice (i) copies of
any Books and Records, (ii) Buyer's and the Corporation's personnel to assist in
locating and obtaining any Books and Records, and (iii) any of Buyer's or the
Corporation's personnel whose assistance or participation is reasonably required
by Sellers or any of their affiliates in anticipation of, or preparation for,
any litigation, tax return filing, or other matter in which any Seller is
involved; provided, however, that any such copying or assistance shall be had or
-------- -------
done in such a manner so as not to interfere with the normal conduct of Buyer's
and the Corporation's businesses. Sellers shall reimburse Buyer for the
reasonable out-of-pocket expenses (i.e., expenses paid to third parties)
incurred by Buyer or the Corporation in performing the covenants contained in
this Section 8.3.
8.4 RELEASE BY SELLERS AND SELLERS' AFFILIATES.
------------------------------------------
(a) Except for liabilities and obligations to any Seller or Sellers'
Affiliates expressly described in SCHEDULE 1.1(d) or SCHEDULE 2.2(d) attached
--------------- ---------------
hereto, each Seller, on behalf of itself and all Sellers' Affiliates, as of the
Closing Date, hereby releases, discharges, and acquits the Corporation of and
from any and all debts, liabilities, and obligations of the Corporation to such
Seller or any Sellers' Affiliate, including, without limitation, all management
or consulting fees, cost reimbursement obligations, and any guarantee of any
obligation of or to such Seller or Sellers' Affiliate; provided, however, that
-------- -------
this Section 8.4 shall not apply to any obligation of Buyer or the Corporation
expressly provided for in this Agreement; and provided further, that Jeffrey
-------- -------
Kossak, as of the Closing Date, hereby releases, discharges, and acquits the
Corporation of and from any and all claim, liability, or other obligation (i)
that he is entitled to warrants (or any other equity interests other than the
Shares held in his name) from the Corporation, and (ii) arising under that
certain Settlement Agreement, dated as of February 20, 1996, among Ardith
Grandbouche, Arthur Canario, Thomas Canario, Richard Machen, the Corporation,
and Jeffrey Kossak. Each Seller hereby agrees that the matters released hereby
are not limited to matters which are known or disclosed, and hereby waives any
and all rights and benefits that such Seller or any Sellers' Affiliate now has
or in the future may have conferred upon such Seller or any Sellers' Affiliate.
(b) Effective as of the Closing Date, each of the Sellers hereby fully
releases, discharges, and acquits each of the other Sellers from any and all
liabilities, claims, costs, losses, and expenses, of every kind and character,
known or unknown, relating to the Corporation, and/or the management of the
business and affairs of the Corporation, arising prior to the Closing Date,
except as relates to the indemnification obligations of Sellers to Buyer set
forth in this Agreement.
8.5 POST-CLOSING TAX FILINGS. Neither Buyer nor OccuSystems shall make any
------------------------
election permitted under Section 338 or Section338(h)(10) of the Internal
Revenue Code of 1986, as amended, in connection with the transactions
contemplated by this Agreement. The parties acknowledge that it is their
intention that OccuSystems shall include in its consolidated
30
<PAGE>
tax returns the results of operations of the Corporation for all periods
beginning on and after the Effective Time. Accordingly, the Corporation will
need to file a "short period" federal income tax return for its "short period"
tax year ending on the date prior to the Effective Time. Sellers agree to
prepare and file the Corporation's "short period" federal income tax return and
to pay any and all taxes due in connection with such "short period" return, and
Ardith Grandbouche is hereby designated as the Corporation's authorized agent
for the purpose of filing such return. The parties hereto agree to make any and
all filings and elections necessary to accomplish the tax results described
above and to cooperate in all reasonable respects with all other parties in
providing all information and documents necessary for the other parties to file
the tax returns and elections contemplated hereby.
8.6 POST-CLOSING CALCULATION OF ASSUMED LIABILITIES. Within ninety (90) days
-----------------------------------------------
after the Closing Date, Buyer shall prepare an unaudited balance sheet and any
other appropriate statements necessary to establish the Assumed Liabilities as
of the Effective Time, plus any amounts paid to Mille Capital Corporation or
with respect to Chase Manhattan pursuant to Section 5.5 before or after the
Effective Time. Buyer shall afford Sellers a reasonable opportunity to review
such balance sheet and/or other appropriate statements. If such balance sheet
and other appropriate statements indicate that the actual Assumed Liabilities as
of the Effective Time, plus any amounts paid to Mille Capital Corporation or
with respect to Chase Manhattan pursuant to Section 5.5, were greater than Seven
Million Four Hundred Thousand Dollars ($7,400,000), Sellers agree that the
Escrow Agent shall, pursuant to the appropriate provisions of the Escrow
Agreement, transfer to OccuSystems cash (for which purpose the Escrow Agent
shall be empowered, as necessary, to sell shares of the OccuSystems Stock then
held in escrow) equal to the amount by which the Assumed Liabilities as of the
Effective Time, plus any amounts paid to Mille Capital Corporation or with
respect to Chase Manhattan pursuant to Section 5.5, were greater than Seven
Million Four Hundred Thousand Dollars ($7,400,000), and the purchase price for
the Shares shall be deemed adjusted accordingly; alternatively, to satisfy such
obligations pursuant to this Section 8.6, Sellers, or any of them, (i) may
direct that the Escrow Agent return shares of such Sellers' OccuSystems Stock
held by the Escrow Agent (provided, that for such purpose Buyer and Sellers
--------
agree that such OccuSystems Stock shall be valued at $29.25 per share, and,
provided further, that Buyer may direct that any such transferred OccuSystems
- ----------------
Stock be sold by the Escrow Agent and any and all proceeds therefrom delivered
to Buyer), or (ii) may tender cash directly to Buyer, in which event (x) Buyer
shall make no claim against the escrow to the extent of such cash, and (y) Buyer
shall instruct the Escrow Agent to release to the Seller or Sellers who shall
have tendered cash to Buyer as aforesaid shares of the OccuSystems Stock held by
the Escrow Agent in the name of such Seller or Sellers (provided, that for such
purpose Buyer and Sellers agree that such OccuSystems Stock shall be valued at
$29.25 per share).
8.7 NONCOMPETITION AND NONSOLICITATION COVENANTS OF SELLERS.
-------------------------------------------------------
(a) During the period beginning on the Closing Date and ending November
1, 2000 (the "Restricted Time Period"), each of the Sellers hereby jointly and
severally covenants and agrees to be bound and abide by the restrictions set
forth in this Section 8.7.
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<PAGE>
(b) During the Restricted Time Period, except pursuant to an Employment
Agreement with Buyer, none of the Sellers will, directly or indirectly
(including financial interests held by any Sellers' Affiliate), either as an
employee, employer, consultant, agent, principal, partner, stockholder (other
than any shares in a mutual fund, regardless of amount, or as an owner of less
than five percent (5%) of the securities of a publicly held corporation),
corporate officer, director, investor or financier, or in any other individual
or representative capacity, engage or participate in, or consult with, any
business or practice of medicine which includes (for more than one third (1/3)
of its volume within the Restricted Area (as defined below), whether measured by
revenues, profits, or patient visits) the provision of, marketing of,
establishing networks of providers or payors for, or otherwise promoting,
occupational healthcare services or the practice of occupational medicine (i.e.,
employer or employer's insurance paid medical services relating to employees and
having specific reference to employment related matters, including without
limitation preplacement physical exams, laboratory testing, x-rays, audiometry,
spirometry, electrocardiography, drug screens, work related injuries and
illnesses, physical therapy and rehabilitation associated with work-related
injuries, work-related independent medical evaluations, and/or consulting with
employers regarding employer policies and case management) or any business or
services related thereto, at any location within (i) a twenty (20) mile radius
of any Clinic, or (ii) a twenty (20) mile radius of any other facility presently
owned, operated, or managed by Buyer or by any affiliate of Buyer (such
facilities being described in SCHEDULE 8.7(b) hereto)(such area described in (i)
---------------
and (ii) immediately preceding being referred to in this Section 8.7(b) as the
"Restricted Area"); provided, however, that, anything in this Section 8.7(b) to
-------- -------
the contrary notwithstanding, (x) Dr. Arthur Canario shall not be prohibited
hereby from continuing to practice medicine with his orthopedic practice in its
form as of the date hereof, and (y) Ardith Grandbouche shall not be prohibited
from working in the State of New York so long as neither she nor any person or
entity with which she is associated, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer, director,
investor or financier, or in any other individual or representative capacity,
engages in any of the foregoing described activities at any location (except for
locations in the State of New York) within the Restricted Area.
(c) During the Restricted Time Period, none of the Sellers will, either
for any Seller or for any other person, firm, corporation, or other entity,
either directly or indirectly: (i) call on or solicit, or attempt to call on or
solicit, any of Buyer's or any affiliate of Buyer's patients, customers or
suppliers, in any manner which is competitive with Buyer's or such affiliate of
Buyer's occupational medicine business or services or its provision of
independent medical evaluations, as such businesses are operated from time to
time in the areas identified in clauses (i) and (ii) of Section 8.7(b) above;
(ii) induce, or attempt to induce, any employee of Buyer or any affiliate of
Buyer to terminate his or her employment or hire away, or attempt to hire away,
any employee of Buyer or any affiliate of Buyer; (iii) induce, or attempt to
induce, any supplier of services (including physician services) or resources
(including investment and other financing resources) to withdraw, curtail or
cancel the furnishing of supplies or services to Buyer or any affiliate of
Buyer; or (iv) engage in any act or activity which would reasonably be expected
to materially interfere with or harm any business relationship Buyer or any
affiliate of Buyer may have with any patient, customer, employee, employer,
independent contractor, principal, or supplier.
32
<PAGE>
(d) Each of the Sellers expressly acknowledges that such Seller has
knowledge of certain business methods, trade secrets, and other proprietary
information in connection with Sellers' and the Corporation's businesses. Each
of the Sellers expressly acknowledges and agrees that the Confidential
Information (as hereinafter defined) is owned by the Corporation and is now
proprietary and confidential, and if any of the Confidential Information was
imparted to, or became known by, any persons engaging in a business in any way
competitive with that of Buyer or any affiliate of Buyer, such disclosure would
result in hardship, loss, irreparable injury and damage to Buyer or such
affiliate of Buyer the measurement of which would be difficult, if not
impossible, to determine. Accordingly, each of the Sellers expressly agrees
that Buyer has a legitimate interest in protecting the Confidential Information
and its business goodwill, that it is necessary for Buyer to protect its
businesses and the businesses of its affiliates from such hardship, loss,
irreparable injury, and damage, that the following covenants are a reasonable
means by which to accomplish those purposes and that violation of any of the
protective covenants contained herein shall constitute a breach of trust and is
grounds for appropriate legal action for damages, enforcement, and/or
injunction. Notwithstanding the foregoing, neither this Section 8.7(d) nor
Section 8.7(e) shall apply to any information that was (i) known to the
receiving party before its disclosure, (ii) is publicly available through no
fault of any Seller or the party in possession of such information, or (iii) has
been lawfully obtained from a third party without breach of the restrictions set
forth in this Paragraph 8.7(d).
(e) The confidential information obtained from or held by the Corporation or
its predecessors (the "Confidential Information") includes, by way of
illustration and not by way of limitation: (i) lists containing the names of
patients, customers, employees, principals, and suppliers of the Clinics; (ii)
the past, present, and prospective methods, procedures, and techniques utilized
in identifying prospective referral sources, patients, customers, and suppliers
and in soliciting the business thereof; (iii) the methods, procedures, and
techniques used in the operation of the Corporation's businesses, including the
methods, procedures, and techniques utilized in marketing, pricing, applying,
and delivering occupational health products and services; and (iv) compilations
of information, records, and processes which are used in the operation of the
Corporation's businesses, including, without limitation, custom computer
software programs.
(f) Each of the Sellers acknowledges that the Confidential Information gives
Buyer and the Corporation an advantage over its respective competitors and that
the same is not available to, or known by, Buyer's or the Corporation's
competitors or the general public. Each of the Sellers acknowledges that the
Corporation and its predecessors have devoted, and Buyer will devote,
substantial time, money, and effort in the development of the Confidential
Information and in maintaining the proprietary and confidential nature thereof.
Each of the Sellers agrees to use his or her best efforts and to exercise utmost
diligence to protect and safeguard any of the Confidential Information that is
known to such Seller or that at any time is in his or her possession. Except as
required by law or a court order, each of the Sellers agrees that he or she will
not disclose, disseminate, or distribute to another, or induce any other person
to disclose, disseminate, or distribute, any Confidential Information, directly
or indirectly, either for a Seller's own benefit or for the benefit of another,
whether or not acquired, learned, obtained or developed by such Seller alone or
in conjunction with others, and none of the Sellers will use
33
<PAGE>
or cause to be used any Confidential Information in any way except as is
required in the course of such Seller's involvement with Buyer. Each of the
Sellers acknowledges and agrees that all Confidential Information, whether
prepared by one of the Sellers or otherwise, shall remain the exclusive property
of the Corporation and Buyer.
(g) Each covenant in this Section 8.7 shall be construed as an agreement
that is independent of any other provision of this Agreement and, unless
otherwise indicated herein, each such covenant shall survive the Closing of the
transactions contemplated by this Agreement. The existence of any claim or cause
of action of any of the Sellers against Buyer, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Buyer of each of the covenants set forth in this Section 8.7.
(h) If any of the Sellers violates any of covenants set forth in this
Section 8.7 and Buyer or any of its affiliates brings legal action for
injunctive or other relief hereunder, Buyer shall not, as a result of the time
involved in obtaining the relief, be deprived of the benefit of the full
Restricted Time Period of the protective covenants contained in this Section
8.7. Accordingly, with respect to the violating Seller, the Restricted Time
Period shall have a duration equal to the time period stated in Section 8.7(a),
computed from the date relief is granted, but reduced by the time between the
period when the restriction began to run and the date of the first violation of
the covenant by such violating Seller.
(i) Each of the Sellers agrees that the breach or attempted breach of
Sellers' obligations under this Section 8.7 would cause irreparable injury to
Buyer and that any remedy at law would be inadequate. Each of the Sellers
therefore agrees, in addition to any other relief, that Buyer and its affiliates
will be entitled to injunctive and other equitable relief in case of any such
breach or attempted breach. Each of the Sellers expressly waives any
requirement that he or she could assert for the securing or posting of any bond
in connection with the obtaining of such injunctive or other equitable relief.
(j) If any of the restrictions set forth in this Section 8.7 are
adjudicated by a court of competent jurisdiction to be excessively broad, said
restrictions determined to be excessively broad shall be reduced to the minimum
extent necessary to make such restrictions enforceable, and the restrictions
shall be enforced subject to such reduction. Any provision of this Section 8.8
not so reduced shall remain in full force and effect as written.
8.8 POST-CLOSING FINANCIAL RESULTS. As soon as reasonably practicable, Buyer
------------------------------
shall make public thirty (30) days of post-Closing combined financial results
with respect to the Corporation and OccuSystems.
ARTICLE 9
----------
TERMINATION
-----------
9.1 BY MUTUAL CONSENT. This Agreement may be terminated without further
-----------------
obligation of the parties at any time prior to Closing by mutual consent of the
parties hereto.
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<PAGE>
9.2 DAMAGES. No party shall be liable in damages to any other party as a
-------
result of the failure to consummate the transactions contemplated by this
Agreement unless such failure is caused by the material breach of such party of
any of the terms of this Agreement.
9.3 UNILATERAL TERMINATION. If, through no fault of or breach by a party
----------------------
hereto, the Closing is not consummated on or before December 4, 1996, this
Agreement may be unilaterally terminated by written notice given by such party
to the other parties.
9.4 NONSOLICITATION BY BUYER IN THE EVENT OF TERMINATION. In the event that
----------------------------------------------------
this Agreement is terminated pursuant to the provisions of Section 9.1 or 9.3,
during the one (1) year period following such termination: (i) Buyer will not,
either for Buyer or for any other person, firm, corporation, or other entity,
either directly or indirectly, induce, or attempt to induce, any employee of the
Corporation to terminate his or her employment or hire away, or attempt to hire
away, any employee of the Corporation; and (ii) Buyer will maintain the
confidentiality of any and all information regarding the Corporation obtained
from Sellers or the Corporation in connection with the transactions contemplated
by this Agreement.
ARTICLE 10
-----------
MISCELLANEOUS
-------------
10.1 CONFIDENTIALITY. Subject to Section 10.2, prior to the Closing, the
---------------
parties hereto shall keep confidential all information relating to the other
that it obtains pursuant to this Agreement and shall use such information only
for the purposes contemplated by this Agreement. In the event that this
Agreement is terminated pursuant to Article 9, or otherwise, or the Closing does
not occur by reason of failure of one of the conditions to the Closing, Buyer
and the Corporation agree (a) to return to the other party all documents,
financial statements, and other information furnished or copied in connection
with the transactions contemplated by this Agreement, and (b) not to disclose
without the prior written consent of the other party any information obtained
with respect to the business or operations of the other party hereto or any
affiliate of such party.
10.2 PUBLICITY. Prior to Closing, no public announcement or other publicity
---------
regarding the transactions contemplated by this Agreement shall be made by any
party without the prior written approval of all parties as to form, timing, and
manner of distribution or publication. Sellers and OccuSystems shall agree on
the form and content of any joint press release or other public announcement
(including, for example, letters to the Corporation's employees, customers, and
suppliers) which is to be released at or immediately following Closing. Nothing
in this Section 10.2 or in Section 10.1 shall be considered to prohibit any
party from making any disclosure required by any Law, including, without
limitation, any federal or state securities law, rule, or regulation, or any
court order.
10.3 NOTICES. All notices, requests, demands, and other communications
-------
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when received if delivered personally, given by
prepaid telegram, mailed first class,
35
<PAGE>
postage prepaid, registered or certified mail, delivered by Federal Express or
other courier service, or sent by facsimile or other online transmission system,
as follows:
If to Buyer or OccuSystems:
OccuSystems, Inc.
3010 LBJ Freeway, Suite 400
Dallas, Texas 75234
Attention: General Counsel
FAX No. (972) 243-7540
If to the Corporation or any Seller (other than Jeffrey Kossak):
Andrew Blumenthal, Esq.
Blumenthal & Blumenthal
250 West 57th Street
New York, New York 10107
FAX No. (212) 956-5463
And:
Paul M. Antinori, Esq.
Crummy, Del Deo, Dolan, Griffinger & Vecchione
One Riverfront Plaza
Newark, New Jersey 07102-5497
FAX No. (201) 596-0545
If to Jeffrey Kossak:
c/o Arlington Associates
1370 Avenue of the Americas, Suite 3300
New York, New York 10019
With a copy to:
Raymond T. Lyons, Esq.
Connell, Foley & Geiser
85 Livingston Avenue
Roseland, New Jersey 07068
FAX No. (201) 535-9217
10.4 GOVERNING LAW; INTERPRETATION; SECTION HEADINGS. THIS AGREEMENT SHALL
-----------------------------------------------
BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF NEW JERSEY. The section headings contained herein are for
purposes of convenience only and shall not be deemed
36
<PAGE>
to constitute a part of this Agreement or to affect the meaning or
interpretation of this Agreement in any way.
10.5 ENTIRE AGREEMENT. This Agreement (including the Schedules and Exhibits
----------------
referred to herein) sets forth the entire agreement and understanding of the
parties with respect to the transactions contemplated hereby and supersedes all
prior agreements, arrangements, and understandings, whether written or oral,
related to the subject matter hereof, including, without limitation, the letter
of intent, dated as of September 3, between OccuSystems and the Corporation. No
representation, promise, inducement, or statement of intention has been made by
any party hereto which is not embodied in this Agreement, or in the Exhibits or
Schedules attached hereto or the written statements, certificates, or other
documents delivered pursuant hereto.
10.6 SURVIVAL; LIMITATION ON ACTIONS. Except as otherwise expressly set
-------------------------------
forth in this Section 10.6, all of the terms, provisions, covenants,
representations, warranties, and conditions of this Agreement shall survive the
Closing for a period of time equal to the lesser of (a) the applicable statute
of limitations with respect to any Claim arising therefrom, or (b) four (4)
years. Anything herein to the contrary notwithstanding, however: (i) the
applicable statute of limitations shall be the only limitation with respect to
any Claim regarding tax matters or based on fraud, (ii) subject to clause (i)
immediately preceding, the representations and warranties of the Sellers set
forth in Sections 4.1(f), 4.1(h), 4.1(i), 4.1(j), 4.1(k), 4.1(l), 4.1(q),
4.1(r), 4.1(s), 4.1(v), and 4.1(w) shall survive the Closing for a period of two
(2) years. All of the terms, provisions, covenants, representations, warranties,
and conditions of this Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective successors and
assigns.
10.7 AMENDMENT; NO WAIVER. This Agreement may be amended, modified,
--------------------
superseded, or canceled, and any of the terms, provisions, covenants,
representations, warranties, or conditions hereof may be waived, only by a
written instrument executed by all parties hereto, or, in the case of a waiver,
by the party waiving compliance. The failure of any party at any time or times
to require performance of any provision hereof shall in no manner affect the
right to enforce the same. No waiver by any party of any condition, or of the
breach of any term, provision, covenant, representation, or warranty contained
in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such condition or breach or a waiver of any other condition or of the
breach of any other term, provision, covenant, representation, or warranty.
10.8 SEVERABILITY. In the event that any one or more of the provisions of
------------
this Agreement shall be held or otherwise found to be invalid, illegal, or
unenforceable, all other provisions hereof shall be given effect separately
therefrom and shall not be affected thereby.
10.9 ASSIGNMENT; NO THIRD PARTY BENEFICIARY. None of the parties hereto
--------------------------------------
shall assign any of its rights or obligations hereunder without the prior
written consent of the other parties hereto; provided, however, and
-----------------
notwithstanding the foregoing, that Buyer may (a) prior to or at the Closing
assign all or any portion of Buyer's rights and obligations pursuant to this
Agreement to OccuSystems or to any other wholly owned subsidiary or affiliate of
37
<PAGE>
OccuSystems, and (b) after the Closing, assign any or all of its rights
hereunder without any consent or approval of any other party to this Agreement;
and provided, further, that any such assignment by Buyer shall not relieve Buyer
of liability to Sellers hereunder. Except for any such valid assignment, this
Agreement is for the sole benefit of the undersigned parties hereto and is not
for the benefit of any third party.
10.10 FURTHER ASSURANCES. Sellers shall execute and deliver such other
------------------
documents and instruments, and take such other actions, as Buyer may reasonably
request in order more fully to vest and perfect in Buyer all right, title, and
interest in and to the Shares and otherwise to effectuate the transactions
contemplated by this Agreement.
10.11 COUNTERPART AND FACSIMILE SIGNATURES. Separate copies of this
------------------------------------
Agreement may be signed by the parties hereto, with the same effect as though
all of the parties had signed one copy of this Agreement. Signatures
transmitted by facsimile shall be accepted as original signatures.
10.12 ATTORNEYS' FEES. In any action at law or equity to enforce any
---------------
of the provisions or rights under this Agreement, the unsuccessful party to such
litigation, as determined by the court in any final judgment or decree, shall
pay the successful party or parties all costs, expenses, and reasonable
attorneys' fees incurred therein by such party or parties (including, without
limitation, such costs, expenses, and fees on any appeal or in connection with
any bankruptcy proceeding), and if the successful party recovers judgment in any
such action or proceeding, such costs, expenses, and attorneys' fees shall be
included in and as a part of such judgment.
10.13 INTERPRETATION OF AGREEMENT. The parties hereto acknowledge
---------------------------
and agree that this Agreement has been negotiated at arm's length and between
parties equally sophisticated and knowledgeable in the matters dealt with in
this Agreement. Accordingly, any rule of law or legal decision that would
require interpretation of any ambiguities in this Agreement against the party
that has drafted it is not applicable and is waived. The provisions of this
Agreement shall be interpreted in a reasonable manner to effect the intent of
the parties as set forth in this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement as of the day and year first above written.
OCCUSYSTEMS, INC.
BY:
----------------------------------
NAME:
--------------------------------
TITLE:
-------------------------------
OCCUCENTERS, INC.
BY:
----------------------------------
NAME:
--------------------------------
TITLE:
-------------------------------
SELLERS:
-------
-------------------------------------
ARDITH GRANDBOUCHE
-------------------------------------
ARTHUR CANARIO, M.D.
-------------------------------------
THOMAS CANARIO
-------------------------------------
RICHARD MACHEN
-------------------------------------
JEFFREY KOSSAK
39
