STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into as of
____________, 1996, between Xxxxxxx Medical Management Holdings Corporation, a
Delaware corporation (the "Buyer") and FHP International Corporation, a Delaware
corporation (the "Seller").
RECITALS
WHEREAS, in connection with the Seller's merger (the "FHP Merger")
with PacifiCare Health Systems, Inc. ("PacifiCare"), the Seller intends to sell
its shares of common stock of Xxxxxxx Medical Management Corporation, a Delaware
corporation ("TMMC"), and Xxxxxxx Health Services Corporation, a Delaware
corporation ("THSC"), to the Buyer, which has been formed for the purpose of
acquiring all of the capital stock of TMMC and THSC.
WHEREAS, the Seller owns 2,767,500 shares of common stock, par value
$.01 per share, of TMMC, and 545 shares of common stock, par value $.01 per
share, of THSC, constituting 92.25% of the outstanding common stock of each of
TMMC and THSC (the "Xxxxxxx Shares").
WHEREAS, the Buyer has previously acquired 232,500 shares of common
stock, par value $.01 per share, of TMMC and 45 shares of common stock, par
value $.01 per share, of THSC, in each case constituting all outstanding shares
of the common stock of each of TMMC and THSC not held by the Seller, pursuant to
a Management Stock Exchange Agreement of even date herewith among the Buyer and
the various management investors named herein.
WHEREAS, the Seller desires to sell, and the Buyer desires to buy, the
Xxxxxxx Shares for the consideration described herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the Seller and the Buyer
hereby agree as follows:
ARTICLE 1. DEFINITIONS
SECTION 1.1 DEFINITIONS. In addition to the terms defined in the
text hereof, for the purpose of this Agreement the following will have the
following meanings:
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"Agreement" means this Stock Purchase Agreement between the Buyer and
the Seller as amended or supplemented.
"Commission" means the Securities and Exchange Commission.
"Encumbrance" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise, except
for any restriction on transfer generally arising under any applicable federal
or state securities law.
ARTICLE 2. PURCHASE OF STOCK
SECTION 2.1 PURCHASE OF STOCK BY BUYER. The Seller hereby sells,
assigns, transfers and conveys to the Buyer all of the Seller's right, title and
interest in and to, and its ownership of, the Xxxxxxx Shares in exchange for
rights to purchase 2,767,500 shares of the Buyer's common stock, par value $.01
per share, that when issued will constitute 92.25% of the Buyer's outstanding
common stock (the "Rights"), plus a note (the "Note") with a payoff amount equal
to the proceeds of a fully subscribed offering of the Rights to the Seller's
common and preferred stockholders in connection with the FHP Merger (the
"Offering"). If the Offering is not fully subscribed, the Buyer will sell to
the Seller all of its shares of common stock not subscribed for in the Offering
in exchange for the cancellation of the remaining indebtedness under the Note.
SECTION 2.2 CLOSING. The Buyer's purchase of the Xxxxxxx Shares as
contemplated by this Agreement (the "Closing") will take place at the same place
and on the same day as the closing of the FHP Merger (the "Closing Date").
SECTION 2.3 CLOSING DELIVERIES.
(a) BY THE SELLER. At the Closing, the Seller will deliver to
the Buyer certificates evidencing the Xxxxxxx Shares. Each certificate
will be properly endorsed for transfer to or accompanied by a duly executed
stock power in favor of the Buyer and will be in a form acceptable for
transfer on the books of TMMC and THSC.
(b) BY THE BUYER. At the Closing, the Buyer will deliver to the
Seller the Note. Certificates evidencing the Rights will be delivered
directly to the Seller's common and preferred stockholders, as contemplated
in the registration statement on Form S-1 filed with the Commission with
respect to the Offering (the "Registration Statement").
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ARTICLE 3. TAX CONSEQUENCES
SECTION 3.1 IRC Section 338(h)(10) ELECTION. In connection with the
purchase of the Xxxxxxx Shares, the Seller and the Buyer will discuss the
possibility of an election under Section 338(h)(10) of the Internal Revenue Code
of 1986, as amended. No such election will be made by the Buyer and the Seller
without the prior written consent of N-T Holdings, Inc., a Delaware corporation
(the "Parent"), which consent will not be withheld unless there is an adverse
effect on the Parent (including through an adverse effect on FHP).
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
SECTION 4.1 SELLER'S REPRESENTATIONS AND WARRANTIES. In order to
induce the Buyer to enter into this transaction, the Seller represents and
warrants that the Seller owns all of the Xxxxxxx Shares beneficially and of
record. All of the Xxxxxxx Shares are owned free and clear of any Encumbrance.
The Buyer is acquiring good and marketable title to and complete ownership of
the Xxxxxxx Shares, free of any Encumbrance.
SECTION 4.2 BUYER'S REPRESENTATIONS AND WARRANTIES. In order to
induce the Seller to enter into this transaction, the Buyer represents and
warrants as follows:
(a) CAPITALIZATION. The authorized capital of the Buyer consists of
15 million shares of common stock, par value $.01 per share, and 1.2 million
shares of preferred stock, par value $.01 per share. There are presently
232,500 issued and outstanding shares of the Buyer's Common Stock. There are no
outstanding options, warrants or other rights to purchase any equity securities
of the Buyer.
(b) RESTRICTIONS ON TRANSFER. The Buyer hereby acknowledges and
agrees that the transfer of the Xxxxxxx Shares under this Agreement has not been
registered under the Securities Act of 1933, as amended (the "Act"), or
qualified with the securities regulatory agency of any state and may not be
resold or otherwise disposed of unless registered under the Act and qualified
with the securities regulatory agency of any state that has jurisdiction over
any such transfer or unless an exemption from such registration or qualification
is available. The Buyer will transfer the Xxxxxxx Shares only in accordance
with the applicable requirements of all federal and state securities laws. The
Buyer acknowledges that the certificate(s) evidencing the Xxxxxxx Shares may
bear a legend regarding restrictions on transfer.
(c) RISK. The Buyer recognizes that investment in TMMC and THSC
involves substantial risks, and it has taken full cognizance of and understands
all of the risk factors related to the purchase of the Xxxxxxx Shares and its
knowledge of TMMC and experience in financial and business matters is such that
it is capable of evaluating the risks of an investment in the Xxxxxxx Shares.
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ARTICLE 5. CONDITIONS OF THE BUYER'S OBLIGATIONS
The obligations of the Buyer under this Agreement are subject to the
fulfillment of the following conditions at or prior to the Closing:
SECTION 5.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of the Seller contained in Section 4.1 above are
true and correct as of the date hereof, and will be true and correct on and as
of the Closing Date.
SECTION 5.2 CAPITAL CONTRIBUTION. The Seller will contribute to TMMC
an amount of cash sufficient to increase TMMC's net worth to approximately $60
million (the "Capital Contribution"); provided that such amount shall not exceed
$70 million. The Capital Contribution will be made by wire transfer of
immediately available funds to an account in the name of TMMC.
ARTICLE 6. CONDITIONS OF THE SELLER'S OBLIGATIONS
The obligations of the Seller under this Agreement are subject to the
fulfillment of the following conditions at or prior to the Closing:
SECTION 6.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of the Buyer contained in Section 4.2 above are
true and correct as of the date hereof, and will be true and correct on and as
of the Closing Date.
SECTION 6.2 REGISTRATION OF RIGHTS. The Registration Statement filed
with the Commission by the Buyer with respect to the Offering will have been
declared effective by the Commission.
ARTICLE 7. GENERAL
SECTION 7.1 GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of California disregarding
conflict of law provisions.
SECTION 7.2 ENTIRE AGREEMENT. This Agreement contains the entire
agreement and understanding of the parties hereto, and incorporates all prior
and contemporaneous discussions, agreements and understandings between the
parties with respect to the subject matter hereof.
SECTION 7.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties and covenants of both the Buyer and the Seller
contained in or made pursuant to this Agreement will survive the execution and
delivery of this Agreement.
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SECTION 7.4 AMENDMENT AND MODIFICATIONS. No amendment or other
modification to this Agreement will be binding upon any party unless executed in
writing by all parties hereto.
SECTION 7.5 WAIVER. No waiver by any party of any of the provisions
of this Agreement will be deemed, or will constitute, a waiver of any other
provision, whether similar, nor will any waiver constitute a continuing waiver.
No waiver will be binding unless executed in writing by the party making the
waiver.
SECTION 7.6 CAPTIONS. All captions in this Agreement are intended
solely for the convenience of the parties, and none will be deemed to affect the
meaning and construction of any provision of this Agreement.
SECTION 7.7 COUNTERPARTS. This Agreement and any amendment hereto
may be executed in one or more counterparts and by different parties in separate
counterparts. Such counterparts will constitute one and the same agreement and
will become effective when the counterparts have been signed by each party and
delivered to the other party.
SECTION 7.8 THIRD PARTY BENEFICIARY. The parties to this Agreement
hereby acknowledge and agree that the Parent is an intended third party
beneficiary of the rights of FHP under this Agreement, and in accordance
therewith, is entitled to enforce or seek remedies with respect to any of such
rights in law or in equity.
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IN WITNESS WHEREOF, the undersigned have caused this Stock Purchase
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date provided first written above.
FHP INTERNATIONAL CORPORATION
By: _________________________
Xxxxxxxx W. Price III
President and Chief Executive
Officer
XXXXXXX MEDICAL MANAGEMENT HOLDINGS CORPORATION
By: __________________________
Xxxx X. Xxxxxxxxx
President and Chief Executive
Officer
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