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EXHIBIT 2.1
PURCHASE AGREEMENT
AMONG
FOUNDATION HEALTH SYSTEMS, INC.,
FOUNDATION HEALTH CORPORATION,
FOUNDATION HEALTH PHARMACEUTICAL SERVICES, INC.,
INTEGRATED PHARMACEUTICAL SERVICES, INC.
AND
ADVANCE PARADIGM, INC.
DATED: FEBRUARY 26, 1999
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PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "AGREEMENT") is made as of the 26th day
of February 1999, by and among Advance Paradigm, Inc., a Delaware corporation
("BUYER"), Foundation Health Systems, Inc., a Delaware corporation (the
"COMPANY"), Foundation Health Corporation ("FHC"), a California corporation,
Foundation Health Pharmaceutical Services, Inc., a California corporation
("FHPS"), and Integrated Pharmaceutical Services, Inc., a California
corporation ("IPS", and together with FHC and FHPS, the "SUBSIDIARIES"). The
Company is the ultimate parent of the Subsidiaries.
RECITALS:
WHEREAS, the Company owns (directly or indirectly) all of the
outstanding capital stock of the Subsidiaries; and
WHEREAS, Buyer desires to purchase from the Company all of the
outstanding capital stock of FHPS, and the Company desires to sell to Buyer all
of the outstanding capital stock of FHPS, in accordance with the terms and
conditions of this Agreement; and
WHEREAS, Buyer desires to purchase from IPS certain assets of IPS, and
IPS desires to sell to Buyer certain assets of IPS, in accordance with the
terms and conditions of this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, Buyer, the Company and the Subsidiaries
(collectively, the "PARTIES") agree as follows:
ARTICLE 1
DEFINITIONS
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including, but not limited to, court costs and reasonable
attorneys' fees and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED BUSINESS" means the pharmacy benefit requirements of the
Company and its Affiliates, and employer groups, administrative services
organizations and other third party clients of the Company and its Affiliates.
"BUYER" has the meaning set forth in the preface to this Agreement.
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"BUYER PERMITS" shall have the meaning set forth in Section 3.6.
"CHANGE OF CONTROL" of a company shall occur when: (i) a third party
acquires fifty percent (50%) or more of the outstanding voting stock of such
company; (ii) the company sells all or substantially all of its assets to a
third party; or (iii) the company merges into or consolidates with another
party such that (a) the company is not the surviving company, (b) if the
surviving company, a majority of the Board of Directors of the company
comprising the board immediately prior to such transaction does not also
constitute a majority following such transaction, or (c) if the surviving
company, a majority of the outstanding shares of the company's stock is not
held by holders who held a majority of the shares of stock of the company
immediately prior to such transaction.
"CLAIM NOTICE" has the meaning set forth in Section 8.5.
"CLOSING" has the meaning set forth in Section 2.5.
"CLOSING DATE" has the meaning set forth in Section 2.5.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"COMPANY" has the meaning set forth in the preface to this Agreement.
"CONTRACT" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment agreement,
license, instrument, purchase and sales order, commitment, undertaking or
obligation.
"CURRENT BALANCE SHEET" has the meaning set forth in Section 4.9.
"CURRENT FINANCIAL STATEMENTS" has the meaning set forth in Section
4.8.
"DEFAULT IN PHARMACY PAYMENT" has the meaning set forth in Section
5.12(d).
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(1).
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all
federal, state, and local statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of
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the environment, including without limitation all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, each as amended and as now in
effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4.8.
"FHPS PERMITS" shall have the meaning set forth in Section 4.19.
"FHS SUCCESSOR" means any third party that acquires the Company or the
Affiliated Business in a Change of Control transaction.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"XXXX-XXXXX-XXXXXX ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8.4.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8.4.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section 4.21.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LIENS" means liens, claims, charges, options, pledges, security
interests or other encumbrances.
"MATERIAL ADVERSE CHANGE (OR EFFECT)" means a change (or effect) in
the condition (financial or otherwise), properties, assets (including
intangible assets), liabilities (including contingent liabilities), rights,
obligations, operations, or business, which change (or effect), individually or
in the aggregate, is materially adverse to the operations or business of FHPS,
the Purchased Assets or Buyer, each taken as a whole.
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"MATERIAL CONTRACT" means each Contract to which the respective Person
is a party, or by which it or its properties or assets are bound, and which is
material to any of its businesses, assets, properties or prospects.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"NON-AFFILIATED BUSINESS" means the pharmacy benefit services offered
to third party health plan customers by the Company, FHPS, IPS or their
Affiliates prior to the Closing.
"PARTIES" has the meaning set forth in the preface to this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PRIOR FINANCIAL STATEMENTS" has the meaning set forth in Section 4.8.
"PURCHASED ASSETS" means all of the assets of IPS identified on
Exhibit A hereto.
"PURCHASE PRICE" has the meaning set forth in Section 2.2.
"PURCHASED MATERIAL CONTRACTS" has the meaning set forth in Section
4.22.
"SECTION 338 ELECTION" has the meaning set forth in Section 5.5.
"SECTION 338 FORMS" has the meaning set forth in Section 5.5.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SERVICE AGREEMENT" has the meaning set forth in Section 5.11.
"SHARES" means all of the outstanding shares of the Common Stock, no
par value, of FHPS.
"STRADDLE PERIOD" means any taxable period which includes but does not
end on the Closing Date.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"THIRD PARTY CLAIM" has the meaning set forth in Section 8.4.
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ARTICLE 2
PURCHASE AND SALE
2.1 BASIC TRANSACTION.
(a) On and subject to the terms and conditions of this
Agreement, Buyer agrees to purchase from FHC, and FHC agrees to sell to Buyer,
all of the Shares and IPS agrees to sell to Buyer and Buyer agrees to purchase
all of the Purchased Assets, for the consideration specified in Section 2.2.
(b) Prior to the Closing, the Company shall, and shall cause
each of the Subsidiaries to, take any and all action necessary to contribute
the Purchased Assets from IPS to FHPS as mutually agreed upon by the parties,
so that the agreed upon Purchase Assets shall be assets of FHPS at the Closing.
(c) Prior to the Closing, all of the outstanding shares of
stock of IPS held by FHPS shall have been transferred to FHS or an Affiliate of
FHS.
2.2 PURCHASE PRICE. Buyer agrees to pay to the Company, at the
Closing, Seventy Million Dollars ($70,000,000.00) (the "PURCHASE PRICE") by
wire transfer of federal or other immediately available funds to an account
designated by Buyer. The allocation of the purchase price among the Purchased
Assets and the Shares shall be as set forth in Schedule 2.2.
2.3 ASSUMPTION OF LIABILITIES. On or subject to the terms and
conditions of this Agreement, at the Closing, Buyer shall assume and agree to
pay, perform and discharge all of the liabilities and obligations of FHPS
identified on Exhibit B hereto, and the liabilities of the Company and IPS set
forth in Schedule 2.3 hereto related to the Purchased Assets purchased at the
Closing. No other obligations of the Company or IPS shall be assumed by Buyer.
2.4 WARRANT FOR SHARES. Upon execution of this Agreement, Buyer shall
issue to FHS a warrant to purchase 200,000 shares of the common stock of Buyer,
subject to and in form and substance as set forth in the warrant agreement
attached hereto as Exhibit E.
2.5 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Xxxxxxx Xxxxxx &
Green, P.C., 0 Xxxxxxxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx, commencing at 9:00 a.m.,
local time, on the later of March 31, 1999 or the second business day following
the satisfaction or waiver of all conditions to the obligations of the Parties
to consummate the transactions contemplated hereby (other than conditions with
respect to actions the respective Parties will take at the Closing itself) or
such other date as Buyer and the Company may mutually determine (the "CLOSING
DATE").
2.6 DELIVERIES AT THE CLOSING. At the Closing, (a) the Company shall
deliver to Buyer the various certificates, instruments, and documents referred
to in Article 6, (b) Buyer shall deliver to the Company the various
certificates, instruments, and documents referred to in Article 7, (c) the
Company shall deliver to Buyer the various certificates and transfer documents
set forth on Exhibit C hereto, and (d) Buyer shall deliver to the Company the
consideration specified in Section 2.2.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to the
Company:
3.1 CORPORATE STATUS. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
the requisite power and authority to own or lease its properties and to carry
on its business as presently conducted. There is no pending or threatened
proceeding for the dissolution, liquidation, insolvency or rehabilitation of
Buyer.
3.2 CORPORATE POWER AND AUTHORITY. Buyer has the corporate power and
authority to execute and deliver this Agreement and the Service Agreement, to
perform its obligations hereunder and under the Service Agreement and to
consummate the transactions contemplated hereby and by the Service Agreement.
Buyer has taken all corporate action necessary to authorize its execution and
delivery of this Agreement, the performance of its obligations hereunder and
the consummation of the transactions contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered by Buyer and constitutes its legal, valid and binding obligation
enforceable against Buyer in accordance with its terms, except as the same may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
3.4 NO VIOLATION. The execution and delivery of this Agreement and the
Service Agreement by Buyer, the performance by Buyer of its obligations
hereunder and under the Service Agreement and the consummation by Buyer of the
transactions contemplated by this Agreement and the Service Agreement will not
(a) contravene any provision of the Certificate of Incorporation or Bylaws of
Buyer, (b) violate or conflict with any law, statute, ordinance, rule,
regulation, decree, writ, injunction, judgment, ruling or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon, or enforceable against Buyer, the occurrence of any of which
would have a Material Adverse Effect on Buyer, (c) conflict with, result in any
breach of, or constitute a default (or an event which would, with the passage
of time or the giving of notice or both, constitute a default) under, or give
rise to a right to terminate, amend, modify, abandon or accelerate, any
Material Contract which is applicable to, binding upon or enforceable against
Buyer, the occurrence of which would have a Material Adverse Effect on Buyer,
(d) result in or require the creation or imposition of any Lien upon or with
respect to any of the property or assets of Buyer, (e) give to any individual
or entity a right or claim against the Buyer, which would have a Material
Adverse Effect on Buyer or (f) require the consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority, any
court or tribunal or any other Person, except (i) pursuant to the
Xxxx-Xxxxx-Xxxxxx Act, the Exchange Act and the Securities Act and applicable
inclusion requirements of Nasdaq, (ii) filings required under the securities or
blue sky laws of the various states, (iii) any filings required to be made by
the Subsidiaries, or (iv) any governmental permits or licenses required to
operate the businesses of the Subsidiaries.
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3.5 NO COMMISSIONS. Other than Xxxxxx Xxxxxxx, no broker, finder,
investment banker or other Person is or will be, in connection with the
transactions contemplated by this Agreement, entitled to any brokerage,
finder's or other fee or compensation based on any arrangement or agreement
made by or on behalf of Buyer and for which Buyer or the Company will have any
obligation or liability.
3.6 COMPLIANCE WITH LAW. Buyer has substantially complied with and is
substantially complying with all applicable laws, rules, regulations and
ordinances, and has the lawful authority and has obtained and now holds all
material state, federal, special or local governmental authorizations,
licenses, certificates (including Certificates of Need) and permits
(collectively "BUYER PERMITS") needed or required to conduct its businesses, as
such businesses are presently being conducted, the absence of which would have
a Material Adverse Effect on Buyer, and has made all material filings required
by applicable law and regulations.
3.7 OTHER APPROVALS. Schedule 3.7 sets forth a list of all consents,
approvals, qualifications, orders or authorizations of, or filings with, any
governmental authority, including any court or other governmental third party,
required in connection with Buyer's valid execution, delivery or performance of
this Agreement and the Service Agreement, or the consummation of any
transaction contemplated by this Agreement and the Service Agreement.
3.8 INVESTIGATION BY BUYER. In entering into this Agreement:
(a) Buyer acknowledges that, except for the specific
representations and warranties of the Company and the Subsidiaries contained in
Article 4 hereof, none of the Company, the Subsidiaries, any Affiliate of the
Company, or any of their respective directors, officers, employees, Affiliates,
controlling persons, agents, advisors or representatives, makes or shall be
deemed to have made any representation or warranty, either express or implied,
as to the accuracy or completeness of any financial projections, forecasts or
budgets provided or otherwise made available to Buyer or any of its directors,
officers, employees, Affiliates, controlling persons, agents, advisors or
representatives (including, without limitation, in any management
presentations, supplemental information or other materials or information with
respect to any of the above). With respect to any such projection or forecast
delivered by or on behalf of the Company or the Subsidiaries to Buyer, Buyer
acknowledges that: (i) there are uncertainties inherent in attempting to make
such projections and forecasts; (ii) it is familiar with such uncertainties;
(iii) it is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all such projections and forecasts so furnished to it;
(iv) it is not acting in reliance on any such projection or forecast so
furnished to it; and (v) it shall have no claim against any such person with
respect to any such projection or forecast; and
(b) Buyer agrees, to the fullest extent permitted by law,
that the Company and the Subsidiaries and their respective directors, officers,
employees, Affiliates, controlling persons, agents, advisors or representatives
shall not have any liability or responsibility whatsoever to Buyer or any of
its directors, officers, employees, Affiliates, controlling persons, agents,
advisors or representatives on any basis (including, without limitation, in
contract or tort, under Federal or state securities laws or otherwise) based
upon any financial projections provided or otherwise made available, or
statements made regarding such projections, (or
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omissions to so provide, make available or state), to Buyer or any of its
directors, officers, employees, Affiliates, controlling persons, agents,
advisors or representatives.
3.9 ACQUISITION FOR INVESTMENT. Buyer is acquiring the Shares solely
for its own account and not with a view to any distribution or other
disposition of such Shares, and the Shares will not be transferred except in a
transaction registered or exempt from registration under the Securities Act.
3.10 ABILITY TO PERFORM UNDER SERVICES AGREEMENT. Buyer represents and
warrants that it has or will have, the financial, personnel, and systems
capabilities to perform its obligations under the Service Agreement, in
accordance with the transition schedule set forth therein.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SUBSIDIARIES
The Company and the Subsidiaries, jointly and severally, make the
following representations and warranties to Buyer:
4.1 CORPORATE STATUS. Each of the Company and the Subsidiaries is a
corporation, duly organized and validly existing and, except where the failure
would not have a Material Adverse Effect on FHPS or the Purchased Assets, has
the requisite power and authority to own or lease its properties and to carry
on its business as presently conducted, except where any such failure would not
have a Material Adverse Effect on FHPS or the Purchased Assets. Each of the
Company and the Subsidiaries is duly qualified to do business as a foreign
corporation in each of the jurisdictions where the nature of its properties and
the conduct of its business require such qualification, except for such
jurisdictions where the failure to be so qualified would not have a Material
Adverse Effect on the Company or a Subsidiary. Each of the Company and the
Subsidiaries is in good standing in each of the jurisdictions in which it is so
qualified. There is no pending or threatened proceeding for the dissolution,
liquidation, insolvency or rehabilitation of the Company or a Subsidiary.
4.2 POWER AND AUTHORITY. Each of the Company and the Subsidiaries has
the corporate power and authority to execute and deliver this Agreement and the
Service Agreement, to perform its obligations hereunder and under the Service
Agreement, and to consummate the transactions contemplated hereby and by the
Service Agreement. Each of the Company and the Subsidiaries has taken all
corporate action necessary to authorize the execution and delivery of this
Agreement and the Service Agreement, the performance of its obligations
hereunder and under the Service Agreement, and the consummation of the
transactions contemplated hereby and by the Service Agreement.
4.3 ENFORCEABILITY. Each of this Agreement and the Service Agreement
has been duly executed and delivered by the Company and each of the
Subsidiaries (hereinafter sometimes referred to individually as a "COMPANY
PARTY" and collectively as the "COMPANY PARTIES") and constitutes the legal,
valid and binding obligation of each of them, enforceable against each of them
in accordance with its terms, except as the same may be limited by
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applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general equitable
principles regardless of whether such enforceability is considered in a
proceeding at law or in equity.
4.4 CAPITALIZATION. Schedule 4.4 sets forth, as of the date hereof,
with respect to FHPS, (a) the number of authorized shares of each class of its
capital stock, (b) the number of issued and outstanding shares of each class of
its capital stock and (c) the number of shares of each class of its capital
stock which are held in treasury. FHC owns 100% of the capital stock of FHPS.
All of the issued and outstanding shares of capital stock of FHPS (a) have been
duly authorized and validly issued and are fully paid and non-assessable, (b)
were issued in compliance with all applicable state and federal securities laws
and (c) were not issued in violation of any preemptive rights or rights of
first refusal. Except as set forth on Schedule 4.4, no preemptive rights,
rights of first refusal or similar rights exist with respect to the shares of
capital stock of FHPS, and no such rights arise or become exercisable by virtue
of or in connection with the transactions contemplated hereby. Except as set
forth on Schedule 4.4, there are no outstanding or authorized rights, options,
warrants, convertible securities, subscription rights, conversion rights,
exchange rights or other agreements or commitments of any kind that could
require FHPS to issue or sell any shares of its capital stock (or securities
convertible into or exchangeable for shares of its capital stock). Except as
set forth on Schedule 4.4, there are no outstanding stock appreciation, phantom
stock, profit participation or other similar rights with respect to FHPS. There
are no proxies, voting rights or other agreements or understandings with
respect to the voting or transfer of the capital stock of FHPS. The shares of
capital stock of FHPS are free and clear of all Liens. FHPS is not obligated to
redeem or otherwise acquire any of its outstanding shares of capital stock.
4.5 NO LIENS ON ASSETS. The Purchased Assets are free and clear of all
Liens.
4.6 NO VIOLATION, CONSENTS. The execution and delivery of this
Agreement and the Service Agreement by the Company Parties, the performance by
each of the Company Parties of their obligations hereunder and under the
Service Agreement and the consummation by them of the transactions contemplated
by this Agreement and the Service Agreement will not (a) contravene any
provision of the certificates of incorporation, bylaws or other organizational
or governing document of the Company or a Subsidiary, (b) violate or conflict
with any law, statute, ordinance, rule, regulation, decree, writ, injunction,
judgment, ruling or order of any Governmental Authority or of any arbitration
award which is either applicable to, binding upon or enforceable against the
Company or a Subsidiary, the occurrence of any of which would have a Material
Adverse Effect on FHPS or the Purchased Assets, (c) conflict with, result in
any breach of, or constitute a default (or an event which would, with the
passage of time or the giving of notice or both, constitute a default) under,
or give rise to a right of payment under or the right to terminate, amend,
modify, abandon or accelerate, any Material Contract which is applicable to,
binding upon or enforceable against FHPS, the occurrence of any of which would
have a Material Adverse Effect on FHPS or the Purchased Assets, subject to
Section 5.12 below, (d) result in or require the creation or imposition of any
Lien upon or with respect to any of the properties or assets of FHPS or the
Purchased Assets, (e) except as set forth on Schedule 4.6, give to any
individual or entity a right or claim against FHPS which would have a Material
Adverse Effect on FHPS or the Purchased Assets or (f) except as set forth on
Schedule 4.6, require the consent, approval, authorization or permit of, or
filing with or notification to, any
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Governmental Authority, any court or tribunal or any other Person, except (i)
pursuant to the Xxxx-Xxxxx-Xxxxxx Act and applicable reporting requirements of
the Exchange Act, the Securities Act or the New York Stock Exchange, Inc., (ii)
filings required under the securities or blue sky laws of the various states,
or (iii) except where the failure to obtain such consent or approval would not
have a Material Adverse Effect on FHPS or the Purchased Assets, or the ability
of the Company to consummate the transactions set forth in this Agreement.
4.7 RECORDS OF FHPS. The copies of the certificates of incorporation
and bylaws of FHPS and the agreements of FHPS and IPS which were provided to
Buyer are true, accurate, and complete and reflect all amendments made through
the date of this Agreement. The minute books and other records of corporate
actions for FHPS made available to Buyer for review were correct and complete
as of the date of such review, no further entries have been made through the
date of this Agreement, such minute books and records contain the true
signatures of the persons purporting to have signed them, and such minute books
and records contain an accurate record of all corporate actions of the
stockholders and directors (and any committees thereof) of FHPS taken by
written consent or at a meeting since formation. All corporate actions taken by
FHPS have been duly authorized or ratified. All accounts, books, ledgers and
official and other records of FHPS have been fully, properly and accurately
kept and are complete, and there are no material inaccuracies or discrepancies
contained therein. The stock ledgers of FHPS, as previously made available to
Buyer, contain accurate and complete records of all issuances, transfers and
cancellations of shares of the capital stock of FHPS. To the Company Parties'
knowledge, the books and all corporate (including minute books and stock record
books) and financial records of FHPS are substantially complete and correct in
all material respects and have been maintained in accordance with applicable
sound business practices, laws and other requirements.
4.8 FINANCIAL STATEMENTS. The Company has delivered to Buyer the
unaudited financial statements of FHPS, consisting of balance sheets at
December 31, 1995, 1996 and 1997 and the related statements of operations for
the respective periods then ended (collectively, the "FINANCIAL STATEMENTS").
The 1995, 1996 and 1997 financial statements of FHPS are referred to herein as
its "PRIOR FINANCIAL STATEMENTS." The financial statements for the twelve (12)
months ended December 31, 1998 are referred to herein as the "CURRENT FINANCIAL
STATEMENTS." The Financial Statements (i) were prepared from the books and
records of FHPS, (ii) were prepared in accordance with GAAP applied on a
consistent basis (except as may be expressly indicated therein or in any notes
thereto, or except for the absence of notes, statement of cash flows, and
statement of shareholders equity which may otherwise be required under GAAP)
and (iii) present fairly the financial position of FHPS as at the dates thereof
and the results of its operations for the periods then ended (subject to normal
year-end adjustments which would not in the aggregate have a Material Adverse
Effect on the FHPS and any other adjustments expressly described therein or in
the notes thereto). The balance sheets included in the Current Financial
Statements do not reflect any writeup or revaluation increasing the book value
of any assets, except as specifically disclosed in the notes thereto or as
otherwise disclosed in writing to Buyer. All financial projections, forecasts,
or budgets that the Company and the Subsidiaries have made available to Buyer
have been or will be prepared in good faith based upon assumptions that the
Company and the Subsidiaries believe to be reasonable.
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4.9 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Except as set forth
on Schedule 4.9, since the date of the balance sheet dated as of December 31,
1998 included in the Current Financial Statements (the "CURRENT BALANCE
SHEET"), FHPS has not (a) issued, sold, pledged, disposed of, encumbered, or
authorized the issuance, sale, pledge, disposition, grant or encumbrance of any
shares of its capital stock, or any options, warrants, convertible securities
or other rights of any kind to acquire any shares of such capital stock or any
other ownership interest of FHPS, (b) declared, set aside, made, or paid any
dividend or other distribution payable in cash, stock, property or otherwise of
or with respect to its capital stock or other securities, or reclassified,
combined, split, subdivided or redeemed, purchased or otherwise acquired,
directly or indirectly, any of its capital stock or other securities; (c)
except for raises in the ordinary course and consistent with past practice,
paid any bonus to or increased the rate of compensation of any of its officers
or salaried employees or amended any other terms of employment of such persons;
(d) sold, leased or transferred any of its properties or assets or acquired any
properties or assets other than in the ordinary course of business consistent
with past practice; (e) made or obligated itself to make capital expenditures
other than in the ordinary course of business consistent with past practice;
(f) made any payment in respect of its liabilities other than in the ordinary
course of business consistent with past practice; (g) incurred any obligations
or liabilities (including, without limitation, any indebtedness for borrowed
money, issuance of any debt securities, or the assumption, guarantee, or
endorsement of the obligations of any person) or entered into any transaction
or series of transactions involving in excess of $15,000 individually or
$50,000 in the aggregate out of the ordinary course of business, except for
this Agreement and the transactions contemplated hereby; (h) suffered any
theft, damage, destruction or casualty loss, whether or not covered by
insurance, in excess of $15,000 individually or $50,000 in the aggregate; (i)
suffered any extraordinary losses (whether or not covered by insurance); (j)
waived, canceled, compromised or released any rights having a value in excess
of $15,000 individually or $50,000 in the aggregate other than in the ordinary
course of business consistent with past practice; (k) made or adopted any
material change in its accounting practice or policies; (l) made any material
adjustment to its books and records other than in respect of the conduct of its
business activities in the ordinary course consistent with past practice; (m)
entered into any material transaction with any other Company Party or any
Affiliate of any of the Company Parties, except in the ordinary course of
business; (n) entered into any employment agreement not terminable at will; (o)
terminated, amended or modified any agreement involving an amount in excess of
$15,000 individually or $50,000 in the aggregate other than in the ordinary
course of business consistent with past practice; (p) imposed any material
security interest or other Lien on any of its assets other than in the ordinary
course of business consistent with past practice; (q) delayed paying any
account payable beyond forty-five (45) days following the date on which it is
due and payable except to the extent being contested in good faith; (r) made or
pledged any charitable contributions in excess of $1,000 individually or $5,000
in the aggregate; (s) acquired (including, without limitation, for cash or
shares of stock, by merger, consolidation, or acquisition of stock or assets)
any interest in any corporation, partnership or other business organization or
division thereof or any assets, or made any investment in another Person either
by purchase of stock or securities, contributions or property transfer of
capital other than as permitted or provided in this Agreement; (t) increased or
decreased prices charged to customers, except in the ordinary course of
business consistent with past practice, materially increased or decreased the
average monthly inventory, other than in the ordinary course of business
consistent with past practice, ordered any inventory which would be
inconsistent with the prior practices of
13
such Company, or taken any actions which might reasonably result in any
material increase in the loss of customers; (u) entered into any other
transaction or been subject to any event which has or may reasonably be
expected to have a Material Adverse Effect on FHPS; or (v) agreed to do or
authorized any of the foregoing.
4.10 LIABILITIES OF FHPS. Except as set forth on Schedule 4.10(a),
FHPS has no liabilities or obligations, whether accrued, absolute, contingent
or otherwise, except (a) to the extent reflected on the Current Balance Sheet
and not heretofore paid or discharged; (b) liabilities incurred in the ordinary
course of business consistent with past practice since the date of the Current
Balance Sheet (none of which relates to breach of contract, breach of warranty,
tort, infringement or violation of law, or which arose out of any action, suit,
claim, governmental investigation or arbitration proceeding) and which, in the
aggregate would not have a Material Adverse Effect on FHPS; (c) liabilities
incurred prior to the date of the Current Balance Sheet which, in accordance
with GAAP consistently applied, were not required to be recorded thereon and
which, in the aggregate, would not have a Material Adverse Effect on FHPS; or
(d) inter-company liabilities that on a consolidated basis are not reflected on
the Current Balance Sheet. Schedule 4.10(b) lists all indebtedness in excess of
$10,000 owed by FHPS to a bank or any other Person, including without
limitation, indebtedness for borrowed money (including principal and accrued
but unpaid interest) and capitalized equipment leases of FHPS. Schedule 4.10(c)
lists each deposit account maintained by or for the benefit of FHPS with any
bank, broker or other depository institution, and the names of all persons
authorized to withdraw funds from each such account.
4.11 LITIGATION. Except as set forth on Schedule 4.11, there is no
action, suit or other legal or administrative proceeding or governmental
investigation pending, or, to the Company Parties' knowledge, threatened
against or anticipated or contemplated to be initiated by, FHPS, or FHPS'
properties or assets, or the Purchased Assets, or which question the validity
or enforceability of this Agreement or the transactions contemplated hereby,
and, to the Company Parties' knowledge, there is no reasonable basis for any of
the foregoing. The Company shall retain all actions, suits and other legal and
administrative proceedings and governmental investigations set forth on
Schedule 4.11. There are no outstanding orders, decrees or stipulations issued
by any Governmental Authority in any proceeding to which FHPS is or was a party
which have not been substantially complied with or which continue to impose any
material obligations on FHPS.
4.12 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 4.12:
(a) During the period commencing from the date in 1991 on which
FHPS became a wholly owned subsidiary of the Company to the date of this
Agreement, the business of FHPS has been and is operated in compliance with all
Federal, state and local environmental protection, health and safety or similar
laws, statutes, ordinances, restrictions, licenses, rules, regulations, permit
conditions and legal requirements, including without limitation the Federal
Clean Water Act ("CWA") 42 U.S.C. Section 7401 et seq., Safe Drinking Water Act,
("SDWA") 42 U.S.C. Section 300f et seq., Resource Conservation & Recovery Act
("RCRA") 42 U.S.C. Section 6901 et seq., Clean Air Act ("CAA") 42 U.S.C. Section
7401 et seq., Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") 42 U.S.C. Section 9601 et seq., Emergency Planning and Community
Right to Know Act ("EPCRA") 42 U.S.C. Section 11001 et seq., Toxic Substances
14
Control Act ("TSCA") 15 U.S.C. Section 2601 et seq., and the Occupational Safety
and Health Act ("OSHA") 29 U.S.C. Section 655 et seq., each as amended and
currently in effect (collectively, "ENVIRONMENTAL LAWS"), except where the
failure to be so in compliance would not result in a Material Adverse Effect on
FHPS.
(b) During the period commencing from the date in 1991 on
which FHPS became a wholly owned subsidiary of the Company to the date of this
Agreement, FHPS has not received any written notice from any Governmental
Authority or other third party or, to the knowledge of the Company Parties, any
other communication alleging or concerning any violation by FHPS, or
responsibility for or liability of FHPS under any Environmental Law, which, if
decided unfavorably to FHPS would have a Material Adverse Effect on FHPS or the
Purchased Assets. There are no pending, or to the knowledge of the Company
Parties, threatened, claims, suits, actions, proceedings or investigations with
respect to the businesses or operations of FHPS alleging or concerning any
violation of or responsibility for or liability under any Environmental Law,
nor does any Company Party have any knowledge of any fact or condition that
could give rise to such a claim, suit, action, proceeding or investigation
which, if decided unfavorably to FHPS would have a Material Adverse Effect on
FHPS or the Purchased Assets.
4.13 REAL ESTATE. FHPS does not currently own any real property.
Schedule 4.13 sets forth a list of all leases, licenses or similar use or
occupancy agreements to which FHPS is a party, which are for the use or
occupancy of real estate owned by a third party ("LEASES") (true and complete
copies of which have previously been furnished to Buyer), in each case, setting
forth: (i) the lessor and lessee thereof and the commencement date, term and
renewal rights under each of the Leases; and (ii) the street address or legal
description of each property covered thereby (the "LEASED PREMISES"). The
Leases are in full force and effect and have not been amended except as
disclosed in Schedule 4.13, and there have been no notices of default by either
party to the Leases. With respect to each such Leased Premises: (i) FHPS'
interests in the Leased Premises are free and clear of any Liens, covenants and
easements or title defects created or suffered to be created by FHPS, except
for Liens for taxes which are not yet due or are otherwise being contested; and
(ii) none of the Company Parties has received notice of (A) any condemnation
proceeding with respect to any portion of the Leased Premises or any access
thereto and, to the knowledge of the Company Parties, no such proceeding is
contemplated by any Governmental Authority; or (B) any special assessment which
may affect any of the Leased Premises and, to the knowledge of the Company
Parties, no such special assessment is contemplated by any Governmental
Authority, any of which would have a Material Adverse Effect on FHPS.
4.14 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.14, FHPS
is in substantial compliance with all laws, regulations and orders applicable
to it, its business, operations, properties and assets, except where the
failure to comply would not have a Material Adverse Effect on FHPS or the
Purchased Assets. During the period commencing from when FHPS became a wholly
owned subsidiary of the Company in 1991 to the date of this Agreement, FHPS has
not been cited, fined or otherwise notified of any asserted past or present
failure to comply with any laws, regulations or orders, where there remains any
remedial action to be undertaken by FHPS as a result thereof, and no proceeding
with respect to any such violation is pending or to the Company Parties'
knowledge threatened. Except as set forth on Schedule 4.14,
15
FHPS is not subject to any decree or injunction to which it is a party which
restricts the continued operation of its business or the expansion thereof to
other geographical areas, customers and suppliers or lines of business, which
decree or injunction has a Material Adverse Effect on FHPS.
4.15 LABOR AND EMPLOYMENT MATTERS. FHPS is not a party to or bound by
any collective bargaining agreement or any other agreement with a labor union.
There is not now any actual or threatened labor dispute, strike or work
stoppage which affects or which may affect the business of FHPS or which may
interfere with its continued operations. Except as set forth on Schedule 4.15,
none of the Company Parties is aware that any executive or key employee or
group of employees of FHPS or IPS has any plans to terminate his, her or their
employment with FHPS or IPS as a result of the transactions contemplated hereby
or otherwise.
4.16 EMPLOYEE BENEFIT PLANS.
(a) Employee Benefit Plans. Schedule 4.16(a) contains a list
setting forth each employee benefit plan or arrangement of FHPS, including but
not limited to employee pension benefit plans, as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
Multiemployer Plans, if any, as defined in Section 3(37) of ERISA, employee
welfare benefit plans, as defined in Section 3(1) of ERISA, deferred
compensation plans, stock option plans, bonus plans, stock purchase plans,
hospitalization, disability and other insurance plans, severance or termination
pay plans and policies, whether or not described in Section 3(3) of ERISA, in
which employees, their spouses or dependents, of the Company participate
("EMPLOYEE BENEFIT PLANS") (true and accurate copies of which, together with
the most recent annual reports on Form 5500 and summary plan descriptions with
respect thereto, were furnished to Buyer).
(b) Compliance with Law. With respect to each Employee
Benefit Plan to the best knowledge of the Company Parties: (i) each has been
administered in all respects in compliance with its terms and with all
applicable laws, including, but not limited to, ERISA and the Code; (ii) no
actions, suits, claims or disputes, other than routine benefit claims, are
pending, or threatened; (iii) no audits, inquiries, reviews, proceedings,
claims, or demands are pending with any governmental or regulatory agency; (iv)
there are no facts which could give rise to any material liability in the event
of any such investigation, claim, action, suit, audit, review, or other
proceeding; (v) except as set forth on Schedule 4.16(b), all reports, returns
and similar documents required to be filed with any Governmental Authority or
distributed to any plan participant have been duly or timely filed or
distributed; and (vi) no "prohibited transaction" has occurred under Section
406 of ERISA or Section 4975 of the Code, except where the failure of any of
the matters in subparagraphs (i)-(vi) would not have a Material Adverse Effect
on FHPS.
(c) Title IV Plans. FHPS does not contribute to a
Multiemployer Plan as described in Section 4001(a)(3) of ERISA or a defined
benefit plan.
(d) Welfare Plans. (i) Except as otherwise provided by
applicable state or federal law, FHPS is not obligated under any employee
welfare benefit plan as described in Section 3(1) of ERISA ("WELFARE PLAN") to
provide medical or death benefits with respect to any employee or former
employee of FHPS or its predecessors after termination of employment;
16
(ii) no violations of the notice and continuation coverage requirements of
Section 4980B of the Code or Sections 601 through 608 of ERISA have occurred
with respect to any Welfare Plan that is a group health plan within the meaning
of Section 5000(b)(1) of the Code which would have a Material Adverse Effect on
FHPS; and (iii) there are no reserves, assets, surplus or prepaid premiums
under any Welfare Plan which is an Employee Benefit Plan.
(e) PBGC Liability. FHPS (i) has never terminated or
withdrawn from an employee benefit plan under circumstances resulting (or
expected to result) in liability to the Pension Benefit Guaranty Corporation
("PBGC") (other than routine claims for benefits); (ii) has no assets subject
to (or expected to be subject to) a lien for unpaid contributions to any
employee benefit plan; (iii) has not failed to pay premiums to the PBGC when
due (iv) is not subject to (or expected to be subject) an excise tax under Code
Section 4971; (v) has not engaged in any transaction which would give rise to
liability under Section 4069 or Section 4212(c) of ERISA; or (vi) has not
violated Code Section 4980B or Section 601 through 608 of ERISA, any of which
matters described in clauses (i)-(vi) would have a Material Adverse Effect on
FHPS.
(f) Other Liabilities. Except as set forth on Schedule
4.16(f), (i) FHPS is not obligated to pay separation, severance, termination or
similar benefits or to vest any person, in whole or in part, solely as a result
of any transaction contemplated by this Agreement or solely as a result of a
"change of control" (as such term is defined in Section 280G of the Code); and
(ii) none of the Employee Benefit Plans has any unfunded liabilities which are
not reflected on the Current Balance Sheet or the books and records of FHPS.
4.17 INSURANCE. FHPS and the Purchased Assets are covered by policies
of insurance for its properties, assets and businesses (the "INSURANCE
POLICIES"), which policies are in full force and effect, and which coverage
amounts are adequate for the business conducted by FHPS and the Purchased
Assets, and all premiums due thereon have been paid. Prior to the Closing Date,
each of the Insurance Policies will be in full force and effect. FHPS has
complied with the provisions of such Insurance Policies, except where the
failure to comply would not have a Material Adverse Effect on FHPS. There is no
pending claim under any of the Insurance Policies for an amount in excess of
$10,000 individually or $50,000 in the aggregate that relates to loss or damage
to the properties, assets or business of FHPS.
4.18 RECEIVABLES. All of the Receivables of FHPS, net of any allowance
for doubtful accounts reflected in the Current Balance Sheet, are valid and
legally binding, represent bona fide transactions and arose in the ordinary
course of business of FHPS. To the best of the Company Parties' knowledge, all
of the Receivables of FHPS reflected in each Current Balance Sheet are
collectible in accordance with the terms of such receivables, without set off
or counterclaims, subject to the allowance for doubtful accounts, if any, set
forth on such Current Balance Sheet. For purposes of this Agreement, the term
"RECEIVABLES" means all receivables of FHPS, including without limitation,
trade account receivables arising from the provision of services, sale of
inventory, notes receivable, and insurance proceeds receivable, whether or not
billed.
4.19 LICENSES AND PERMITS. There are no licenses and governmental or
official approvals, permits or authorizations required for the conduct of FHPS'
business and operations, the absence of which would have a Material Adverse
Effect on FHPS (collectively, the "FHPS
17
PERMITS"). All FHPS Permits are valid and in full force and effect, FHPS is in
compliance with the respective requirements thereof, no proceeding is pending
or, to the Company Parties' knowledge, threatened to revoke or amend any of
them, and none of the FHPS Permits is or will be impaired or affected, which
impairment or affect would have a Material Adverse Effect on FHPS, by the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for such of the preceding which,
individually or in the aggregate, would not have a Material Adverse Effect on
FHPS or on the ability of the parties to consummate the transactions
contemplated herein.
4.20 ADEQUACY OF THE ASSETS; RELATIONSHIPS WITH CUSTOMERS AND
SUPPLIERS; AFFILIATED TRANSACTIONS. Except as set forth on Schedule 4.20, the
Purchased Assets, including Purchased Assets held by IPS, and assets and
properties currently owned and operated by FHPS constitute, in the aggregate,
all of the assets and properties used in the conduct of the business of FHPS
and IPS, with respect to the Purchased Assets, in the manner in which and to
the extent to which such business is currently being conducted. Neither FHPS,
nor, with respect to the Purchase Assets, IPS, has received any notice from any
current supplier of items essential to the conduct of its business that such
supplier intends to terminate or materially alter a business relationship with
FHPS or, with respect to the Purchased Assets, IPS, for any reason, involving
an amount in excess of $50,000, and to the Company Parties' knowledge, no such
supplier intends to terminate or materially alter any such business
relationship with FHPS, or IPS. Neither FHPS nor IPS has received any notice
from any customer that such customer intends to discontinue purchases of
products or services from FHPS, or, in connection with the Purchased Assets,
IPS, and to the Company Parties' knowledge no such customer intends to
discontinue or cancel purchases or orders, involving in each case amounts in
excess of $50,000. No Company Party has any direct or indirect interest in any
customer, supplier or competitor of FHPS or in any Person from whom FHPS leases
real or personal property, except to the extent that any such customer,
supplier or competitor is also an Affiliate of the Company, or except for any
passive investment interest held by any of the Company Parties.
4.21 INTELLECTUAL PROPERTY. Except as set forth in Schedule 4.21, FHPS
has full legal right, title and interest in and to all trademarks, service
marks, trade names, copyrights, know-how, patents, trade secrets, licenses
(including licenses for the use of computer software programs), and other
intellectual property used in the conduct of its business (the "INTELLECTUAL
PROPERTY"), the absence of which would have a Material Adverse Effect on FHPS
or the Purchased Assets. Schedule 4.21 sets forth a true and correct list of
all Intellectual Property of FHPS. To the Company Parties' knowledge, FHPS owns
or possesses adequate rights to use all Intellectual Property reasonably
necessary to the conduct of the business of FHPS as presently conducted, and
the unrestricted conduct and the unrestricted use and exploitation of the
Intellectual Property does not infringe or misappropriate any rights held or
asserted by any Person, except where the failure to possess such rights or the
infringement would not have a Material Adverse Effect on FHPS or the Purchased
Assets. To the Company Parties' knowledge, no Person is infringing on the
Intellectual Property, and no payments are required for the continued use of
the Intellectual Property, except for software licenses entered into in the
ordinary course of business. None of the Intellectual Property has ever been
declared invalid or unenforceable, or is the subject of any pending or, to the
Company Parties' knowledge, threatened action for opposition, cancellation,
declaration, infringement, or invalidity, unenforceability or misappropriation
or like claim, action or proceeding, which declaration or unenforceability, or
which pending or threatened action would have a Material Adverse Effect on FHPS
if decided adversely to FHPS.
18
4.22 MATERIAL CONTRACTS. Schedule 4.22 sets forth a list of each
Material Contract of each Subsidiary, including all material contracts with
customers for the provision of products or services by each Subsidiary, other
than any Material Contract relating to any excluded assets or liabilities (the
"PURCHASED MATERIAL CONTRACTS"). The copy of each Material Contract furnished
to Buyer is a true and complete copy of the document it purports to represent
and reflects all amendments thereto made through the date of this Agreement.
Neither Subsidiary has violated any of the terms or conditions of any Purchased
Material Contract which would permit termination or material modification of
any Purchased Material Contract. All of the material covenants to be performed
by each Subsidiary and, to the knowledge of the Company Parties, any other
party thereto, have been fully performed in all material respects, and neither
Subsidiary has received notice for breach or indemnification or notice of
default or termination under any Purchased Material Contract by or against FHPS
or IPS or to the knowledge of the Company Parties, any other party thereto. To
the knowledge of the Company Parties, no event has occurred which constitutes,
or after notice or the passage of time, or both, would constitute, a default by
either Subsidiary under any Purchased Material Contract, and to the knowledge
of the Company Parties no such event has occurred which constitutes or would
constitute a material default by any other party. Neither Subsidiary is subject
to any liability or payment resulting from re-negotiation of amounts paid under
any Purchased Material Contract. As used in this Section 4.22, Purchased
Material Contracts shall mean formal or informal, written or oral (a) loan
agreements, indentures, mortgages, pledges, hypothecations, deeds of trust,
conditional sale or title retention agreements, security agreements, equipment
financing obligations or guaranties, or other sources of contingent liability
in respect of any indebtedness or obligations to any other Person, or letters
of intent or commitment letters with respect to same, which exceed $10,000
individually or $50,000 in the aggregate; (b) contracts obligating FHPS or IPS
to provide products or services for a period of one year or more; (c) leases of
real property extending for a period of one year or more; (d) leases of
personal property which individually provide for total payments in excess of
$10,000, or in the aggregate $25,000 and which are not cancelable without
penalty on notice of sixty (60) days or less; (e) agreements providing for an
independent contractor's services, or letters of intent with respect to same,
where the payment due thereunder exceeds $10,000; (f) employment agreements,
management service agreements, consulting agreements, having a value in the
form of revenue or expense in excess of $10,000; (g) any contract relating to
pending capital expenditures by FHPS in excess of $10,000; (h) contracts
obligating FHPS to purchase supplies, equipment, media and related services of
any kind, in an amount exceeding $10,000 and not cancelable without penalty on
notice of thirty (30) days or less; (i) any non-competition agreements
restricting FHPS in any manner; and (j) confidentiality agreements,
non-competition agreements, employee handbooks, policy statements and any other
agreements relating to any employee of FHPS, which is not terminable as of the
Closing.
4.23 ACCURACY OF INFORMATION FURNISHED. Subject to Buyer's
representation and warranty under Section 3.10, no representation, statement or
information contained in this Agreement (including, without limitation, the
various Schedules attached hereto) or any agreement executed in connection
herewith or in any certificate delivered pursuant hereto or thereto contains
any untrue statement of a material fact or omits any material fact necessary to
19
make the information contained therein not misleading. The Company Parties have
provided Buyer with true, accurate and complete copies of all documents listed
or described in the various Schedules attached hereto.
4.24 NO COMMISSIONS. Other than X X Xxxxx Securities Corporation,
neither the Company nor any Subsidiary has incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation in
connection with the transactions contemplated hereby.
4.25 ABSENCE OF SENSITIVE PAYMENTS. FHPS has not made or maintained
(a) any contributions, payments or gifts of its funds or property to any
governmental official, employee or agent where either the payment or the
purpose of such contribution, payment or gift was or is illegal under the laws
of the United States or any state thereof, or any other jurisdiction (foreign
or domestic); or (b) any contribution, or reimbursement of any political gift
or contribution made by any other Person, to candidates for public office,
whether federal, state, local or foreign, where such contributions by FHPS were
or would be a violation of applicable law.
4.26 TAX MATTERS. Within the times (including extensions) and in the
manner prescribed by law, FHPS (or the Company, on behalf of FHPS) has filed
all federal, state, local and foreign returns for Taxes ("RETURNS") required to
be filed in any jurisdiction (including, without limitation, informational
returns) and such Returns are complete, true and correct in all material
respects. All Returns complied in all material respects with the tax laws,
rules and regulations, as presently interpreted, applicable to such Returns.
FHPS (or the Company on behalf of FHPS) has not waived or extended any statute
of limitations relating to the assessment of any Taxes. No audit or examination
of any of the Returns of FHPS is currently in progress or, to the Company
Parties' knowledge, threatened or has occurred in the past. All Taxes required
to be paid pursuant to such Returns have been paid on or before their
respective due dates, including any extensions thereof.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of the terms of this Agreement and the transactions contemplated hereby.
5.2 COMPLIANCE WITH COVENANTS. The Company shall, and shall cause the
Subsidiaries to, comply with all of the covenants of the Company Parties under
this Agreement.
5.3 COOPERATION. Each of the parties agrees to cooperate with the
other in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation in connection with the transactions contemplated by
this Agreement and to use its respective reasonable best efforts to agree
jointly on a method to overcome any objections by any Governmental Authority to
any such transactions. In addition, the Company agrees to cooperate with Buyer,
with third party
20
costs paid by Buyer, in connection with any audit of historical financial
information that may be required under the rules and regulations of the
Securities and Exchange Commission.
5.4 APPLICATIONS AND OTHER ACTIONS. Each of the parties hereto shall
use its reasonable best efforts to take, or cause to be taken, all appropriate
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated herein, including, without limitation,
using its reasonable best efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of any Governmental
Authority and parties to Material Contracts with the Company and the
Subsidiaries as are necessary for the consummation of the transactions
contemplated hereby. Each of the parties shall make on a prompt and timely
basis all governmental or regulatory notifications and filings required to be
made by it for the consummation of the transactions contemplated hereby.
5.5 PURCHASE PRICE ALLOCATION AND SECTION 338 ELECTIONS. If requested
by Buyer, Buyer, the Company and the Subsidiaries shall join in an election to
have the provisions of Section 338(h)(10) of the Code and similar provisions of
state law ("SECTION 338 ELECTION") apply to the acquisition of FHPS. Buyer
shall be responsible for, and control, the preparation and filing of such
election. Each of the Company and the Subsidiaries shall allocate the Purchase
Price in accordance with Section 2.2 and shall report, act and file in all
respects and for all purposes consistent with such Schedule 2.2, unless to do
so would cause undue hardship on the Company. Each of the Company and the
Subsidiaries shall execute and deliver to Buyer such documents or forms
(including Section 338 Forms, as defined below) as Buyer shall request or as
are required by applicable law for an effective 338(h)(10) Election. "SECTION
338 FORMS" shall mean all returns, documents, statements, and other forms that
are required to be submitted to any federal, state, county or other local
taxing authority in connection with a 338(h)(10) Election, including, without
limitation, any "statement of Section 338 election" and IRS Form 8023 (together
with any schedules or attachments thereto) that are required pursuant to
Treasury Regulations.
5.6 ACCESS TO INFORMATION. From the date hereof to the Closing Date,
the Company shall, and shall cause each of the Subsidiaries and their
respective directors, officers, employees, auditors, counsel and agents to,
afford Buyer and Buyer's officers, employees, auditors, counsel and agents
reasonable access, during regular business hours and upon reasonable advance
notice, to its properties, offices and other facilities, to its officers and
employees and to all books and records, and shall furnish such persons with all
financial, operating and other data and information as may be requested. No
information provided to or obtained by Buyer shall affect any representation or
warranty in this Agreement.
5.7 NOTIFICATION OF CERTAIN MATTERS. From the date hereof to the
Closing Date, each of the parties to this Agreement shall give prompt notice to
the other parties of the occurrence or non-occurrence of any event which would
likely cause any representation or warranty made by such party herein to be
untrue or inaccurate or any covenant, condition or agreement contained herein
not to be complied with or satisfied (provided, however, that, any such
disclosure shall not in any way be deemed to amend, modify or in any way affect
the representations, warranties and covenants made by any party in or pursuant
to this Agreement).
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5.8 CONFIDENTIALITY; PUBLICITY. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or their
respective Affiliates, employees, agents and representatives shall disclose to
any third party this Agreement, the subject matter or terms hereof or any
confidential information or other proprietary knowledge concerning the business
or affairs of the other party which it may have acquired from such party in the
course of pursuing the transactions contemplated by this Agreement, including
all notes, documents and materials prepared by or for the respective party
which reflect, interpret, evaluate, include or are derived from such
confidential information or proprietary knowledge of the other party, without
the prior consent of the other party hereto; provided, that any information
that is otherwise publicly available, without breach of this provision, or has
been obtained from a third party, or has been requested pursuant to the order
of a court of competent jurisdiction or governmental agency having the
authority to obtain such information, or pursuant to the rules of any
applicable stock exchange to which any of the parties is subject shall not be
deemed confidential information; provided, however, that the party from whom
disclosure is sought, regarding information concerning the other party shall
promptly notify such party and allow such party to obtain any order blocking or
otherwise controlling the disclosure of such information. Any press releases or
any other public announcements concerning this Agreement or the transactions
contemplated hereby shall be approved by both Buyer and the Company; provided,
however, that if any party reasonably believes that it has a legal obligation
to make a press release and the consent of the other party cannot be obtained,
then the release may be made without such approval. Prior to such time, the
parties shall not make any public disclosure regarding the Agreement or the
transactions contemplated hereby.
5.9 NO OTHER DISCUSSIONS. The Company Parties and their Affiliates
shall not directly or indirectly, through any officer, director, employee,
affiliate or agent or otherwise, take any action to solicit, initiate, seek,
entertain, encourage, support or respond to any inquiry, proposal or offer
from, furnish any information to, or participate in any negotiations with, any
third party regarding any acquisition of FHPS or the Purchased Assets, any
merger or consolidation with or involving FHPS or the Purchased Assets, or any
acquisition of any material portion of the Shares of FHPS or Purchased Assets,
including the grant of any license to any Intellectual Property of FHPS other
than licenses in the ordinary course of business related to the sale of FHPS'
products. The Company agrees that any such negotiations (other than
negotiations with Buyer) in progress as of the date hereof will be suspended
and that the Company will not accept or enter into any agreement, arrangement
or understanding regarding any such third party acquisition transaction prior
to the termination hereof. In the event a Company Party or any of their
respective officers, directors, employees, affiliates or agents receives any
proposal for, any third party acquisition transaction involving FHPS or the
Purchased Assets, or any request for nonpublic information in connection with
any such proposal, the Company will immediately notify Buyer, describing in
detail the identity of the Person making such proposal and the terms and
conditions of such proposal. Nothing contained in this Section shall be
construed as limiting the ability of the Company as to any matter described in
this section, with regard to any other assets of the Company other than the
Purchased Assets and the Shares.
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5.10 FHPS TAX MATTERS.
(a) Company Returns. The Company and/or FHPS shall duly
prepare, or cause to be prepared, and the Company shall file, or cause to be
filed, on a timely basis all Returns of FHPS for any period ending on or before
the Closing Date. The Company shall file amended Tax Returns with respect to
periods ending on or before the Closing Date only as agreed by Buyer and the
Company.
(b) Buyer Returns. Buyer shall duly prepare, or cause to be
prepared, and file, or cause to be filed, on a timely basis all Returns of FHPS
for any tax period which ends after the Closing Date, including but not limited
to any Straddle Periods. Any such Returns with respect to the Straddle Periods
shall, insofar as they relate to FHPS, be on a basis consistent with previous
Returns filed in respect of FHPS, unless Buyer and the Company conclude that
there is no reasonable basis for such position.
(c) Tax Cooperation. The Company and Buyer shall provide the
other party with such forms, information and records and make such of its
officers, directors, employees and agents available as may be reasonably
requested by such other party in connection with the preparation of any Return
or any audit or other proceeding, including any ruling request, that relates to
FHPS.
(d) Company Indemnification. The Company shall be liable for
and shall indemnify and hold Buyer harmless against all Taxes of FHPS or
attributable to the Purchased Assets payable for any taxable year or taxable
period ending on or before the Closing Date. To appropriately apportion any
income taxes relating to any taxable year, beginning before and ending after
the Closing Date, the parties shall apportion such income taxes to the taxable
period ending on or before the Closing Date by a closing of the books
consistent with their past practice for reporting items, except that (i)
exemptions, allowances or deductions that are calculated on a time basis, such
as the deduction for depreciation shall be apportioned on a time basis, and
(ii) all Taxes relating to actions outside the ordinary course of business,
occurring after the Closing, on the Closing Date shall be apportioned to the
period ending after the Closing Date. To appropriately apportion any non-income
taxes relating to any taxable year beginning before and ending after the
Closing Date, the parties shall apportion such non-income taxes to the taxable
period ending on or before the Closing Date, as follows: (x) ad valorem taxes
(including without limitations real and personal property taxes), shall be
accrued on a daily basis over the period for which such taxes are levied, or,
if it cannot be determined over the period such taxes are being levied, over
the fiscal period of the relevant taxing authority in each case irrespective of
the lien or assessment date of such taxes, (y) all taxes relating to actions
outside the ordinary course of business occurring after the Closing on the
Closing Date shall be apportioned to the period ending after the Closing Date,
and (z) franchise and other privilege taxes not measured by income shall be
accrued on a daily basis over the period to the which the privilege relates.
(e) Buyer and FHPS Indemnification. Buyer and FHPS shall be
liable for, and shall indemnify and hold the Company and any of its Affiliates
harmless against any and all Taxes imposed on FHPS relating or apportioned to
any taxable year or portion thereof ending after the Closing Date, including
without limitation all Taxes relating to actions outside the ordinary course of
business occurring after the Closing, on the Closing Date.
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(f) Refunds or Credits. Buyer and FHPS shall promptly pay to
the Company any refunds or credits (including interest paid to Buyer thereon)
relating to Taxes for which the Company may be liable under Section 5.10
hereof. For purposes of this Section 5.10(f), the terms "refund" and "credit"
shall include a reduction in Taxes and the use of an overpayment of Taxes as an
audit or other tax offset. Receipt of a refund shall occur upon the filing of a
Tax Return or an adjustment therein, using such reduction, overpayment or
offset, or upon the receipt of cash. Upon the reasonable request and cost of
the Company, Buyer shall prepare and file or cause to be prepared and filed,
all claims for refunds relating to such Taxes; provided, however, that Buyer
shall not be required to file such claims for refund to the extent such claim
for refund would have a Material Adverse Effect on Buyer or FHPS in the future,
or to the extent such claims for refund relate to a carryback of an item. Buyer
shall be entitled to all other refunds and credits of Taxes; provided, however,
Buyer will not allow the amendment of any Tax Return relating to any Taxes for
a period (or portion thereof) ending on or prior to the Closing Date or the
carryback of an item to a period ending on or prior to Closing without the
Company's consent.
(g) Consent. Whenever any taxing authority asserts a claim,
makes an assessment or otherwise disputes the amount of taxes for which the
Company is or may be liable under this Agreement, Buyer shall, if informed of
such assertion, promptly inform the Company within fifteen business days, and
the Company shall have the right to control the resulting proceedings and to
determine whether and when to settle any such claim, assessment or dispute to
the extent such proceedings or determinations affect the amount of taxes for
which the Company may be liable under this Agreement. Whenever any taxing
authority asserts a claim, makes an assessment, or otherwise disputes the
amount of taxes for which the Buyer is liable under this Agreement, the Buyer
shall have the right to control any resulting proceedings and to determine
whether and when to settle any such claim, assessment or dispute, except to the
extent such proceeding affect the amount of taxes for which the Company may be
liable under this Agreement.
(h) Survival. The obligations of the parties set forth in
this Section 5.10 shall be unconditional and absolute and shall remain in
effect until thirty days after the expiration of the applicable statute of
limitations.
5.11 SERVICE AGREEMENT. Buyer, the Company and IPS shall enter into a
service agreement (the "SERVICE AGREEMENT") in the form of Exhibit D hereto
under which Buyer or any of its subsidiaries or Affiliates shall be the
provider of certain mail order, network claims processing and other pharmacy
benefit management services set forth in the Service Agreement.
5.12 TRANSITION OF SERVICES.
(a) Implementation Schedule. On or before the Closing, the
parties will complete a schedule and attach it to this Agreement as Schedule
5.12, which schedule will include the name, address, contact person and number
of lives eligible for pharmacy benefits for each plan covered by the Affiliated
Business and the Non-affiliated Business and the targeted date that such
business will be transitioned to Buyer's pharmacy claims processing system (the
"IMPLEMENTATION SCHEDULE"). The parties shall use their respective reasonable
best efforts to ensure that all of such business is transitioned to and
implemented by Buyer.
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(b) Transition of the Company Affiliated Business. Upon
Closing, Buyer shall provide claims processing services, retail pharmacy
network management services, rebate contracting and formulary management
services, mail service pharmacy and other pharmacy benefit management services
for the Company Affiliated Business in accordance with the terms and provisions
set forth in the Service Agreement, including subject to the transition
schedule set forth therein.
(c) Transition of the Non-affiliated Business.
(i) The Company agrees that, following the Closing
and until such time as the claims processing services are implemented
by Buyer for each plan, the Company shall continue to perform the same
scope of claims processing services that it provided for each such
plan prior to the Closing. The Company shall use its reasonable best
efforts to ensure that during this transition period such services are
performed in such a manner that is consistent with the ordinary course
of business immediately prior to Closing in order to preserve and keep
intact the business relationships with such plans.
(ii) The Company and IPS agree that following the
Closing and until such time as the FHS Affiliated Business has been
transitioned to the jointly negotiated drug manufacturer agreements
(as contemplated by the Service Agreement), upon the request of Buyer,
the Company and IPS shall cause the Non-affiliated Business to be
eligible for rebates under any or all of the existing IPS rebate
agreements should Buyer determine in its sole discretion that it
desires to continue to use such agreements for the Non-affiliated
Business. The Company and IPS agree that such rebates will be serviced
in accordance with Buyer's instructions. IPS agrees that all rebates
collected by IPS based on the utilization of the Non-affiliated
Business prior to Closing shall be paid by IPS following Closing
pursuant to the terms and conditions of the respective agreements for
the Non-affiliated Business, and that Advance Paradigm's obligation to
pay such rebates on such business shall begin with the rebates
collected for the quarter ending June 30, 1999.
(iii) Upon Closing, subject to the respective
agreements between Buyer and each plan covered by the Non-affiliated
Business, mail pharmacy services shall be provided for the
Non-Affiliated Business as determined by Buyer in its sole discretion.
(d) Pharmacy Network Agreements. Pursuant to the transactions
contemplated by this Agreement, IPS will assign to FHPS prior to Closing or
directly to Buyer as of the Closing, and Buyer will acquire, all of the retail
pharmacy network contracts held by IPS, including, but not limited to those set
forth on Schedule 4.22, and Buyer will assume all of the rights and obligations
thereunder upon Closing, or as soon thereafter as is practical; provided,
however, that the parties may agree to substitute new agreements between Buyer
and any such pharmacies in lieu of assignment of any such agreements. In
addition, the parties will use their reasonable best efforts to obtain
assignments of all other retail pharmacy network agreements, subject to any
limitations imposed under applicable law or regulation affecting any of the
Company's Affiliates. Subject to the respective agreements between Buyer and
each plan covered by the Non-affiliated Business, the pharmacy eligible
participants covered by such plans will continue to receive their prescription
services from such retail pharmacies. The parties will
25
use their reasonable best efforts to obtain a release of IPS and/or FHS from
any liability arising from any such pharmacy network agreements from and after
the Closing. In the event Buyer has failed or is otherwise unable to pay any
such pharmacies in accordance with such agreements (a "DEFAULT IN PHARMACY
PAYMENT"), upon written notice to Buyer and confirmation from Buyer's chief
financial officer that such amounts have not been paid to the pharmacies or to
the pharmacies' Affiliates or designees, FHS, or an FHS Affiliated Plan may
make payment in order to remedy any such Default in Pharmacy Payment, and FHS
shall have the right to offset any amounts that would have been due to Buyer
for such claims under the Service Agreement for such claims.
5.13 CONDUCT OF COMPANY PENDING TRANSITION. From and after the date
hereof and prior to the complete transition of the Affiliated Business and the
Non-affiliated Business, unless Buyer shall otherwise agree in writing, and
except as otherwise expressly contemplated by this Agreement, each of the
Company and the Subsidiaries consents and agrees that the businesses of FHPS
and the business relating to the Purchased Assets shall be conducted only in,
and each of the Company and the Subsidiaries shall not take any action
affecting FHPS or the Purchased Assets except in, the ordinary course of
business and consistent with past practices, and each of the Company and the
Subsidiaries shall use its best efforts to maintain and preserve the business
organization, assets, employees and advantageous business relationships of FHPS
and the Purchased Assets.
5.14 RESTRICTIVE COVENANTS.
(a) In order to assure that Buyer will realize the benefits
of the transactions contemplated hereby, subject to the Company's right to
terminate the Service Agreement after five (5) years, during the term of the
Service Agreement, but in any event not less than the five-year period
following the Closing Date, the Company and its Affiliates shall not engage in
pharmacy claims processing, retail pharmacy network management, mail service
pharmacy, rebate management or (subject to Section 3 of the Service Agreement)
the negotiation and performance of drug manufacturer agreements.
Notwithstanding the foregoing, (i) if the parties' obligations regarding
formulary management and drug manufacturer agreements are terminated in
accordance with Section 11(c)(i) of the Service Agreement, then, so long as the
Company complies with Section 11(c)(i) of the Service Agreement, the Company
may thereafter provide such services for the FHS Affiliated Members; and (ii)
if the Company releases Buyer from its obligations to perform the retail
pharmacy network management services in accordance with Section 11(c)(ii) of
the Service Agreement, then, so long as the Company is in compliance with
Section 11(c)(ii) of the Service Agreement, the Company may thereafter provide
such services for the FHS Affiliated Members; both (i) and (ii) including
participation (which may include minority ownership interests representing not
more than twenty percent (20%) of the equity or voting control) in cooperative
groups or alliances, provided the Company shall not market such services to
third parties. This section shall not be deemed to be a limitation on providing
clinical services (including pharmacy formulary and rebate management services
in accordance with Section 3 of the Service Agreement) to the FHS Affiliated
Members and the Company's contracting medical groups, or the disease management
services offered by the Company, or otherwise limit the Company or any
Affiliate from undertaking activities relating to the processing and payment of
medical claims generally as a payor of such claims.
26
(b) Section 5.14(a) shall not be deemed to be a limitation on
providing clinical services (including pharmacy formulary and rebate management
services in accordance with Section 3 of the Services Agreement) to the
Affiliated Business and the Company's contracting medical groups, or the
disease management services offered by the Company, or otherwise limit the
Company or any Affiliate from undertaking activities relating to the processing
and payment of medical claims generally as a payor of such claims.
(c) Nothing contained in this Section 5.14 shall limit any
FHS Successor from owning and operating any business (or line of business), for
the benefit of the enrollees of the FHS Successor or other third parties with
whom the FHS Successor contracts, which would otherwise be construed as
violating the provisions of this Section 5.14; provided that the FHS Successor
shall be bound to this Section 5.14 with respect to the business of the Company
and the Affiliated Business, including business that would have been
attributable to the Company but for the Change of Control of the Company; and
provided further that except as expressly otherwise stated herein, all terms,
conditions and obligations of this Agreement shall become the obligations of
any FHS Successor. The Buyer and the FHS Successor shall use their respective
best efforts to agree on the allocation of enrollees between FHS and the FHS
Successor that are subject to this provision. To the extent that the Company
acquires any managed care company that has an ownership in or otherwise
provides services that would conflict with this provision, this provision shall
not apply to the enrollees of such managed care organization as of the
effective date of such acquisition; provided that the provisions of this
Section 5.14 shall continue to apply to any and all current and additional
Affiliated Business. In addition, prior to consummating any acquisition of a
managed care company that has an ownership interest on or otherwise provide
services that would conflict with this Section 5.14, the Company shall notify
Buyer of such acquisition, and Buyer shall engage in good faith negotiations
regarding cooperative efforts with such entity, including Buyer's opportunity
to acquire such business.
(d) Notwithstanding anything contained herein to the
contrary, in the event of a breach or threatened breach of the covenants
contained in Section 5.14(a) hereof, Buyer may, in addition to any other
available remedies, be entitled to an injunction enjoining the Company and its
Affiliates or any person or persons acting for or with the Company in any
capacity whatsoever from violating any of the terms herein, in accordance with
applicable law regarding the award of an equitable remedy.
5.15 RETENTION OF LITIGATION BY THE COMPANY. The Parties agree that
the Company shall retain all actions, suits and other legal and administrative
proceedings and governmental investigations pending or threatened against FHPS,
or FHPS' properties or assets, or the Purchased Assets. The Parties agree that
the Buyer has not agreed to assume, and shall not be required to assume, any
such pending or threatened action, suit or other legal or administrative
proceeding or governmental investigation, and the Company agrees that it will
take all actions and do all things necessary to ensure that Buyer is not liable
for any of the foregoing.
5.16 FHPS FUNDS. The Company shall cause FHPS to have not less than
Five Million Dollars ($5,000,000.00) in cash immediately prior to and at the
Closing.
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ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF THE BUYER
The obligations of Buyer to effect the transactions contemplated
hereby shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions, any or all of which may be waived in whole or in part
by Buyer:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Company Parties
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing Date with the same force and effect as though made at
and as of that time except (a) for changes specifically permitted by this
Agreement and (b) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date. Each of the Company Parties shall have performed or complied with in all
material respects all of their obligations required by this Agreement to be
performed or complied with at or prior to the Closing Date. Each of the Company
Parties shall have delivered to Buyer a certificate, dated as of the Closing,
duly signed by the Chief Executive Officer and principal accounting officer,
certifying that such representations and warranties are true and correct in all
material respects and that all such obligations have been performed and
complied with in all material respects.
6.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between
September 30, 1998 and the Closing Date, (a) there shall have been no Material
Adverse Change to FHPS or the Purchased Assets, (b) there shall have been no
adverse federal, state or local legislative or regulatory change affecting in
any material respect the services, products, business or prospects of FHPS or
the Purchased Assets, and (c) none of the Purchased Assets or the assets of
FHPS shall have been damaged by fire, flood, casualty, act of God or the public
enemy or other cause (regardless of insurance coverage for such damage), which
damages may have a Material Adverse Effect on the Purchased Assets or FHPS, or
have become the subject of a condemnation proceeding, and the Company Parties
shall have delivered to Buyer a certificate, dated as of the Closing Date, to
that effect.
6.3 CORPORATE CERTIFICATES. The Company shall have delivered to Buyer
(i) copies of the organizational documents of FHPS as in effect immediately
prior to the Closing Date, (ii) copies of resolutions adopted by the Board of
Directors and stockholders of the Company and the Subsidiaries authorizing the
transactions contemplated by this Agreement, and (iii) a certificate of good
standing of each of the Company and the Subsidiaries issued by the Secretary of
State of its respective state of incorporation and each other state in which
each is qualified to do business as of a recent date, certified in each case as
of the Closing Date by the Secretary of the respective Company Party as being
true, correct and complete.
6.4 OPINION OF COUNSEL. Buyer shall have received an opinion dated as
of the Closing Date from counsel for the Company Parties in form and substance
reasonably acceptable to Buyer.
6.5 CERTIFICATES AND TRANSACTION DOCUMENTS. Buyer shall have received
from the Company all of the certificates and transfer documents set forth on
Exhibit C.
28
6.6 CONSENTS AND APPROVALS. The Company Parties shall have received
and furnished to Buyer all consents to the transaction contemplated hereby and
waivers of rights to terminate or modify any material rights or obligations of
the Company Parties from any Person from whom such consent or waiver is
required under any Material Contract on or prior to the Closing and effective
through and including the Closing Date, or who as a result of the transactions
contemplated hereby, would have such rights to terminate or modify such
Contracts or instruments, either by the terms thereof or as a matter of law.
The requirements of the Xxxx-Xxxxx-Xxxxxx Act, if applicable, shall have been
satisfied.
6.7 NO ADVERSE LITIGATION. There shall not be pending or threatened
any action or proceeding by or before any court or other governmental body
which shall seek to restrain, prohibit, invalidate or collect damages arising
out of the transactions contemplated hereby, and which, in the reasonable
judgment of Buyer, makes it inadvisable to proceed with the transactions
contemplated hereby.
6.8 LIABILITIES. Prior to the Closing, the Company shall have obtained
full satisfactions or releases of all obligations and liabilities due to or on
behalf of any Affiliate of a Subsidiary.
6.9 LIENS. The shares of capital stock of each Subsidiary held by the
Company shall be free and clear of any Liens. The Purchased Assets shall be
free and clear of any Liens.
6.10 SERVICE AGREEMENT. The Service Agreement shall be executed and
become effective immediately following the Closing.
6.11 IMPLEMENTATION SCHEDULE. Buyer and the Company shall have agreed
upon the Implementation Schedule set forth on Schedule 5.12.
6.12 FINANCIAL STATEMENTS. The Company shall have delivered, or shall
have caused to be delivered, to Buyer the Prior Financial Statements and the
Current Financial Statements. The Company shall have agreed to deliver the
balance sheet of FHPS at March 31, 1999 within thirty (30) days of the Closing.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY PARTIES
The obligations of the Company Parties to effect the transactions
contemplated hereby shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions, any or all of which may be waived in
whole or in part by the Company Parties:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date with the same force and effect as though made at and as of that
time except (a) for changes specifically permitted by or disclosed pursuant to
this Agreement and (b) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date. Buyer
29
shall have performed and complied with in all material respects all of its
obligations required by this Agreement to be performed or complied with at or
prior to the Closing Date. Buyer shall have delivered to the Company a
certificate, dated as of the Closing Date, and signed by an executive officer,
certifying that such representations and warranties are true and correct in all
material respects and that all such obligations have been performed and complied
with in all material respects.
7.2 NO ADVERSE LITIGATION OR LEGISLATION. There shall not be pending
or threatened any action or proceeding by or before any court or other
governmental body which shall seek to restrain, prohibit, invalidate or collect
damages arising out of the transactions contemplated hereby, and which, in the
reasonable judgment of the Company Parties, makes it inadvisable to proceed
with the transactions contemplated hereby.
7.3 NO MATERIAL ADVERSE CHANGE. Between September 30, 1998 and the
Closing Date, there shall have been no Material Adverse Change to Buyer.
7.4 OPINION OF BUYER COUNSEL. The Company shall have received an
opinion dated as of the Closing Date from counsel to Buyer in form and
substance reasonably acceptable to the Company.
7.5 XXXX - XXXXX - XXXXXX ACT. The requirements of the
Xxxx-Xxxxx-Xxxxxx Act, if applicable, shall have been satisfied.
ARTICLE 8
REMEDIES FOR BREACHES OF THIS AGREEMENT
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement shall
survive the Closing (except if the Party suffering Adverse Consequences knew or
had reason to know of any misrepresentation or breach of warranty or covenant
at the time of Closing) and continue in full force and effect thereafter until
the earlier of: (i) the completion of the Buyer's consolidated audit for the
fiscal year ending March 31, 2000, or (ii) ninety (90) days following the end
of the fiscal year ending March 31, 2000.
8.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER. In the event any
Company Party breaches (or in the event any third party alleges facts that, if
true, would mean any Company Party has breached) any representations,
warranties, and covenants of the Company Parties contained herein, then the
Company agrees to indemnify Buyer from and against any Adverse Consequences
Buyer may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences suffered after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach (or the alleged breach), subject to the limitations set
forth below.
8.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE COMPANY. In the
event Buyer breaches (or in the event any third party alleges facts that, if
true, would mean Buyer has breached) any representations, warranties, and
covenants of Buyer contained herein, then Buyer agrees to indemnify the Company
from and against any Adverse Consequences the Company may suffer through and
after the date of the claim for indemnification (including any Adverse
30
Consequences suffered after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of or caused by the
breach (or the alleged breach), subject to the limitations set forth below.
8.4 PROCEDURE FOR MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify any Party (the
"INDEMNIFIED PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which
may give rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this Article 8, then the Indemnified Party shall
promptly issue a Claim Notice to the Indemnifying Party with respect thereto.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within fifteen
(15) days following the receipt of the Claim Notice that the Indemnifying Party
will indemnify the Indemnified Party from and against the entirety of any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim, (ii)
upon request of the Indemnified Party, the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified Party
that the Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations hereunder,
and (iii) the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(c) The Indemnified Party: (i) may retain separate co-counsel
at its sole cost and expense and participate in the defense of the Third Party
Claim and (ii) will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably); and the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 8.4(b) is
or becomes unsatisfied, (i) the Indemnified Party may defend against the Third
Party Claim in any manner it reasonably may deem appropriate, (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim to the fullest extent provided in this
Article 8.
8.5 NOTICE OF CLAIM. A Party suffering Adverse Consequences that gives
or could give rise to a claim for indemnification under this Article 8 shall
promptly notify each other Party thereof in writing (a "CLAIM NOTICE") in
accordance with Section 10.1. The Claim Notice shall contain a brief
description of the nature of the Adverse Consequences suffered and, if
practicable, an aggregate dollar value estimate of the Adverse Consequence
suffered. No delay in
31
the issuance of a Claim Notice shall relieve any Party from any obligation
under this Article 8, unless and solely to the extent such Party is thereby
prejudiced.
8.6 LIMITATION ON AND EXPIRATION OF INDEMNIFICATION. Notwithstanding
anything in this Article 8 to the contrary, the Company's rights to
indemnification from Buyer, and Buyer's rights to indemnification from the
Company, shall be limited as follows:
(a) all rights of the parties hereto to indemnification
hereunder for breaches of representations and warranties shall expire following
the completion of the Buyer's consolidated audit for the fiscal year ending
March 31, 2000; provided, however, if, prior to such expiration, a state of
facts shall have become known which threatens to give rise to a liability
against which any party hereto would be entitled to indemnification hereunder
and the indemnified party shall have given notice of such facts to the
indemnifying party, then the rights of the indemnified party to indemnification
with respect to such liability shall continue until such liability shall have
been finally determined and disposed of; and provided, further, that any
obligation for indemnification by the Company arising out of Taxes shall
continue for the period of the applicable statute of limitations for such
Taxes.
(b) No party shall be entitled to indemnification pursuant to
Section 8.1 or 8.2 unless and until the aggregate amount of damages resulting
from any and all indemnification sustained by such party exceeds $500,000.
Further, the aggregate amount to which an Indemnified Party shall be entitled
to recover for all obligations of indemnification under this Section 8 shall
not exceed the amount of $20 million.
(c) whenever the word "material" or phrase "Material Adverse
Effect" is used in this Agreement, it shall be construed as referring to
damages with respect to any individual claim which exceeds $75,000.
8.7 ADJUSTMENT FOR INSURANCE. The amount which an Indemnifying Party
is required to pay to, for or on behalf of the Indemnified Party pursuant to
this Article 8 shall be adjusted (including, without limitation, retroactively)
by any insurance proceeds actually recovered by or on behalf of such
Indemnified Party in reduction of the related indemnifiable loss (the
"INDEMNIFIABLE LOSS"). Amounts required to be paid, as so reduced, are
hereinafter sometimes called an "INDEMNITY PAYMENT". If an Indemnified Party
has received or has had paid on its behalf an Indemnity Payment for an
Indemnifiable Loss and subsequently receives insurance proceeds for such
Indemnifiable Loss, then the Indemnified Party shall (x) promptly notify the
Indemnifying Party of the amount and nature of such proceeds, and (y) pay to
the Indemnifying Party the amount of such insurance proceeds or, if lesser, the
amount of the Indemnity Payment.
8.8 MITIGATION OF LOSS. Each Indemnified Party is obligated to use all
reasonable efforts to mitigate to the fullest extent practicable the amount of
any Indemnifiable Loss for which it is entitled to seek indemnification
hereunder, and the Indemnifying Party shall not be required to make any payment
to an Indemnitee in respect of such Indemnifiable Loss to the extent such
Indemnified Party failed to comply with the foregoing obligation.
8.9 SUBROGATION. Upon making any Indemnity Payment, the Indemnifying
Party will, to the extent of such payment, be subrogated to all rights of the
Indemnified Party against
32
any third party in respect of the Indemnifiable Loss to which the payment
relates; provided, however, that until the Indemnified Party recovers full
payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party
against any such third party on account of such payment are hereby made
expressly subordinated and subjected in right of payment of the Indemnified
Party's rights against such third party. Without limiting the generality of any
other provision hereof, each such Indemnified Party and Indemnifying Party will
duly execute, upon request, all instruments reasonably necessary to evidence
and perfect the above-described subrogation and subordination rights.
8.10 OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy (including without limitation any such remedy
arising under Environmental, Health, and Safety Requirements) any Party may
have with respect to the transactions contemplated by this Agreement; provided,
however, that the limitations contained in Section 8.6 shall apply to such
remedies, except with respect to any equitable remedy, or any rights of any of
the parties arising under the Service Agreement.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by mutual written consent of all of the parties hereto at
any time prior to the Closing; or
(b) by Buyer upon delivery of written notice to the Company
in accordance with Section 10.1 of this Agreement in the event of a material
breach by a Company Party of any provision of this Agreement; or
(c) by the Company upon delivery of written notice to Buyer
in accordance with Section 10.1 of this Agreement in the event of a material
breach by Buyer of any provision of this Agreement; or
(d) by Buyer or the Company upon delivery of written notice
to the other in accordance with Section 10.1 of this Agreement, if the Closing
shall not have occurred by March 31, 1999, unless the failure of the Closing to
occur is the result of a breach by the terminating party that caused the
Closing to be delayed.
9.2 EFFECT OF TERMINATION. Except for the provisions of Article 8 and
Section 10.3 hereof, which shall survive any termination of this Agreement, in
the event of termination of this Agreement pursuant to Section 9.1, this
Agreement shall forthwith become void and of no further force and effect, and
the parties shall be released from any and all obligations hereunder; provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
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ARTICLE 10
GENERAL PROVISIONS
10.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage pre-paid),
guaranteed overnight delivery or facsimile transmission, if such transmission
is confirmed by delivery by certified or registered mail (first class postage
pre-paid) or guaranteed overnight delivery, to the following addresses and
telecopy numbers (or to such other addresses or telecopy numbers which such
party shall designate by like notice to the other party):
(a) if to Buyer to:
Advance Paradigm, Inc.
000 X. Xxxx Xxxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Chief Executive Officer, President and Chairman
Telecopy: (000) 000-0000
with a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: J. Xxxxxxx Xxxxxx, Xx., P.C.
Telecopy: (000) 000-0000
(b) if to the Company Parties to:
Foundation Health Systems, Inc.
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxx
President - Specialty Services
Telecopy: 0-000-000-0000
with a copy to:
Foundation Health Systems, Inc.
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: B. Xxxxxx Xxxxxx, Esquire
Senior Vice President, General Counsel
and Secretary
Telecopy: 0-000-000-0000
and
34
Xxxxxxx Xxxxxx & Green, P.C.
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxx, Esquire
Telecopy: 000-000-0000
10.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto, and other documents delivered at the Closing
pursuant hereto), contains the entire understanding of the parties in respect
of its subject matter and supersedes all prior agreements and understanding
(oral or written) between or among the parties with respect to such subject
matter. The Exhibits and Schedules constitute a part of this Agreement as
though set forth in full herein.
10.3 EXPENSES; SALES TAX. Except as otherwise provided herein, each
party shall bear its own transaction fees. The Company shall bear, be
responsible for and pay any state sales tax arising as a result of sale of the
Shares.
10.4 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled, or discharged, except by written instrument executed by
all parties. No failure to exercise and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of such or any other right, power or privilege. No waiver
of any breach of any provision shall be deemed to be a waiver of any preceding
or succeeding breach of the same or any other provision, nor shall any waiver
be implied from any course of dealing between the parties. No extension of time
for performance of any obligations or other acts hereunder or under any other
agreement shall be deemed to be an extension of the time for performance of any
other obligations or any other acts.
10.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns. Nothing expressed or implied
herein shall be construed to give any other Person any legal or equitable
rights hereunder. Except as expressly provided herein, the rights and
obligations of this Agreement may not be assigned by the Company Parties
without the prior written consent of Buyer. Buyer may assign all or any portion
of its rights hereunder to one or more of its wholly owned subsidiaries.
10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument.
10.7 INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Time shall be of the essence in this Agreement.
35
10.8 GOVERNING LAW; INTERPRETATION. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of
Delaware without giving effect to the principles of conflicts of laws.
10.9 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the United States
District Court for the District of Delaware and each of the parties consents to
the jurisdiction of such court (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may
be served on any party anywhere in the world. To the extent not prohibited by
applicable law, each of the parties hereby waives any right to trial by jury in
any action or proceeding based on or arising out of this Agreement.
10.10 ARM'S LENGTH NEGOTIATIONS. Each party hereto expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed himself or itself of the terms,
contents, conditions, and effects of this Agreement; (b) said party has relied
solely and completely upon his or its own judgment in executing this Agreement;
(c) said party has had the opportunity to seek and has obtained the advice of
counsel before executing this Agreement; (d) said party has acted voluntarily
and of his or its own free will in executing this Agreement; (e) said party is
not acting under duress, whether economic or physical, in executing this
Agreement; and (f) this Agreement is the result of arm's length negotiations
conducted by and among the parties and their respective counsel.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
ADVANCE PARADIGM, INC.
By:
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Name:
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Title:
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FOUNDATION HEALTH SYSTEMS, INC.
By:
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Name:
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Title:
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FOUNDATION HEALTH PHARMACEUTICAL SYSTEMS, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
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INTEGRATED PHARMACEUTICAL SYSTEMS, INC.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
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FOUNDATION HEALTH CORPORATION
By:
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Name:
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Title:
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