YORK HANNOVER PHARMACEUTICALS, INC.
AND
UNITED PROFESSIONAL COMPANIES, INC.
AGREEMENT OF GENERAL PARTNERSHIP
THIS AGREEMENT of General Partnership is made as of July 13,
1995, by and between York Hannover Pharmaceuticals, Inc., a Florida corporation
("York Hannover"), and United Professional Companies, Inc., a Delaware
corporation ("UPC"), collectively referred to herein as the Partnership.
INTENTIONS OF THE PARTIES
WHEREAS, York Hannover and UPC desire to form a general
partnership under the laws of the State of Wisconsin for the purposes and on the
terms and conditions stated in this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereby create a Partnership on the terms and conditions set forth
below:
SECTION I: DEFINED TERMS
The defined terms used in this Agreement shall, unless the
context otherwise requires, have the meanings specified in this Section I. The
singular shall include the plural and vice versa, and the use of any gender
shall be deemed to be or include the other gender, whenever appropriate.
1.1 Act - means the Wisconsin Uniform Partnership Act, as from
time to time amended.
1.2 Administrative Partner - means York Hannover.
1.3 Affiliated Person or Affiliate - means, as to any named
Partner, any Person directly or indirectly controlling, controlled by or under
direct or indirect common control with the Partner.
1.4 Agreement - means this Agreement of Partnership, as it may
be amended from time to time. Words such as "herein," "hereinafter," "hereof,"
"hereto," "hereby," and "hereunder," when used with reference to this Agreement,
refer to this Agreement as a whole including those items which are included by
reference, unless the context otherwise requires.
1.5 Bankruptcy or Insolvency - means any Partner's or the
Partnership's filing in any court pursuant to any statute of the United States
or of any state, of a petition in bankruptcy or insolvency, any Partner's or the
Partnership's filing for reorganization or for appointment of
a receiver or trustee of all or a material portion of the Partner's or
Partnership's assets; the making by any Partner or the Partnership of an
assignment for the benefit of creditors; the admission by any Partner or the
Partnership in writing of its inability to pay its debts as they fall due; or
any Partner's or the Partnership's seeking, consenting to or acquiescing in the
appointment of a trustee, receiver or liquidator of any material portion of its
property. The phrase "bankruptcy or insolvency" shall also include the filing
against any Partner or the Partnership in any court pursuant to any statute of
the United States or of any State, of a petition in bankruptcy or insolvency, or
for the reorganization, or for appointment of a receiver or a trustee of all or
a substantial portion of the Partner's or Partnership's property, and within
ninety (90) days after such commencement of any such proceeding against the
Partner or Partnership such petition shall not have been dismissed (or
satisfactory evidence that such Partner or Partnership is diligently contesting
such petition shall not have been received by the other Partners, provided such
other Partner is not otherwise in default hereunder). In addition, if the whole
or any portion of the Partnership Interest of any Partner is subject to levy or
attachment, and such levy or attachment is not released or discharged within
sixty (60) days, such Partner shall be deemed "bankrupt or insolvent" for
purposes of this Agreement.
1.6 Capital Account - means, as to any Partner, the account
established on the books and records of the Partnership under Section 6.1. Each
Partner's Capital Account shall initially equal the Capital Contribution made by
the Partner to the Partnership pursuant to Section 3.1 and during the term of
the Partnership shall be
(a) increased by the amount of
(1) Profit allocated to such Partner, and
(2) any Capital Contributions subsequently made by
such Partner, and
(b) decreased by the amount of
(1) all loss allocated to the Partner, and
(2) all money and the agreed value of other property
(net of liabilities assumed or to which the property is subject) distributed
to such Partner.
1.7 Capital Contribution - means the total amount of money and
the agreed value of other property contributed to the Partnership by a Partner
(net of any liabilities assumed or to which the property is subject). "Capital
Contribution" shall also mean any amounts paid by a Partner pursuant to any
guarantees to a lender of funds to the Partnership for the purpose of owning,
developing or operating the Business. Any reference in this Agreement to the
Capital Contribution of a then Partner shall refer to the interest of such
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then Partner, except to the extent that the interest of any prior Partner shall
have been forfeited and the portion so forfeited was not transferred to a
successor Partner.
1.8 Closing - means the date on which this Agreement is
executed by the initial Partners.
1.9 Code - means the Internal Revenue Code of 1986.
1.10 Control, Controlling and Controlled - means the direct or
indirect ownership interest of more than 10% ownership or voting power of the
Person or Entity in question. "Self-dealing" shall not mean the contracting for
services or the purchasing of Products and Services, from or to the Affiliates
of any Partners, or the management or marketing of the Business by a General
Partner or by the Entities or Persons in whom a General Partner or one or more
partners of a General Partner has an interest, subject to Sections 2.7-3 and
5.3-8 hereof.
1.11 Dissolution or Termination of a Partner - means in the
case of a corporate or partnership Partner, the earlier of (i) the adoption of a
plan of liquidation by such Partner or (ii) the effective date of dissolution in
accordance with applicable law.
1.12 General Partner - means UPC, York Hannover and any
successor General Partner(s) admitted pursuant to the terms hereof.
1.13 Incapacity - means the Bankruptcy, Dissolution, or
Termination of such Partner.
1.14 Net Revenues - means all revenues subsequent to any
deductions for Medicare, Medicaid, or other third party disallowances.
1.15 Notification - means a writing, containing the
information required by this Agreement to be communicated to any Person, sent in
accordance with the provisions of Section 9.1 herein (including all required
copies).
1.16 Operating Partner - means UPC.
1.17 Partner- means any General Partner.
1.18 Partnership - means this Partnership, as it may from time
to time be constituted.
1.19 Partnership Interest - means the entire ownership
interest (which may be segmented into and/or expressed as a percentage of
various rights and/or obligations) of a
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Partner in the Partnership at any particular time, including the right of such
Partner to any and all benefits to which a Partner may be entitled as provided
in this Agreement and in the Act, together with the obligations of such Partner
to comply with all of the terms and provisions of this Agreement and of the Act.
1.20 Partnership's Business - means the provision of the
following services and products Institutional pharmacy, infusion therapy,
third-party billing, medical equipment and supplies, respiratory (except
respiratory therapy services and supplies to Part A eligible patients will not
be provided by the Partnership; provided, however, that the Partnership shall
provide the delivery services presently being provided as part of the
respiratory Part A Program of UPC), and such other services and products as
shall be specifically agreed upon by the Partners (hereafter "Products and
Services"), to long term care and other facilities located in the counties
listed on Exhibit A (with the exception of that certain facility set forth on
Exhibit A which is and will continue to be served by York Hannover or its
Affiliates) and in those presently existing facilities owned by Unicare Health
Facilities, Inc. and its affiliated corporations outside the designated counties
which facilities are also described in Exhibit A attached hereto and
incorporated herein by reference ("Partnership Market").
1.21 Percentage of Interest or Interests in the Partnership -
means each Partner's percentage of the total Partnership Interest in the
Partnership, as set forth in Section 3.3.
1.22 Person - means any natural person or entity, and the
successors and assigns of such Person where the context so permits.
1.23 Profit and Loss - means the taxable income and loss of
the Partnership as determined for federal income tax purposes, including all
items required to be separately stated by Section 702 of the Code and Treasury
Regulations thereunder.
1.24 Working Capital Loan(s) - means all loans required by the
Partnership and made by a Partner, as made from time to time, to pay costs and
expenses of the Partnership in excess of cash receipts. Such loans shall be
obligations of the Partnership and shall be increased by (i) the amount of
accumulated interest thereon (to be computed at the simple annual rate equal to
the prime lending rate charged by Firstar Bank Milwaukee N.A. plus four percent
(4%)), if but only if such loan results from one Partner's inability to provide
its proportionate working capital and the other Partner's exercise of its right
to provide said portion of the working capital, and decreased by (ii) the
amounts distributed to the Partners that made the Working Capital Loan, pursuant
to Section 3.1-2, which amounts shall be applied first to accrued and unpaid
interest, and the balance, if any, to reduction of principal.
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SECTION II: THE PARTNERSHIP
2.1 Formation. UPC and York Hannover hereby form a general
partnership under and pursuant to the provisions of the Act for the purposes and
upon the terms and conditions hereinafter set forth in this Agreement.
2.2 Name. The name of the Partnership shall be "York Hannover
Partnership," and all business of the Partnership shall be conducted in such
name.
2.3 Location. The initial location of the office of the
Partnership shall be in Brooksville, Florida.
2.4 Purpose.
2.4-1 The purpose of the Partnership is to provide
Products and Services to patients in the Partnership Market.
2.4-2 The Partnership shall be a partnership only for the
purposes and in the market specified hereinabove. This Agreement shall not be
deemed to create a general or limited partnership, joint venture or other
arrangement between the Partners with respect to any activities whatsoever other
than the activities within the purpose of the Partnership as specified above.
2.4-3 The Partnership is empowered to do any and all
things necessary, appropriate, or convenient for the furtherance and
accomplishment of its purposes, and for the protection and benefit of the
Partnership and its properties, including but not limited to the following:
a. Entering into and performing contracts;
b. Applying for and obtaining governmental
authorizations, licenses and approvals;
c. Bringing and defending actions at law or equity;
and
d. Subject to the express provisions of this
Agreement, purchasing the interest of any Partner.
2.4-4 The credit and assets of the Partnership shall be
used solely for the benefit of the Partnership. No asset of the Partnership
shall be transferred or encumbered for, or in payment of, any individual
obligation of a Partner. In the event the Partnership is made a party to any
obligation, or otherwise incurs any losses or expenses as a result of or in
connection with personal obligations or liabilities of any Partner unconnected
with Partnership Business, such Partner shall reimburse the Partnership for all
such losses or
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expenses incurred by the Partnership, including attorneys' fees, and the cash
distributions pursuant to Section IV hereof of any such Partner may be charged
therefor. Each Partner shall bear its own costs and expenses, including without
limitation all legal fees, incurred in connection with the formation of the
Partnership.
2.4-5 All real and personal property owned by the
Partnership shall be deemed owned by the Partnership as an entity, and no
Partner shall have any ownership interest in such property in its individual
name or right, excepting only certain property including without limitation
licensed software which cannot be transferred from a Partner to the Partnership.
Such Partnership property, including property contributed to the Partnership by
the Partners, shall include leasehold interests.
2.5 Term. The term of the Partnership shall commence at 12:01
a.m. on August 1, 1995 and shall continue for five (5) years subject to
dissolution and continuation as described herein. On or prior to the fourth
(4th) anniversary of the Closing, the Partners shall determine whether they
desire to have the Partnership dissolved at the end of the five (5) year period.
In the event that the Partners concur that they wish the Partnership to
continue, the Partnership shall continue for an additional one (1) year period
beyond the five (5) years and thereafter the Partnership shall automatically
continue for periods of two (2) years unless at least one (1) year prior to the
then-effective date of termination, at least one of the Partners determines that
the Partnership should be dissolved and so notifies the other Partner.
2.6 Authority. Each party hereto represents to the other party
that it has the requisite power and authority, under its Charter, Bylaws and
governing state law, to enter into and perform this Agreement, and that the
execution and performance of this Agreement shall not violate any provisions of
any laws, contracts, or other documents applicable to such party.
2.7 Disclosure. Conflicts and Waiver; Fiduciary Duty.
2.7-1 Except otherwise expressly provided elsewhere in
this Agreement, nothing in this Agreement shall be deemed to restrict in any way
the rights of any Partner, or of any Affiliate, to conduct any business or
activity whatsoever (other than those described in this Agreement) without any
accountability to the Partnership or to any Partner. Each Partner acknowledges
that each other Partner or its Affiliate may be interested, directly or
indirectly, in various other businesses and undertakings not including the
Partnership.
2.7-2 York Hannover, its owner, Stockbridge Investment
Partners, Inc. ("Stockbridge") and Stockbridge's shareholders agree that they
shall not engage in any business or enterprise, directly or indirectly, which
competes with the Partnership's Business
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or any of the Partners within the Partnership Market during the term of this
Agreement and for a two (2) year period following the dissolution of the
Partnership. York Hannover, Stockbridge, Stockbridge's shareholders and UPC
shall execute a covenant not to compete agreement on or before the Closing.
2.7-3 Subject to Section 5.3-8, the Partnership may
transact business with the Partners and/or their subsidiaries, Affiliates,
partners, shareholders and/or others involved in a management capacity with the
Partners and/or the General Partner under the following terms and conditions:
a. The Partnership may purchase goods or services
from the Partners if there is set forth in writing the terms and conditions of
any purchase, sale or contract in question; and
b. The cost of any goods or services from any
Partner to the Partnership shall not exceed the cost of such goods or services
as charged by said entity to comparable third parties.
2.7-4 Without limiting Section 5.7 below, each Partner
shall at all times act in a manner consistent with or for the benefit of the
Partnership, in accordance with its fiduciary obligation under law and,
specifically, the Act.
2.8 Statutory Compliance.
2.8-1 The Partnership shall exist under and be governed
by, and this Agreement shall be construed in accordance with the applicable laws
(without resort to choice of law doctrines) of the State of Wisconsin, and
relevant federal statutes including, but not limited to, titles XVIII and XIX of
the Social Security Act, 42 U.S.C. xx.xx. 1395 and 1396. The Partnership shall
make all filings and disclosures required by, and shall otherwise comply with,
all such laws.
2.8-2 The Operating Partner, on behalf of the Partnership,
shall execute and file any assumed or fictitious name certificate or
certificates required by law to be filed in connection with the formation of the
Partnership, and shall execute and file such other documents and instruments as
may be necessary or appropriate to the formation of, and conduct of Business by,
the Partnership.
SECTION III: PARTNERSHIP CAPITAL AND PERCENTAGE OF INTEREST
3. 1 Capitalization
3.1-1 Capital Contributions of the Partners. The Partners
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shall contribute the assets described in Exhibit B. The initial contributions
shall be made no later than July 31, 1995. Each Partner shall also be obligated
to contribute to the Partnership, no later than July 31, 1995, an amount of cash
which, when added to the value of the inventory and fixed assets contributed by
such Partner to the Partnership, will equal that Partner's Partnership Interest
multiplied by the sum of the total value of the inventory and fixed assets
contributed by both Partners plus such amount of cash. For purposes of this
provision, the "value" of the inventory and fixed assets contributed by each
Partner shall be calculated as of the Closing date. For example, if the value of
the inventory and fixed assets contributed by York Hannover were $439,000 and
the value of the inventory and fixed assets contributed by UPC were $181,000,
then UPC would be obligated to contribute cash in the amount of $477,500
($477,500 plus $181,000 equals 60% of the sum of $477,500 plus $439,000 plus
$181,000). Each Partner shall be liable to the Partnership for that Partner's
share of the aggregate contributions duly called for under this Section 3.1.
Each Partner's share shall be in proportion to its Partnership Interest.
3.1-2 Working Capital Loans. The Partners shall provide
any additional required working capital needed by the Partnership to commence
operations by loaning money to the Partnership on the Closing date in an amount
equal to their Partnership Interests, i.e., if the additional required working
capital is $1,000,000, then York Hannover shall contribute $400,000 (40%) and
UPC $600,000 (60%). In the event one Partner is unable to provide its working
capital loan on the date of execution of this Agreement, the other Partner shall
have the right (but not the obligation) to provide said portion of the working
capital and, in such event, receive interest at the prime rate charged by
Firstar Bank Milwaukee N.A. plus four percent (4%). Otherwise, the working
capital loans shall not bear interest. Any and all loans shall be evidenced by a
negotiable note executed by the Partnership, shall be secured by Partnership
receivables and shall provide for monthly payment of principal and interest, in
the situation specified herein, on a priority basis.
3.2 General Provisions Concerning Partnership Capital.
3.2-1 Benefit of Obligations. The obligation of the
Partners to make Capital Contributions hereunder shall not inure to the benefit
of, or be enforceable by, any person or entity other than the Partnership and
the Partners.
3.2-2 Capital Accounts. An individual Capital Account
shall be maintained for each Partner.
3.2-3 Return of Capital. Except as specifically provided
herein, no Partner may withdraw capital from the Partnership without the express
approval of the Partners. To the extent any monies which any Partner is entitled
to receive pursuant to Section IV hereof or pursuant to any other provision of
this Agreement would constitute a return of capital, each of the Partners hereby
consents to the withdrawal of such capital.
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3.2-4 Partner Loans. Any loans, including Working Capital
Loans, by any Partner to the Partnership shall not be considered Capital
Contributions and shall not increase the Capital Account of the lending Partner,
and shall be evidenced by a written agreement signed by the Operating Partner,
on behalf of the Partnership, contemporaneously with the making of such loan.
3.2-5 Interest on Capital. No interest shall be paid on
any Capital Contribution to the Partnership by any Partner.
3.3 Partnership Interests. The respective Percentage Interests
of the Partners shall be as follows:
UPC 60%
York Hannover 40%
---
100%
In addition, York Hannover shall have the option (the "YH
Option") to purchase from UPC up to an additional nine percent (9%) Partnership
Interest so that, if exercised in full, York Hannover would have up to a
forty-nine percent (49%) Partnership Interest and UPC would then have a
fifty-one percent (51%) Partnership Interest.
3.3-1 Date of Exercise. The YH Option shall be exercised
within six (6) months from the date of closing by written notice delivered to
UPC.
3.3-2 One Exercise. The YH Option may be exercised in
whole or in part (no fractional percentage interests, however), but there shall
be only one exercise election made.
3.3-3 Purchase Price. The purchase price for the YH Option
shall be determined as follows:
========================================================================================================================
1. Base Price $568,000
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2. Plus 9% of total initial contributed
tangible personal
property plus cash
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3. Plus 9% of any Profit and Loss from
the date of Closing until the date of Option
exercise
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4. Less 9% of any pro-rata cash
distributions from the date of Closing until
the date of Option exercise (i.e., no
subtraction would be made for any
Priority Distributions)
------------------------------------------------------------------------------------------------------------------------
Subtotal
5. Multiplied by the percentage acquired x 0% acquired (1% - 9%) divided by 9%
divided by 9 maximum
Option purchase price
========================================================================================================================
3.3-4 Separate Agreement. The parties shall execute a
separate option-to purchase agreement on the Closing Date.
3.4 Penalty for Removal of Contribution. The Partners agree
that no more than twenty percent (20%) of the initial beds serviced by the
Partnership which are located in facilities owned by either of the Partners may
be removed from the Partnership during the Partnership Term without the prior
consent of the other Partner. However, in the event that in excess of twenty
percent (20%) of a Partner's contributed beds are removed during the Partnership
Term, for any reason, the Partner whose beds have not been so removed shall not
unreasonably withhold its consent to such removal if such Partner is compensated
directly (with the Partnership having no liability therefor) by the Partner
whose beds are being removed according to the following formula:
Owned Beds Total Minimum Target (80%)
YH 876 701
UPC 1440 1152
The Partners agree that it shall not be considered unreasonable to refuse
consent to a removal of beds if it appears that a Partner or a Partner's
Affiliate will provide Products and Services for such beds in competition with
the Partnership. An amount equal to the number of beds by which a Partner's
owned beds falls below the Minimum Target multiplied by $1,436 multiplied by the
number of months remaining in the then-current Partnership Term divided by sixty
(60) months shall be paid to the Partner whose beds have not been removed. In
all cases of greater than 20% bed removal, the Partners shall not remove or
cause the removal of any of their contributed beds from the Partnership without
notice and approval of all Partners, which approval shall not be unreasonably
withheld.
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SECTION IV: PROFIT, LOSS AND DISTRIBUTION
4.1 Allocation of Profit or Loss and Distribution of Cash from
Operations.
4.1-1 For any fiscal year after the first fiscal year of
the Partnership, ended December 31, 1995, there shall be distributed to the
extent possible quarterly, but in no event less frequently than semi-annually,
in cash to the Partners, in proportion to their respective Percentage Interests,
an amount equal to the Partnership's Profit for that period as computed under
this Agreement, but increased by the amounts deducted for that period as
depreciation or cost recovery, depletion, or amortization on the Partnership's
federal income tax return, reduced by (A) payments made by the Partnership to
either Partner, including Priority Distributions, (B) any payments made by the
Partnership during that period on account of the principal of all debt
obligations, other than obligations for which provision was made in computing
Profit, and (C) a reserve reasonably retained for the operating and capital
requirements of the Partnership's Business and subject to the existence of
available cash.
4.1-2 York Hannover shall be allowed a priority
distribution ("Priority Distribution") subject to the terms, conditions and the
restrictions described below, for the sole purpose of making interest payments
which are due from York Hannover to National HealthCare L.P. pursuant to the
$2.5 million loan dated December 17, 1993, described in full in the documents
attached as Exhibit C, such principal amount to be reduced to $1.75 million on
or before the Closing date ("York Hannover/NH Loan") or to a lender which has
made a loan to York Hannover replacing the York Hannover/NH Loan (the
"Replacement Debt"). In no event during the term of the Partnership shall the
York Hannover/NH Loan or the Replacement Debt be greater in principal amount
than $1.75 million nor shall the interest rate be higher than that of the York
Hannover/NH Loan. The Priority Distribution shall be determined and paid in the
following manner:
4.1-2-1 On a monthly basis, UPC, as Operating Partner,
shall calculate the Partnership's pre-tax earnings as determined in accordance
with generally accepted accounting principles ("Pre-Tax Earnings").
4.1-2-2 To the extent that York Hannover's share (as
represented by its Percentage Interest) of cumulative Pre-Tax Earnings net of
prior cash distributions to York Hannover is a positive number, and subject to
the availability of cash within the Partnership, York Hannover shall be entitled
to a Priority Distribution, which shall be made on the last business day of each
month. Under no circumstances shall the Priority Distribution exceed on a
monthly basis one-twelfth of the amount specified in Section 4.1-2-4, except
that if a full Priority Distribution has not been made for any month due to a
shortage of available cash, such shortfall shall be made up in the first
subsequent month (in addition to the payment of the Priority Distribution for
such month, but subject to the limitation set forth in Section 4.1-2-4) in which
adequate cash is available.
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4.1-2-3 Once the cumulative Pre-Tax Earnings net of prior
cash distributions to York Hannover has been calculated and the potential
Priority Distribution amount has been calculated, for the potential Priority
Distribution to be made by the Partnership to York Hannover the Partnership must
have sufficient cash available to make such potential Priority Distribution. In
the event there is not sufficient cash available to make the potential Priority
Distribution, the Priority Distribution shall be made only up to the amount of
available cash unless the Partners determine to provide additional working
capital pursuant to Section 3.1-2 in order to make the full potential Priority
Distribution.
4.1-2-4 Under no circumstances shall more than the lesser
of $300,000 or the actual annual interest expense on the York Hannover/NH Loan
(or the Replacement Debt) in the aggregate be distributed, and be outstanding at
any one point in time during the Partnership, to York Hannover as a Priority
Distribution during the term of the Partnership.
4.1-2-5 Partnership distributions, unless otherwise
provided herein, shall be made according to the following hierarchy:
(A) Expenses incurred by the Partners, such as third
party billing fees and expenses and management fees, shall be paid by the
Partnership in the ordinary course and will be included in calculating
Partnership profitability.
(B) Assuming the Partnership is profitable and cash
is available, Partnership shall make the Priority Distributions described in
this Section 4.1. York Hannover's Priority Distributions will not result in
distributions to York Hannover in excess of the distributions that would have
been made to York on a pro rata basis in accordance with its Percentage
Interest, plus $300,000, at any time during the term of the Partnership. For
example, if UPC had received, as of a particular date, total distributions of
$90,000 since the inception of the Partnership, York Hannover could not received
total distributions, including Priority Distributions, in excess of $360,000 by
such date.
(C) After reaching the maximum Priority Distribution
amount, available cash will be distributed as follows:
(i) Pay York Hannover and UPC distributions on a
pro rata basis, in accordance with their respective Partnership Interests,
except that York Hannover can receive no more than an amount necessary for it to
pay interest on the York Hannover/NHC or Replacement Debt; that is, if York
Hannover would receive additional cash in accordance with its Partnership
Interest not required for interest payments on the York Hannover/NHC or
Replacement Debt, then such extra cash would not be paid to York Hannover but
would rather be utilized as set forth in
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(ii) below until the uses set forth in such
clauses have been satisfied;
(iii) At UPC's option, pay down UPC's
disproportionate working capital loans, if any, or make payments to UPC to
"balance" the distributions until UPC's disproportionate working capital loans
have been reduced to zero and the distributions are "balanced" (i.e., YH's
Priority Distribution will be assumed equal to its Partnership Interest (40%));
UPC would then receive cash sufficient to equal its Partnership Interest (60%);
(iii) Remaining available cash will be distributed to Partners in relation to
their Partnership Interests.
4.2 Certain Covenants. Each of the Partners covenants and
agrees as follows
4.2-l Until the York Hannover/NH Loan is repaid in full,
the Partnership shall incur no indebtedness other than (A) indebtedness with
respect to accounts payable in the ordinary course of business consistent with
past practice, (B) indebtedness in an amount of up to Four Hundred Thousand
Dollars ($400,000) for acquisition of a warehouse, (C) loans from the Partners
pursuant to Section 3.1-2 which loans shall be made only for working capital
purposes and (D) loans solely for the acquisition of assets used in the
operation of the Partnership's Business and for no other purpose which assets
shall not exceed a cost of Twenty-Five Thousand Dollars ($25,000) individually
or more than One Hundred Fifty Thousand Dollars ($150,000) in the aggregate in
any consecutive twelve (12) month period.
4.2-2 Until the York Hannover/NH Loan is repaid in full,
the Partnership shall grant no lien, charge or encumbrance upon any of its
assets nor permit any such lien to exist upon its assets except for liens
securing debt permitted under Subsections 4.2-1(B) and (D) above which liens
shall attach only to the assets so acquired and which liens are not
cross-defaulted or cross-collateralized with any other debt and except for liens
on accounts receivables of the Partnership securing loans permitted under
Subsection 4.2-1(C) above.
4.2-3 Except in the ordinary course of business consistent
with past practice until the York Hannover/NH Loan is repaid in full the
Partnership shall not dispose in any single transaction or series of
transactions of any material portion of its assets.
4.2-4 Notwithstanding any other provisions in this
Agreement, following the acceleration of the York Hannover/NH Loan there shall
be no payments of the types described below until all foreclosure proceedings
upon the collateral securing the York Hannover/NH Loan have been concluded
provided that such proceedings have been commenced within sixty (60) days after
the declaration of such acceleration and provided further that such limitation
shall be of no effect if foreclosure is not commenced within such
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sixty (60) day period:
4.2-4-1 Any management fees or billing fees under the
Management Agreement or any other similar agreements.
4.2-4-2 Any payments of principal or interest on loans
from Partners to the Partnership, whether for working capital purposes or
otherwise.
4.2-4-3 Any distributions of profit or return of capital
to the Partners except for the Priority Distribution which shall be paid in
accordance with the provisions of this Agreement to York Hannover to permit
payments of interest on the York Hannover/NH Loan.
4.2-4-4 Any payment of funds by the Partnership to any
Partner (other than Priority Distributions or the payment of expenses for leased
employees or payroll expense to Partners in the ordinary course of business) or
any third party outside the ordinary course of the Partnership Business.
4.2-5 National HealthCare L.P. shall promptly notify the
Partners upon any acceleration of the York Hannover/NH Loan and upon the
disposition of the foreclosed collateral. Subject to federal and state laws,
rules and regulations regarding the confidentiality of patient health care
records, the Partners agree to provide to National HealthCare L.P. reasonable
access to those books and records necessary to facilitate the disposition of the
foreclosed collateral and to cooperate in all reasonable requests of National
HealthCare L.P. in disposition of the collateral.
4.3 Liquidation or Dissolution. In the event of a Liquidation
or Dissolution, the assets of the Partnership shall be distributed to the
Partners in accordance with the balances in their respective Capital Accounts,
after taking into account the allocations of Profit and Loss pursuant to Section
4.1, if any, and distributions of cash or property pursuant to Section 4.1, if
any.
4.4 General.
4.4-l If any assets of the Partnership are distributed to
the Partners in kind, such assets shall be valued on the basis of the fair
market value thereof, and any Partner entitled to any interest in such assets
shall receive such interest as a tenant-in-common with all other Partners so
entitled, if any, subject to Section 4.4-3. The fair market value of such assets
shall be determined by an independent appraiser who shall be selected by
agreement of the Operating Partner and the Administrative Partner. Such
appraiser shall be a member of the Master Appraisal Institute, or comparable
organization. Based upon such fair market value, the Profit or Loss for each
unsold asset shall be
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determined as if such asset had been sold at its fair market value, and such
Profit or Loss shall be allocated as provided in Section 4.1 and shall be
properly credited or charged to the Capital Accounts of the Partners prior to
the Dissolution of the assets in Liquidation pursuant to Section 4.3.
4.4-2 All Profit and Loss of the Partnership shall be
allocated with respect to each taxable year of the Partnership as of the end of,
and within one hundred five (105) days after, the end of such taxable year.
4.4-3 All Profit and Loss shall be allocated, and all
distributions of cash shall be distributed, as the case may be, to the Persons
shown on the records of the Partnership to have been Partners on the day that
such allocation or distribution is to be made except that if a Partner sells,
exchanges or otherwise disposes of all or any portion of its Partnership
Interest to any Person who during such fiscal year is admitted as a Partner, the
Profit and Loss shall be allocated between (and cash distributed to) the
transferor and the transferee on the basis of their pro rata shares based on the
year in which the transfer occurred.
4.4-4 The methods set forth hereinabove by which Profit,
Loss, and Distributions are allocated, apportioned and paid are hereby expressly
consented to by each Partner as an express condition to becoming a Partner.
4.4-5 Notwithstanding anything to the contrary otherwise
contained in this Agreement and solely for purposes of determining a Partner's
liability with respect to a creditor of the Partnership under applicable law, to
the extent that depreciation, cost recovery or other deductions or distribution
taken by a Partner shall cause a deficit in such Partner's Capital Account, such
deficit, to the extent of the amount of any depreciation cost recovery, or other
deductions or distributions so taken, shall not be deemed an asset of the
Partnership or the personal liability of any such Partner.
SECTION V: THE PARTNERS, RIGHTS, POWERS, AND DUTIES
5.1 Operation of the Partnership. The management of the
Partnership and the Partnership Business shall be vested in the Operating
Partner. It shall have control over the Business of the Partnership and assume
direction of its operations. The Operating Partner shall consult and confer as
far as practicable with the other Partner or Partners. Except as otherwise
expressly provided in this Agreement or the management agreement to be executed
by and among the Partnership, York Hannover and the Operating Partner (the
"Management Agreement"), however, all things to be done by the Partnership shall
be done under the Operating Partner's control and supervision.
5.2 Administrative Partner. The Administrative Partner shall
perform all duties
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pursuant to the Management Agreement as are specified therein to be performed by
it and as may be reasonably assigned by the Operating Partner and compensated
for by the Partnership.
5.3 Partners' Concerns. By way of illustration, but not by
limitation, the areas in which Partners holding Partnership Interests of at
least sixty-one percent (61%) must consent to those decisions affecting the
Partnership include the following:
5.3-1 The incurrence of any Partnership debt for borrowed
money;
5.3-2 Transferring, hypothecating, compromising, or
releasing any Partnership claim except on payment in full;
5.3-3 Selling, leasing, or hypothecating any Partnership
property or entering into any contract for any such purpose, other than in the
ordinary course of the Partnership's Business
5.3-4 Knowingly suffering or causing anything to be done
whereby Partnership property may be seized or attached or taken in execution, or
its ownership or possession otherwise endangered
5.3-5 Expansion of either the Products and Services
offered by the Partnership or of the Partnership Market;
5.3-6 The undertaking of any acquisition of a business or
of any property other than in the ordinary course of business;
5.3-7 Any amendment of the Management Agreement;
5.3-8 The entering into of any contract, other than the
Management Agreement, between the Partnership and an Affiliate of either Partner
covering more than one year or more than $5,000 in the aggregate or the purchase
from an Affiliate of either Partner of goods and services in one transaction or
a series of transactions of more than $7,500; or
5.3-9 The entering into of any agreement for the lease,
purchase, or sale of goods, services and property, in which the property leased,
purchased or sold thereunder exceeds a value of $25,000, other than in the
ordinary course of business.
5.4 Premises. The Partnership shall acquire, as soon as
reasonably practicable, a building in Brooksville, Florida for use by the
Partnership in conducting the Partnership Business.
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5.5 Execution of Documents. Except as otherwise provided
herein or in that certain management agreement referenced at Section 5.1 hereof,
the Operating Partner shall have the full power to execute, for and on behalf of
the Partnership, any and all documents and instruments which may be necessary or
desirable to carry on the Partnership Business.
5.6 Duties and Obligations Performed in Good Faith. The
Operating Partner shall be under a fiduciary duty to conduct the affairs of the
Partnership in the best interests of the Partnership, including the safekeeping
and use of all Partnership funds and assets for the benefit of the Partnership.
The Operating Partner shall at all times act in good faith and exercise due
diligence in all activities relating to the conduct of the business of the
Partnership.
5.7 Xxxxxxx Xxxxxxxx Employment Agreement. Each Partner
acknowledges and agrees that the Partnership shall enter into an acceptable
employment agreement with Xxxxxxx Xxxxxxxx, Chief Pharmacist of York Hannover,
as soon as practicable after the execution of this Agreement, and that pending
the execution of such employment agreement Xx. Xxxxxxxx will be employed by the
Partnership at his current rate of compensation.
SECTION VI: ACCOUNTING RECORDS
6.1 Books, Records and Reports.
6.1-1 Books of Account. Proper books of account shall be
kept by the Operating Partner or under its direction and control for the
Partnership, in accordance with generally accepted accounting principles on an
accrual basis for both financial accounting and tax purposes, and entries shall
be made therein of all monies expended and received by the Partnership as well
as all other transactions relating to the Partnership usually or properly
entered in books of account, including a Capital Account for each Partner.
6.1-2 Reports. The Operating Partner shall prepare and
distribute monthly balance sheets, income statements and statements of the
Partners' equity to each Partner within thirty (30) days following the last day
of each month. All such reports shall be prepared in accordance with generally
accepted accounting principles. The annual balance sheets, income statements and
statements of Partners' equity shall cover the immediately preceding twelve (12)
calendar month period, and will be distributed to each Partner within sixty (60)
days after year end. In addition to the above, the Operating Partner, on behalf
of the Partnership, shall prepare tax documentation including Schedules K-1 for
each Partner.
6.1-3 Availability of Books and Records. The Operating
Partner shall make available to each Partner and its agents, for inspection and
copying at the requesting Partner's expense upon reasonable notice and during
regular business hours, the books and records of the Partnership. All
information obtained by reason of such inspection shall be
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deemed to be confidential and proprietary, and shall be so held. Each Partner,
at its own expense, may cause an audit to be conducted of the Partnership's
books and records (but not more often than annually) by an independent auditor.
The Operating Partner shall cooperate in the conduct of such audit.
6.1-4 Access to Books and Records. The Operating Partner
agrees, upon a proper request from the Comptroller General of the United States,
the U.S. Department of Health and Human Services, or their duly authorized
representatives, to allow such agency prompt access to the Partnership's books,
records and documents which may be necessary to verify the nature and extent of
the costs of services provided under this Agreement. Agency access shall be
permitted for a period of four (4) years from the date any services are provided
or performed under this Agreement. The Operating Partner shall notify all other
Partners immediately upon receipt of any request from an agency, or its
representative, for access to the Partnership's books and records.
6.2 Tax Elections. In connection with any assignment or
transfer of a Partnership Interest permitted by the terms of this Agreement, the
Operating Partner, with the consent of the other remaining Partner(s), shall
cause the Partnership, at the request of the transferor or the transferee or
successor to such Interest, on behalf of the Partnership and at the time and in
the manner provided in Treasury Regulations 1.754-l(b) (or any like statute or
regulation then in effect), to make an election to adjust the basis of the
Partnership's property in the manner provided in Sections 734(b) and 743(b), of
the Code or any like statute or regulation then in effect.
6.3 Tax Returns. Each tax return and any other statement to be
filed by the Partnership with the Internal Revenue Service or any other taxing
authority shall be prepared by the Operating Partner or a preparer designated by
the Operating Partner, and such returns shall be distributed to all of the
Partners within one hundred five (105) days after the end of the fiscal year of
the Partnership. Each of the Partners shall in its respective income tax return
and other statements filed with the Internal Revenue Service, or other taxing
authority, report taxable income in accordance with the provisions of this
Agreement.
6.4 Fiscal Year. The fiscal year of the Partnership shall be
the calendar year unless otherwise agreed to by the Operating Partner and the
Administrative Partner. As used in this Agreement, a fiscal year shall include
any partial fiscal year at the beginning and ending of the Partnership.
SECTION VII: TRANSFER OF PARTNER'S INTEREST; ADDITIONAL PARTNERS
7.1 Transfer of Partner's Interest. The Partnership Interest
of each Partner (including such Partner's right to receive a share of the
profits and a return of its Capital Account) shall not be transferred, sold,
assigned, pledged, optioned or otherwise transferred,
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by contract, operation of law or otherwise except through the process described
at Section 7.2, the Put Agreement and the Option to Purchase Additional
Partnership Interest, each to be executed on the Closing date, or with the
written consent of the each and every Partner. The Operating Partner shall amend
the Partnership Agreement to reflect any assignment made under this Section or
Section 7.2 whereby the assignee is to become a Partner. Any purported transfer
which does not meet the requirements of this Section, the Put Agreement, the
Option to Purchase Additional Partnership Interest or Section 7.2 shall be void
and of no effect. However, York Hannover and its permitted assignees shall be
permitted to assign its Partnership Interest to an Affiliate (including by means
of a merger or consolidation of York Hannover with or into another Affiliate)
if, but only if, UPC consents to such assignment, which consent shall not be
unreasonably withheld. Further, York Hannover and its permitted assigns shall be
permitted to pledge York Hannover's Partnership Interest to National HealthCare
L.P. or other third-party lender, which pledge is hereby acknowledged and agreed
to by UPC subject, in the case of a pledge to a third-party lender other than
National HealthCare L.P., to UPC's review and consent to the pledge agreement
which consent shall not be unreasonably withheld.
7.2 Right of First Refusal. If any Partner receives an offer,
whether or not solicited by that Partner, from a person not then a Partner to
purchase all or any portion of the Partner's interest in the Partnership, and if
the Partner receiving the offer is willing to accept it, the Partner may
transfer the interest or portion specified in the offer only after it has
afforded the other Partners the right of first refusal. The Partner desiring to
make the transfer (the "Transferor") must notify the Partnership and each of the
Partners, in writing, of the terms of the proposed transfer.
7.2-1 If, but only if, the Partnership is composed of more
than two (2) Partners, the Partnership shall have the option to purchase the
interest at the lesser of (1) the value of the interest, as of the date the
notice of proposed transfer is received, as determined by an independent
appraiser selected by the non-transferring Partner (which appraiser must be a
member of the Master Appraisal Institute or comparable organization), or (2) the
same price and on the same terms as the proposed transfer.
7.2-2 If the Partnership declines to exercise its option,
or if the Partnership consists of only two (2) Partners, then any of the
Partners may negotiate with the Transferor. If any Partner makes an offer to the
Transferor which is equal to or more favorable than the terms included in the
notice of proposed transfer, then the Transferor shall transfer its interest to
such Partner. If more than one (1) Partner makes an offer to the Transferor
which is equal to or more favorable than the terms included in the notice of
proposed transfer, then the Transferor may transfer its interest to any offering
Partner, at its discretion.
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7.2-3 If neither the Partnership nor any Partner purchases
the Transferor's interest within sixty (60) days after the notice of proposed
transfer, the Transferor may transfer its interest at its discretion.
7.3 Costs of Transfer. All costs and expenses incurred by the
Partnership or the other Partners in connection with the transfer, sale or
assignment of a Partnership Interest in accordance with the provisions hereof,
including any filing fees and publishing costs and the reasonable fees and
disbursements of counsel, shall be prepaid by the assigning Partner, or if not
paid by it, then by the assignee.
7.4 Incapacity of a Partner. In the event of the Bankruptcy,
Insolvency, Incapacity, Termination or Dissolution of a Partner, only one (1)
duly appointed personal representative of such Partner shall be recognized by
the remaining Partners as having the authority to exercise the rights of such
Partner under this Agreement on behalf of its beneficiaries, successors or
assigns. Except as otherwise provided herein, the Bankruptcy, Insolvency,
Incapacity, Termination or Dissolution of a Partner shall not dissolve or
terminate the Partnership.
7.5 Additional Partners. On the written consent of each and
every Partner, additional Partners may be admitted at any time on terms and
conditions agreed upon by the existing Partners. Each new Partner shall be
admitted only if the new Partner shall have executed this Agreement or an
appropriate supplement to it in which the new Partner agrees to be bound by the
terms and provisions of this Agreement as they may be modified by that
supplement. Admission of a new Partner shall not cause dissolution or
termination of the Partnership .
7.6 Liability of a Withdrawn Partner.
7.6-1 If a Partner voluntarily withdraws from the
Partnership it shall be, and remain, liable for all obligations and liabilities
incurred by it as Partner prior to the time withdrawal becomes effective.
7.6-2 If a Partner sells, exchanges, or otherwise
disposes of all or any portion of its Partnership Interest it shall be, and
remain, Liable for all obligations and liabilities incurred by it as a Partner
prior to the time the admission of the assignee or transferee of all or a
portion of the Interest of the Partner as a successor or additional Partner to
the Partnership is effective.
SECTION VIII: DISSOLUTION AND TERMINATION OF THE PARTNERSHIP
8.1 Events Causing Dissolution and Termination.
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8.1-1 The Partnership shall continue in effect until the
date set forth in Section 2.5 hereof, except that the Partnership shall dissolve
prior to such date upon the happening of any of the following events: (i) any
event which makes it unlawful for the Business of the Partnership to be carried
on or for the Partners to carry it on in partnership; (ii) the suspension or
exclusion of the Partnership from participation in either title XVIII or title
XIX of the Social Security Act, 42 U.S.C. xx.xx. 1395 and 1396; or (iii) the
failure to meet any other requirement necessary to the conduct of the
Partnership's business.
8.1-2 Dissolution of the Partnership shall be effective on
the day on which the event occurs giving rise to the Dissolution, but the
Partnership shall not terminate until this Agreement has been canceled and the
assets of the Partnership have been distributed as provided in Section 9 hereof.
IX. LIQUIDATION OF THE PARTNERSHIP
9.1 Liquidation.
9.1-1 As soon as practicable after the Dissolution of the
Partnership, the remaining Partners may give written notice to any Partner of
such fact and shall prepare a plan as to whether and in what manner the assets
of the Partnership shall be liquidated or transferred to a successor entity. All
expenses incurred in any reformation, or attempted reformation, of the
Partnership shall be deemed to be expenses of the Partnership.
9.1-2 The Operating Partner shall liquidate the assets of
the Partnership, apply and distribute the proceeds thereof in accordance with
Section 4.2 hereof and cause the termination of this Agreement.
9.1-3 Notwithstanding the provisions of Section 9.1-2
hereof, in the event the Operating Partner shall determine that an immediate
sale of part or all of the Partnership assets would cause undue loss to the
Partners, the Operating Partner, in order to avoid such loss, may, after having
given written notice to all Partners, either defer Liquidation of and withhold
from distribution for a reasonable time any assets of the Partnership except
those necessary to satisfy the Partnership's debts and obligations, or
distribute the assets to the Partners in kind.
SECTION X: MISCELLANEOUS
10.1 Notices. Any notice which may or is required to be given
hereunder shall be deemed given when deposited into the custody of the United
States Post Office and properly posted and addressed. If such notice is mailed,
it shall be deposited, registered or certified, return receipt requested, in the
United States mail, addressed to each Partner at the address set forth after its
respective name below, or at such different address as to which
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either Partner shall have theretofore given notice hereunder.
If to UPC: Xxxxx Xxxxxxxx, Vice President
United Professional Companies, Inc.
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
With a Copy to: United Health, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Legal Department
If to York
Hannover: c/o Lenox Healthcare, Inc.
The Berkshire Common
0 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, President
With a copy to: Xxxxxxxx & Xxxxxx
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, Esq.
10.2 Successors and Assigns. Subject to the restrictions on
transfer set forth herein, this Agreement shall bind and inure to the benefit of
the parties hereto and their respective legal representatives, successors and
assigns.
10.3 Waiver of Partition. Unless otherwise expressly
authorized in this Agreement, no Partner will, either directly or indirectly,
take any action to require partition or apportionment of the Partnership or of
any of its assets or properties. Notwithstanding any provisions of applicable
law to the contrary, each Partner (and its legal representative, successor or
assign) hereby irrevocably waives any and all right to maintain any action for
partition or to compel any sale with respect to its interest in, or with respect
to any assets or properties of the Partnership, except as expressly provided in
this Agreement.
10.4 No Oral Modifications; Amendments. No oral amendment of
this Agreement shall be binding on the Partners. Any modification or amendment
of this Agreement must be in writing signed by all the Partners.
10.5 Captions. Any article, section or paragraph titles or
captions contained in
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this Agreement and the table of contents are for convenience of reference only
and shall not be deemed a part of this Agreement.
10.6 Terms. Common nouns and pronouns shall be deemed to refer
to the masculine, feminine, neuter, singular and plural, as the identity of the
person or persons, firm or corporation may in the context require. Any reference
to the Code or other statutes or laws shall include all amendments,
modifications or replacements of the specific sections and provisions concerned.
10.7 Invalidity. If any provision of this Agreement shall be
held invalid, the same shall not affect in any respect whatsoever the validity
of the remainder of this Agreement.
10.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same instrument.
10.9 Further Assurances. The parties hereto agree that they
will cooperate with each other and will execute and deliver, or cause to be
delivered, all such other instruments, and will take all such other actions, as
either party hereto may reasonably request from xxx-e to time in order to
effectuate the provisions and purposes hereof.
10.10 Complete Agreement. This Agreement constitutes the
complete and exclusive statement of the agreement between the Partners as to the
matters set forth herein. It supersedes all prior written and oral statements
and no representation, statement, condition or warranty not contained in this
Agreement shall be binding on the Partners or have any force or effect
whatsoever.
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IN WITNESS WHEREOF, the Partners acknowledge that this
Agreement of Partnership is their act, and acknowledge under the penalties for
perjury, to the best of their knowledge, information and belief, that they have
executed this Agreement under seal as of the date set forth hereinabove.
WITNESS: UNITED PROFESSIONAL COMPANIES, INC.
/s/ By: /s/
---------------------------- ---------------------------------
Title:
-----------------------------
WITNESS: YORK HANNOVER PHARMACEUTICALS, INC.
/s/ By: /s/
---------------------------- --------------------------------
Title:
-----------------------------
WITNESS: STOCKBRIDGE INVESTMENT PARTNERS, INC.
/s/ By: /s/
----------------------------- -------------------------------
Title:
-----------------------------
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