EXHIBIT 10.15
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Indemnification Agreement"),
dated as of June 28, 2002, is by and among the shareholders of AERIES
HEALTHCARE CORPORATION ("Aeries"), a Delaware corporation, named on the
signature page hereto (collectively, whether one or more, "Sellers"), and
PSYCHIATRIC SOLUTIONS, INC., a Delaware corporation and/or its designated
affiliate ("Purchaser"). Capitalized terms used in this Indemnification
Agreement, if not otherwise defined herein, shall have the respective meanings
ascribed to such terms in the Stock Purchase Agreement (as defined herein).
RECITALS:
Effective as of the date first set out above, Purchaser acquired all
of the issued and outstanding common stock and warrants to acquire common stock
of Aeries, pursuant to the terms and conditions of a certain Stock Purchase
Agreement dated as of June 20, 2002, by and among Purchaser and Sellers (the
"Stock Purchase Agreement"). As a condition precedent to the closing of the
Stock Purchase Agreement, Purchaser deposited $4,500,000 of the cash proceeds
of the Purchase Price (the "Escrowed Funds") in an interest-bearing escrow
account established pursuant to an Escrow Agreement of even date herewith by
and among Purchaser, Sellers, and escrow agent to secure any contingent
obligations of Sellers for breaches of their representations and warranties
under the Stock Purchase Agreement. The Escrow Funds are to be used to
indemnify Purchaser pursuant to the terms and conditions of this
Indemnification Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein and other good and valuable
consideration the receipt, adequacy, and sufficiency of which are hereby
acknowledged, it is agreed as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF SELLERS.
As an inducement to the other party to enter into this Indemnification
Agreement, each signatory hereby represent and warrant to the others the
following matters.
1.1 AUTHORITY; VALIDITY; NO BREACH BY SELLERS.
1.1.1 Each of the Sellers has the power and authority to execute
and deliver this Indemnification Agreement and to perform his, her or
its obligations under this Indemnification Agreement. All actions
required to be taken by each of the Sellers to authorize the
execution, delivery and performance of this Indemnification Agreement
have been duly and properly taken.
1.1.2 This Indemnification Agreement is the lawful, valid and
legally binding obligation of Sellers, enforceable against each in
accordance with its respective terms, except as enforceability may be
restricted, limited, or delayed by applicable bankruptcy or other laws
affecting creditors' rights generally and except as enforceability may
be subject to general principles of equity or public policy.
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1.1.3 The execution and delivery of this Indemnification Agreement
by Sellers will neither conflict with nor result in any material
breach or contravention of, or the creation of any encumbrance under,
any indenture, agreement, lease, instrument or understanding to which
any Seller is a party or by which any Seller is bound.
1.2 AUTHORITY; VALIDITY; NO BREACH BY PURCHASER.
1.2.1 Purchaser has the power and authority to execute and deliver
this Indemnification Agreement and to perform its obligations under
this Indemnification Agreement. All actions required to be taken by
Purchaser to authorize the execution, delivery and performance of this
Indemnification Agreement have been duly and properly taken.
1.2.2 This Indemnification Agreement is the lawful, valid and
legally binding obligation of Purchaser, enforceable against Purchaser
in accordance with its respective terms, except as enforceability may
be restricted, limited, or delayed by applicable bankruptcy or other
laws affecting creditors' rights generally and except as
enforceability may be subject to general principles of equity or
public policy.
1.2.3 The execution and delivery of this Indemnification Agreement
by Purchaser will neither conflict with nor result in any material
breach or contravention of, or the creation of any encumbrance under,
any indenture, agreement, lease, instrument or understanding to which
Purchaser is a party or by which Purchaser is bound.
1.3 NO UNTRUE OR INACCURATE REPRESENTATIONS OR WARRANTIES. The
representations and warranties of each party contained in this Indemnification
Agreement are true, accurate, correct, and complete in all material respects,
and do not contain any untrue statement of material fact or omit to state a
material fact necessary in order to make the statements and information
contained therein not misleading.
SECTION 2. INDEMNIFICATION; SURVIVAL; LIMITATIONS.
2.1 INDEMNIFICATION BY SELLERS. From and after the Closing Date,
Sellers shall indemnify and hold harmless, on a joint and several basis,
Purchaser, its subsidiaries and Affiliates, and its and their respective
officers, directors, principals, attorneys, agents, employees or other
representatives (each a "Purchaser Indemnified Party" and all, collectively,
"Purchaser Indemnified Parties") from and against: (i) any and all losses,
liabilities, damages, costs (including court costs and costs of appeal) and
expenses (including reasonable attorneys' fees) that such Purchaser Indemnified
Party incurs as a result of, or with respect to, any inaccuracy in any of the
representations or warranties made by Sellers in the Stock Purchase Agreement
except that indemnification of Purchaser Indemnified Parties for inaccuracies
in the Historical Financial Information shall be limited to the sum of all
inaccuracies in such statements (positive and negative) on a dollar-for-dollar
basis, and (ii) claims for refunds pursuant to Section 8 of the Stock Purchase
Agreement.
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2.2 INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify and
hold harmless Sellers and their respective officers, directors, principals,
attorneys, agents, heirs, executors, assigns or other representatives (each a
"Seller Indemnified Parties" and all, collectively, "Seller Indemnified Party")
from and against: (i) any and all losses, liabilities, damages, costs
(including court costs and costs of appeal) and expenses (including reasonable
attorneys' fees) that such Seller Indemnified Party incurs as a result of, or
with respect to, any inaccuracy in any of the representations or warranties
made by Purchaser in the Stock Purchase Agreement, and (ii) claims for
additional funds due Purchaser pursuant to Section 8 of the Stock Purchase
Agreement.
2.3 THE ESCROWED FUNDS. The Escrowed Funds consist of four (4)
separate funds of in the following amounts: The Earn Out Fund, $1,500,000; the
One-Year Warranty Fund, $1,000,000; the Two-Year Warranty Fund, $1,000,000; and
the Cost Report Fund, $1,000,000.
2.4 LIMITATIONS. The foregoing indemnities by Sellers are subject
to the following limitations:
2.4.1 EARN OUT WARRANTIES. Claims for breach of warranties made
pursuant to Section 3.22 (Earn Out) of the Stock Purchase Agreement
may be made on the following basis: In the event Aggregate EBITDA is
less than $1,115,000, Purchaser shall be entitled to recover from the
Earn Out Fund an amount calculated by multiplying the number of whole
dollars by which Aggregate EBITDA is less than $1,115,000 by
2.6785714. If Aggregate EBITDA is $555,000 or less, Purchaser shall be
entitled to all amounts in the Earn Out Fund and shall have no further
remedy for claims for breach of Section 3.22 (Earn Out). Provided,
however, that if Xxxx Xxxxxxx ceases to be able to function as the
chief executive officer of Hospital (whether called by that title or
not) in an unfettered manner as the result of any action or inaction
by Purchaser or its agents or representatives and provided further
that Xxxx Xxxxxxx gives written notice to Purchaser specifying such
action or inaction within three (3) days of such, and following such
notice Purchaser shall have three (3) days to either (i) cure the
alleged action or inaction, or (ii) notify Xxxx Xxxxxxx that Purchaser
contends its action or inaction does not prevent Xxxx Xxxxxxx from
functioning as the Hospital's chief executive officer in an unfettered
manner, the warranty contained in Section 3.22 shall be deemed to be
satisfied and Sellers shall be entitled to the entire $1,500,000.
Claims for breach of warranties made pursuant to Section 3.22 of the
Stock Purchase Agreement may be brought, if at all, only before
December 1, 2002, after which all warranties with regard to Section
3.22 of the Stock Purchase Agreement shall expire. All amounts in the
Earn Out Fund not claimed by Purchaser under this Indemnification
Agreement shall be delivered to Sellers in accordance with the terms
of the Escrow Agreement.
2.4.2 ONE-YEAR WARRANTIES. Claims for breach of warranties made
pursuant to Section 3.6 (Financial Information) of the Stock Purchase
Agreement may be brought, if at all, only before the end of the 365th
day following the Closing Date and only against the amounts remaining
in the One-Year Warranty Fund, after which all warranties under
Section 3.6 of the Stock Purchase Agreement shall expire. All amounts
in the One-Year Warranty Fund
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not claimed by Purchaser under this Indemnification Agreement shall be
delivered to Sellers in accordance with the terms of the Escrow
Agreement.
2.4.3 TWO-YEAR WARRANTIES. Claims for breach of warranties made in
any Subsection of Section 3, Representations and Warranties of
Sellers, of the Stock Purchase Agreement, other than Section 3.6
(Financial Information), Section 3.9 (Medicare
Participation/Accreditation), and Section 3.22 (Earn Out), may be
brought, if at all, only before the end of the 730th day following the
Closing Date and only against the amounts remaining in the Two-Year
Warranty Fund, after which all warranties under the Stock Purchase
Agreement shall expire. All amounts in the Two-Year Warranty Fund not
claimed by Purchaser under this Indemnification Agreement shall be
delivered to Sellers in accordance with the terms of the Escrow
Agreement.
2.4.4 COST REPORT WARRANTIES. Claims for breach of warranties made
pursuant to Section 3.9 (Medicare Participation/Accreditation) of the
Stock Purchase Agreement and claims for amounts due pursuant to
Section 8 of the Stock Purchase Agreement may be brought, if at all,
only before the end of the 30th day following receipt by Purchaser of
the Final Notice of Program Reimbursement from Medicare for calendar
year 2000 or 2001, as appropriate, by Purchaser, after which all
warranties with regard to such Cost Report shall expire. All amounts
in the Cost Report Fund not claimed by Purchaser under this
Indemnification Agreement shall be delivered to Sellers in accordance
with the terms of the Escrow Agreement.
2.5 GENERAL LIMITATIONS. Purchaser's sole recourse against
Sellers for indemnification under this Indemnification Agreement shall be
recovery from the designated Escrowed Fund and shall be limited to the
aggregate amount originally placed into each respective fund. Moreover, Sellers
shall not be required to make any indemnification payment pursuant to this
Indemnification Agreement from either the One-Year Warranty Fund or the
Two-Year Warranty Fund unless and until the aggregate of all amounts for which
indemnity would be payable from either or both Funds exceeds $25,000 (the
"Basket Amount"), in which event Sellers shall then be responsible for all
amounts including the Basket Amount.
2.6 NOTICE AND CONTROL OF LITIGATION.
2.6.1 If any claim or liability is asserted in writing against a
Person entitled to indemnification under this Indemnification
Agreement (the "Indemnified Party') that would give rise to a claim
under this Indemnification Agreement, the Indemnified Party shall
notify the Person giving the indemnity ("Indemnifying Party") in
writing of the same within twenty (20) business days of receipt of
such written assertion of a claim or liability; provided, however,
that the failure to provide such notice as so indicated shall not
affect the Indemnifying Party's obligation to indemnify and the
Indemnifying Party shall have no remedy by reason of such failure
except to the extent of any actual prejudice resulting from such
delay. The Indemnifying Party shall have the right to defend any such
claim, select the counsel, and control the defense, settlement, and
prosecution of any litigation. If the Indemnifying Party fails,
within ten (10) business days after notice of such claim, to initiate
the defense of such claim, the Indemnified
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Party will (upon further notice to the Indemnifying Party) have the
right to undertake the defense, compromise or settlement of such claim
on behalf of and for the account and risk of the Indemnifying Party;
provided, however, that such claim shall not be compromised or settled
without the consent of the Indemnifying Party, which consent shall not
be unreasonably withheld or delayed.
2.6.2 The Indemnified Party shall cooperate in all reasonable
respects with the Indemnifying Party in the investigation, trial and
defense of any lawsuit or action that may be subject to this
Indemnification Agreement and any appeal arising therefrom; provided,
however, that the Indemnified Party may, at its own cost, participate
in the investigation, trial and defense of such lawsuit or action any
appeal arising therefrom. The parties shall cooperate with each other
in any notifications to insurers.
2.7 EXCLUSIVE REMEDY. EXCEPT FOR CLAIMS FOR BREACH OF THIS
INDEMNIFICATION AGREEMENT, THE SOLE AND EXCLUSIVE REMEDY FOR ANY BREACH OF ANY
COVENANT OR AGREEMENT OR THE INACCURACY OF ANY REPRESENTATION OR WARRANTY, OR
ALLEGED BREACH OR INACCURACY OF ANY COVENANT, AGREEMENT, REPRESENTATION OR
WARRANTY, RESPECTIVELY, MADE IN THE STOCK PURCHASE AGREEMENT OR IN ANY
AGREEMENT EXECUTED AND DELIVERED PURSUANT THERETO, OR FOR ANY OTHER ALLEGED OR
ACTUAL BREACH OR VIOLATION OF THE STOCK PURCHASE AGREEMENT OR ANY AGREEMENT
EXECUTED AND DELIVERED PURSUANT THERETO, SHALL BE THE INDEMNIFICATION REMEDY
PROVIDED IN THIS INDEMNIFICATION AGREEMENT.
2.8 MITIGATION. The Indemnified Party shall take all reasonable
steps to mitigate all liabilities and claims, including availing itself as
reasonably directed by Indemnifying Party of any defenses, limitations, rights
of contribution, claims against third parties and other rights at law, and
shall provide such evidence and documentation of the nature and extent of any
liability as may be reasonably requested by the Indemnifying Party. Each party
shall act in a commercially reasonable manner in addressing any liabilities
that may provide the basis for an indemnifiable claim (that is, each party
shall respond to such liability in the same manner that it would respond to
such liability in the absence of the indemnification provided for in this
Indemnification Agreement). Any request for indemnification of specific costs
shall include invoices and supporting documents containing reasonably detailed
information about the costs and/or damages for which indemnification is being
sought.
SECTION 3. MISCELLANEOUS PROVISIONS.
3.1 SUCCESSORS AND ASSIGNS. All of the terms and provisions of
this Indemnification Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto. No party hereto may assign any of its rights or delegate any of
its duties under this Indemnification Agreement without the prior written
consent of the other parties.
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3.2 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee. This Agreement
and its subject matter have substantial contacts with Tennessee, and all
actions, suits, or other proceedings with respect to this Agreement shall be
brought only in a court of competent jurisdiction sitting in Davidson County,
Tennessee, or in the United States District Court having jurisdiction over that
County. In any such action, suit, or proceeding, such court shall have personal
jurisdiction of all of the parties hereto, and service of process upon them
under any applicable statutes, laws, and rules shall be deemed valid and good.
3.3 AMENDMENTS. This Indemnification Agreement may not be amended
or modified other than by written instrument signed by the parties hereto.
3.4 NOTICES. All notices, offers, requests, demands, and other
communications pursuant to this Indemnification Agreement shall be given in
writing by personal delivery, by prepaid first class registered or certified
mail properly addressed with appropriate postage paid thereon, by facsimile
transmission, or by UPS, FedEx or other recognized, reputable overnight courier
and shall be deemed to be duly given and received on the date of delivery if
delivered personally, on the second day after the deposit in the United States
Mail if mailed, upon acknowledgment of receipt of electronic transmission if
sent by facsimile transmission, or upon delivery if by UPS, FedEx or other
recognized, reputable overnight courier. Notices shall be sent to the parties
at the following address:
Sellers: Xxxx X. Xxxxxxx, Sellers' Representative
c/o Sherrard & Xxx, PLC
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
with copies to: Xxxxxxxx & Xxx, PLC
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq., or
Xxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
xxxxxxx@xxxxxxxxxxx.xxx or
xxxxxx@xxxxxxxxxxx.xxx
Purchaser: Psychiatric Solutions, Inc.
000 Xxxxxxxx Xxxx, Xxxxx X-000
Xxxxxxxx, Xxxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
xxxxxxx@xxxxxxxxxxxx.xxx
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with copies to: Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
xxx@x0xx.xxx
or to such other address, and to the attention of such other person or officer
as any party may hereafter designate in writing.
3.5 HEADINGS. The section and other headings contained in this
Indemnification Agreement are included for the purpose of convenient reference
only and shall not restrict, amplify, modify or otherwise affect in any way the
meaning or interpretation of this Indemnification Agreement.
3.6 GENDER AND NUMBER. All references to the neuter gender shall
include the feminine or masculine gender and vice versa, where applicable, and
all references to the singular shall include the plural and vice versa, where
applicable.
3.7 THIRD PARTY BENEFICIARY. This Agreement has been made and is
solely for the benefit of the parties hereto and their respective successors
and permitted assigns. Nothing in this Agreement is intended to confer any
rights or remedies under or by reason of this Agreement on any persons other
than the parties to it and their respective successors and permitted assigns or
to relieve or discharge the obligation or liability of any third persons to any
party to this Agreement.
3.8 COUNTERPARTS; EXECUTION BY FACSIMILE. This Indemnification
Agreement may be executed in several counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
Agreement, binding on all of the parties hereto.
3.9 SEVERABILITY. If any term, provision, condition or covenant
of this Indemnification Agreement or the application thereof to any party or
circumstance shall be held to be invalid or unenforceable to any extent in any
jurisdiction, then the remainder of this Indemnification Agreement and the
application of such term, provision, condition or covenant in any other
jurisdiction or to persons or circumstances other than those as to whom or
which it is held to be invalid or unenforceable, shall not be affected thereby,
and each term, provision, condition and covenant of this Indemnification
Agreement shall be valid and enforceable to the fullest extent permitted by
law.
3.10 ENTIRE AGREEMENT. This Indemnification Agreement, and the
Stock Purchase Agreement and the Escrow Agreement executed contemporaneously
herewith, set forth the entire agreement and understanding of the parties
hereto with respect to the matters covered herein and therein, and supersede
all prior agreements, arrangements and understandings relating to the subject
matter of this Indemnification Agreement and the Stock Purchase Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in multiple originals by themselves or their
authorized officers, all as of the day and year first written above.
PURCHASER: SELLERS:
PSYCHIATRIC SOLUTIONS, INC. AERIES HEALTHCARE MANAGEMENT
SERVICES, L.L.C.
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxxx
--------------------------------- -------------------------------
Its: Vice President Xxxx X. Xxxxxxx, Sole Member
--------------------------------
THE HILLSTREET FUND, L.P.,
A DELAWARE LIMITED PARTNERSHIP
BY: HILLSTREET CAPITAL, INC.,
ITS INVESTMENT MANAGER
By: /s/ Xxxxxxxxx X. Xxxxxxxxx
-------------------------------
Xxxxxxxxx X. Xxxxxxxxx,
President
/s/ Xxxx Xxxxxxxx
----------------------------------
Xxxx Xxxxxxxx
/s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx
XYRX ASSET INVESTMENT FUND, LLC
By: /s/ Xxx X. Xxxxxxxxx
-------------------------------
Xxx X. Xxxxxxxxx, President
/s/ Xxxx X. Xxxxxxx
----------------------------------
Xxxx X. Xxxxxxx
/s/ Xxxx X. Xxxxxxx
----------------------------------
Xxxx X. Xxxxxxx
/s/ Xxxx Xxxxxx
----------------------------------
Xxxx Xxxxxx
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