EXHIBIT 3.2
STOCK PURCHASE AGREEMENT
between
PREFERRED HEALTH CHOICE, INC.
and
UNITED PAYORS & UNITED PROVIDERS, INC.
OCTOBER 22, 1996
STOCK PURCHASE AGREEMENT
Agreement made as of October 22, 1996, but effective as of
September 30, 1996, between Preferred Health Choice, Inc., an
Illinois Corporation ("PHC") and a wholly-owned indirect subsidiary
of Pioneer Financial Services, Inc. a Delaware corporation ("PFS"),
and United Payors & United Providers, Inc., a Delaware corporation
("Buyer").
RECITALS
WHEREAS, PHC owns an aggregate of 8,499,998 shares (the
"Shares") of Common Stock, without par value, constituting all of
the issued and outstanding capital stock of National Health
Services, Inc., a Wisconsin corporation ("NHS");
WHEREAS, NHS owns an aggregate of 1,000 shares of capital
stock of Healthcare Review Corporation, a Kentucky corporation
("HRC"), which shares represent all of the issued and outstanding
shares of capital stock of HRC;
WHEREAS, NHS and PFS desire to enter into a Health Care
Administrative Services Agreement, dated as of October 24, 1996
(the "Services Agreement");
WHEREAS, NHS and National Group Life Insurance Company, an
Illinois corporation and an affiliate of PHC ("NGL"), desire to
enter into a Lease, dated as of October 24, 1996 (the "Lease");
WHEREAS, Buyer desires to acquire from PHC, and PHC desires to
sell to Buyer, all of the Shares.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and covenants herein contained, and for
other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
THE TRANSACTION
1.1 On the terms and subject to the conditions set forth
herein, at the closing (the "Closing") on the Closing Date (as
hereinafter defined):
(a) PHC shall sell, transfer and assign to Buyer, and Buyer
shall purchase from PHC, the Shares for a purchase price
(the "Purchase Price") of Five Million Dollars
($5,800,000) and the warrants (the "Warrants") described
in the forms of the Warrant Certificates attached as
Exhibits A-1 and A-2 hereto (the "Warrant Certificates").
(b) Buyer shall pay the Purchase Price as follows:
(i) Buyer shall pay to PHC Five Million Dollars
($5,800,000) in the form of a wire transfer to a
bank account designated by PHC of readily available
U.S. funds,
(ii) Buyer shall (A) issue to PHC the Warrants, (B)
execute and deliver to PHC the Warrant Certificates,
and (C) thereafter perform its obligations under the
Warrant Certificates fully and in a timely manner.
(c) The parties shall deliver the documents and instruments
and take the actions referred to in Article VII hereof.
(d) The closing shall be held at the offices of Buyer at 2:00
p.m., local time, on October 23, 1996 or at such other
date, time and place as the parties may agree in writing
(the "Closing Date"); however, the transactions
contemplated herein shall be deemed for all purposes to
have taken place, and to be effective, as of September
30, 1996.
1.2 On the terms, and subject to the conditions set forth
herein, immediately following the Closing:
(a) PFS and NHS shall enter into the Services Agreement.
(b) NGL and NHS shall enter into the Lease.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PHC
Except as may otherwise be set forth in a letter (the "PHC
DISCLOSURE LETTER") delivered to Buyer concurrently with the
execution and delivery of this Agreement and initialed for
identification purposes by Buyer and PHC, PHC hereby represents and
warrants to Buyer, its successors and assigns as follows:
2.1 Organization and Qualification. Paragraph 2.1 of the
PHC Disclosure Letter lists the name and jurisdiction of
incorporation of NHS, HRC and each of NHS' other direct and
indirect Subsidiaries (the subsidiaries listed in paragraph 2.1 of
the PHC Disclosure Letter are herein referred to collectively as
the "Subsidiaries" and individually as a "Subsidiary"). PHC, NHS
and each Subsidiary is a corporation and in good standing as a
domestic corporation under the laws of the state of its
incorporation, and, to the knowledge of PFS, is duly qualified to
do business as a foreign corporation and is in good standing in
each other jurisdiction in which the character of its properties or
the nature of its business makes such qualification necessary,
except in jurisdictions, if any, where the failure to be so
qualified would not prevent PHC from fulfilling its obligations
hereunder or constitute or would result in a Material Adverse
Event with respect to NHS. As used in this Agreement, the term
"MATERIAL ADVERSE EVENT" when used in reference to NHS and/or its
Subsidiaries shall mean any event, circumstance, condition,
development or occurrence causing, resulting in or having (or, with
the passage of time, reasonably likely to cause, result in or have)
a material adverse effect on the condition (financial or
otherwise), business, properties, business relationships, prospects
or results of operations of NHS and its Subsidiaries taken as a
whole. NHS and each Subsidiary has the requisite corporate power
and authority to own, use or lease its respective properties and to
carry on its respective business as now being conducted.
2.2 Capitalization of NHS. The authorized, issued and
outstanding capital stock of NHS and each Subsidiary are as set
forth in paragraph 2.2 of the NHS Disclosure Letter. All of the
issued and outstanding shares of capital stock of NHS and each
Subsidiary have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights (whether
created by statute or otherwise). Except as disclosed in paragraph
2.2 of the NHS Disclosure Letter, there are no options, warrants or
other rights, commitments or agreements of any character which call
for the issuance of shares of capital stock of NHS or any
Subsidiary or any securities, instruments or rights convertible
into or exchangeable for shares of capital stock or other
securities of NHS or any Subsidiary. Neither NHS nor any
Subsidiary has any obligation, contingent or otherwise, to register
any securities of NHS or any Subsidiary under the federal
securities laws.
2.3 Title to Shares. All of the issued and outstanding
shares of capital stock of NHS are, and immediately prior to the
Closing Date will be, owned of record and beneficially by PHC, free
and clear of all liens, charges, pledges, encumbrances, equities,
rights of first refusal, options or other claims of any nature,
except liens for current taxes not yet delinquent. All of the
issued and outstanding shares of capital stock of each Subsidiary
are, and immediately prior to the Closing Date will be, owned of
record and beneficially by NHS, free and clear of all liens,
charges, pledges, encumbrances, equities, rights of first refusal,
options or other claims of any nature, except liens for current
taxes not yet delinquent.
2.4 Authority.
(a) PHC has the requisite corporate power and authority to
execute and deliver this Agreement and to fulfill its
obligations hereunder. The execution and delivery of
this Agreement by PHC and the performance of its
obligations hereunder have been duly and validly
authorized by the Board of Directors and sole shareholder
of PHC, and no other corporate proceedings on the part of
PHC are necessary, as a matter of law or otherwise, in
connection therewith. This Agreement has been duly and
validly executed and delivered by PHC and, assuming this
Agreement constitutes the valid and binding obligations
of Buyer, this Agreement constitutes a valid and binding
agreement of PHC, enforceable against PHC in accordance
with its terms, except (a) as such enforcement may be
subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in
effect relating to creditors' rights, and (b) as the
remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which
any proceeding therefore may be brought. All corporate
action on the part of PHC, its Board of Directors and its
sole shareholder which is necessary, as a matter of law
or otherwise, for the execution, delivery and performance
of this Agreement by PHC has been duly and validly taken.
(b) PFS has the requisite corporate power and authority to
execute and deliver the Services Agreement and to fulfill
its obligations thereunder. The execution and delivery
of the Services Agreement by PFS and the performance of
its obligations thereunder have been duly and validly
authorized by the Executive Committee of the Board of
Directors of PFS, and no other corporate proceedings on
the part of PFS are necessary, as a matter of law or
otherwise, in connection therewith. When executed and
delivered by PFS as provided herein, the Services
Agreement will have been duly and validly executed and
delivered by PFS and, assuming the Services Agreement has
been duly and validly executed by NHS, will constitute a
valid and binding agreement of PFS, enforceable against
PFS in accordance with its terms, except (a) as such
enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and
(b) as the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court
before which any proceeding therefore may be brought. All
corporate action on the part of PFS, and its Board of
Directors which is necessary, as a matter of law or
otherwise, for the execution, delivery and performance of
the Services Agreement by PFS has been duly and validly
taken.
(c) NGL has the requisite corporate power and authority to
execute and deliver the Lease and to fulfill its
obligations thereunder. The execution and delivery of
the Lease by NGL and the performance of its obligations
thereunder have been duly and validly authorized by the
Board of Directors of NGL, and no other corporate
proceedings on the part of NGL are necessary, as a matter
of law or otherwise, in connection therewith. When
executed and delivered by NGL as provided herein, the
Lease will have been duly and validly executed and
delivered by NGL and, assuming the Lease constitutes the
binding obligations of NHS, the Lease will constitute a
valid and binding agreement of NGL, enforceable against
NGL in accordance with its terms, except (a) as such
enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and
(b) as the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court
before which any proceeding therefore may be brought. All
corporate action on the part of NGL and its Board of
Directors which is necessary, as a matter of law or
otherwise, for the execution, delivery and performance of
this Agreement by NGL has been duly and validly taken.
2.5 No Other Investments or Subsidiaries. NHS has no equity
interest or investment in any entity other than the Subsidiaries.
2.6 Financial Statements. PHC has furnished to Buyer true and
complete copies of its consolidated balance sheet dated August 31,
1996 and its consolidated statement of operations for the eight
month period ended August 31, 1996. Such financial statements are
in accordance with the books and records of the entities covered
thereby, and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis and
present fairly the consolidated financial position of NHS and its
Subsidiaries as of the end of the period covered and the
consolidated results of operations for the period covered in
conformity with generally accepted accounting principles. As used
in this Agreement, the "Latest NHS Balance Sheet" shall mean the
August 31, 1996 consolidated balance sheet of NHS attached as
Schedule 1 to paragraph 2.6 of the PHC Disclosure Letter.
2.7 Absence of Certain Changes. Except as contemplated by
this Agreement or disclosed in the PHC Disclosure Letter, since the
date of the Latest NHS Balance Sheet, NHS and each Subsidiary has
conducted its respective business only in, and has not engaged in
any transaction other than according to, the ordinary and usual
course of such business consistent with prior practices, and, since
such date, there has not been (a) any Material Adverse Event with
respect to NHS or its Subsidiaries: (b) any declaration, setting
aside or payment of any dividend or other distribution with respect
to the capital stock of NHS or any Subsidiary; (c) any change in
the accounting principles, practices or methods of NHS or any
Subsidiary; (d) any labor dispute or difficulty which is reasonably
likely to result in any Material Adverse Event with respect to NHS
or any Subsidiary; (e) any asset of NHS or any Subsidiary having a
value of $50,000 or more sold or disposed of, subjected to any
lien, charge or other encumbrance; (f) any amendment or termination
of any contract or agreement to which NHS or any Subsidiary is a
party which involves the payment (in any form) by or to NHS or such
Subsidiary of $100,000 or more in any twelve-month period; (g) any
repurchase of, issuances or other changes to the outstanding
capital stock of NHS or any Subsidiary; or (h) any increase in the
compensation payable or which could become payable by NHS or any
Subsidiary to any of their respective directors, officers,
employees or consultants, or any amendment of any employee benefit
plan.
2.8 Absence of Undisclosed Liabilities. To the knowledge of
PHC, except and to the extent reserved against or reflected in the
Latest NHS Balance Sheet or disclosed in the PHC Disclosure Letter:
(a) neither NHS nor any Subsidiary had, at such date, any
liabilities or obligations (contingent or otherwise) in excess of
$50,000 in the aggregate which were required by generally accepted
accounting principles, consistently applied, to be reserved against
or reflected therein, and (b) since the date of the Latest NHS
Balance Sheet, except in the ordinary course of its business,
neither NHS nor any Subsidiary has incurred any liabilities or
obligations in excess of $50,000 in the aggregate which, had they
been incurred prior to such date, would have been required by such
principles, so applied, to have been reserved against or reflected
in the Latest NHS Balance Sheet.
2.9 Consents and Approvals; No Violation. Except as disclosed
in the PHC Disclosure Letter, the execution and delivery of this
Agreement, the Services Agreement and the Lease do not and the
consummation of the transactions contemplated hereby will not:
(a) conflict with any provision of the articles of
incorporation or bylaws of PLI, NGL, PHC, NHS or any
Subsidiary;
(b) require PLI, NGL, PHC, NHS or any Subsidiary to obtain
any consent, approval, authorization or permit of or
from, or filing with or notification to, any governmental
or regulatory authority except as contemplated herein;
(c) conflict with, result in the breach of or constitute a
default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms,
conditions or provisions of any note, lease, mortgage,
license, agreement or other instrument or obligation to
which NHS or any Subsidiary is a party or by which NHS or
any Subsidiary or any of their respective assets may be
bound which are required to be disclosed in paragraphs
2.11, 2.14 or 2.15 of the PHC Disclosure Letter; or
(d) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to PLI, NGL, PHC, NHS or
any Subsidiary.
2.10 Certain Fees and Expenses. No person or entity has been
authorized by PHC, NHS or any Subsidiary to act for PHC, NHS or any
Subsidiary in connection with the transactions provided for in this
Agreement in a way which would entitle such person to receive from
NHS or any Subsidiary any broker's fees, commissions, finder's
fees, investment banking or financial advisory fees in connection
with this Agreement (or for reimbursement of any expenses related
thereto).
2.11 Employment and Similar Agreements. Paragraph 2.11 of the
PHC Disclosure Letter sets forth (a) all written employment,
severance, bonus, consulting or indemnification arrangements,
agreements, understandings or plans between NHS or any Subsidiary
and any of their respective directors, officers or employees
(including without limitation any such arrangements, agreements,
understandings or plans which are conditioned upon a change of
control involving NHS or any Subsidiary); (b) all written
compensatory arrangements, agreements, understandings or plans
between NHS or any Subsidiary and any consultant (including without
limitation any such arrangements, agreements, understandings or
plans which are conditioned upon a change of control involving
NHS); and (c) a list of current employees of NHS and each
Subsidiary which reflects, among other things, the current
compensation of each such employee.
2.12 Litigation. Except as disclosed in paragraph 2.12 of the
PHC Disclosure Letter, as of the date hereof, there is no claim,
action or proceeding, including without limitation any claim of
indemnification, pending or, to the knowledge of PHC, NHS or any
Subsidiary, threatened against or relating to NHS or any
Subsidiary. Neither NHS nor any Subsidiary or any of their
respective officers, directors or employees has been permanently or
temporarily enjoined by any order, judgment or decree of any court
or any other governmental or regulatory authority from engaging in
or continuing any conduct or practice in connection with the
business, assets, properties or affairs of NHS or any Subsidiary.
There is not in existence on the date hereof any order, judgment or
decree of any court or other tribunal or other governmental or
regulatory authority enjoining or requiring NHS or any Subsidiary
to take any action of any kind with respect to its business,
assets, properties or affairs.
2.13 Taxes. Except as disclosed in paragraph 2.13 of the PHC
Disclosure Letter: NHS and each Subsidiary, either on their own or
as part of a consolidated group of corporations, have timely filed
accurate, true and complete copies of all income, franchise,
license, sales, payroll and property tax returns and reports that
are or have been required to be filed with the United States and
with the jurisdictions in which they are qualified to do business
or are required to file tax returns or reports and have paid in
full all taxes, interest, penalties, assessments or deficiencies
that are or have been due or payable or are or have been claimed by
any taxing authority to be due and payable (whether or not it is
currently known that such taxes are or have been due and payable).
NHS and each Subsidiary have, to the extent required, made
estimated payments against all taxes that have not yet become due
and payable and have withheld or collected, and, to the extent
required, paid over to the proper governmental authorities, all
taxes, assessments and fees required by law to have been withheld
or collected. NHS and each Subsidiary have duly paid or provided
for all taxes with respect to any period prior to the date of this
representation and warranty. There are no liens for taxes,
assessments, fees or other governmental charges upon any of the
assets or properties of NHS and each Subsidiary. Neither NHS nor
any Subsidiary has waived or been granted an extension which is
still effective, for any applicable limitation period for the
assertion of any tax liability for any federal income tax year.
2.14 Benefit Plans. Each employee benefit plan covering
employees of NHS or any Subsidiary which is maintained or
contributed to by NHS or any Subsidiary conforms in all material
respects to, and its administration is in conformity in all
material respects with, all applicable laws and regulations; no
liability or penalty under the Employment Retirement Income
Security Act of 1974, as amended, has been or will be incurred by
NHS or any Subsidiary with respect to any such plan; full payment
has been made of all amounts which NHS or any Subsidiary is
required to have paid as contributions to such plans; there is not
in the aggregate any accumulated funding deficiency with respect to
such plans; and the current value of accrued benefits of each such
plan does not exceed the current value of such plan's assets.
2.15 Contracts. Paragraph 2.15 of the PHC Disclosure Letter
lists all agreements, contracts, licenses, leases, and
understandings, whether written or oral, which either (a) involve
payment (in any form) by or to NHS or any Subsidiary of $100,000 or
more in any twelve-month period or (b) are material to NHS (except
that such list may exclude agreements which are listed elsewhere in
the PHC Disclosure Letter). All such agreements, contracts,
licenses, leases and understandings are in full force and effect
and no party thereto has given any notice of termination with
respect thereto (except notices of termination which have been
withdrawn). Neither NHS nor any Subsidiary is in material breach of
any agreement, contract, license, lease or understanding which is
described or required to be described in the PHC Disclosure Letter,
nor does any event exist which, with notice or passing of time or
both, would constitute or result in a material breach by NHS or any
Subsidiary of any such agreement, contract, license, lease or
understanding. To the knowledge of PHC, NHS and each Subsidiary,
the other party or parties to each such agreement, contract,
license, lease or understanding has complied with all material
commitments and obligations on its or their part.
2.16 Intellectual Property Rights.
(a) As used in this Agreement, "INTELLECTUAL PROPERTY RIGHTS"
includes United States and foreign inventions, invention
disclosures, patents, inventors' certificates, utility
models, trademarks, service marks, trade names,
copyrights, trade secrets (including processes and
software programs), registrations and applications
therefor, and past, present and future causes of action
and remedies therefor. To the knowledge of PHC, NHS and
each Subsidiary, NHS and each Subsidiary has full right,
title and interest in or to use (as currently used) all
Intellectual Property Rights which are material to the
conduct of its business as now conducted, and the
consummation of the transactions contemplated hereby will
not alter or impair in an adverse manner such
Intellectual Property Rights. Paragraph 2.16 of the PHC
Disclosure Letter lists all Intellectual Property Rights,
including computer software (whether owned by or licensed
to NHS or any Subsidiary) which is material to the
conduct of the business of NHS as now conducted.
(b) To the knowledge of PHC, NHS and each Subsidiary, neither
NHS nor any Subsidiary is in default under any material
agreement pursuant to which it is licensing Intellectual
Property Rights of a third party or granting licenses to
its own Intellectual Property Rights. Neither NHS nor any
Subsidiary has notified any other party of an alleged
default of any such agreement. Neither PHC, NHS nor any
Subsidiary has received any communications alleging that
NHS or any Subsidiary has violated any other person' s
Intellectual Property Rights or has engaged in unfair
competition against such person.
(c) To the knowledge of PHC, NHS and each Subsidiary, NHS and
each Subsidiary do not infringe (nor has it
misappropriated) any third party's Intellectual Property
Rights and neither NHS nor any Subsidiary has any
material liability for any past infringement or
misappropriation. No material dispute or disagreement
involving NHS or any Subsidiary exists or is, to the
knowledge of NHS or any Subsidiary, threatened with
regard to any third party Intellectual Property Right,
including any allegation of Intellectual Property Rights
infringement or misappropriation or of any breach or
default of an Intellectual Property Rights license or
similar agreement.
2.17 Properties, Liens. Except for statutory mechanics and
materialmen's liens and liens for current taxes not yet delinquent,
NHS and each Subsidiary own or lease, free and clear of any liens,
claims, charges, options or other encumbrances (it being understood
that, with respect to leased properties, such representation
regarding the absence of liens, claims, charges, options or other
encumbrances relates only to the leasehold interest of NHS or any
Subsidiary, as applicable), all tangible and intangible properties,
real and personal, material to the operation of their respective
businesses as now conducted whether or not reflected in the Latest
NHS Balance Sheet (except property sold or disposed of in the
ordinary course of business since the date of the Latest NHS
Balance Sheet) and all such property acquired or used since such
date, and to the knowledge of NHS or any Subsidiary, there has not
been any violation of any law, regulation or ordinance (including
without limitation laws, regulations and ordinances relating to
health, fire, safety, zoning, environmental, building, city
planning or similar issues) relating to such properties or
businesses which may reasonably be expected to result in a Material
Adverse Event. There are no proceedings affecting any of such
properties pending or threatened which may reasonably be expected
to, materially and adversely, curtail the use of such property for
the purpose for which it was acquired or the purpose for which it
is now used. Paragraph 2.17 of the PHC Disclosure Letter lists all
real property owned or leased by NHS or any Subsidiary.
2.18 Compliance with Applicable Laws. To the knowledge of
PFS, NHS and each Subsidiary holds all licenses, permits and
authorizations necessary for the lawful conduct of its business, as
now conducted, except for such licenses, permits and authorizations
the absence of which will not result in a Material Adverse Event;
and neither PHC, NHS nor any Subsidiary has received any notice
from any authority or person which asserts that NHS or any
Subsidiary lacks any license, permit or authorization necessary for
the lawful conduct of its business, or that NHS or any Subsidiary
is in violation of any material law, ordinance or regulation of
material significance to NHS or any subsidiary.
2.19 Environmental Liability. To the knowledge of PHC, NHS or
any Subsidiary:
(a) The businesses of NHS and each Subsidiary has been and is
operated in material compliance with all applicable
statutory or regulatory requirements of all federal,
state and local governmental authorities with
jurisdiction over the environment or over workplace
health and safety, and neither NHS nor any Subsidiary has
caused or allowed the generation, treatment, storage,
release or disposal of hazardous substances except in
accordance with such statutes and regulations as they
existed at the time of such generation, treatment,
storage, release or disposal.
(b) Neither PHC, NHS nor any Subsidiary has received any
written notice or, to the best knowledge of PHC, NHS or
any Subsidiary, any other communication, from any
governmental authority alleging or concerning any
violation by NHS or any Subsidiary of, or responsibility
or liability of NHS or any Subsidiary, any statute or
regulation relating to the environment. There are no
pending or threatened, claims, suits, proceedings or
investigations with respect to the businesses or
operations of NHS or any Subsidiary alleging or
concerning any violation of or responsibility or
liability under any statutes or regulations relating to
the environment, nor does PHC, NHS or any Subsidiary have
any knowledge of any fact or condition which might
reasonably be expected to give rise to such a claim,
suit, proceeding or investigation.
(c) There are no pending or threatened actions, proceedings
or investigations seeking to revoke or deny renewal of
any of such approvals, permits and licenses; nor does
PHC, NHS or any Subsidiary have knowledge of any fact or
condition which might reasonably be expected to give rise
to any action, proceeding or investigation to revoke or
deny renewal of such approvals, permits or licenses if
such revocation or denial would constitute a Material
Adverse Event.
2.20 Insurance. NHS and each Subsidiary has in place
insurance coverage of the types, in the coverage amounts and
subject to retention, deductible or other similar terms as
described in paragraph 2.20 of the PHC Disclosure Letter. PFS
management reasonably believes such coverage to be appropriate and
adequate.
2.21 Service Agreements. To the knowledge of PHC, NHS and each
Subsidiary, all charges made to customers of NHS or any Subsidiary
have been properly computed and billed in material compliance with
applicable agreements and procedures in place with respect to such
customers, and no such customer has any right to any material
refund, price or fee adjustments offset or similar right with
respect to any such charges.
2.22 Minute Books and Stock Records. PHC has delivered or made
available to Buyer true and complete copies of the minute books and
stock records of NHS and each Subsidiary, which contain a complete
and correct records of all stock transactions of each such company
and of all meetings of the Boards of Directors of each such
company (and committees thereof) and all meetings of their
stockholders and all actions by written consent without a meeting
by such Boards of Directors (and committees) and their stockholders
since the date of incorporation and reflect accurately in all
material respects all actions by such directors and by stockholders
with respect to all transactions referred to in such minutes.
2.23 Certain Relationships. Neither PHC, NHS nor any
Subsidiary has any knowledge that any material customer of NHS or
any Subsidiary currently plans to terminate its relationship with
any such company.
2.24 Affiliated Transactions. Section 2.24 of the PHC
Disclosure Letter lists all transactions which are now in effect
between NHS or any Subsidiary, on the one hand, and any person or
entity affiliated with NHS or any Subsidiary (other than NHS or a
Subsidiary), on the other hand, including without limitation any
charge for services (administrative or otherwise).
2.25 Full Disclosure. PHC has delivered, or made available to
Buyer, copies of all written instruments, agreements and other
documents referred to in the PHC Disclosure Letter except as
otherwise indicated. All instruments, agreements, schedules and
other documents referred to in the PHC Disclosure Letter delivered
or to be delivered, or made available, to Buyer pursuant to this
Agreement are true and complete in all material respects. No
representation or warranty made in this Article II as supplemented
by the PHC Disclosure Letter contains or will contain any untrue
statement of a material fact or omits or will omit to state a
material fact required to be stated herein or therein or necessary
to make such representation or warranty in light of the
circumstances in which it is made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as may otherwise be set forth in a letter ("BUYER
DISCLOSURE LETTER") delivered to PHC concurrently with the
execution of this Agreement and initialed for identification
purposes by PHC and Buyer, Buyer hereby represents and warrants to
PHC, its successors and assigns as follows:
3.1 Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing as a domestic
corporation under the laws of the state of Delaware, is duly
qualified to do business as a foreign corporation and is in good
standing in each other jurisdiction in which the character of its
properties or the nature of its business makes such qualification
necessary, except in jurisdictions, if any, where the failure to be
so qualified would not constitute or result in a Material Adverse
Event or result in a Material Adverse Event. As used in this
Agreement, the term "MATERIAL ADVERSE EVENT" when used in reference
to Buyer shall mean any event, circumstance, condition, development
or occurrence causing, resulting in or having a material adverse
effect on the condition (financial or otherwise), business,
properties, business relationships, prospects or results of
operations of Buyer taken as a whole. Buyer has the requisite
corporate power and authority to own, use or lease its respective
properties and to carry on its respective business as now being
conducted.
3.2 Capitalization of Buyer.
(a) The authorized, issued and outstanding capital stock of
Buyer is as set forth in paragraph 3.2 of the Buyer Disclosure
Letter. All of the issued and outstanding shares of capital stock
of Buyer have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights (whether created
by statute or otherwise). Except as disclosed in paragraph 3.2 of
the Buyer Disclosure Letter, there are no options, warrants or
other rights, commitments or agreements of any character which call
for the issuance of shares of capital stock of Buyer or any
securities, instruments or rights convertible into or exchangeable
for shares of capital stock or other securities of Buyer. Neither
Buyer nor any affiliate thereof has any obligation, contingent or
otherwise, to register any securities of Buyer under the federal
securities laws.
(b) The Warrants have been duly authorized, and when issued
as contemplated herein, will be duly and validly issued; and the
capital stock of Buyer to be issued to the holder or holders of the
Warrants upon the exercise of the Warrants will, when so issued, be
duly authorized, validly issued and nonassessable and will not be
subject to preemptive rights.
3.3 Authority Relative to this Agreement.
(a) Buyer has the requisite corporate power and authority to
execute and deliver this Agreement and the Warrant
Certificates and to fulfill its obligations hereunder and
thereunder. The execution and delivery of this Agreement
and the Warrant Certificates by Buyer and the performance
of its obligations hereunder and thereunder have been
duly and validly authorized by the Executive Committee of
the Board of Directors of Buyer, and no other corporate
proceedings on the part of Buyer are necessary, as a
matter of law or otherwise, in connection therewith. This
Agreement has been, and the Warrant Certificates when
executed and delivered as provided herein, shall have
been, duly and validly executed and delivered by Buyer
and, assuming this Agreement, constitutes the valid and
binding obligations of PHC, this Agreement constitutes,
and the Warrant Certificates will constitute, valid and
binding agreements of Buyer, enforceable against Buyer in
accordance with their respective terms, except (a) as
such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors'
rights, and (b) as the remedy of specific performance and
injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be
brought.
(b) When executed and delivered as provided herein, the
Services Agreement and the Lease will have been duly and
validly authorized, executed and delivered by NHS and,
assuming the Services Agreement and the Lease constitute
the valid and binding obligations of the other parties
thereto, the Services Agreement and the Lease will
constitute valid and biding agreements of NHS,
enforceable against NHS in accordance with their
respective terms, except (a) as such enforcement may be
subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in
effect relating to creditors' rights, and (b) as the
remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which
any proceeding therefor may be brought.
3.4 Financial Statements. Buyer has furnished to PHC the
consolidated balance sheets of Buyer as of December 31, 1995 and
June 30, 1996 and the consolidated statements of operations and
cash flows of Buyer for the year ended December 31, 1995 and the
six month periods ended June 30, 1995 and June 30, 1996. Such
financial statements, with the notes thereto, are, and, except as
disclosed in paragraph 3.4 of the Buyer Disclosure Letter will be,
in accordance with the books and records of Buyer and have been, or
will be, prepared in accordance with generally accepted accounting
principles applied on a consistent basis and present fairly the
financial condition of Buyer as of the end of each period covered
and the results of its operations and cash flows for each of the
periods in accordance with generally accepted accounting
principles. As used in this Agreement, the "LATEST BUYER BALANCE
SHEET" shall mean the June 30, 1996 balance sheet of Buyer
attached as Schedule 1 to paragraph 3.4 of the Buyer Disclosure
Letter.
3.5 Absence of Certain Changes. Except as contemplated by
this Agreement or disclosed in paragraph 3.5 of the Buyer
Disclosure Letter, since the date of the Latest Buyer Balance
Sheet, Buyer has conducted its business only in, and has not
engaged in any transaction other than according to, the ordinary
and usual course of such business consistent with prior practices,
and, since such date, there has not been (a) any Material Adverse
Event with respect to Buyer; (b) any declaration, setting aside or
payment of any dividend or other distribution with respect to the
capital stock of Buyer; (c) any change in the accounting
principles, practices or methods of Buyer; (d) any labor dispute or
difficulty which is reasonably likely to result in any Material
Adverse Event with respect to Buyer; (e) any asset of Buyer
having a value of $100,000 or more sold or disposed of, subjected
to any lien, charge or other encumbrance; (f) any amendment or
termination of any contract or agreement to which Buyer is party
which involves the payment (in any form) by or to Buyer of $250,000
or more in any twelve-month period; or (g) any repurchase of,
issuances or other changes to the outstanding capital stock of
Buyer.
3.6 Absence of Undisclosed Liabilities. To the knowledge of
Buyer, except and to the extent reserved against or reflected in
the Latest Buyer Balance Sheet: (a) Buyer had, at such date, no
material liabilities or obligations (contingent or otherwise) which
were required by generally accepted accounting principles,
consistently applied, to be reserved against or reflected therein,
and (b) since the date of the Latest Buyer Balance Sheet, except in
the ordinary course of its business, Buyer has not incurred any
material liabilities or obligations which, had they been incurred
prior to such date, would have been required by such principles, so
applied, to have been reserved against or reflected in the Latest
Buyer Balance Sheet.
3.7 Financial Capability. Buyer has, and on and after the
Closing Date will have, the financial capability to effect the
consummation of the transactions contemplated in this Agreement
and, the Warrant Certificates.
3.8 Consents and Approvals; No Violation. Except as disclosed
in paragraph 3.5 of the Buyer Disclosure Letter, the execution and
delivery of this Agreement and the Warrant Certificates, and the
execution and delivery of the Services Agreement and the Lease by
NHS do not, and the consummation of the transactions contemplated
hereby and thereby will not:
(a) conflict with any provision of the articles or
certificate of incorporation or bylaws of Buyer;
(b) require Buyer to obtain any consent, approval,
authorization or permit of or from, or make any filing
with or notification to, any governmental or regulatory
authority;
(c) conflict with, result in the breach of or constitute a
default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms,
conditions or provisions of any note, lease, mortgage,
license, agreement or other instrument or obligation to
which Buyer is a party or by which Buyer or any of its
assets may be bound; or
(d) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Buyer.
3.9 Certain Fees and Expenses. No person or entity has been
authorized by Buyer to act for Buyer in connection with the
transactions provided for in this Agreement in a way which would
entitle such person to receive from PHC (or NHS or any Subsidiary
prior to the Closing) any broker's fees, commissions, finder's
fees, investment banking or financial advisory fees in connection
with this Agreement (or for reimbursement of any expenses related
thereto).
3.10 Litigation. Except as disclosed in paragraph 3.10 of the
Buyer Disclosure Letter, as of the date hereof, there is no claim,
action or proceeding, including without limitation any claim of
indemnification, pending or, to the best knowledge of Buyer,
threatened against or relating to Buyer which if adversely decided
would result in a Material Adverse Event with respect to Buyer.
Neither Buyer nor any of its respective officers, directors or
employees has been permanently or temporarily enjoined by any
order, judgment or decree of any court or any other governmental or
regulatory authority from engaging in or continuing any conduct or
practice in connection with the business, assets, properties or
affairs of Buyer. There is not in existence on the date hereof any
order, judgment or decree of any court or other tribunal or other
governmental or regulatory authority enjoining or requiring Buyer
to take any action of any kind with respect to its business,
assets, properties or affairs.
3.11 Taxes. Buyer, either on its own or as part of a
consolidated group of corporations, has timely filed accurate, true
and complete copies of all income, franchise, license, sales,
payroll and property tax returns and reports that are or have been
required to be filed with the United States and with the
jurisdictions in which it is qualified to do business or is
required to file tax returns or reports and has paid in full all
taxes, interest, penalties, assessments or deficiencies that are or
have been due or payable or are or have been claimed by any taxing
authority to be due and payable (whether or not it is currently
known that such taxes are or have been due and payable). Buyer
has, to the extent required, made estimated payments against all
taxes that have not yet become due and payable and has withheld or
collected, and, to the extent required, paid over to the proper
governmental authorities, all taxes, assessments and fees required
by law to have been withheld or collected. Buyer has duly paid or
provided for all taxes with respect to any period prior to the date
of this representation and warranty. There are no liens for taxes,
assessments, fees or other governmental charges upon any of the
assets or properties of Buyer. Buyer has not waived or been
granted an extension which is still effective, for applicable
limitation period for the assertion of any tax liability for any
federal income tax year.
3.12 Benefit Plans. Each employee benefit plan covering
employees of Buyer which is maintained or contributed to by Buyer
conforms in all material respects to, and its administration is in
conformity in all material respects with, all applicable laws and
regulations; no liability or penalty under the Employment
Retirement Income Security Act of 1974, as amended, has been or
will be incurred by Buyer with respect to any such plan; full
payment has been made of all amounts which Buyer is required to
have paid as contributions to such plans; there is not in the
aggregate any accumulated funding deficiency with respect to such
plans; and the current value of accrued benefits of each such plan
does not exceed the current value of such plan's assets.
3.13 Intellectual Property Rights.
(a) As used in this Agreement, "INTELLECTUAL PROPERTY RIGHTS"
includes United States and foreign inventions, invention
disclosures, patents, inventors' certificates, utility
models, trademarks, service marks, trade names,
copyrights, trade secrets (including processes and
software programs), registrations and applications
therefor, and past, present and future causes of action
and remedies therefor. To the knowledge of Buyer, Buyer
has full right, title and interest in or to use (as
currently used) all Intellectual Property Rights which
are material to the conduct of its business as now
conducted, and the consummation of the transactions
contemplated hereby will not alter or impair in an
adverse manner such Intellectual Property Rights.
(b) To the knowledge of Buyer, Buyer is not in default under
any material agreement pursuant to which it is licensing
Intellectual Property Rights of a third party or granting
licenses to its own Intellectual Property Rights. Buyer
has not notified any other party of an alleged default of
any such agreement. Buyer has not received any
communications alleging that Buyer has violated any other
person's Intellectual Property Rights or has engaged in
unfair competition against such person.
(c) To the best knowledge of Buyer, Buyer is not infringing
(nor has it misappropriated) any third party's
Intellectual Property Rights and does not have any
material liability for any past infringement or
misappropriation. No material dispute or disagreement
involving Buyer exists or is, to the knowledge of Buyer,
threatened with regard to any third party Intellectual
Property Right, including any allegation of Intellectual
Property Rights infringement or misappropriation by Buyer
or of any breach or default by Buyer of an Intellectual
Property Rights license or similar agreement.
3.14 Properties, Liens. Except for statutory mechanics and
materialmen's liens and liens for current taxes not yet delinquent,
Buyer owns or leases, free and clear of any liens, claims, charges,
options or other encumbrance (it being understood that, with
respect to leased properties, such representation regarding the
absence of liens, claims, charges, options or other encumbrances
relates only to the leasehold interest of Buyer), all tangible and
intangible properties, real and personal, material for the
operation of its business as currently conducted whether or not
reflected in the Latest Buyer Balance Sheet (except property sold
or disposed of in the ordinary course of business since the date of
the Latest Buyer Balance Sheet) and all such property acquired or
used since such date, and, to the knowledge of Buyer, there has not
been any violation of any law, regulation or ordinance (including
without limitation laws, regulations and ordinances relating to
health, fire, safety, zoning, environmental, building, city
planning or similar issues) relating to such properties or
businesses which may reasonably be expected to result in a Material
Adverse Event. There are no proceedings affecting any of such
properties pending or threatened which may reasonably be expected
to, materially and adversely, curtail the use of such property for
the purpose for which it was acquired or the purpose for which it
is now used.
3.15 Compliance with Applicable Laws. Except as disclosed in
paragraph 3.10 of the Buyer Disclosure Letter, Buyer has not
received any notice from any authority or person which asserts that
Buyer lacks any license, permit or authorization necessary for the
lawful conduct of its business, or that Buyer is in violation of
any material law, ordinance or regulation of material significance
to Buyer.
3.16 Environmental Liability. To the knowledge of Buyer:
(a) The business of Buyer has been and is operated in
material compliance with all applicable statutory or
regulatory requirements of all federal, state and local
governmental authorities with jurisdiction over the
environment or over workplace health and safety. Buyer
has not caused or allowed the generation, treatment,
storage, release or disposal of hazardous substances
except in accordance with such statutes and regulations
as they existed at the time of such generation,
treatment, storage, release or disposal.
(b) Buyer has not received any written notice or, to the
knowledge of Buyer, any other communication, from any
governmental authority alleging or concerning any
violation by Buyer of, or responsibility or liability of
Buyer under, any statute or regulation relating to the
environment. There are no pending or threatened claims,
suits, proceedings or investigations with respect to the
business or operations of Buyer alleging or concerning
any violation of or responsibility or liability under any
statutes or regulations relating to the environment, nor
does Buyer have any knowledge of any fact or condition
which might reasonably be expected to give rise to such a
claim, suit, proceeding or investigation.
(c) There are no pending or threatened, actions, proceedings
or investigations seeking to revoke or deny renewal of
any of such approvals, permits and licenses; nor does
Buyer have knowledge of any fact or condition which might
reasonably be expected to give rise to any action,
proceeding or investigation to revoke or deny renewal of
such approvals, permits or licenses if such revocation or
denial would constitute a Material Adverse Event with
respect to Buyer.
3.17 Insurance. Buyer has in place insurance coverage of such
types, in such coverage amounts and subject to such retention,
deductible or other terms as management reasonably believes to be
appropriate.
3.18 Service Agreements. To the knowledge of Buyer, all
charges made to customers of Buyer have been properly computed and
billed in material compliance with applicable agreements and
procedures in place with respect to such customers, and no such
customer has any right to any material refund, price or fee
adjustments offset or similar right with respect to any such
charges.
3.19 Minute Books and Stock Records. Buyer has made available
to PHC true and complete copies of the minute books of Buyer, which
contain a complete and correct record of all stock transactions of
Buyer and all meetings of the Boards of Directors of Buyer (and
committees thereof) and all meetings of its stockholders and all
actions by written consent without a meeting by such Boards of
Directors (and committees) and its stockholders since the date of
incorporation and reflect accurately in all material respects all
actions by such directors and by stockholders with respect to all
transactions referred to in such minutes.
3.20 Certain Relationships. Buyer has no knowledge that any
material customer of Buyer currently plans to terminate or alter in
any manner materially detrimental to Buyer its relationship with
Buyer.
3.21 Full Disclosure. Buyer has delivered, made available to
PHC, copies of all written instruments, agreements and other
documents referred to in the Buyer Disclosure Letter except as
otherwise indicated. All instruments, agreements, schedules and
other documents delivered or to be delivered, or made available, to
PHC pursuant to this Agreement are true and complete in all
material respects. No representation or warranty made in this
Article III as supplemented by the Buyer Disclosure Letter contains
or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated herein or
therein or necessary to make such representation or warranty, in
light of the circumstances in which it is made, not misleading.
ARTICLE IV
CONDUCT OF BUSINESS OF NHS AND EACH SUBSIDIARY PRIOR TO CLOSING
During the period from the date of this Agreement until the
Closing, PHC agrees (except as expressly contemplated by this
Agreement or the PHC Disclosure Letter or to the extent that Buyer
shall otherwise consent in writing, such consent not to be
unreasonably withheld or delayed) to take such actions or refrain
from taking such actions, as the case may be, which are necessary
to maintain compliance with the following covenants:
4.1 Ordinary Course. NHS and each Subsidiary shall carry on
their respective businesses in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted
and use all reasonable efforts consistent with past practice and
policies to preserve intact their present business organizations,
keep available the services of their employees and preserve their
relationships with customers, suppliers, licensor, lessors, lessees
and others having business dealings with them to the end that their
goodwill and ongoing businesses shall be unimpaired at the Closing.
NHS and each Subsidiary will continue to maintain a standard system
of accounting established and administered in accordance with
generally accepted accounting principles. Neither NHS nor any
Subsidiary will prepay any costs, fees or charges to NHS or any
Subsidiary, or incur any new liability for any costs, fees or
charges to NHS or any Subsidiary except in the ordinary course.
4.2 Dividends: Changes in Stock. Neither NHS nor any
Subsidiary will (a) declare or pay any dividends on or make other
distributions in respect of any shares of its capital stock, (b)
split, combine or reclassify any shares of its capital stock or
issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any shares of its capital
stock or (c) propose to do any of the foregoing.
4.3 Issuance or Repurchase of Securities. Neither NHS nor any
Subsidiary will issue, pledge, deliver or sell or authorize or
propose the issuance, pledge, delivery or sale of, or repurchase or
propose the repurchase of, any shares of its capital stock, or any
options, warrants or other rights to purchase or acquire, or
securities convertible into or exchangeable for, any such shares.
4.4 Governing Documents. Neither NHS nor any Subsidiary will
propose or adopt any amendment to their respective charter
documents.
4.5 Acquisitions. Neither NHS nor any Subsidiary will acquire
or agree to acquire (a) any business or any corporation,
partnership, association or other business organization or division
thereof (whether by merger, stock purchase, asset acquisition or
otherwise); (b) any capital stock of any person or entity; or (c)
any asset having a value of $50,000 or more.
4.6 Dispositions. Neither NHS nor any Subsidiary will sell,
lease or otherwise dispose of any asset having a value of $50,000
or more.
4.7 Incurrence of Indebtedness. Neither NHS nor any
Subsidiary will incur, guarantee, become subject to, or agree to
incur, guarantee or become subject to any obligation or liability
(absolute or contingent), except current liabilities incurred, and
obligations under contracts entered into, in the ordinary course of
business consistent with prior practice; provided, however, that
neither NHS nor any Subsidiary shall enter into any material lease
or extension of any material lease with respect to any real or
personal property or issue or sell, or guaranty the repayment of,
any debt securities or otherwise incur any indebtedness for
borrowed money.
4.8 Employees. Neither NHS nor any Subsidiary will make any
change in the compensation payable or to become payable to any of
its officers, directors, employees, agents or consultants (other
than increases in compensation called for by the terms of any
employment or other agreement currently in effect which are in the
ordinary course of business and consistent with prior practice), or
enter into to or amend any employment, severance, termination or
other agreement with or make any loans to any of its officers,
directors, employees, agents or consultants or make any change in
its existing borrowing or lending arrangements for or on behalf of
any of such persons, whether contingent on consummation of the
transactions contemplated hereby or otherwise.
4.9 Benefit Plans. Neither NHS nor any Subsidiary will (a)
pay, agree to pay or make any accrual or arrangement for payment of
any employee benefit pursuant to any existing plan, agreement or
arrangement to any officer, director or employee except in the
ordinary course of business and consistent with past practice; (b)
pay or agree to pay or make any accrual or arrangement for payment
to employees of any amount relating to unused vacation or sick
days, except in the ordinary course of business and consistent with
past practice; (c) adopt or commit itself to adopt or agree to, or
pay, grant, issue or accrue salary or benefits pursuant to, any
additional pension, profit-sharing, bonus, extra compensation,
incentive, deferred compensation, stock purchase, stock option,
stock appreciation right, group insurance, severance pay,
retirement or other employee benefit plan, agreement or
arrangement, or any employment or consulting agreement with or for
the benefit of any director, officer, employee, agent or
consultant, whether past or present; or (d) amend in any material
respect any such existing plan, agreement or arrangement.
4.10 Additional Matters. Neither NHS nor any Subsidiary will:
(a) enter into any new agreements, commitments or contracts
which either (i) involve payment by NHS of $50,000 or
more in any twelve-month period or (ii) are outside the
ordinary course of business;
(b) pay any obligation or liability (absolute or contingent)
other than current liabilities in the ordinary course of
business;
(c) cancel or agree to cancel any material debts or claims;
(d) waive or relinquish any rights of substantial value;
(e) otherwise make any material change in the conduct of its
business or operations;
(f) settle any litigation or other claims involving the
payment by NHS of more than $25,000 in any one instance
and $100,000 in the aggregate;
(g) make any investment in any third person or entity; or
(h) agree in writing or otherwise to take any of the
foregoing actions or to take any action which NHS
reasonably believe would constitute a Material Adverse
Event with respect to NHS or any Subsidiary.
ARTICLE V
CONDUCT OF BUSINESS OF BUYER PRIOR TO CLOSING
During the period from the date of this Agreement until the
Closing, Buyer agrees (except as expressly contemplated by this
Agreement or the Buyer Disclosure Letter or to the extent that PHC
shall otherwise consent in writing, such consent not to be
unreasonably withheld or delayed) to take such actions or refrain
from taking such actions, as the case may be, which are necessary
to maintain compliance with the following covenants:
5.1 Ordinary Course. Buyer shall carry on its business in the
usual, regular and ordinary course, in substantially the same
manner as heretofore conducted and use all reasonable efforts
consistent with past practice and policies to preserve intact its
present business, keep available the services of its key employees
and preserve its relationships with material customers, suppliers,
licensors, lessors, lessees and others having business dealings
with it to the end that its goodwill and ongoing business shall be
unimpaired at Closing. Buyer will continue to maintain a standard
system of accounting established and administered in accordance
with generally accepted accounting principles.
5.2 Dividends: Changes in Stock. Buyer will not (a) declare
or pay any dividends on or make other distributions in respect of
any shares of its capital stock, (b) split, combine or reclassify
any shares of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in
substitution for any shares of its capital stock or (c) propose to
do any of the foregoing.
5.3 Issuance or Repurchase of Securities. Buyer will not
issue, pledge, deliver or sell or authorize or propose the
issuance, pledge, delivery or sale of, or repurchase, or propose
the repurchase of, any shares of its capital stock, or any options,
warrants or other rights to purchase or acquire, or securities
convertible into or exchangeable for, any such shares.
5.4 Governing Documents. Buyer will not propose or adopt any
amendment to its charter documents.
5.5 Other Extraordinary Transactions. Buyer will not enter
into or consummate any other transaction or agreement which would
have the effect of preventing consummation of the transactions
contemplated hereby or which would result in a Material Adverse
Effect with respect to Buyer.
ARTICLE VI
ADDITIONAL COVENANTS
6.1 Access to Information.
(a) Between the date of this Agreement and the Closing, PHC
shall (i) give Buyer and its authorized representatives
full access, during normal business hours and upon
reasonable notice, to all plants, offices, warehouses and
other facilities and to all contracts, internal reports,
data processing files and records, federal, state, local
and foreign tax returns and records, commitments, books,
records and affairs of NHS and each Subsidiary, whether
located on the premises of NHS or at another location,
(ii) permit Buyer and its authorized representatives to
make such inspections as Buyer may reasonably require,
(iii) furnish Buyer such financial, operating, technical
and product data and other information with respect to
the business, properties and operations of NHS and each
Subsidiary as Buyer from time to time may reasonably
request, including without limitation financial
statements and schedules, (iv) provide Buyer and their
authorized representatives the opportunity, during normal
business hours and upon reasonable notice, to interview
employees, vendors, customers, sales representatives,
distributors and other personnel of NHS and its
Subsidiaries; and (v) assist and cooperate with Buyer and
its authorized representatives in the development of
integration plans for implementation by Buyer following
the Closing.
(b) Between the date of this Agreement and the Closing, Buyer
shall furnish PHC and its authorized representatives such
financial and other information with respect to the
business as PHC from time to time may reasonably request,
including without limitation financial statements and
schedules.
(c) All information and documents obtained pursuant to this
Section 6.1, shall be subject to the terms of the
Confidentiality Agreement between the parties dated
September 1, 1996, which remains in full force and effect
and shall survive any termination of this Agreement. From
and after the Closing Date, the provisions of such
Confidentiality Agreement shall in no way limit the right
of Buyer or any of its affiliates to make use of any
information concerning NHS or any Subsidiary.
6.2 Governmental Filings. PHC and Buyer shall, as promptly as
reasonably practicable, make all filings necessary under any
applicable federal, state, local and foreign laws and to obtain any
required regulatory approvals, clearances or expirations of waiting
periods in connection with the transactions contemplated by this
Agreement. Each party shall use all reasonable efforts to
cooperate with the other party in preparing its respective
governmental filings and in obtaining all required regulatory
approvals, clearances and expirations of waiting periods.
6.3 Notice of Defaults.
(a) PHC will give prompt notice to Buyer of (i) any written
notice of default received by NHS or any Subsidiary
subsequent to the date of this Agreement and prior to the
Closing under any instrument or agreement to which NHS or
any Subsidiary is a party or by which either of them or
any of their properties is bound, and (ii) any suit,
action or proceeding instituted or, to the best knowledge
of NHS or any Subsidiary, threatened against or affecting
NHS or any Subsidiary subsequent to the date of this
Agreement and prior to the Closing.
(b) Buyer will give prompt notice to NHS of any suit, action
or proceeding instituted or, to the best knowledge of
Buyer threatened against or affecting Buyer subsequent to
the date of this Agreement and prior to the Closing which
might adversely affect Buyer's ability to consummate the
transactions contemplated hereunder.
6.4 Communications. No party will furnish any written
communications to the public generally if the subject matter
thereof relates to the transactions contemplated by this Agreement
without the prior written approval of the other parties as to the
content thereof, which approval shall be provided promptly and
shall not be unreasonably withheld. Nothing in this Section 5.4,
however, shall be deemed (a) to prohibit any disclosure reasonably
required by any applicable law or by any competent governmental or
regulatory authority or (b) to prevent either party from disclosing
the general nature of the transactions contemplated hereby without
identifying the other party or any of its affiliates. Immediately
following the Closing, Buyer shall notify all employees of NHS and
the Subsidiaries of the purchase of NHS by Buyer in a manner and in
form and substance reasonably satisfactory to PHC.
6.5 Expenses. Whether or not the transactions contemplated
hereby are consummated, all costs and expenses (including without
limitation, fees and expenses of counsel and accountants) incurred
in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expense except as
otherwise specifically set forth herein; provided, however, that
Buyer shall bear all expenses relating to the obtaining of all
regulatory approvals required in connection with the consummation
of the transactions hereunder.
6.6 Brokers or Finders. Neither Buyer nor PHC nor any of
their respective affiliates shall enter into any agreement or
arrangement with any agent, broker, investment banker or other firm
or person pursuant to which such person shall be entitled to any
broker or finder's fee or any other commission or similar fee from
any other party in connection with any of the transactions
contemplated by this Agreement.
6.7 Additional Actions. Subject to the terms and conditions
of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all reasonable
action and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Agreement as promptly as reasonably
practicable. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this
Agreement, each party to this Agreement, to the extent within such
party's reasonable control, shall take all such necessary action.
6.8 Interim Financial Statements.
(a) As promptly as practicable following the end of each
month prior to the Closing, and at the Closing, PHC shall
deliver to Buyer monthly financial statements of NHS and
its Subsidiaries in a format consistent with its past
practices which is reasonably acceptable to Buyer.
(b) As promptly as practicable following the end of each
month prior to the Closing, and at the Closing, Buyer
shall deliver to PHC monthly financial statements of
Buyer and its subsidiaries in a format consistent with
its past practices which is reasonably acceptable to PHC.
6.9 Warrant Certificates, Services Agreement and Lease.
Buyer shall perform fully and in a timely manner its obligations
under the Warrant Certificates and shall cause NHS to perform fully
and in a timely manner its obligations under the Services Agreement
and the Lease.
6.10 Employee Benefit Plan Contributions. PHC shall, on a
timely basis, make all contributions to, and pay all costs and
expenses related to, all employee benefit plans covering employees
of NHS insofar as such contributions, costs or expenses have
historically been at the expense of PHC and are attributable to any
period through the Closing Date (whether the obligation to fund
such contributions, costs or expenses becomes fixed prior to or
after the Closing Date).
6.11 Tax Matters. The following Tax provisions shall
apply after the Effective Date:
(a) Section 338(h)(10) Election. At the request of the
Buyer, PHC or its affiliates, if applicable, will join
with PHC in making an election under Section 338(h)(10)
of the Internal Revenue Code of 1986, as amended (the
"IRC") (and any corresponding elections under state or
local law) (collectively, a "Section 338(h)(10)
Election") with respect to the acquisition of the stock
of NHS hereunder. In the event the Section 338(h)(10)
Election is made, the parties shall timely comply with
the election requirements, allocation of purchase price
requirements, tax return filing requirements and other
applicable provisions of Treas. Reg. 1.338(h)(10) and
applicable provisions cross-referenced therein. The
parties shall bear their respective administrative
expenses of complying with the requirements of the
Section 338(h)(10) Election. Buyer shall reimburse PHC
within 15 days after request therefor for up to $50,000
in the aggregate of any financial loss or detriment
incurred by PHC or its affiliates as a result of the
Section 338(h)(10) Election.
(b) Cooperation on Tax Matters.
(i) PHC and Buyer shall cooperate fully, as and to the
extent reasonably requested by the other party, in
connection with the filing of tax returns and any
audit, litigation or other proceeding with respect
to taxes. Such cooperation shall include the
retention and (upon the other party's request) the
provision of records and information which are
reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a
mutually convenient basis to provide additional
information and explanation of any material provided
hereunder. PHC and the Buyer agree (A) to retain
all books and records with respect to tax matters
pertinent to NHS relating to any taxable period
beginning before the Closing Date until the
expiration of the statute of limitations (and, to
the extent notified by PHC or the Buyer, any
extensions thereof) of the respective tax periods,
and to abide by all record retention agreements
entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior
to transferring, destroying or discarding any such
books and records and, if the other party so
requests, PHC or Buyer, as the case may be, shall
allow the other party to take possession of such
books and records.
(ii) PHC and Buyer further agree, upon request, to use
their best efforts to obtain any certificate or
other document from any governmental authority or
any other person or entity as may be necessary to
mitigate, reduce or eliminate any tax that could be
imposed (including, but not limited to, with respect
to the transactions contemplated hereby).
(iii) Except as otherwise stated herein, PHC and
Buyer shall each have the right to control any
and all disputes and proceedings with tax
authorities arising in respect of taxes for
which it may be the subject of an
indemnification claim under this Agreement or
under which it may be entitled to a tax
reimbursement, refund or credit.
6.12 Reimbursement of Intercompany Amounts. Within fifteen
(15) days after request therefor, supported by appropriate
documentation:
(a) Buyer shall, or shall cause NHS or its Subsidiaries,
to pay (to the extent unpaid) (x) all amounts
payable by NHS or its Subsidiaries to PFS or its
subsidiaries which are reflected on the Closing
Balance Sheet, and (y) all amounts advanced,
allocated or to be allocated, or otherwise owed to
PFS or its subsidiaries by NHS or its Subsidiaries
for or with respect to the period from September 30,
1996 through the Closing Date.
(b) PHC shall, or shall cause PFS and its Subsidiaries
to pay (to the extent unpaid) (x) all amounts
payable by PFS and its subsidiaries to NHS or its
Subsidiaries which are reflected on the Closing
Balance Sheet, and (y) all amounts owed by PFS or
its subsidiaries to NHS or its Subsidiaries for or
with respect to the period from September 30, 1996
through the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE
TRANSACTION
7.1 Conditions to the Obligations of Both Parties. The
respective obligations of PHC and Buyer to effect the transactions
contemplated to occur at the Closing hereunder shall be subject to
the satisfaction on or prior to the Closing of the following
conditions:
(a) Governmental Approvals. All material authorizations,
consents, orders or approvals of, or declarations or
filings with, or expiration of waiting periods imposed
by, any competent federal, state, local or foreign
governmental or regulatory authority necessary for the
consummation of the transactions contemplated by this
Agreement shall have been filed, occurred or been
obtained.
(b) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order
preventing the consummation of the transactions
contemplated hereby shall have been issued by any
federal, state or foreign court or other competent
governmental or regulatory authority and remain in
effect, and no litigation seeking the issuance of such an
order or injunction, or seeking substantial damages
against any party hereto if the transactions contemplated
hereby are consummated, shall be pending which, in the
good faith judgment of the President of PHC or NHS
(acting upon advice of their respective counsel) has a
reasonable probability of resulting in such order,
injunction or substantial damages. In the event any such
order or injunction shall have been issued, each party
agrees to use its reasonable efforts to have any such
injunction lifted.
(c) Statutes. No federal, state, local or foreign statute,
rule or regulation shall have been enacted which would
make the consummation of the transactions contemplated
hereby illegal.
7.2 Further Conditions to the Obligations of Buyer. The
obligations of Buyer to effect the transactions contemplated hereby
are subject to the satisfaction on or prior to the Closing of the
following conditions, unless waived by Buyer:
(a) Representations and Warranties. The representations and
warranties of PHC set forth in this Agreement shall be
true and correct in all material respects as of the
Closing as though made at and as of the Closing, and
Buyer shall have received a certificate (the "PHC
Bring-Down Certificate"), dated the date of Closing to
the foregoing effect signed by an authorized officer of
PHC. The PHC Bring-Down Certificate will also include
certified copies of resolutions of the Board of Directors
and sole shareholder of PHC approving the transactions
contemplated by this Agreement.
(b) Performance of Obligations of PHC. PHC shall have
performed in all material respects all obligations
required to be performed by it under this Agreement prior
to the Closing, and the PHC Bring-Down Certificate shall
include a statement to such effect.
(c) No Litigation. There shall not have been instituted and
be continuing or, to the knowledge of PHC, NHS or any
Subsidiary threatened, against NHS or any Subsidiary any
claim, action or proceeding the result of which could
reasonably be expected to result in a Material Adverse
Event with respect to NHS or any Subsidiary (except such
matters, if any, as were disclosed in the PHC Disclosure
Letter).
(d) No Material Adverse Event. No Material Adverse Event with
respect to NHS or any Subsidiary (except such matters, if
any, as were described in the NHS Disclosure Letter)
shall have occurred.
(e) Resignations of Officers and Directors. There shall have
been tendered to Buyer the written resignation of each
officer and each member of the Board of Directors of NHS
and each Subsidiary from their capacities as officers or
directors, effective at the Closing.
(f) Third-Party Approvals. Any and all consents (or
novations) from third parties relating to contracts,
licenses, leases and other agreements and instruments
disclosed or required to be disclosed, pursuant to
Section 2.15 hereof, to the extent reasonably required to
preserve the benefits of such contracts, licenses, leases
and other agreements and instruments following the
Closing, shall have been obtained.
(g) Delivery of Share Certificates. The stock certificate(s)
representing all issued and outstanding Shares shall have
been delivered to Buyer, duly assigned to Buyer, in form
and substance reasonably satisfactory to Buyer and its
counsel.
(h) Employment. Xxxxxxx X. Xxxx shall have entered into an
employment agreement with Buyer or NHS.
(i) PHC shall have received from A. Xxxxx Xxxx III, counsel
to PHC, PFS and NGL, a signed legal opinion to the
following effects: (i) NHS and each Subsidiary is a
corporation duly organized, validly existing and in good
standing as a domestic corporation under the laws of the
jurisdiction of its incorporation; (ii) this Agreement,
has been, and, when executed and delivered by PFS and
NGL, respectively, as contemplated herein, the Services
Agreement and the Lease will have been duly executed and
delivered by PHC, PFS or NGL, as the case may be, and,
assuming this Agreement, the Services Agreement and the
Lease constitute binding obligations of the other parties
thereof, constitute, or will constitute, as the case may
be, valid and binding obligations of PHC, PFS or NGL, as
the case may be, enforceable against PHC, PFS or NGL, as
the case may be, in accordance with the respective terms
of such agreements, except (A) as such enforcement may be
subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in
effect relating to creditors' rights, (B) as the remedy
of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and
to the discretion of the court before which any
proceeding therefor may be brought, and (C) insofar as
the enforceability of indemnification provisions
contained in any of such agreements may be limited by
public policy considerations; (iii) all of the issued and
outstanding shares of capital stock of NHS and each
Subsidiary are owned of record as set forth in paragraph
2.2 of the PHC Disclosure Letter; (iv) the execution and
delivery of this Agreement, the Services Agreement and
the Lease by PHC, PFS or NGL, as the case may be, and the
performance of their respective obligations hereunder and
thereunder have been duly and validly authorized by all
requisite corporate action on the part of PHC, PFS or
NGL, as the case may be; and (v) such counsel is not
aware of any pending or threatened litigation involving
NHS or any Subsidiary except for such matters, if any, as
are listed in the PHC Disclosure Letter.
7.3 Further Conditions to the Obligations of PHC. The
obligations of PHC to effect the transactions contemplated hereby
are subject to the satisfaction on or prior to the Closing of the
following conditions, unless waived by PHC.
(a) Representations and Warranties. The representations and
warranties of Buyer set forth in this Agreement shall be
true and correct in all material respects as of the
Closing as though made at and as of the Closing, and PHC
shall have received a certificate to the foregoing effect
signed by an authorized officer of Buyer (the "Buyer
Bring-Down Certificate"). The Buyer Bring-Down
Certificate will also include certified copies of
resolutions of the Board of Directors of Buyer approving
the transactions contemplated by this Agreement.
(b) Performance of Obligations of Buyer. Buyer shall have
performed in all material respects all obligations
required to be performed by Buyer under this Agreement
prior to the Closing, and the Buyer Bring-Down
Certificate shall include a statement to such effect.
(c) Delivery of Closing Consideration. Buyer shall have
delivered to PHC the cash and the Warrant Certificates
referred to in Section 1.1(b) above.
(d) No Litigation. There shall not have been instituted and
be continuing or, to the knowledge of Buyer threatened,
against Buyer any claim, action, or proceeding which
materially and adversely affects Buyer's ability to
fulfill its obligations hereunder or which could
reasonably be expected to result in a Material Adverse
Event with respect to Buyer (except such matters, if any,
as were described in of the Buyer Disclosure Letter).
(e) No Material Adverse Event. No Material Adverse Event with
respect to Buyer (except such matters, if any, as were
described in the Buyer Disclosure Letter) shall have
occurred.
(f) Third-Party Approvals. Any and all consents (or
novations) required from third parties relating to
contracts, licenses, leases and other agreements and
instruments material to NHS and the Subsidiary, taken as
a whole, to the extent reasonably required to preserve
the benefits of such contracts, licenses, leases and
other agreements and instruments following the Closing,
shall have been obtained.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) By Mutual Consent. By mutual consent of PHC and Buyer;
(b) By PHC or Buyer. By either PHC, on the one hand, or
Buyer, on the other hand:
(i) if the Closing shall not have occurred on or before
October 25, 1996; provided the failure of the
transactions to be consummated by the applicable
date is not caused by any breach of this Agreement
by the party seeking such termination;
(ii) if a court of competent jurisdiction or other
competent governmental or regulatory authority shall
have issued an order, decree or ruling, or taken any
other action, permanently restraining, enjoining or
otherwise prohibiting the consummation of the
transactions contemplated hereby and such order,
decree, ruling or other action shall have become
final and not appealable; or
(iii) if any statute, rule or regulation is enacted,
promulgated or deemed applicable to the
consummation of the transactions contemplated
hereby by any competent governmental or
regulatory authority which makes the
consummation of such transactions illegal.
(c) By PHC. By PHC, if a material default under or a material
breach of this Agreement by Buyer shall have occurred and
be continuing thirty (30) days after receipt of written
notice thereof from PHC;
(d) By Buyer. By Buyer if a material default under or a
material breach of this Agreement by PHC shall have
occurred and be continuing thirty (30) days after receipt
of written notice thereof from Buyer.
8.2 Effect of Termination. In the event of termination of
this Agreement as provided in Section 8.1 above, this Agreement
shall forthwith terminate and there shall be no liability or
obligation on the part of either party hereto or their respective
officers, directors, employees or agents, except that (a) nothing
set forth herein shall relieve a party hereto from liability for
its breach of this Agreement and (b) the confidentiality provisions
referred to in Section 6. l(c) shall survive any such termination.
8.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of each of the parties
hereto.
8.4 Extension: Waiver. At any time prior to the Closing, to
the extent legally allowed, PHC, on the one hand, and Buyer, on the
other hand, (a) may extend the time for the performance of any of
the obligations or other acts of the other party hereto, (b) may
waive any inaccuracies in the representations and warranties made
by the other party contained herein or in any document delivered
pursuant hereto and (c) may waive the other party's compliance with
any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed by or on behalf of PHC or Buyer (as
applicable) and shall be effective only to the extent set forth in
such instrument. No extension or waiver of any single condition,
covenant, agreement, representation, warranty, breach, default or
other matter hereunder shall be deemed an extension or waiver of
any other condition, covenant, agreement, representation, warranty,
breach, default or other matter theretofore or thereafter
occurring.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification By PHC. Subject to the limitations
contained in this Section 9.1, PHC shall, from and after the
Closing Date, jointly and severally, indemnify, defend and hold
harmless Buyer and NHS, and their respective officers, directors,
agents, employees and representatives, successors and assigns
(collectively, "Buyer Indemnified Parties") from and against any
and all claims, actions, suits, proceedings, demands, assessments,
judgments, losses, expenses, liabilities, damages, recoveries and
deficiencies, including without limitation interest, penalties and
reasonable attorneys' fees, expert witness fees, costs and other
expenses (collectively, "Losses") borne by or asserted against any
of such indemnified parties in any way relating to, arising out of
or resulting from:
(a) any misrepresentation or breach of warranty made by PHC
in this Agreement;
(b) any breach by PHC of any covenant or agreement contained
in this Agreement; and
(c) the matters referred to in paragraph 2.12 of the PHC
Disclosure Letter; and
(d) no Buyer Indemnified Party shall have the right to
recover from PHC based on claims for indemnification made
under Section 9.1(a) or 9.1(b) or for breach of the
representations or warranties of PHC in Article II of
this Agreement: (i) unless and until the aggregate
Losses on a cumulative basis attributable to such claims
exceed $300,000, and then only to the extent of such
excess, and (ii) if such claim is asserted with respect
to claims under Section 9.1(a) or with respect to the
representations and warranties of PHC in Article II of
this Agreement, such claim is asserted prior to the date
such representations and warranties terminate pursuant to
Section 10.1 below.
9.2 Indemnification By Buyer.
(a) Buyer shall, from and after the Closing Date, jointly and
severally, indemnify, defend and hold harmless PHC, its
officers, directors, agents, employees and
representatives, successors and assigns (collectively,
"PHC Indemnified Parties") from and against any and all
claims, actions, suits, proceedings, demands,
assessments, judgments, losses, expenses, liabilities,
damages, recoveries and deficiencies, including without
limitation interest, penalties and reasonable attorneys'
fees, expert witness fees, costs and other expenses
(collectively, "Losses") borne by or asserted against any
of such indemnified parties in any way relating to,
arising out of or resulting from:
(i) misrepresentation or breach of warranty made by
Buyer in this Agreement, the Warrant Certificates;
and
(ii) any breach by Buyer of any covenant or agreement
contained in this Agreement, or the Warrant
Certificates.
(b) No PHC Indemnified Party shall have the right to recover
from Buyer based on claims for indemnification made under
Section 9.2(a) or for breach of the representations or
warranties of Buyer in Article III of this Agreement if
such claim is asserted with respect to claims under
Section 9.2(a) or the representations and warranties of
Buyer in Article III of this Agreement, such claim is
asserted prior to the date such representations and
warranties terminate pursuant to Section 10.1 below.
9.3 Third Party Claims. Notice and Opportunity to Settle. The
following provisions shall be applicable in the event that any
Buyer or PHC Indemnified Party asserts indemnity rights pursuant to
this Article VIII relating to any third party claim:
(a) Within 30 days after the receipt by the party entitled to
indemnity hereunder (the "Indemnified Party") of any
claim or demand (including but not limited to, notice of
any action, suit or proceeding) by any third party
against an Indemnified Party which gives rise to a right
to claim of indemnification hereunder, the affected
Indemnified Party shall give the other (collectively, the
"Indemnifying Party") written notice of such claim or
demand; provided, however, that the failure to give such
notice shall not relieve the Indemnifying Party of its
obligations hereunder except to the extent that such
failure is materially prejudicial to the Indemnifying
Party.
(b) The Indemnifying Party shall have the right (without
prejudice to the right of any Indemnified Party to
participate at its own expense through counsel of its own
choosing), to defend against such claim or demand at its
expense and through counsel of its own choosing (the
choice of such counsel to be subject to the reasonable
consent of the affected Indemnified Parties) and to
control such defense if it gives written notice of its
intention to do so within 15 days of the receipt of the
notice referred to in Section 9.3(a) above. If the
Indemnifying Party shall decline or fail to assume the
defense of such claim or demand, the affected Indemnified
Parties shall have the right to assume control of such
defense at the expense of the Indemnifying Party. The
Indemnified Parties shall cooperate fully in the defense
of such claim or demand and shall make available to the
Indemnifying Party or its counsel all pertinent
information under their control relating thereto. The
Indemnifying Party agrees to cooperate with the
Indemnified Parties in order to enable their counsel to
participate in the defense and to deliver to the
Indemnified Parties copies of all pleadings and other
information within the Indemnifying Party's knowledge or
possession reasonably requested by the Indemnified
Parties that is relevant to the defense of any such claim
or demand. The Indemnifying Party and the Indemnified
Parties and their respective counsel shall maintain
confidentiality with respect to all such information
consistent with the conduct of a defense hereunder.
(c) The Indemnifying Party shall have the right to elect to
settle any such claim or demand for monetary damages only
at its sole expense and provided the settlement includes
an unconditional release of all Indemnified Parties,
subject to the consent of the affected Indemnified
Parties; provided, further, that if the affected
Indemnified Parties fail to give such consent within 20
days of being requested to do so, the affected
Indemnified Parties shall, at their expense, assume the
defense of such claim or demand and regardless of the
outcome of such matter, the Indemnifying Party' s
liability hereunder shall be limited to the amount of any
such proposed settlement plus costs and expenses incident
to the defense and settlement of such claim or demand.
(d) In the event the Indemnifying Party assumes the defense
of a claim or demand, the Indemnified Parties shall have
the right thereafter to take over control of the defense
of any claim or demand from the Indemnifying Party at any
time and to elect to settle such claim or demand;
provided, however, that in such case, unless Otherwise
agreed by the Indemnifying Party, the Indemnifying Party
shall have no indemnification obligations with respect to
such claim, demand or settlement except for the costs and
expenses of such Indemnifying Party incurred in the
defense of the claim or demand.
(e) With respect to claims or demands arising under Section
9.1(a), 9.1(b) or the representations and warranties of
PHC in Article II above, the provisions of this Section
9.3 are subject to the $300,000 deductible set forth in
Section 9.l(d) hereof. Until such deductible has been
exhausted, Buyer and PHC shall cooperate with each other
in the handling and/or settlement of any claim of
indemnification covered by this Section 9.3 such that
Losses attributable to such claim will be properly
allocated to PHC up to the amount of any unused portion
of such deductible.
ARTICLE X
GENERAL PROVISIONS
10.1 Investigation Will Not Affect Representations and
Warranties; Survival. No investigation made by or for any party
hereto prior to the Closing shall affect or modify any
representations and warranties made to that party by another party.
All representations and warranties of the parties made herein shall
survive the Closing and shall expire 18 months after the Closing
Date except that Sections 2.1, 2.2, 2.3, 2.4, 2.9, 2.25, 3.1, 3.2,
3.3, 3.8 and 3.21 (only to the extent Sections 2.25 or 3.21 relate
one or more such other listed Sections) shall survive indefinitely.
Except as otherwise expressly provided herein, all covenants and
obligations of the respective parties hereunder shall survive the
Closing indefinitely until fully satisfied in accordance with this
Agreement.
10.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon personal
delivery, facsimile transmissions (with written or facsimile
confirmation of receipt), telex or delivery by an overnight express
courier service (delivery, postage or freight charges prepaid), or
on the fourth day following deposit in the United States mail (if
sent by registered or certified mail, return receipt requested,
delivery postage or freight charges prepaid), addressed to the
parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to Buyer, to: Mr. S. Xxxxxx Xxxxx
United Payors & United Providers,
Inc.
0000 Xxxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
(b) if to PHC, to: Xxxxx X. Xxxx, Xx.
Preferred Health Choice, Inc.
0000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
FAX: (000) 000-0000
with a copy to: A. Xxxxx Xxxx III
Pioneer Financial Services, Inc.
0000 Xxxx Xxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
FAX: (000) 000-0000
10.3 Interpretation. When a reference is made in this
Agreement to an Article, Section, Exhibit or Schedule, such
reference shall be to an Article, Section, Exhibit or Schedule to
this Agreement unless otherwise indicated. All Exhibits referred to
herein are hereby incorporated by reference herein. The words
"include," "includes" and "including" when used herein shall be
deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. Whenever a
representation or warranty herein is made to the "knowledge," "best
knowledge" or awareness of a party, it shall refer to facts within
the actual knowledge of such party and such party's officers,
provided that, in the case of each party, such references shall be
deemed to impose upon such party a duty to conduct a reasonable
investigation concerning the existence of such facts, as well as an
investigation of reasonably available corporate records concerning
such facts.
10.4 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be considered one and the same
document and shall become effective when the counterparts have been
signed by each of the parties and delivered to the other party, it
being understood that each party need not sign the same
counterpart.
10.5 Miscellaneous. This Agreement and the Exhibits,
Schedules, documents, instruments and other agreements specifically
referred to herein (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof; (b) are not
intended to confer upon any other person any rights or remedies
hereunder (except indemnification rights conferred upon Indemnified
Parties in Article VIII of this Agreement); and (c) shall not be
assigned by operation of law or otherwise except as otherwise
specifically set forth herein; provided, however, any party hereto
may assign any of its rights and obligations hereunder to any
wholly-owned, direct or indirect subsidiary, but no such assignment
shall relieve such party of its obligations hereunder. Each party
hereby acknowledges and agrees that it has not replied upon any
statement, representation or warranty relating to the matters
covered by this Agreement other than those contained herein..
10.6 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the
laws of the State of Illinois, without giving effect to its
conflict of law provisions.
10.7 Severability. In case any provision in this Agreement
shall be found by a court of competent jurisdiction to be invalid,
illegal or unenforceable, such provision shall be construed and
enforced as if it had been narrowly drawn so as not to be invalid,
illegal or unenforceable, and the validity, legality and
enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
10.8 Successors and Assigns. This Agreement shall be binding
upon the parties hereto and their respective successors and
permitted assigns and shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
10.9 Time of the Essence. The parties agree that time is of
the essence of each provision of this Agreement.
10.10 Attorneys' Fees. In the event of any dispute with
respect to the subject matter of this Agreement, the prevailing
party shall be entitled to such party's reasonable attorneys' fees
and court costs incurred in resolving or settling the dispute, in
addition to any and all other damages to which such party may be
entitled.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
PREFERRED HEALTH CHOICE, INC.
By:
Its:
UNITED PAYORS & UNITED PROVIDERS, INC.
By:
Its:
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