EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of July 31, 2003 (this "Agreement"), by
and among National Medical Health Card Systems, Inc., a Delaware corporation
("Acquirer"), PORTLAND PROFESSIONAL PHARMACY, a Maine corporation ("PPRX"),
PORTLAND PROFESSIONAL PHARMACY ASSOCIATES, a Maine corporation ("PRXA"; and,
together with PPRX, the "Companies"), and the three individuals listed on
Schedule I hereto, who own all the capital stock of PPRX and of PRXA (each a
"Shareholder" and collectively the "Shareholders").
RECITALS
WHEREAS, the Shareholders own all of the issued and outstanding shares of
capital stock of each of PPRX and PRXA (collectively, the "Shares");
WHEREAS, the Shareholders desire to sell the Shares to the Acquirer and the
Acquirer desires to purchase the Shares from the Shareholders upon the terms and
subject to the conditions set forth in the Agreement (the "Acquisition");
WHEREAS, the respective Boards of Directors of PPRX, PRXA and Acquirer have
approved the Acquisition upon the terms and subject to the conditions set forth
in this Agreement; and
NOW, THEREFORE, in consideration of the premises, the representations,
warranties and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
subject to the terms and conditions set forth herein, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
In this Agreement, the following words and phrases shall have the meanings
hereinafter set forth:
"Acquisition" shall have the meaning given to such term in the Recitals
hereof.
"Acquirer" shall have the meaning given such term in the first paragraph of
this Agreement.
"Acquirer Common Stock" shall mean common stock of Acquirer, $.001 par
value per share.
"Acquirer Disclosure Schedule" shall have the meaning given such term in
the preamble to Article V hereof.
"Acquirer Indemnified Party" shall have the meaning given such term in
Section 11.01 hereof.
"Affiliated Group" shall have the meaning give such term in Section 3.11(a)
hereof.
"Affiliates" shall have the meaning as set forth in Rule 144 promulgated
under the Securities Act.
"Business Day" shall mean any day, other than a Saturday, Sunday or legal
holiday under the Federal laws of the United States or the laws of the State of
New York.
"Closing" shall have the meaning given such term in Section 2.02 hereof.
"Closing Date" shall have the meaning given such term in Section 2.02
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission of the
United States.
"Companies" shall have the meaning given such term in the first paragraph
of this Agreement.
"Company Disclosure Schedule" shall have the meaning given such term in the
preamble to Article III hereof.
"Company Indemnified Party" shall have the meaning given such term in
Section 11.02 hereof.
"Contest" shall have the meaning given such term in Section 12.02(b)
hereof.
"Contracts" shall have the meaning given such term in Section 3.16(a)
hereof.
"Earn Out" shall have the meaning given such term in Section 2.05 hereof.
"Employee Plan" shall have the meaning given such term in Section 3.17(a)
hereof.
"Environmental Laws" shall mean, with respect to the Companies, any
federal, state, or local law, statute, rule, regulation, order or other
requirement of law relating to (i) the manufacture, transport, use, treatment,
storage, disposal, release or threatened release of Hazardous Substances, or
(ii) the protection of human health or the environment (including, without
limitation, natural resources, air, and surface or subsurface land or waters).
"Environmental Liabilities" shall mean any and all liabilities,
responsibilities, claims, suits, losses, costs (including remediation, removal,
response, abatement, clean-up, investigative and/or monitoring costs and any
other related costs and expenses), other causes of action recognized now or at
any later time, damages, settlements, expenses, charges, assessments, liens,
penalties, fines, pre-judgment and post-judgment interest, attorney fees and
other legal fees (a) pursuant to any agreement, order, notice, requirement,
responsibility or directive (including directives embodied in Environmental
Laws), injunction, judgment or similar documents (including settlements) arising
out of or in connection with any Environment Laws, or (b) pursuant to any claim
by a governmental entity or other person or entity for personal injury, property
damage, damage to natural resources, remediation or similar costs or expenses
incurred or asserted by such entity or person pursuant to common law or statute.
"Environmental Material Adverse Effect" shall mean, with respect to the
Companies, any Environmental Liabilities that are reasonably expected to exceed
$5,000 per occurrence, or $20,000 in the aggregate.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
it now exists and is hereafter amended.
"ERISA Affiliate" shall mean any person, firm or entity (whether or not
incorporated) which, by reason of its relationship with PPRX or PRXA is required
to be aggregated with PPRX or PRXA under Sections 414(b), 414(c), 414(m) or
414(o) of the Code, or which, together with PPRX or PRXA, is a member of a
controlled group within the meaning of Section 4001(a)(14) of ERISA.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Financial Statements" shall have the meaning given such term in Section
3.07(a) hereof.
"Generally accepted accounting principles" shall mean generally accepted
accounting principles in the United States.
"Governmental Entity" shall mean any court, administrative agency or
commission or other federal, provincial, state, local, municipal or foreign
government or governmental authority or instrumentality.
"Hazardous Substance" shall mean any material or substance that is: (i)
listed, classified or regulated pursuant to or under any applicable
Environmental Law, or (ii) any petroleum product or by-product, asbestos, urea
formaldehyde insulation or polychlorinated biphenyls.
"Indemnified Party" shall have the meaning given such term in Section 11.04
hereof.
"Indemnifying Party" shall have the meaning given such term in Section
11.04 hereof.
"Indemnified Employees" shall have the meaning given such term in Section
7.05 hereof.
"Indemnity Claim" shall have the meaning given such term in Section 11.07
hereof.
"Intellectual Property" shall have the meaning given such term in Section
3.23 hereof.
"Interim Financial Statements" shall have the meaning given such term in
Section 3.07(a) hereof.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean, with respect to a Person, such Person's actual
knowledge after reasonable inquiry of officers, directors or other employees of
such Person reasonably believed to have knowledge of such matters.
"License" shall have the meaning given such term in Section 3.24 hereof.
"Liens" shall mean all liens, mortgages, charges, security interests,
pledges, rights or claims of others, restraints on transfer or other
encumbrances.
"Losses" shall have the meaning given such term in Section 11.01(a) hereof.
"Material Adverse Change" shall mean a change, event, occurrence or a
development involving a prospective change which could have a Material Adverse
Effect.
"Material Adverse Effect" shall mean, with respect to any Person, a
material adverse effect on the business, prospects, results of operations,
financial condition or assets of such Person and its Subsidiaries, if any, taken
as a whole, or which would prevent or materially delay the consummation of the
transactions contemplated hereby. In determining whether any individual event
would result in a Material Adverse Effect, notwithstanding that such event does
not of itself have such effect, a Material Adverse Effect shall be deemed to
have occurred if the cumulative effect of such event and all other then existing
events would result in a Material Adverse Effect.
"Nasdaq National Market" shall mean the National Association of Securities
Dealers Automated Quotation National Market.
"Person" shall mean an individual, corporation, partnership, limited
liability company, joint venture, association, trust or unincorporated
organization, or a government or any agency or political subdivision thereof.
"Pre-Closing Period" shall have the meaning given such term in Section
12.01(d) hereof.
"Post-Closing Period" shall have the meaning given such term in Section
12.01(d) hereof.
"PPRX" shall have the meaning given such term in the first paragraph of
this Agreement.
"PPRX Common Stock" shall mean all of the issued and outstanding shares of
PPRX, no par value per share.
"PRXA" shall have the meaning given such term in the first paragraph of
this Agreement.
"PRXA Common Stock" shall mean all of the issued and outstanding shares
of PRXA, no par value per share.
"Public Filings" shall have the meaning given such term in Section 5.06
hereof.
"Purchase Price" shall have the meaning given such term in Section 2.03
hereof.
"Regulatory Authority" shall mean any foreign, federal, provincial, state,
local or municipal government or governmental authority the approval of which,
or filing with, is legally required for consummation of the transactions
contemplated by this Agreement.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment.
"Requisite Regulatory Approvals" shall have the meaning given such term in
Section 9.01(b) hereof.
"Section 338(h)(10) Elections" shall have the meaning given such term in
Section 12.05 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Shares" shall have the meaning give such term in the Recitals hereof.
"Shareholder" shall have the meaning given such term in the first paragraph
of this Agreement.
"Shareholder Agreements" shall have the meaning given such term in Section
4.01 hereof
"Subsidiary" of any Person means, with respect to such Person, any
corporation, partnership, joint venture or other legal entity of which such
Person (either alone or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the Board of
Directors or other governing body of such corporation or other legal entity.
"Takeover Proposal" shall have the meaning given such term in Section
6.03 hereof.
"Tax" and "Taxes" shall include any federal, state, local or foreign
income, gross receipts, capital, franchise, import, goods and services, value
added, sales and use, estimated, alternative minimum, add-on minimum, sales,
use, transfer, registration, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental, customs, duties, real
property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee withholding, or other tax, of any kind
whatsoever, including any interest, penalties or additions to tax or additional
amounts in respect of the foregoing; the foregoing shall include any transferee
or secondary liability for a Tax and any liability assumed by agreement or
arising as a result of being (or ceasing to be) a member of any Affiliated
Group, as defined in Section 1504 of the Code (or being included (or required to
be included) in any Tax Return relating thereto). Provided, however, that the
term "Tax" is not intended to include any fees or other amounts payable to any
state regulatory authority in respect of the transfer of pharmacy or other
professional licenses in connection with the Acquisition.
"Tax Returns" shall mean returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
Schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of any Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Treasury Regulations" shall mean the regulations issued by the US
Department of Treasury pursuant to the Code.
"Year-End Financial Statements" shall have the meaning given such term in
Section 3.07(a) hereof.
ARTICLE II
THE ACQUISITION
Section 2.01. Purchase of Shares. At the Closing, Acquirer shall purchase
the Shares from the Shareholders, thereby acquiring all of the issued and
outstanding shares of capital stock of each of PRXA and PPRX.
Section 2.02. Closing. The closing (the "Closing") of the Acquisition shall
take place at 3 p.m., New York time, on July 31, 2003, (the "Closing Date"), at
the offices of the Companies, 0000 Xxxxxxxx Xxxxxx, Xxxxxxxx XX, unless another
time, place or date is agreed to in writing by the parties hereto.
Section 2.03 Purchase Price. Subject to the terms and conditions set forth
in this Agreement, the purchase price to be paid by Acquirer at Closing for the
Shares shall be 3,150,000, in cash, to be paid to the Shareholders at the
Closing, ( the "Purchase Price") The Purchase Price shall be allocated as
provided on Schedule 2.03.
Section 2.04 Deliveries at Closing. At the Closing, the Shareholders will
deliver to Acquirer (a) stock certificates representing all of the PPRX Common
Stock, accompanied by stock powers duly endorsed in blank or accompanied by duly
executed instruments of transfer, (b) stock certificates representing all of the
PRXA Common Stock, accompanied by stock powers duly endorsed in blank or
accompanied by duly executed instruments of transfer and (c) the certificates
and other documents contemplated by Section 9.02. At the Closing, Acquirer will
deliver to the Shareholders (x) the Purchase Price by wire transfer of
immediately available funds and (y) the certificates and other documents
contemplated by Section 9.03.
Section 2.04.5 Post Closing Balance Sheet. Within ten business days after
the Closing Date, the Shareholders shall deliver to the Acquirer a closing
balance sheet dated as of July 31, 2003 (the "Closing Balance Sheet") which
shall be prepared in a manner consistent with the Companies' unaudited balance
sheet at June 30, 2003 (the "June Balance Sheet"). If and to the extent the net
book value (total assets minus total liabilities) on the Closing Balance Sheet
is less than 90% of the net book value shown on the June Balance Sheet
($280,000), the Shareholders shall pay such deficit to the Acquirer, within five
business days after delivery of the Closing Balance Sheet. Provided, however,
that fees paid or accrued in July for legal and consulting services prior to
July 15, 2003 shall not be treated as a deduction against net book value, and
that amounts that Acquirer elects to pay at or around Closing from funds of the
Companies (such as to Xx. Xxxxxx) shall not be treated as a deduction against
net book value.
Section 2.05 Earn Out. In addition to the Purchase Price and subject to the
provisions contained in Schedule 2.05 hereto, Acquirer shall, to the extent
applicable, pay to the Shareholders as additional consideration for the Shares,
cash and/or shares of Acquirer Common Stock as calculated in accordance with
Schedule 2.05 hereto (the "Earn Out").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE SHAREHOLDERS
Except as set forth (by reference to the applicable Section of this
Agreement) in the disclosure schedule delivered by the Companies and the
Shareholders to Acquirer on the date hereof (the "Company Disclosure Schedule"),
a copy of which is attached hereto as Schedule 3.0, PPRX, PRXA and each
Shareholder hereby, jointly and severally, represent and warrant to Acquirer as
of the date hereof and as of the Closing Date as follows:
Section 3.01. Organization, Etc.
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(a) PPRX is a corporation duly organized and validly existing under the
laws of the State of Maine and has full corporate power and authority to conduct
its business as it is now being conducted and to own, operate or lease the
properties and assets it currently owns, operates or holds under lease. PPRX is
duly qualified or licensed to do business and is in good standing as a foreign
corporation in the jurisdictions set forth in the Company Disclosure Schedule,
which constitute all of the jurisdictions where the character of its business or
the nature of its properties makes such qualification or licensing necessary,
except where the failure to so qualify or be licensed would not have a Material
Adverse Effect. PPRX has heretofore delivered to Acquirer true and correct
copies of its Articles of Incorporation and Bylaws as in effect on the date
hereof. PPRX is not in violation of any provisions of its Articles of
Incorporation or Bylaws.
(b) PRXA is a corporation duly organized and validly existing under the
laws of the State of Maine and has full corporate power and authority to conduct
its business as it is now being conducted and to own, operate or lease the
properties and assets it currently owns, operates or holds under lease. PRXA is
duly qualified or licensed to do business and is in good standing as a foreign
corporation in the jurisdictions set forth in the Company Disclosure Schedule,
which constitute all of the jurisdictions where the character of its business or
the nature of its properties makes such qualification or licensing necessary,
except where the failure to so qualify or be licensed would not have a Material
Adverse Effect. PRXA has heretofore delivered to Acquirer true and correct
copies of its Articles of Incorporation and Bylaws as in effect on the date
hereof. PRXA is not in violation of any provisions of its Articles of
Incorporation or Bylaws.
Section 3.02. Subsidiaries and Other Interests. Except as described in the
Company Disclosure Schedule, neither PPRX nor PRXA has any Subsidiaries or,
directly or indirectly, owns any equity, legal, beneficial or similar interest
in, any corporation, partnership, joint venture, association or other entity.
Section 3.03. Capitalization.
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(a) The authorized, issued and outstanding capital stock of each of the
Companies is as set forth on the Company Disclosure Schedule. All of the issued
and outstanding shares of capital stock of each of the Companies are owned, of
record and beneficially, by the Shareholders in the amounts set forth on the
Company Disclosure Schedule. No Persons other than the Shareholders are or will
be entitled to receive any payment with respect to any shares of capital stock
of each of the Companies. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class and series
of authorized capital stock of each of the Companies are as set forth in their
respective Articles of Incorporation, and all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are valid,
binding and enforceable and in accordance with all applicable corporate laws.
All outstanding shares of capital stock of each of the Companies have been duly
authorized and validly issued and are fully paid and non-assessable and are free
and clear of any Liens. All of the outstanding securities of each of the
Companies were issued in compliance with all applicable securities (federal and
state) and corporate laws. None of the outstanding securities have been issued
in violation of any preemptive rights, rights of first refusal or similar
rights. There are no outstanding options, warrants, convertible securities,
calls, rights, commitments, preemptive rights or agreements or instruments or
understandings of any character to which either of the Companies is a party or
by which either of the Companies is bound, obligating either of the Companies to
issue, deliver or sell, or cause to be issued, delivered or sold, contingently
or otherwise, additional shares of its capital stock or any securities or
obligations convertible into or exchangeable for such shares or to grant,
extend, accelerate the vesting of, change the price of or otherwise amend or
enter into any such option, warrant, convertible security, call, right,
commitment, preemptive right or agreement. There are no outstanding obligations,
contingent or other, of either of the Companies to purchase, redeem or otherwise
acquire any shares of its capital stock. There are no bonds debentures, notes or
other indebtedness of either of the Companies having the right to vote (or
convertible into securities having the right to vote) on any matters on which
the Shareholders may vote. Except in respect of the Acquisition as contemplated
by this Agreement and except for the Shareholder Agreements, there are no voting
trust agreements or other contracts, agreements, arrangements, commitments,
plans or understandings restricting or otherwise relating to voting (i) between
or among the Companies and any of their respective shareholders or (ii) between
or among any of the Companies' shareholders.
Section 3.04. Authorization. The Companies have all requisite corporate
power and authority to enter into this Agreement and each of the other
agreements contemplated hereby, to carry out their respective obligations under
this Agreement and under each of the other agreements contemplated hereby and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and each of the other agreements contemplated hereby,
the consummation of the transactions contemplated hereby and thereby and the
performance by PPRX and PRXA of their respective obligations hereunder and
thereunder have been duly authorized by all necessary corporate action on the
part of PPRX, PRXA and the Shareholders. Each of this Agreement and the other
agreements contemplated hereby have been duly executed and delivered by the
Companies and constitute the legal, valid and binding obligation of the
Companies, enforceable against the Companies in accordance with their respective
terms (except as the enforceability thereof may be limited by any applicable
bankruptcy, insolvency or other laws affecting creditors' rights generally or by
general principles of equity, regardless of whether enforceability is considered
in equity or at law).
Section 3.05. No Violation. The execution and delivery by PPRX and PRXA of
this Agreement and each of the other agreements contemplated hereby do not, and
the consummation by PPRX and PRXA of the transactions contemplated hereby and
thereby, and compliance with the terms hereof and thereof will not, (a) conflict
with, or result in any violation of or default under, any provision of the
respective Articles of Incorporation or Bylaws of PPRX or PRXA; (b) conflict
with, or result in any violation of or default or loss of any benefit under, any
License, or any statute, law, rule or regulation, or any judgment, decree or
order of any court or other governmental agency or instrumentality to which PPRX
or PRXA is a party or to which any its respective properties is subject; (c)
conflict with, or result in a breach or violation of or default or loss of any
benefit under, or accelerate the performance required by, any agreement (written
or unwritten), understanding, arrangement, contract, indenture or other
instrument to which PPRX or PRXA is a party or to which any of its property is
subject, or constitute a default or loss of any right thereunder or an event
which, with the lapse of time or notice or both, will result in a default or
loss of any right thereunder or the creation of any Lien upon any of the assets
or properties of PPRX or PRXA; (d) result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any License or (e) result in PPRX or
PRXA being required to pay any material amount or refund to any Affiliate or
licensee of PPRX or PRXA in respect of amounts received by PPRX or PRXA in
advance of the performance of services. PPRX and PRXA are in compliance with all
applicable laws, rules or regulations relating to or affecting the operation,
conduct or ownership of its property or business, other than violations that
individually or in the aggregate does not and will not have a Material Adverse
Effect on the Companies, taken as a whole.
Section 3.06. Approvals. The execution and delivery of this Agreement and
each of the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby by PPRX and PRXA will not require
the consent, approval, order or authorization of any Governmental Entity or
Regulatory Authority or any other Person under any statute, law, rule,
regulation, permit, license, agreement, indenture or other instrument to which
PPRX or PRXA is a party or to which its properties are subject, and no
declaration, filing or registration with any Governmental Entity or Regulatory
Authority is required by PPRX or PRXA in connection and with the execution and
delivery of this Agreement and each of the other agreements contemplated hereby,
the consummation of the transactions contemplated hereby and thereby, or the
performance by PPRX or PRXA of its obligations hereunder and thereunder, except
for (i) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the Exchange Act, the
Securities Act, applicable state securities laws and the securities laws of any
foreign country, and (ii) such consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on the Companies, taken as a whole, and would not prevent, or materially
alter or delay any of the transactions contemplated by this Agreement.
Section 3.07. Financial Statements and Other Information.
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(a) The Companies have delivered to Acquirer true, correct and complete
copies of (i) the unaudited balance sheet of PPRX and PRXA (on a combined basis)
as of December 31, 2002 and December 31, 2001 and the related unaudited
statements of operations and retained earnings, and cash flows for each of the
years in the three-year period ended December 31, 2002, [including the
accompanying letter dated February 5, 2003 of Xxxxxx Xxxxxxxx Xxxxxxxxx
reporting on its review of such financial statements (the "Year-End Financial
Statements")], and (ii) the unaudited balance sheet of PPRX and PRXA (on a
combined basis) as of June 30, 2003 and the related unaudited statement of
profit and loss for the Companies for the six-month period ended June 30, 2003
(the "Interim Financial Statements"). The Year-End Financial Statements and
Interim Financial Statements are herein collectively referred to as the
"Financial Statements."
(b) The Financial Statements are in accordance with the books and records
of the Companies and have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods covered
thereby and the balance sheets included therein present fairly as of their
respective dates the financial condition of the Companies. All material
liabilities and obligations, whether absolute, accrued, contingent or otherwise,
whether direct or indirect, and whether due or to become due, which existed at
the date of such Financial Statements have been disclosed in the balance sheets
included in the Financial Statements or in notes to the Financial Statements to
the extent such liabilities were required, under generally accepted accounting
principles, to be so disclosed. The statements of operations, accumulated
deficit and cash flows included in the Financial Statements present fairly the
results of operations, accumulated deficit and cash flows of the Companies for
the periods indicated. The statements of operations included in the Financial
Statements do not contain any material items of special or non-recurring income
or other income not earned in the ordinary course of business except as
expressly specified therein.
(c) All properties, investments, tangible assets and deferred costs
reflected in the latest balance sheets included in the Financial Statements have
a fair market or realizable value at least equal to the value thereof as
reflected therein.
(d) The accounts and notes receivable of the Companies included in the
latest balance sheet of the Companies included in the Financial Statements are
actual and bona fide receivables representing obligations of the total amount
thereof shown on the books of the Companies, net of certain amounts relating to
Medicare/Medicaid disallowances or disallowances from any other government
entity. The Companies have the right to collect receivables in the full amounts
shown over the period of usual trade terms. The Companies have performed in all
material respects all obligations with respect thereto which it was obligated to
perform to the date hereof, and to the Companies' Knowledge these receivables
are not subject to any defenses or rights of setoff.
(e) Since June 30, 2003, there has been no Material Adverse Change in the
Companies.
Section 3.08. No Undisclosed Liabilities. Except as set forth in the notes
to the Financial Statements, the liabilities on the latest balance sheet of the
Companies included in the Financial Statements consist solely of accrued
obligations and liabilities incurred by the Companies in the ordinary course of
business to Persons which are not Affiliates of the Companies. There are no
liabilities of the Companies of any kind whatsoever, whether or not accrued and
whether or not contingent or absolute, including without limitation documentary
or standby letters of credit, bid or performance bonds, or customer or third
party guarantees, other than (a) liabilities disclosed in the Financial
Statements or in the Company Disclosure Schedule, (b) liabilities incurred in
the ordinary course of business and not required to be set forth in the
Financial Statements under generally accepted accounting principles and (c)
liabilities which have arisen after June 30, 2003 in the ordinary course of
business and consistent with past practice (none of which is a liability for
breach of contract, breach of warranty, tort, infringement claim or lawsuit or a
liability to repay or refund to any person any amounts previously received by
the Company) . There are no asserted claims for indemnification by any Person
against PPRX or PRXA under any law or agreement or pursuant to such
corporations' respective Articles of Incorporation or Bylaws, and the Companies
are unaware of any facts or circumstances that might give rise to the assertion
of such a claim against PPRX or PRXA thereunder.
Section 3.09. Corporate Action. All corporate action of the Board of
Directors and of the Shareholders of PPRX and PRXA taken on or prior to the date
hereof has been duly authorized, adopted or ratified in accordance with
applicable law and their respective Articles of Incorporation and Bylaws and has
been duly recorded in PPRX's and PRXA's, respective, corporate minute books
(true, correct and complete copies of which have been delivered to or made
available for inspection by Acquirer).
Section 3.10. Events Subsequent to December 31, 2002.
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(a) Except as disclosed in the Company Disclosure Schedule, since December
31, 2002, neither PPRX nor PRXA has (a) issued any stock, bond or other
corporate security (including without limitation securities convertible into or
rights to acquire capital stock of PPRX or PRXA); (b) borrowed any amount or
incurred or become subject to any liability (absolute, accrued or contingent),
except current liabilities incurred and liabilities under contracts entered
into, all in the ordinary course of business; (c) discharged or satisfied any
Lien or incurred or paid any obligation or liability (absolute, accrued or
contingent) other than current liabilities shown on its balance sheet included
in the Year-End Financial Statements for the period ended December 31, 2002 and
current liabilities incurred since December 31, 2002 in the ordinary course of
business; (d) declared or made any payment or distribution to shareholders or
purchased or redeemed any shares of its capital stock or other securities, or
entered into, any agreement or commitment or currently has an intention to do
so; (e) mortgaged, pledged or subjected to Lien any of its assets, tangible or
intangible, other than liens for current taxes not yet due and payable; (f)
sold, assigned or transferred any of its tangible assets except in the ordinary
course of business, or canceled any debt or claim; (g) sold, assigned,
transferred or granted any license with respect to any patent, trademark, trade
name, service xxxx, copyright, trade secret or other intangible asset; (h)
suffered any loss of property or waived any right of substantial value whether
or not in the ordinary course of business; (i) suffered any adverse change in
its relations with, or any loss or threatened loss of, any of its suppliers or
customers disclosed pursuant to Section 3.23; (j) (1) granted any severance or
termination pay to any of its directors, officers, employees or consultants, (2)
entered into any employment, deferred compensation or other similar agreement
(or any amendment to any such existing agreement) or arrangement with any of its
directors, officers, employees or consultants, (3) increased any benefits
payable under any existing severance or termination pay policies or employment
agreements, (4) increased the compensation, bonus or other benefits payable to
any of its directors, officers, consultants or employees, except in each case in
the ordinary course of business consistent with past practices; (k) made any
material change in the manner of its business or operations; (l) made any
material change in any method of accounting or accounting practice, except as
specifically disclosed in the Financial Statements; (m) entered into any
transaction except in the ordinary course of business or as otherwise
contemplated hereby; or (n) entered into any commitment (contingent or
otherwise) to do any of the foregoing.
Section 3.11. [MOVED TO SECTION 8.07]Taxes.
-----
(a) PPRX and PRXA (or any affiliated, combined, consolidated unitary or
similar group ("Affiliated Group") of which PPRX or PRXA is or has been a
member) have each duly and timely filed with the appropriate taxing authorities
all Tax Returns that are required to have been filed for, by, on behalf of or
with regard to it and its assets, operations and businesses, and such returns
are true, correct and complete and reflect all liabilities for Taxes for the
periods covered thereby.
(b) All Taxes due and payable by or with respect to PPRX or PRXA, either
directly or as a part of a consolidated, combined or similar return, for all
periods through the Closing Date have been or will be fully and timely paid when
due. The reserves or accruals for Taxes provided in the respective books and
records of the Companies with respect to any period for which Tax Returns have
not yet been filed or for which Taxes are not yet due and owing are or, prior to
the Closing, will be sufficient for all unpaid Taxes of the Companies through
the close of business on the Closing Date. The amount of the reserves or
accruals for the Taxes of the Companies through June 30, 2003 is set forth on
the Company Disclosure Schedule. The Companies have not incurred any Taxes other
than in the ordinary course of business. The Companies have no liability for
Taxes of any person under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, foreign or federal law), as transferee or successor,
by contract, or otherwise.
(c) The Companies have complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes and has duly and timely withheld from employee salaries, wages and
other compensation and have paid over to the appropriate taxing authorities all
amounts required to be so withheld and paid over for all periods under all
applicable laws.
(d) Any deficiencies asserted, assessed or proposed as a result of any
governmental audits of the Tax Returns of PPRX or PRXA have been paid or
settled, and there are no present disputes as to Taxes payable by PPRX or PRXA.
There is no audit, investigation, or proceeding in progress, pending, expected
or threatened against either of the Companies by any governmental agency in
connection with Taxes; nor, to the knowledge of either of the Companies, is
there any reasonable basis for any such audit, investigation or proceeding. No
issue has been raised by a federal, state, local or foreign taxing authority in
any current or prior examination of the Companies which, by application of the
same or similar principles, could reasonably be expected to result in a proposed
deficiency for any subsequent taxable period.
(e) Neither PPRX nor PRXA has (i) executed or filed with any taxing
authority any agreement extending the period for assessment or collection of any
Taxes, including but not limited to any applicable statute of limitations; (ii)
requested any extension of time within which to file any Tax Return, which Tax
Return has not since been filed; (iii) received any written ruling of a taxing
authority related to Taxes or entered into any written and legally binding
agreement with a taxing authority relating to Taxes or (iv) made any payments,
or is obligated to make any payments, or is a party to any agreement that could,
individually or collectively, require it to make payments that are not
deductible under Section 280(G) of the Code.
(f) Neither PPRX nor PRXA is a party to any tax allocation or sharing
agreement or similar document or arrangement.
(g) No Power of Attorney with respect to any Tax matter is currently in
force with respect to either of the Companies.
(h) Acquirer has received complete copies of (i) all income Tax Returns for
PPRX and PRXA for all applicable taxable periods since 1999 and (ii) any audit
report issued within the last three years relating to any Taxes due from or with
respect to PPRX or PRXA, or its income, assets or operations. The Company
Disclosure Schedule sets forth the jurisdictions in which PPRX or PRXA filed Tax
Returns since their inception, and as of the date hereof no claim has ever been
made by any taxing authority in a jurisdiction in which PPRX or PRXA does not
(or did not) file Tax Returns that it is or may be subject to taxation by that
jurisdiction.
(i) Neither PPRX nor PRXA, nor any other person on behalf of PPRX or PRXA,
has (i) agreed to or is required to make any adjustments pursuant to Section
481(a) of the Code or any similar provision of state, local or foreign law by
reason of a change in accounting method, nor has any such change been proposed
or threatened, or has any application pending with any taxing authority
requesting permission for any changes in accounting methods or (ii) executed or
entered into a closing agreement pursuant to Section 7121 of the Code or any
similar provision of state, local or foreign law. Neither PPRX nor PRXA, nor any
other person on behalf of PPRX or PRXA, has filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by PPRX or PRXA.
(j) No property owned by either of the Companies is (i) "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code or (ii) is
"tax-exempt bond financed property" within the meaning of Section 168(g) of the
Code.
(k) Neither PPRX nor PRXA is subject to any private letter rulings of the
Internal Revenue Service or comparable rulings of other Tax authorities.
(l) There are no Liens as a result of unpaid Taxes upon any of the assets
or properties of either of the Companies.
(m) Neither PPRX nor PRXA is a party to any joint venture, partnership or
other arrangement that is treated as a partnership for federal income tax
purposes. Neither PPRX nor PRXA own any interest in any entity that is
disregarded for U.S. federal income tax purposes.
(n) Neither PPRX nor PRXA is or has ever been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Internal
Revenue Code.
(o) Neither PPRX nor PRXA has constituted either a "distributing
corporation" or a "controlled corporation" within the meaning of Section
355(a)(1)(A) of the Code in a distribution qualifying for tax free treatment
under Section 355 of the Code (i) in the two years prior to the date of this
Agreement or (ii) in a distribution that could otherwise constitute part of a
"plan" or "series of transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with this Agreement.
(p) Neither PPRX nor PRXA (A) has or is projected to have an amount
includable in its income for the current taxable year under Section 951 of the
Code; or (B) has an unrecaptured overall foreign loss within the meaning of
Section 904(f) of the Code.
(q) Each of PPRX and PRXA has properly and timely elected under Section
1362 of the Code, and under each analogous or similar provision of state and
local law in each jurisdiction where PPRX and PRXA, as applicable, is required
to file a Tax Return, to be treated as an "S" corporation for all taxable
periods since their respective dates of formation. There has not been any
voluntary or involuntary termination or revocation of any such election. No Tax
will be imposed upon PPRX or PRXA under Section 1374 of the Code in connection
with the transactions contemplated by this Agreement.
Section 3.12. Litigation. There is no action, suit, investigation,
arbitration or proceeding pending or threatened in writing or otherwise against
or affecting the Companies or any of their respective properties or rights
(including without limitation no charge of patent and/or trademark
infringement), by or before any Governmental Entity, or any basis in fact
therefor known to either of the Companies, against or involving the Companies or
any of their respective officers, directors, employees or consultants (in all
instances, in their capacity as such), assets, business or products, whether at
law or in equity. There is no judgment, decree or order against either of the
Companies or their respective officers or directors (in their capacities as
such). The Company Disclosure Schedule accurately describes each action, suit,
investigation, arbitration or proceeding brought against or affecting the
Companies or any of their properties or assets (including any of their patents,
trademarks or other intellectual property) or to which either of the Companies
was a party. With respect to each litigation or claim described in the Company
Disclosure Schedule, copies of all pleadings, filings, correspondence with
opposing parties and their counsel, opinions of counsel, results of studies,
judgments, orders, attachments, impositions of or recordings of Liens and other
documents have been furnished or made available to Acquirer. All proceedings
have been timely reported to all applicable insurance carriers in all material
respects and no reservation of rights or denial of coverage has been issued by
such carrier as to any pending claim.
Section 3.13. Compliance with Laws. The Companies have complied in all
material respects with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings and charges thereunder)
of any Governmental Entity relating to or affecting the operation, conduct or
ownership of its properties or businesses. No investigation, audit, or review by
any Governmental Entity (including without limitation any audit or similar
review by any federal, foreign, state or local taxing authority) with respect to
either of the Companies is pending or threatened, nor has any Governmental
Entity indicated in writing to either of the Companies an intention to conduct
the same. Neither the Companies nor any director, officer, consultant or
employee of the Companies (in all instances, in their capacity as such), is in
default with respect to any order, writ, injunction or decree known to or served
upon the Companies of any Governmental Entity. There is no existing law, rule,
regulation or order, whether federal, state, local, municipal or foreign, which
would prohibit or materially restrict the Companies from, or otherwise
materially adversely affect the Companies in, conducting their respective
businesses in any jurisdiction in which they are now conducting business or in
which they currently propose to conduct business.
Section 3.14. Title to and Condition of Property.
----------------------------------
(a) The Companies own no real property. Each lease or agreement under which
either of the Companies is a lessee or lessor of any property, real or personal,
is a valid and binding agreement of such Company in full force and effect and
without any default thereunder by any other party thereto. No event has occurred
and is continuing which, with due notice or lapse of time or both, would
constitute a default or event of default by either of the Companies under any
such lease or agreement or by any other party thereto. The Companies' possession
of such property have not been disturbed and no claim has been asserted in
writing against the Companies adverse to their rights in such leasehold
interests.
(b) All buildings, structures, appurtenances and material items of
machinery, equipment and other tangible assets used by the Companies are in good
operating condition and repair, normal wear and tear excepted, are usable in the
ordinary course of business, are adequate and suitable for the uses to which
they are being put and conform in all material respects to all applicable laws,
ordinances, codes, rules, regulations and authorizations relating to its use and
operation. The Companies' premises or equipment are not in need of maintenance
or repairs other than ordinary routine maintenance and repairs which are not
material, individually or in the aggregate, in nature or cost, and no such
maintenance or repair has intentionally been delayed, deferred or prolonged.
Section 3.15. Environmental Matters.
---------------------
(a) Except as would not have an Environmental Material Adverse Effect, each
of PPRX and PRXA has been and is currently being operated in compliance with all
applicable limitations, restrictions, conditions, standards, prohibitions,
requirements and obligations of Environmental Laws and related orders of any
court or other governmental authority; neither PPRX nor PRXA is required to
obtain any permits or licenses pursuant to any Environmental Law to conduct its
business as presently conducted;
(b) There are not any existing, pending or threatened actions, suits,
claims, investigations, inquiries or proceedings by or before any court or any
other governmental entity directed against either PPRX or PRXA that pertain or
relate to (1) any remedial obligations under any applicable Environmental Law,
(2) violations by PPRX or PRXA of any Environmental Law, (3) personal injury or
property damage claims relating to a Release of chemicals or Hazardous
Substances, or (4) response, removal, or remedial costs under the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA"), 42
U.S.C.ss.9601 et seq. the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C.ss.6901 et seq., or any similar state or federal laws;
(c) No portion of any real property leased by PPRX is listed on the
National Priorities List ("NPL") or the Comprehensive Environmental Response,
Compensation, and Liability Information System ("CERCLIS") under CERCLA, or any
similar ranking or listing under any state law. Except as would not have an
Environmental Material Adverse Effect, no facts or circumstances exist which
could reasonably be expected to result in any liability to PPRX, PRXA or
Acquirer with respect to the current or past business and operations of PPRX or
PRXA in connection with (i) any Release, transportation or disposal of any
Hazardous Substances, or (ii) any action taken or omitted that was not in full
compliance with or was in violation of any applicable Environmental Law.
Section 3.16. Contracts.
---------
(a) The Company Disclosure Schedule contains a complete list of all
currently effective written or oral (i) employment contracts, arrangements or
policies of either of the Companies which may not be immediately terminated
without penalty (or any augmentation or acceleration of benefits); (ii) leases,
sales contracts and other agreements with respect to any property, real or
personal, of either of the Companies, except for leases of personal property
involving, on an annual basis, less than $15,000 individually or $50,000 in the
aggregate; (iii) contracts or commitments for capital expenditures or
acquisitions in excess of $15,000 on an annual basis for one project or set of
related projects; (iv) agreements, contracts, indentures or other instruments
relating to the borrowing of money, or the guarantee of any obligation (third
party or otherwise) for the borrowing of money (excluding routine checking
account overdraft agreements); (v) contracts or agreements providing for any
covenant not to compete by either of the Companies or otherwise restricting in
any way the Companies' engaging in any business activity (including a
description of the businesses to which the covenant not to compete applies);
(vi) contracts or agreements relating to consultancies, professional retentions,
agency, sales or distributorship arrangements pertaining to either of the
Companies or their products or activities involving in excess of $15,000 on an
annual basis; (vii) contracts, agreements or commitments requiring either of the
Companies to indemnify or hold harmless any Person; (viii) all contracts with
any customer or supplier that cannot be terminated without penalty in excess of
$15,000 by either of the Companies within one year; (ix) any written agreement,
contract, arrangement or understanding with any Affiliate, licensee or
Shareholder; (x) any license or agreement granting or restricting the right of
either of the Companies to use a trade name, trademark, logo, patent, software
or other Intellectual Property; and (xi) contracts, agreements, arrangements or
commitments, other than the foregoing, which could reasonably be considered
material to the Companies' business (all contracts, agreements, arrangements or
commitments to which the Companies are a party, whether or not listed on the
Company Disclosure Schedule, being hereinafter referred to as "Contracts"). True
and correct copies of all the Contracts listed on the Company Disclosure
Schedule have been furnished or made available to Acquirer. Each Contract is a
legal valid, binding and enforceable obligation of the Companies in full force
and effect and the Companies have duly performed their respective obligations
thereunder to the extent such obligations have accrued, and no breach or default
thereunder by either of the Companies or any other party thereto has occurred
that could impair the ability of the Companies to enforce any rights thereunder.
There are no material liabilities of the Companies arising directly from any
breach of or default in any provision of any of the Contracts, nor has there
occurred any breach or default thereof by the Companies which would permit the
acceleration of any obligation of any party thereto or the creation of a Lien
upon any asset(s) of either of the Companies.
(b) The consummation of the Acquisition or the other transactions
contemplated hereby will not result in any violation or termination of, default
or loss of benefit under, or give rise to a right of termination under, the
terms of any Contract. There are no negotiations pending or in progress to
revise, in any material respect, any Contract.
Section 3.17. Employee Plans.
--------------
(a) The Company Disclosure Schedule lists each of the following plans,
contracts, policies and arrangements which is, or has been at anytime during the
last three years, sponsored, maintained or contributed to by, or otherwise
binding xxxx XXXX, XXXX or any of their ERISA Affiliates for the benefit of any
current or former employee, director or other personnel: (i) any "employee
benefit plan," as such term is defined in Section 3(3) of ERISA, whether or not
subject to the provisions of ERISA, (ii) any personnel policy, and (iii) any
other employment, consulting (for annual compensation in excess of $20,000),
collective bargaining, stock option, stock bonus, stock purchase, phantom stock,
incentive, bonus, deferred compensation, retirement, severance, vacation,
dependent care, employee assistance, fringe benefit, medical, dental, sick
leave, death benefit, change in control, golden parachute or other compensatory
plan, contract, policy or arrangement which is not an employee benefit plan as
defined in Section 3(3) of ERISA (each such plan, contract, policy and
arrangement described in (i), (ii) or (iii) above being herein referred to as an
"Employee Plan").
(b) With respect to each Employee Plan, the Companies have delivered to
Acquirer true and complete copies of (i) each contract, plan document, policy
statement, summary plan description and other written material governing or
describing the Employee Plan and/or any related funding arrangements (including,
without limitation, any related trust agreement or insurance company contract)
or, if there are no such written materials, a summary description of the
Employee Plan, and (ii) where applicable, (A) the last annual report (5500
series) filed with the Internal Revenue Service or the Department of Labor; (B)
the two most recent balance sheets and financial statements; (C) the two most
recent actuarial reports or valuation statements; and (D) the most recent
determination letter issued by the IRS, as well as any other determination
letter, private letter ruling, opinion letter or prohibited transaction
exemption issued by the Internal Revenue Service or the Department of Labor
since inception and any application therefor which is currently pending.
(c) Each Employee Plan has been maintained and administered in accordance
with its terms and in compliance with the provisions of applicable law,
including, without limitation, applicable disclosure, reporting, funding and
fiduciary requirements imposed by ERISA and/or the Code. All contributions,
insurance premiums, benefits and other payments to or under each Employee Plan
with respect to all periods prior to the Closing have been made (in accordance
with the governing documents and applicable law) or fully accrued on the
Financial Statements. With respect to each Employee Plan, (i) no application,
proceeding or other matter is pending before the IRS, the Department of Labor or
any other governmental agency, (ii) no action, suit, proceeding or claim (other
than routine claims for benefits) is pending or threatened, and (iii) no facts
exist which could give rise to an action, suit, proceeding or claim which, if
asserted, could result in a material liability or expense to the Companies, any
of their respective ERISA Affiliates or the assets of any Employee Plan.
(d) With respect to each Employee Plan which is an "employee benefit plan"
within the meaning of Section 3(3) of ERISA or which is a "plan" within the
meaning of Section 4975(e) of the Code, there has occurred no transaction which
is prohibited by Section 406 of ERISA or which constitutes a "prohibited
transaction" under Section 4975(c) of the Code and with respect to which a
prohibited transaction exemption has not been granted and is not currently in
effect.
(e) With respect to each funded Employee Plan which is an employee pension
plan within the meaning of Section 3(2) of ERISA, (i) the Employee Plan has
been, since its inception a qualified plan under Section 401(a) of the Code, and
its related trust has been, since its inception exempt from federal income
taxation under Section 501(a) of the Code, (ii) a favorable IRS determination
letter is currently in effect and, since the date of the last determination
letter, the Employee Plan has not been amended or operated in a manner which
would adversely affect its qualified status and no event has occurred which has
caused or could cause the loss of such status, and (iii) there has been no
termination or partial termination within the meaning of Section 411(d)(3) of
the Code.
(f) Neither PPRX, PRXA nor any of their ERISA Affiliates has ever
maintained or been obligated to contribute to a single employer, multiple
employer or multi-employer pension plan (within the meaning of Section 3(2) of
ERISA) which is or was covered by Title IV of ERISA or by Section 302 of ERISA
or Section 412 of the Code, and neither PPRX, PRXA nor any of their ERISA
Affiliates has incurred or may incur any direct or indirect liability under
Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code, contingent
or otherwise.
(g) PPRX and its ERISA Affiliates have complied in all respects with the
provisions of Section 4980B of the Code with respect to any Employee Plan which
is a group health plan within the meaning of Section 5001(b)(1) of the Code.
Neither PPRX nor its ERISA Affiliates maintains, contributes to, or is obligated
under any plan, contract, policy or arrangement providing health or death
benefits (whether or not insured) to current or former employees or other
personnel beyond the termination of their employment or other services, except
as required in Section 4980B of the Code. Each Employee Plan may be unilaterally
terminated and/or amended by PPRX or its ERISA Affiliates at any time without
damage or penalty.
(h) The consummation of the transactions contemplated by this Agreement
will not (either alone or in conjunction with another event, such as a
termination of employment or other services) entitle any employee or other
person to receive severance or other compensation which would not otherwise be
payable absent the consummation of the transactions contemplated by this
Agreement or cause the acceleration of the time of payment or vesting of any
award or entitlement under any Employee Plan.
Section 3.18. Labor Matters. The Company Disclosure Schedule contains a
list of all current employees (including without limitation part-time, temporary
and inactive employees), leased employees, independent contractors and
consultants of the Companies, their respective salaries or wages, other
compensation and dates of employment and positions. The Companies are not a
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization, nor,
as of the date hereof, are the Companies the subject of any proceeding asserting
that either of the Companies have committed an unfair labor practice or is
seeking to compel either of the Companies to bargain with any labor union or
labor organization nor, as of the date of this Agreement, are there pending or
threatened, any material labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving either of the Companies.
Section 3.19. Insurance Policies. The Company Disclosure Schedule contains
a correct and complete description of all insurance policies covering the
Companies, their respective businesses, employees, agents and assets. Each such
policy is in full force and effect and the Companies believes each such policy
is of the type and in the amount customarily carried by Persons conducting
businesses or owning assets similar to those of the Companies. Such policies
shall not, pursuant to their terms, in any way be affected by, or terminate or
lapse by reason of, this Agreement. All retroactive premium adjustments under
any worker's compensation policy of the Companies have been recorded in the
Financial Statements in accordance with generally accepted accounting principles
and are reflected in the Financial Statements. All premiums with respect to such
insurance policies have been paid on a timely basis, and no notice of
cancellation or termination has been received with respect to any such policy.
The Companies have not failed to give any notice or present any claim thereunder
in due and timely fashion. There are no pending claims against such insurance by
or on behalf of the Companies as to which the insurers have denied coverage or
otherwise reserved rights. The Companies have not been refused any insurance
with respect to its assets or operations, nor has their coverage been limited,
by any insurance carrier to which they have applied for any such insurance with
which they have carried insurance since the date of their inception.
Section 3.20. Records. Each of the Companies has records that accurately
and validly reflect its transactions and accounting controls sufficient to
ensure that such transactions are (a) in all material respects executed in
accordance with their respective management's general or specific authorization
and (b) recorded in conformity with generally accepted accounting principles.
Section 3.21. Brokerage Fees. Except for TM Capital Corp., neither the
Companies nor their respective Affiliates has retained any financial advisor,
broker, agent or finder or paid or agreed to pay any financial advisor, broker,
agent or finder on account of this Agreement or any of the agreements
contemplated hereby or any transaction contemplated hereby or thereby or any
transaction of like nature.
Section 3.22. Suppliers and Customers.
-----------------------
(a) The Company Disclosure Schedule lists (i) all suppliers of the
Companies to which the Companies made payments during the period beginning
January 1, 2002 through December 31, 2002, or expects to make payments during
the period beginning January 1, 2003 through December 31, 2003, in excess of
$15,000 in the aggregate, (ii) all customers of the Companies during the period
beginning January 1, 2002 through December 31, 2002, or customers that the
Companies expect will pay to the Companies during the period beginning January
1, 2003 through December 31, 2003, more than $15,000 in the aggregate and (iii)
all other suppliers and customers the loss of any of which, individually or in
the aggregate with all other suppliers or customers affiliated with such
supplier or customer, could have a Material Adverse Effect on the Companies.
(b) To the Companies' and the Shareholders' Knowledge, none of the
Companies' customers or suppliers listed on the Company Disclosure Schedule
intend to cease purchasing from, selling to or dealing with the Companies nor
has any information been brought to their attention which might lead them to
believe any such customer or supplier intends to alter in any material respect
the amount of such purchases, sales or the extent of dealings with the Companies
or to materially alter such purchases, sales or dealings in the event of the
consummation of the Acquisition. No customer has informed the Companies that it
intends to cancel outstanding or currently anticipated contracts with the
Companies.
(c) Neither the Companies nor any of their respective officers, directors
or Affiliates, nor any entity controlled by one of more of the foregoing:
(i) owns, directly or indirectly, any interest in (excepting less than 1%
stock holdings for investment purposes in securities of publicly held and traded
companies), or is an officer, director, employee or consultant of, any Person
which is, or is engaged in business as, a competitor of either of the Companies;
(ii) owns, directly or indirectly, in whole or in part, any material
tangible or intangible property that the Companies uses in the conduct of their
respective businesses, except as disclosed in the Company Disclosure Schedule;
or
(iii) has any cause of action or other claim whatsoever against, or owes
any amount to, the Companies, except for claims in the ordinary course of
business such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements existing on the date hereof.
Section 3.23. Intellectual Property. The Company Disclosure Schedule
contains an accurate and complete list of all domestic and foreign patents,
patent applications, patent licenses, software licenses (other than generally
available pre-packaged "off-the-shelf" software) and licenses, trade names,
trademarks, copyrights, service marks, trademark registrations and applications,
service xxxx registrations and applications, and copyright registrations and
applications owned (in whole or in part), licensed to any extent or used or
anticipated to be used by the Companies in the conduct of their respective
businesses (collectively, and, together with the know how, "Intellectual
Property"). The Companies either own all right, title and interest in and to, or
possesses the exclusive right to use, the Intellectual Property, trade secrets
and technology used in the conduct of their respective businesses (including,
without limitation, the exclusive right to use and license the same (in the
jurisdiction(s) where registered in the case of trademarks, service marks and
copyrights)) and each item constituting part of the Intellectual Property in
which the Companies have an ownership or license interest have been, to the
extent indicated on the Company Disclosure Schedule, duly registered with, filed
in or issued by, as the case may be, the United States Patent and Trademark
Office or such other Governmental Entities as are indicated on the Company
Disclosure Schedule and such registrations, filings and issuances remain in full
force and effect. No claim of infringement or misappropriation of patents,
trademarks, trade names, service marks, copyrights or trade secrets of any other
Person has been made nor threatened against the Companies. The Companies are not
infringing or misappropriating any patents, trademarks, trade names, service
marks, copyrights or trade secrets of any other Person. The Companies have not
granted any license, franchise or permit to any Person to use any of the
Intellectual Property of the Companies and no other Person has the right to use
the same trademarks, service marks or trade names used by the Companies or any
similar trademarks, service marks or trade names likely to lead to confusion.
Since inception the Companies have not conducted its business under any
corporate, trade or fictitious name, except Portland Professional Pharmacy,
Portland Professional Pharmacy, Inc. or Portland Professional Pharmacy
Associates. The Company Disclosure Schedule sets forth all trademark
registrations and applications, service xxxx registrations and applications and
copyright registrations and applications abandoned by the Companies since their
inception.
Section 3.24. Licenses. The Companies have all licenses, permits, consents
and other governmental certificates, authorizations and approvals required by
applicable federal, state and local Governmental Entity for the conduct of their
respective businesses and the use of their respective properties as presently
conducted or used, including, without limitation, all licenses required under
applicable federal, state, local or municipal law relating to public health and
safety, or employee health and safety except where the failure to have such
license, permit, consent, certificate, authorization or approval could not have
a Material Adverse Effect on the Companies (collectively, "Licenses"). The
Company Disclosure Schedule contains a true and complete list of the Licenses.
All of the Licenses are in full force and effect and no action or claim is
pending nor is threatened to revoke or terminate any License or declare any
License invalid in any material respect. The Companies have taken all necessary
action to maintain such Licenses. The Company Disclosure Schedule contains a
true and complete list of all federal, state, local, municipal and foreign
governmental or judicial consents, orders, decrees and other compliance
agreements relating to the Companies or any of their respective businesses under
which the Companies are operating or bound.
Section 3.25. No Illegal or Improper Transactions. Neither the Companies
nor any of their respective directors, officers, employees, agents or
Affiliates, have directly or indirectly used funds or other assets of the
Companies or made any promise or undertaking in such regard, for (a) illegal
contributions, gifts, entertainment or other expenses relating to political
activity; (b) illegal payments to or for the benefit of governmental officials
or employees, whether domestic or foreign; (c) illegal payments to or for the
benefit of any person, firm, corporation or other entity, or any director,
officer, employee, agent or representative thereof; (d) the establishment or
maintenance of a secret or unrecorded fund or (e) any other illegal payment; and
there have been no false or fictitious entries made in the books or records of
the Companies with respect to any of the foregoing.
Section 3.26. Restrictive Documents and Territorial Restrictions. The
Companies are not subject to, or a party to, any charter, bylaw, mortgage, Lien,
lease, license, permit, agreement, contract, instrument, law, rule, ordinance,
regulation, order, judgment or decree, or any other restriction of any kind or
character, which adversely affects the business, prospects, operations or
condition (financial or otherwise) of their respective businesses or any of
their respective assets or properties in any material respect, or which would
prevent consummation of the transactions contemplated hereby, or the continued
operation of their respective businesses after the date hereof on substantially
the same basis as heretofore operated or which would materially restrict the
ability of the Companies to acquire any property or conduct business in any
area.
Section 3.27. Bank Accounts. The Company Disclosure Schedule contains a
true, correct and complete list of the names and locations of all banks, trust
companies, savings and loan associations and other financial institutions at
which the Companies maintain safe deposit boxes or accounts of any nature.
Section 3.28. No Misleading Statements. This Agreement, the information and
schedules referred to herein, when considered as a whole, and the certificates
that have been furnished to Acquirer in connection with the transactions
contemplated hereby do not include any untrue statement of a material fact and
do not omit to state any material facts necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, severally but not jointly, agrees and represents and
warrants to Acquirer as follows:
Section 4.01. Ownership. Such Shareholder holds of record and owns
beneficially the number of shares of PPRX Common Stock and PRXA Common Stock set
forth next to his name in Schedule 4.01 hereto, free and clear of any Liens.
There are no outstanding options, warrants, convertible securities, calls,
rights, commitments, court orders, proceedings, preemptive rights or agreements
or instruments or understandings of any character (other than this Agreement and
the shareholder agreements described on Schedule 4.01 (the "Shareholder
Agreements")) to which such Shareholder is a party or by which he, is bound,
obligating him, to deliver or sell, or cause to be issued, delivered or sold,
contingently or otherwise, any shares of PPRX Common Stock or PRXA Common Stock
owned by him or any securities or obligations convertible into or exchangeable
for such shares or to grant, extend or enter into any such option, warrant,
convertible security, call, right, commitment, preemptive right or agreement.
Such Shareholder is not a party to any voting trust, proxy, or other agreement,
commitment or understanding, or any court order proceeding, with respect to the
voting, dividend rights or disposition of any capital stock of PPRX or PRXA,
except for the Shareholders Agreements and except as otherwise disclosed on the
Company Disclosure Schedule. At the Closing, good and marketable title to the
Shares being sold by such Shareholder will pass to Acquirer free and clear of
all Liens.
Section 4.02. Authorization. Such Shareholder has all requisite power and
authority to enter into this Agreement and each of the other agreements
contemplated hereby, and to carry out his obligations under this Agreement and
each of the other agreements contemplated hereby and to consummate the
transactions contemplated hereby and thereby. Each of this Agreement and the
other agreements contemplated hereby have been duly executed and delivered by
such Shareholder and (assuming due authorization, execution and delivery of this
Agreement by Acquirer) constitutes the legal, valid and binding obligation of
such Shareholder, enforceable against such Shareholder in accordance with their
respective terms (except as the enforceability thereof may be limited by any
applicable bankruptcy, insolvency or other laws affecting creditors' rights
generally or by general principles of equity, regardless of whether such
enforceability is considered in equity or at law).
Section 4.03. No Violation. The execution and delivery of this Agreement
and each of the other agreements contemplated hereby by such Shareholder does
not, and the consummation by such Shareholder of the transactions contemplated
hereby and thereby, and compliance with the terms hereof and thereof will not,
conflict with, or result in a breach or violation of or default under, or
accelerate the performance required by, the terms of any law, statute,
regulation, order, judgment or decree or any agreement, contract, indenture or
other instrument to which such Shareholder is a party or to which any of his
properties are subject, or constitute a default or loss of any right thereunder
or an event which, with the lapse of time or notice or both, might result in a
default or loss of any right thereunder or the creation of any Lien upon the
shares of PPRX or PRXA owned by, or any consideration to be received by, such
Shareholder pursuant to the Agreement.
Section 4.04. Approvals. The execution and delivery of this Agreement and
each of the other agreements contemplated hereby and the consummation of the
transactions contemplated hereby and thereby by such Shareholder will not
require the consent, approval, order or authorization of any Governmental Entity
or Regulatory Authority or any other Person under any statute, law, rule,
regulation, permit, license, agreement, indenture or other instrument to which
such Shareholder is a party or to which any of his properties are subject, and
no declaration, filing or registration with any Governmental Entity or
Regulatory Authority is required by such Shareholder in connection with the
execution and delivery of this Agreement and each of the other agreements
contemplated hereby, the consummation by such Shareholder of the transactions
contemplated hereby and thereby or the performance by Shareholder of his
obligations hereunder and thereunder.
Section 4.05. Brokerage Fees. Such Shareholder has not retained any
financial advisor, broker, agent or finder or paid or agreed to pay any
financial advisor, broker, agent or finder on account of this Agreement or any
transaction contemplated hereby or any transaction of like nature that would be
required to be paid by such Shareholder.
Section 4.06. Litigation. There is no claim, suit, action, proceeding or
investigation (whether at law or equity, before or by any Federal, state,
foreign, local or municipal commission, court, tribunal, board, agency or
instrumentality, or before any arbitrator) pending or threatened against or
affecting such Shareholder, the outcome of which would in any manner impair his
ability to perform his obligations hereunder or against the transactions
contemplated by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIRER
Except as set forth (by reference to the applicable Section of this
Agreement) in the disclosure schedule delivered by Acquirer to PPRX, PRXA and
the Shareholders on the date hereof (the "Acquirer Disclosure Schedule"), a copy
of which is attached hereto as Schedule 5.0, Acquirer hereby agrees and
represents and warrants to PPRX, PRXA and the Shareholders as follows:
Section 5.01. Organization, Etc. Acquirer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to conduct its business as it is now
being conducted and to own, operate or lease the properties and assets it
currently owns, operates or holds under lease and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified and in good standing would have a Material Adverse Effect on
Acquirer.
Section 5.02. Acquirer Shares.
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(a) The authorized capital stock of Acquirer consists of (i) 25,000,000
shares of common stock, $.001 par value per share, of which, as of June 30,
2003, 7,620,907 shares are issued and outstanding and (ii) 10,000,000 shares of
preferred stock, $.10 par value per share, of which no shares are issued or
outstanding.
(b) The shares of Acquirer Common Stock to be issued pursuant to the Earn
Out, when issued pursuant to this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable and will not have been issued in violation
of any preemptive rights or of any federal or state law. The representations and
warranties contained in this subsection (b) shall be deemed renewed as of the
date of each issuance of Acquirer Common Stock pursuant to the terms of this
Agreement.
Section 5.03. Authorization. Acquirer has all requisite corporate power and
authority to enter into this Agreement and each of the other agreements
contemplated hereby, to carry out its obligations under this Agreement and each
of the other agreements contemplated hereby and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by Acquirer of this
Agreement and each of the other agreements contemplated hereby to which it is a
party, the consummation of the transactions contemplated hereby and thereby and
the performance by Acquirer of its obligations hereunder and thereunder have
been duly authorized by all necessary corporate action on the part of Acquirer.
Each of this Agreement and the other agreements contemplated hereby to which it
is a party has been duly executed and delivered by Acquirer and constitutes the
legal, valid and binding obligation of Acquirer, enforceable against Acquirer in
accordance with their respective terms (except as the enforceability thereof may
be limited by any applicable bankruptcy, insolvency or other laws affecting
creditors' rights generally or by general principles of equity, regardless of
whether such enforceability is considered in equity or at law).
Section 5.04. No Violation. The execution and delivery of this Agreement
and each of the other agreements contemplated hereby by Acquirer do not, and the
consummation by Acquirer of the transactions contemplated hereby and thereby,
and compliance with the terms hereof and thereof will not, (a) conflict with, or
result in any violation of or default or loss of any benefit under, any
provision of Acquirer's Certificate of Incorporation or Bylaws; (b) conflict
with, or result in a breach or violation of or default or loss of any benefit
under, or accelerate the performance required by, the terms of any agreement,
contract, indenture or other instrument to which Acquirer is a party or to which
any of its properties is subject, or constitute a default or loss of any right
thereunder or an event which, with the lapse of time or notice or both, might
result in a default or loss of any right thereunder or the creation of any Lien
upon any of the assets or properties of Acquirer; or (c) result in any
suspension, revocation, impairment, forfeiture or nonrenewal of any material
Acquirer license.
Section 5.05. Approvals. The execution and delivery of this Agreement and
each of the agreements contemplated hereby by Acquirer and the consummation of
the transactions contemplated hereby and thereby will not require the consent,
approval, order or authorization of any Governmental Entity or Regulatory
Authority or any other Person under any statute, law, rule, regulation, permit,
license, agreement, indenture or other instrument to which Acquirer is a party
or to which any of its properties is subject, and no declaration, filing or
registration with any Governmental Entity or Regulatory Authority is required or
advisable by Acquirer in connection with the execution and delivery of this
Agreement and each of the other agreements contemplated hereby, the consummation
by Acquirer of the transactions contemplated hereby and thereby or the
performance by Acquirer of its obligations hereunder and thereunder, other than
(a) compliance with any applicable requirements under the Exchange Act, the
Securities Act and the Nasdaq National Market and state securities and "blue
sky" laws and (b) such other filings or registrations with, or authorizations,
consents or approvals of, governmental bodies, agencies, officials or
authorities the failure of which to make or obtain would not have a Material
Adverse Effect, or would not materially adversely affect the ability of Acquirer
to consummate the Acquisition.
Section 5.06. Commission Filings; Financial Statements. Acquirer has timely
filed since June 30, 2002 all reports and other materials required to be filed
by it pursuant to the applicable provisions of the Securities Act and pursuant
to Section 13, 14 or 15(d) of the Exchange Act (the "Public Filings"). The
Public Filings, as of their respective filing dates, did not contain any untrue
statement of a material fact and did not omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The consolidated
financial statements contained in the Public Filings: (i) complied in all
material respects with the published rules and regulations of the Commission
applicable thereto; (ii) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered, except as may be indicated in the notes to such financial statements
and (in the case of unaudited statements) as permitted by Form 10-Q, and except
that unaudited financial statements may not contain footnotes and are subject to
year-end audit adjustments; and (iii) fairly present in all material respects
the consolidated financial position of Acquirer and its subsidiaries as of the
respective dates thereof and the consolidated results of operations of Acquirer
and its subsidiaries for the periods covered thereby. Since March 31, 2003,
there has been no Material Adverse Change as to Acquirer.
Section 5.07. Valid Issuance. The Acquirer's Board of Directors has
authorized the reservation of that number of shares of Acquirer Common Stock as
may be issued pursuant to the Earn Out. All Acquirer Common Stock subject to the
Earn Out will, when issued pursuant to this Agreement, be validly issued, fully
paid and nonassessable and free and clear of any Liens.
Section 5.08. Broker's and Finder's Fees. Acquirer has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
Section 5.09. No Vote Required. No vote of the stockholders of Acquirer is
necessary to adopt and approve this Agreement, the Acquisition and the other
transactions contemplated by this Agreement, or to issue the Acquirer Common
Stock to be issued hereunder.
Section 5.10. Financial Capacity. Acquirer reasonably believes it has the
financial capacity to pay the consideration for the Shares as of the Closing
Date and otherwise to fulfill its obligations under this Agreement.
Section 5.11. No Misleading Statements. This Agreement, the information and
schedules referred to herein, when considered as a whole, and the certificates
that have been furnished to the Companies and the Shareholders in connection
with the transactions contemplated hereby do not include any untrue statement of
a material fact and do not omit to state any material facts necessary to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE VI
COVENANTS OF THE COMPANIES
Section 6.01. Conduct of Companies. From the date hereof until the Closing,
the Companies shall conduct their respective businesses in the ordinary course,
consistent with past practice, and not enter into any transaction outside the
ordinary course of business. Without limiting the generality of the foregoing,
from the date hereof until the Closing, except as contemplated hereby, and
except to the extent that Acquirer gives prior written consent:
(a) neither PPRX nor PRXA will adopt or propose any change in its Articles
of Incorporation or enter into any agreement or incur any obligation, the terms
of which would be violated by the consummation of the transactions contemplated
by this Agreement;
(b) except as contemplated by this Agreement, neither PPRX nor PRXA will:
(i) enter into any written contract, agreement, plan or arrangement
covering any director, officer or employee of either of the Companies that
provides for the making of any payments, the acceleration of vesting of any
benefit or right or any other entitlement contingent upon (A) the Acquisition or
(B) the termination of employment after the Acquisition;
(ii) enter into or amend any employment, consulting or similar agreement
(oral or written) to increase the compensation payable or to become payable by
it to, or otherwise materially alter its employment or consulting relationship
with, any of its officers, directors or consultants over the amount payable as
of the date hereof, or increase the compensation payable to any other employees
(other than (A) increases to non-Shareholder employees in the ordinary course of
business, consistent with past practice, which, do not exceed the greater of
$1.50 per hour or 5% of total salary or otherwise have a Material Adverse Effect
on the Companies, (B) pursuant to plans disclosed in the Company Disclosure
Schedule, or (C) pre-Closing (or year-end, as the case may be) bonuses to the
Shareholders which are consistent in amount with prior years' practices), or
adopt or, except as required by applicable law to maintain a plan's
tax-qualified status, amend any employee benefit plan or arrangement (oral or
written); provided, however, that nothing herein shall restrict the Companies
from adjusting management compensation in a manner consistent with prior
practices; or
(iii) loan or advance any money to any officer, director, employee,
shareholder or consultant of either of the Companies other than advances in the
ordinary course of business which do not exceed $5,000 at any time outstanding
to any one person;
(c) neither PPRX nor PRXA will (i) purchase, acquire, issue, deliver, sell
or authorize the issuance, delivery or sale of any stock appreciation rights or
of any shares of its capital stock of any class or any securities convertible
into or exchangeable for, or rights, warrants or options to acquire, any such
shares or convertible or exchangeable securities, (ii) make any changes in its
capital structure, or (iii) enter into any agreement or understanding or take
any preliminary action with respect to the matters referred to in clause (i) or
(ii) of this paragraph (c);
(d) the Companies will keep in full force and effect their existing
insurance policies and will not modify or reduce the coverage thereunder;
(e) neither PPRX nor PRXA will (i) pay any dividend or make any other
distribution to holders of its capital stock (other than a distribution to cover
income taxes on pro rata shares of PPRX income for the year ending on the
Closing Date, which amount shall be determined assuming such shares shall be
subject to a combined Federal and State income tax rate of 50%), (ii) split,
combine or reclassify any of its capital stock or propose or authorize the
issuance of any other securities in respect of or in lieu of or in substitution
for any shares of its capital stock, (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock, or (iv) take any preliminary action
with respect thereto;
(f) the Companies will not incur any additional indebtedness for borrowed
money (including, without limitation, by way of guarantee or the issuance and
sale of debt securities or rights to acquire debt securities), incur any account
payable, or enter into or modify any contract, agreement, commitment or
arrangement with respect to the foregoing;
(g) the Companies will not enter into any material transaction that would in the
reasonable judgment of Acquirer, delay the occurrence of the Closing beyond
July 31, 2003;
(h) other than sales of products and services in the ordinary course of
business and consistent with present practice the Companies will not (i) sell,
lease or otherwise dispose of any of its assets having a book or market value in
excess of $25,000 in the aggregate or that are otherwise material, individually
or in the aggregate, to the business, results of operations or financial
condition of the Companies, or (ii) enter into, or consent to the entering into
of, any agreement granting a preferential right to sell, lease or otherwise
dispose of any of such assets;
(i) the Companies will not (i) enter into any new line of business; (ii)
change their investment, liability management and other material policies in any
material respect; (iii) incur or commit to any capital expenditures, obligations
or liabilities in connection therewith other than capital expenditures,
obligations or liabilities that (a) are listed on the Company Disclosure
Schedule or (b) individually do not exceed $25,000 and in the aggregate do not
exceed $100,000; (iv) acquire or agree to acquire by merging or consolidating
with, or acquire or agree to acquire by purchasing a substantial portion of the
assets of, or in any other manner, any business or Person; (v) otherwise, except
as to the acquisition of materials and supplies for its products, services and
activities in the ordinary course of business and consistent with past
practices, acquire or agree to acquire any assets for a total consideration in
the aggregate in excess of $25,000; (vi) make any investment in any Person; or
(vii) enter into any license, technology development or technology transfer
agreement with any other Person in excess of $25,000;
(j) the Companies will not (i) change their methods of accounting as
currently in effect except as required by changes in generally accepted
accounting principles; (ii) change any of its methods of accounting for income
and deductions for income tax purposes from those employed in the preparation of
the income tax returns of the Companies for the period ending December 31, 2002;
(iii) change their fiscal year; (iv) change any tax election; (v) file any
amended Tax Return; (vi) enter into any closing agreement relating to any Tax;
(vii) settle any Tax claim or assessment or (viii) surrender any right to claim
a material Tax refund or to any extension or waiver of the limitations period
applicable to any material Tax claim or assessment.
(k) the Companies will not settle or compromise, or agree to settle or
compromise any suit or other litigation matter or matter in an arbitration
proceeding for any material amount (after taking into account any insurance
proceeds to which the Companies are entitled) or otherwise on terms which would
have a Material Adverse Effect on the Companies; and
(l) the Companies will not agree or commit to do any of the foregoing.
Section 6.02. Access to Records and Personnel. At all reasonable times from
and after the date hereof until the Closing, the Companies shall afford Acquirer
and its accountants, counsel, financial advisor and other representatives full
and complete access to the properties, employees and officers of PPRX and PRXA
and to all books, accounts, financial and other records and contracts of every
kind of PPRX and PRXA.
Section 6.03. No Other Offers. The Companies shall not, nor shall the
Companies authorize or permit any officer, director, employee or Shareholder of,
any investment banker, attorney, accountant or other representative retained by,
the Companies or the Shareholders to, (i) entertain, encourage, solicit or
initiate any inquiries or the making of any proposal that constitute, or may
reasonably be expected to lead to any "takeover proposal" (defined below) or
(ii) engage or participate in any discussions or negotiations, or provide third
parties with any information, relating to any such inquiry or proposal or (iii)
agree to, enter into, accept, approve or recommend any takeover proposal. The
Companies shall promptly advise Acquirer of any such inquiries or proposals and
shall provide Acquirer with the terms of such proposal. As used in this Section
6.03, "takeover proposal" shall mean any proposal outside of the ordinary course
of the Companies' business, for (i) a merger or other business combination
involving, directly or indirectly, PPRX or PRXA or (ii) the acquisition of any
equity interest in PPRX or PRXA, or a substantial portion of the assets of PPRX
or PRXA other than the transactions contemplated hereby or (iii) any similar
transaction which is intended by the Shareholders to prohibit, restrict or delay
consummation of the Acquisition or to materially reduce the remaining value of
the Companies.
Section 6.04. Maintenance of Business. The Companies will use their
commercially best efforts to carry on, preserve and maintain their respective
businesses, preserve and retain their employees, properties and goodwill, keep
available the services of their officers and employees and preserve its
relationships with those of their customers, suppliers, licensors, licensees and
others having business relationships with them that are material to their
business in substantially the same manner as if they had prior to the date
hereof. If either of the Companies become aware of a material deterioration or
facts which are likely to result in a material deterioration in the relationship
with any material customer, supplier, licensor, licensee or others having
business relationships with the Companies, they will promptly bring such
information to the attention of Acquirer in writing.
Section 6.05. Compliance with Obligations. Prior to the Closing Date, the
Companies will comply in all material respects with (a) all applicable federal,
state, local and foreign laws, rules and regulations, (b) all agreements and
obligations, including their respective Articles of Incorporation, by which the
Companies, their properties or their assets may be bound, and (c) all decrees,
orders, writs, injunctions, judgments, statutes, rules and regulations
applicable to the Companies, their properties or their assets.
Section 6.06 SARSEP. Prior to the Closing Date, the Companies shall
terminate the the PPRX SARSEP (the "SARSEP") and each of the Companies shall
fully satisfy all of its obligations (including any funding obligations) arising
under, or in connection with the SARSEP.
ARTICLE VII
COVENANTS OF ACQUIRER
Section 7.01. Commission Filings. Acquirer shall timely file all reports
required to be filed by it with the Commission required under the Securities Act
or Exchange Act between the date hereof and the Closing.
Section 7.02. Maintenance of Business. Acquirer will use its commercially
reasonable efforts to carry on, preserve and maintain its business, preserve and
retain its employees, properties and goodwill, keep available the services of
its officers and employees and preserve its relationships with those of its
customers, suppliers, licensors, licensees and others having business
relationships with it that are material to its business in substantially the
same manner as it has prior to the date hereof.
Section 7.03. Compliance with Obligations. Prior to the Closing Date,
Acquirer will comply in all material respects with (i) all applicable Federal,
state, local and foreign laws, rules and regulations, (ii) all material
agreements and obligations, including its Certificate of Incorporation and
Bylaws, by which it, its properties or its assets may be bound, and (iii) all
decrees, orders, writs, injunctions, judgments, statutes, rules and regulations
applicable to it, its properties or its assets.
Section 7.04. Consents. Acquirer shall promptly apply for or otherwise
seek, and use its commercially reasonable efforts to obtain all consents and
approvals required to be obtained by it for the consummation of the Acquisition.
Acquirer's principal lender, Health Care Finance Group, Inc., has consented to
the Acquisition.
Section 7.05. Maintenance of Companies Indemnification Obligations.
(a) Subject to and following the Closing, the Companies shall, and Acquirer
shall cause the Companies to, indemnify and hold harmless the Indemnified
Employees (as defined below) to the extent provided in the respective Bylaws or
Articles of Incorporation of PPRX or PRXA, in each case as in effect as of the
date of this Agreement without amendment, for fifteen months after the Closing;
provided, however, that all rights to indemnification in respect of any claim
asserted or made within such period shall continue until the final disposition
of such claim. For purposes of this Section 7.05, "Indemnified Employees" shall
mean the individuals who were officers, directors and employees of PPRX or PRXA
on or prior to the Closing.
(b) The provisions of this Section 7.05 shall be in addition to any other
rights available to the Indemnified Employees, shall survive the Closing, and
are expressly intended for the benefit of the Indemnified Employees.
Section 7.06 Acquirer 401(k) Plan. To the extent permitted by applicable
law Acquirer shall recognize service with the Companies prior to the Closing
Date for vesting purposes under Acquirer's 401(k) Plan and the Acquirer shall
amend its 401(k) Plan as and to the extent necessary to provide for the
recognition of such service with the Companies.
Section 7.07 Integration. The parties recognize that the Earn Out portion
of the consideration to be paid by Acquirer will depend in part upon the timing
of a contemplated integration of operations of the Companies, but that such
integration will require some time to complete. Acquirer shall use commercially
reasonable efforts to complete the following steps with regard to such
integration: (i) the leasing and fit-up of new office space for the Companies in
the Greater Portland, Maine area and the moving of the Companies' operations
into such space is to occur as soon as possible; (ii) integration of the
purchasing functions of the Companies and Acquirers shall occur as soon as
possible with a view toward maximizing pricing and availability to the Companies
and Acquirer; (iii) subject to any limitations on the Companies' capacity for
filling orders (such as space limitations prior to their move into new office
space), referrals of business to the Companies from within the customer base of
Acquirer and its affiliates shall occur as soon as possible; and (iv) the
assumption by Acquirer of general administrative functions customarily handled
by Acquirer (payroll, accounting, purchasing, and so forth) and the integration
of the Companies into Acquirer's computer network and accounting and claims
adjudication systems shall occur not later than 270 days from the Closing Date.
ARTICLE VIII
COVENANTS OF THE COMPANIES AND ACQUIRER
Section 8.01. Advice of Changes. Each party will promptly advise the other
such party in writing of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the Acquisition;
(b) any notice or other communication from any Governmental Entity or
Regulatory Authority in connection with the Acquisition;
(c) any actions, suits, claims, investigation or other judicial proceedings
commenced or threatened against it which, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to this
Agreement or which relate to the consummation of the Acquisition;
(d) any event known to its executive officers occurring subsequent to the
date of this Agreement that would render any representation or warranty of such
party contained in this Agreement, if made on or as of the date of such event or
the Closing Date, untrue, inaccurate or misleading in any material respect
(other than an event so affecting a representation or warranty which is
expressly limited to a state of facts existing at a time prior to the occurrence
of such event);
(e) any Material Adverse Change in the business condition of the party; and
(f) from time to time prior to the Closing, PPRX, PRXA and Acquirer will
promptly supplement or amend its respective Disclosure Schedule with respect to
any matter hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedule hereto. No supplement or amendment of a Disclosure Schedule
made pursuant to this Section shall be deemed to cure any breach of, affect or
otherwise diminish any representation or warranty made in this Agreement if the
other party hereto makes a written objection to such supplement or amendment
within two Business Days after receipt thereof (and in any event, prior to
Closing).
Section 8.02. Regulatory Approvals. Prior to the Closing, each party shall
execute and file, or join in the execution and filing of, any application or
other document that may be necessary in order to obtain the authorization,
approval or consent of any Governmental Entity or Regulatory Authority which may
be reasonably required, or that the other party may reasonably request, in
connection with the consummation of the Acquisition. Each party shall use its
best efforts to obtain all such authorizations, approvals and consents.
Section 8.03. Actions Contrary to Stated Intent. No party shall take any
action that would, or reasonably might be expected to, result in any of its
representations and warranties set forth herein being or becoming untrue in any
material respect, or in any of the conditions to the Acquisition set forth in
Article IX hereof not being satisfied.
Section 8.04. Certain Filings. The Companies and Acquirer shall cooperate
with one another:
(a) in determining whether any action by or in respect of, or filing with,
any Governmental Entity or Regulatory Authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement; and
(b) in seeking any such actions, consents, approvals or waivers or making
any such filings, furnishing information required in connection therewith and
seeking timely to obtain any such actions, consents, approvals or waivers.
Section 8.05. Public Disclosure. Acquirer and the Companies shall consult
with each other before issuing any press release or otherwise making any public
statement with respect to the Acquisition or this Agreement and shall not issue
any such press release or make any such public statement prior to such
consultation, except as, in the reasonable judgment of the Board of Directors of
either Acquirer, PPRX or PRXA, may be required by law or applicable rules and
regulations; provided, however, that the party making such determination, will
use reasonable efforts to allow the other parties reasonable time to comment on
such release or announcement in advance of its issuance. Acquirer shall be
permitted to file this Agreement with the Commission.
Section 8.06. Satisfaction of Conditions Precedent. The Companies and
Acquirer will use their commercially reasonable efforts to satisfy or cause to
be satisfied all the conditions precedent that are set forth in Article VIII
hereof, as applicable to each of them, and to cause the transactions
contemplated by this Agreement to be consummated by July 31, 2003 and, without
limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties that may be necessary or reasonably required on its
part in order to effect the transactions contemplated hereby. The Companies and
Acquirer agree to negotiate in good faith with respect to any additional
agreement reasonably requested by another party hereto which such requesting
party determines in good faith is necessary to effect the transactions
contemplated hereby.
Section 8.07. Payment Obligations to Xxxxx Xxxxxx. In connection with the
Employment Agreement dated June 30, 2002 between A. Xxxxx Xxxxxx and the
Companies, referenced on Disclosure Schedule 3.10, the Acquirer is electing to
cause the Companies to extend the term of the Employment Agreement for twelve
months from the Closing Date. Acquirer agrees to pay, or cause the Companies to
pay, pursuant to the terms and conditions of the Employment Agreement, a
retention bonus to Xx. Xxxxxx in the amount of twenty thousand dollars
($20,000), as set forth on Exhibit B, paragraph 2, romanette (i) of the
Employment Agreement. The Shareholders agree that any other retention bonus due
or to become due to Xx. Xxxxxx pursuant to the Employment Agreement shall be
paid by Shareholders. At the request of the Shareholders, Acquirer will pay any
such retention bonus owed to Xx. Xxxxxx by the Shareholders out of any Earn Out
earned pursuant to Schedule 2.05; if Earn Out payments are made in the form of
stock, then at the request of the Shareholders an appropriate portion of the
shares shall be issued in the name of Xx. Xxxxxx, as contemplated by his
Employment Agreement.
ARTICLE IX
CONDITIONS OF CLOSING
Section 9.01. Conditions to All Parties' Obligations. The obligations of
all the parties to this Agreement to effect the Acquisition shall be subject to
the fulfillment or satisfaction, at or prior to the execution of this Agreement
of the following conditions or the mutual waiver by the parties:
(a) Illegality or Legal Constraint. No temporary restraining order,
preliminary or permanent injunction or other order or restraint issued by any
court of competent jurisdiction, no statute, rule, regulation, order, decree,
restraint or pronouncement by any Governmental Entity, and no other legal
restraint or prohibition which would prevent or have the effect of preventing
the consummation of the Acquisition shall have been issued or adopted or be in
effect.
(b) Governmental Authorizations. All permits, approvals, filings and
consents required or advisable to be obtained or made prior to the consummation
of the Acquisition under applicable federal laws or applicable laws of any state
or municipality or foreign country having jurisdiction over the Acquisition and
the other transactions contemplated herein shall have been obtained or made, as
the case may be, on terms and conditions satisfactory to the Companies, the
Shareholders and Acquirer, acting reasonably, (all such permits, approvals,
filings and consents and the lapse of all such waiting periods being referred to
as the "Requisite Regulatory Approvals"), and all such Requisite Regulatory
Approvals shall be in full force and effect.
Section 9.02. Conditions to the Obligations of Acquirer to Effect the
Acquisition. The obligations of Acquirer under this Agreement to effect the
Acquisition are subject to the fulfillment or satisfaction, at or prior to the
execution of this Agreement, of the following conditions, unless waived by
Acquirer in its sole discretion:
(a) Accuracy of Representations and Warranties. Each of the representations
and warranties of the Companies and the Shareholders set forth in Articles III
and IV hereof that is expressly qualified by a reference to materiality shall be
true and correct in all respects as so qualified, and each of the
representations and warranties of the Companies and the Shareholders set forth
in Articles III and IV hereof that is not so qualified shall be true and correct
in all material respects, each as of the date when made and at and as of the
Closing, except for such changes as are permitted by this Agreement and except
to the extent a representation or warranty speaks only as of an earlier date.
(b) Covenants and Agreements. The Companies and the Shareholders shall have
duly performed and complied with the covenants and agreements required by this
Agreement to be performed by or complied with by it, him or her prior to or at
the Closing. None of the events or conditions entitling Acquirer to terminate
this Agreement under Article X hereof shall have occurred or by continuing.
(c) Consents. Any consent required for the consummation of the Acquisition
under any material Contract or License or for the continued enjoyment by PPRX or
PRXA of the benefits of any such contract or license after the Acquisition shall
have been obtained.
(d) Opinion of Counsel. Acquirer shall have received the opinion of Xxxxxxx
& Xxxx, LLP, counsel to the Companies, dated as of the Closing Date,
substantially in the form of Exhibit 9.02(d) hereto.
(e) Certificate of PPRX and PRXA. Acquirer shall have received a
certificate from each of PPRX and PRXA, executed on behalf of PPRX and PRXA by
its respective President, satisfactory in form and substance to Acquirer, as to
compliance with the matters set forth in paragraphs (a), (b) and (c) of this
Section 9.02.
(f) Certificate of Shareholders. Acquirer shall have received a certificate
executed by each Shareholder as to their compliance with the matter set forth in
paragraphs (a) and (b) of this Section 9.02.
(g) No Adverse Decision. There shall not be any action taken or threatened,
or any statute, rule, regulation or order enacted, entered, threatened, or
deemed applicable to the transactions contemplated hereby, by any foreign or
United States Federal or state government or Governmental Entity or Regulatory
Authority or court that, whether in connection with the grant of a Requisite
Regulatory Approval, any agreement proposed by any foreign or United States
Federal or state government or Governmental Entity or Regulatory Authority, or
otherwise, which (i) requires or could reasonably be expected to require any
divestiture of a portion of its business that Acquirer in its reasonable
judgment believes will have a Material Adverse Effect on the Companies or (ii)
imposes any condition upon the Companies that in Acquirer's reasonable judgment
(x) would be materially burdensome to the Companies or (y) would materially
increase the costs incurred or that will be incurred by Acquirer as a result of
consummating the Acquisition and the other transactions contemplated hereby.
There shall be no action, suit, investigation or proceeding pending or
threatened by or before any Governmental Entity which (i) seeks to restrain,
enjoin, prevent the consummation of or otherwise materially affect the
transactions contemplated by this Agreement or (ii) questions the validity or
legality of any such transactions or seeks to recover damages or to obtain other
relief in connection with any such transactions.
(h) Litigation. There shall not have been any litigation or claim pending
or threatened against either PPRX or PRXA as of Closing Date that could
reasonably be expected to have a Material Adverse Effect on either PPRX or PRXA.
(i) Proceedings; Receipt of Documents. All corporate and other proceedings
taken or required to be taken in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory in
form and substance to Acquirer and Acquirer's counsel, and Acquirer and
Acquirer's counsel shall have received all such information and such counterpart
originals or certified or other copies of such documents as Acquirer or its
counsel may reasonably request. Acquirer shall have received such other
instruments, approvals and other documents as it may reasonably request to make
effective the transactions contemplated hereby.
(j) Adverse Change. From the date hereof through and including the Closing
Date, neither PPRX nor PRXA shall have suffered any Material Adverse Change in
its respective business, financial condition, properties or prospects (whether
or not described in any supplement to a schedule hereto).
(k) Shareholder Representation Letters. Each Shareholder shall have
executed and delivered to Acquirer a letter in the form of Exhibit 9.02(j)
relating to such Shareholder's status as an "accredited investor" as defined in
Rule 501(a) of Regulation D under the Securities Act.
(l) Supporting Documents. Acquirer and its counsel shall have received
copies of the following documents:
(i) (A) the Articles of Incorporation of PPRX certified as of a recent date
by the Secretary of State of the State of Maine (B) a certificate of said
Secretary dated as of a recent date as to the due incorporation of PPRX and (C)
a certificate from the Secretary of State of each state or jurisdiction listed
on the Company Disclosure Schedule, as to PPRX's qualification, good standing
(if applicable) and payment of taxes in each such state;
(ii) a certificate of the Secretary or an Assistant Secretary (or other
officer or director executing such certificate) of each of PPRX and PRXA dated
the Closing Date and certifying (A) that attached thereto is a true and complete
copy of the Bylaws of such company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors and the shareholders of such
company authorizing the execution, delivery and performance of this Agreement
and the other agreements contemplated hereby to which such company is a party,
and the consummation of the Agreement and the other agreements contemplated
hereby to which such company is a party, and that all such resolutions are in
full force and effect and are all the resolutions adopted in connection with the
transactions contemplated hereby; and (C) to the incumbency and specimen
signature of each officer or director of such company executing this Agreement
and any certificate or instrument furnished pursuant hereto, and a certification
by another officer or director of such company as to the incumbency and
signature of the officer or director signing the certificate referred to in this
clause (ii); and
(iii) such additional similar supporting documents and other information
with respect to the operations and affairs of PPRX and PRXA as Acquirer or its
counsel may reasonably request.
(m) Employment Agreements. Each of the Shareholders shall have executed an
Employment Agreement with Acquirer, substantially in the form of Exhibit
9.02(m).
(n) SARSEP. The Companies have furnished to Acquirer satisfactory evidence,
in the form of certified board resolutions, that (i) each of the Companies has
satified all of its obligations arising under the SARSEP and (ii) the SARSEP has
been terminated
Section 9.03. Conditions to the Obligations of the Companies and
Shareholders to Effect the Acquisition. The obligations of the Companies and the
Shareholders under this Agreement to effect the Acquisition are subject to the
fulfillment or satisfaction, at or prior to the execution of this Agreement of
the following conditions, unless waived by the Companies and the Shareholders in
their sole discretion:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Acquirer set forth in Article V hereof that are expressly
qualified by a reference to materiality shall be true and correct in all
respects as so qualified, and each of the representations and warranties of
Acquirer set forth in Article V hereof that is not so qualified shall be true
and correct in all material respects as of the date when made and as of the
Closing (except to the extent a representation or warranty speaks only as of an
earlier date and except for changes contemplated by this Agreement).
(b) Covenants and Agreements. Acquirer shall have complied with the
covenants and agreements required by this Agreement to be performed or complied
with by it prior to or at the Closing. None of the events or conditions
entitling the Companies to terminate the Agreement under Article X hereof shall
have occurred and be continuing.
(c) Certificates of Acquirer. The Companies shall have received a
certificate of Acquirer, satisfactory in form and substance to the Companies,
executed on behalf of Acquirer by the Chief Executive Officer and Chief
Financial Officer of Acquirer, as to compliance with the matters set forth in
paragraphs (a) and (b) of this Section 9.03.
(d) Proceedings; Receipt of Documents. All corporate and other proceedings
taken or required to be taken in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Companies and the Shareholders and counsel to the
Companies and the Shareholders, and the Companies, the Shareholders and counsel
to the Companies and the Shareholders shall have received all such information
and such counterpart originals or certified or other copies of such documents as
the Companies, the Shareholders or their counsel may reasonably request. The
Companies and the Shareholders shall have received such other instruments,
approvals and other documents as it may reasonably request to make effective the
transactions contemplated hereby.
(e) Supporting Documents. The Companies and their counsel shall have
received copies of the following documents:
(i) (A) the Certificate of Incorporation of Acquirer certified as of a
recent date by the Secretary of State of the State of Delaware and (B) a
certificate of said Secretary dated as of a recent date as to the corporate and
tax good standing of Acquirer;
(ii) certificates of the Secretary or an Assistant Secretary (or other
officer or director executing such certificate) of Acquirer dated the Closing
Date and certifying (A) that attached thereto is a true and complete copy of the
Bylaws of such company as in effect on the date of such certification; (B) that
attached thereto is a true and complete copy of all resolutions adopted by the
Board of Directors and the shareholders (if any) of such company authorizing the
execution, delivery and performance of this Agreement and the other agreements
contemplated hereby to which such company is a party, and the consummation of
the Agreement and the other agreements contemplated hereby to which such company
is a party, and that all such resolutions are in full force and effect and are
all the resolutions adopted in connection with the transactions contemplated
hereby; and (C) to the incumbency and specimen signature of each officer or
director of Acquirer and any certificate or instrument furnished pursuant
hereto, and a certification by another officer or director of such company as to
the incumbency and signature of the officer or director signing the certificate
referred to in this clause (ii); and
(iii) such additional similar supporting documents and other information
with respect to the operations and affairs of Acquirer as the Companies or their
counsel may reasonably request.
(f) Adverse Change. From the date hereof through the Closing Date, Acquirer
shall not have suffered any Material Adverse Change in its business, financial
condition, assets, properties or prospects (whether or not described in any
supplement hereto).
(g) Employment Agreements. Acquirer shall have executed an Employment
Agreement with each of the Shareholders, substantially in the form of Exhibit
9.02(m).
(h) Registration Rights Agreement. Acquirer shall have executed and
delivered the Registration Rights Agreement in the form of Exhibit 9.03(h)
hereto.
ARTICLE X
TERMINATION, AMENDMENTS AND WAIVERS
Section 10.01. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual consent of the Boards of Directors of PPRX, PRXA and
Acquirer;
(b) by Acquirer, PPRX or PRXA, if the Closing shall not have occurred on or
before the close of business on August 15, 2003 provided that the terminating
party is not at fault for the delay;
(c) by either Acquirer, PPRX or PRXA if a court of competent jurisdiction
or other Governmental Entity shall have issued a non-appealable final order,
decree or ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or other wise prohibiting the Acquisition,
except if the party relying on such order, decree or ruling or other action has
not complied with its obligations under this Agreement.
(d) by Acquirer, if it is not in material breach of its obligations under
this Agreement, and if (i) there has been a breach by the Companies or the
Shareholders of any of their respective representations and warranties hereunder
such that Section 9.02(a) will not be satisfied, (ii) there has been a willful
breach on the part of the Companies or the Shareholders of any of their
respective covenants or agreements contained in this Agreement such that the
first sentence of Section 9.02(b) will not be satisfied, and, in both case (i)
and case (ii), such breach has not been cured within ten days after notice to
the Companies or the Shareholders;
(e) by PPRX, PRXA and the Shareholders (acting by a majority in interest),
if they are not in material breach of their obligations under this Agreement,
and if (i) there has been a breach by Acquirer of any of its representations and
warranties hereunder such that Section 9.03(a) will not be satisfied or (ii)
there has been the willful breach on the part of Acquirer of any of its
covenants or agreements contained in this Agreement such that the first sentence
of Section 9.03(b) will not be satisfied, and, in both case (i) and (ii), such
breach has not been cured within ten days after notice to Acquirer;
(f) by Acquirer or the Companies, if, after the date of this Agreement,
there shall have occurred a Material Adverse Change in the business, financial
condition, assets, properties or prospects of the Companies or Acquirer,
respectively.
Section 10.02. Effect of Termination. In the event of termination of this
Agreement by PPRX, PRXA and the Shareholders or Acquirer as provided in Section
10.01 hereof, this Agreement shall, except as provided herein, forthwith become
void and there shall not be any liability or obligation with respect to the
terminated provisions of this Agreement on the part of the parties hereto or
their respective officers or directors, except and to the extent such
termination results from the willful breach by a party of any of its
representations, warranties or agreements hereunder.
ARTICLE XI
INDEMNIFICATION
Section 11.01. Indemnification by the Shareholders.
(a) Indemnification. Subject to the provisions of Section 11.03 hereof, the
Shareholders shall, jointly and severally, indemnify, defend and hold harmless
Acquirer and its officers, directors, employees, agents and representatives
(each an "Acquirer Indemnified Party") from and against and in respect of any
and all losses, damages, expenses, liabilities, claims, settlements, assessments
and judgments (including reasonable costs and attorney's fees and other expenses
arising out of any claim, or the defense, settlement or investigation thereof,
made with respect to any of the foregoing) (collectively, "Losses") incurred or
suffered by an Acquirer Indemnified Party, arising out of or resulting from any
material inaccuracy, misrepresentation or breach of representation and warranty
contained in Article III of this Agreement or material non-fulfillment of any
covenant or agreement of PPRX or PRXA contained in this Agreement or any
certificate or instrument furnished pursuant hereto.
(b) Several Indemnification. Subject to the provisions of Section 11.03
hereof, each Shareholder shall severally but not jointly indemnify, defend and
hold harmless each Acquirer Indemnified Party from and against and in respect of
any and all losses, damages, expenses, liabilities, claims, settlements,
assessments and judgments (including reasonable costs and attorney's fees and
other expenses arising out of any claim, or the defense, settlement or
investigation thereof, made with respect to any of the foregoing) incurred or
suffered by Acquirer, arising out of or resulting from any material inaccuracy,
misrepresentation or breach of such Shareholder of his representations and
warranties contained in Article IV of this Agreement, or material
non-fulfillment of any of his respective covenants or agreements or any
certificate or instrument furnished pursuant hereto.
Section 11.02. Indemnification by Acquirer. Subject to the provisions of
Section 11.03 hereof, Acquirer shall indemnify, defend and hold harmless PPRX
and PRXA, their respective officers, directors, employees, agents and
representatives and each of the Shareholders (each a "Company Indemnified
Party") from and against and in respect of any and all losses, damages,
expenses, liabilities, claims, settlements, assessments and judgments (including
the reasonable costs and attorney's fees and other expenses arising out of any
claim, or the defense, settlement or investigation thereof, made with respect to
any of the foregoing) incurred or suffered by any Company Indemnified Party,
arising out of or resulting from any material inaccuracy, misrepresentation or
breach by Acquirer of the representations or warranties contained in Article V
of this Agreement or material non-fulfillment of any covenants or agreements of
Acquirer contained in this Agreement or any certificate or instrument furnished
pursuant hereto.
Section 11.03. Limitations.
(a) An Indemnifying Party (as defined in Section 11.05 below) shall not be
entitled to make any claim for indemnification under this Article XI with
respect to the inaccuracy, misrepresentation or breach of any representation and
warranty contained in this Agreement after the date on which such representation
or warranty ceases to survive pursuant to Section 11.06 hereof.
(b) Notwithstanding anything to the contrary contained herein, no
Indemnified Party (as defined in Section 11.04 below) shall be entitled to
indemnification from an Indemnifying Party (as defined in Section 11.04 below)
with respect to the inaccuracy, misrepresentation or breach or any
representation and warranty until the aggregate losses suffered by the
Indemnified Parties and for which indemnification is available hereunder exceed
$100,000 in the aggregate, whereupon the Indemnified Parties shall be entitled
to claim indemnification for all losses suffered in excess of $100,000 by such
Indemnified Parties and for which indemnification is available hereunder;
provided, however that this $100,000 threshold shall not be applicable with
respect to the representations and warranties contained in Sections 3.03, 3.21,
4.01, and 5.10.
(c) Except as set forth below, the total indemnification liability of all
Shareholders shall not exceed, in the aggregate the lesser of (i) $4,000,000 or
(ii) 60% of the aggregate Purchase Price and Earn Out actually paid to the
Shareholders. The total indemnification liability of the Acquirer shall not
exceed $3,000,000. No limitation provided in this Section 11.03, however, shall
be applicable with respect to any claim for fraud, willful misconduct or
intentional misrepresentation.
Section 11.04. Notice and Defense of Claims. Each Acquirer Indemnified
Party and PPRX Indemnified Party (the "Indemnified Party") shall give notice to
the party or parties required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and, in the event of any claim or demand
asserted by a third party; but the failure of any Indemnified Party to timely
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement unless such failure to give notice materially
adversely affected the ability of the Indemnifying Party to defend such claim.
Upon receipt of any such notice, the Indemnifying Party may elect to defend the
Indemnified Party against such claim, suit, action or proceeding, at its own
expense, through counsel of its own choice that is reasonably acceptable to the
Indemnified Party, and from and after such election and for so long as the
Indemnifying Party is diligently prosecuting such defense, the Indemnifying
Party shall not be responsible for any legal fees or expenses of the Indemnified
Party. Failing such election or reasonably diligent prosecution, the Indemnified
Party shall have the right to (but shall not be obligated to) pay, compromise or
defend the same. In any claim, suit, action or proceeding defended by the
Indemnifying Party, the Indemnified Party may participate, at its expense, in
the defense of the same. The Indemnifying Party in the defense of any such
claim, suit, action or proceeding shall not, except with the consent of the
Indemnified Party, consent to the entry of any judgment or entry into any
settlement which (i) does not include as an unconditional term thereof the
giving by the claimant or plaintiff to the Indemnified Party of a release from
all liability in respect to such claim, suit, action or proceeding or (ii)
requires the performance of any act (other than the payment of moneys for which
such Indemnified Party is held harmless hereunder) or the agreement not to
perform any act by the Indemnified Party. The Indemnified Party shall not settle
or compromise any such claim without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld. The
Indemnified Party shall furnish such information regarding itself or the claim
in question as the Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim, suit,
action or proceeding resulting therefrom.
Section 11.05. Exclusive Remedy. In the absence of fraud, willful
misconduct or intentional misrepresentation (for which liability shall be
governed by applicable law), the indemnification provisions of this Article XI
will be the sole and exclusive remedy of Acquirer and the other Indemnified
Parties after the Closing Date for any damages suffered by the Indemnified
Parties in connection with this transaction. Provided, however, that the
Employment Agreements, Stock Option Agreements, Registration Rights Agreement ,
delivered in connection with this transaction shall govern the availability of
remedies for breaches thereof.
Section 11.06. Survival of Representations and Warranties. All of the
representations, warranties and agreements contained in this Agreement shall
survive the Closing and shall remain in full force and effect until the
expiration of fifteen months from the Closing Date, and thereafter, to the
extent a claim is made prior to such expiration with respect to any breach of
such representation, warranty or agreement, until such claim is finally
determined or settled. Notwithstanding the foregoing, the representations and
warranties contained in Sections 3.01, 3.03, 3.04, 3.11, 3.15 and 3.17 shall
remain in full force and effect until the expiration of the applicable statute
of limitations.
Section 11.07. Reimbursement. Subject to Section 11.02 hereof, at the time
that the Indemnified Party shall suffer a loss because of a breach of any
warranty, representation or covenant by the Indemnifying Party or at the time
the amount of any liability on the part of the Indemnifying Party under this
Agreement is determined (which in the case of payment to third persons shall be
the earlier of (i) the date of such payment, provided that the Indemnified Party
has fully complied with Section 11.03, or (ii) the date that a court of
competent jurisdiction shall enter a final judgment, order or decree (after
exhaustion or expiration of appeal rights) establishing such liability) (such
loss or amount being hereinafter referred to as the "Indemnity Claim"), the
Indemnifying Party shall forthwith, upon notice from the Indemnified Party, pay
to the Indemnified Party the amount of the Indemnity Claim, in cash. (In the
case where the Indemnified Party is the Acquirer and has given due notice of an
Indemnity Claim and subject to the limits stated in Sections 11.03 and 11.06
hereof, the Acquirer may, in its sole discretion, withhold from any amounts
payable pursuant to the Earn Out a sum equal to amount by which (i) the
Acquirer's good faith determination of the liability incurred with regard to the
particular Indemnity Claim exceeds (ii) the Shareholders' good faith
determination of liability incurred with regard to any pending Indemnity Claim
by them against the Acquirer. Amounts withheld from the Earn Out shall accrue
interest at 8% per annum until the date ultimately remitted to the Shareholders
following a final determination or agreement as to the amount of the relevant
liability.) If such amount is not paid forthwith, then the Indemnified Party
may, at its option, take legal action against the Indemnifying Party for
reimbursement in the amount of its Indemnity Claim. For purposes hereof the
Indemnity Claim shall include the amounts so paid, or determined to be owing by
the Indemnified Party together with costs and reasonable attorney's fees and
interest on the foregoing items (but only to the extent pre-judgment interest
due the Indemnified Party is not already included within such items) at the rate
of 8% per annum from the date the Indemnity Claim is due from the Indemnifying
Party to the Indemnified Party as hereinabove provided until the Indemnity Claim
shall be paid.
ARTICLE XII
TAX MATTERS
Section 12.01. Tax Indemnities.
(a) The Shareholders shall, on a pro rata basis, be responsible for, shall
pay or cause to be paid, and shall indemnify, defend and hold harmless Acquirer
and its Affiliates against and reimburse Acquirer and its Affiliates for any and
all Taxes that may be imposed upon or assessed against PPRX, PRXA or their
respective assets (other than Taxes disclosed in the Financial Statements
provided for in the books and records of PPRX or PRXA and set forth on the
Company Disclosure Schedule): (i) with respect to any Pre-Closing Period; (ii)
arising by reason of any breach or inaccuracy of the representations contained
in Section 3.11 hereof; (iii) with respect to any and all Taxes of any member of
an Affiliated Group of which PPRX , PRXA (or any predecessor thereof) is or was
a member on or prior to the Closing Date, including any Taxes for which each of
PPRX or PRXA may be liable under Section 1.1502-6 of the Treasury regulations
promulgated under the Code (or any similar provision of state, local or foreign
Law); (iv) with respect to any Taxes arising as a result of the Section
338(h)(10) Elections; (v) all recordation, sales, use, stamp, filing, transfer,
documentary or similar fees or Taxes under Maine or Federal law relating to the
transactions contemplated by this Agreement; or (vi) by reason of being a
successor-in-interest or transferee of another Person prior to the Closing. In
respect of the Section 338(h)(10) elections, any liabilities of the Shareholders
hereunder shall be reduced by the amount of unfunded liabilities of Acquirer
under this Article XII.
(b) Acquirer shall be responsible for, shall pay or cause to be paid, and
shall indemnify, defend and hold harmless the Shareholders against and reimburse
the Shareholders for all Taxes that they may at any time suffer or incur, or
become subject to, as a result of, or in connection with, PPRX or PRXA with
respect to Post-Closing Periods.
(c) Payment by the indemnitor of any amount due to the indemnitee under
this Section 12.01 shall be made within 10 days following written notice by the
indemnitee that payment of such amount to the appropriate Tax authority is due
by the indemnitee; provided, that the indemnitor shall not be required to make
any payment earlier than two Business Days before it is due to the appropriate
Tax authority. In the case of a Tax that is contested in accordance with the
provisions of Section 12.02 payment of the Tax to the appropriate Tax authority
will not be considered to be due earlier than the date that a final
determination to such effect is made by such Tax authority or a court. Payments
under this Article XI shall not be subject to the threshold set forth in Section
11.02(b) or the limitation set forth in Section 11.02(c).
(d) For purposes of this Agreement, "Pre-Closing Period" shall mean a
taxable period or portion thereof that ends on or prior to the Closing Date. If
a taxable period begins on or prior to the Closing Date and ends after the
Closing Date, then the portion of the taxable period that ends on (and
including) the Closing Date shall constitute a Pre-Closing Period. In the case
of any Tax that is imposed on a periodic basis and is payable for a period that
begins before the Closing Date and ends after the Closing Date, the portion of
such Taxes payable for the Pre- Closing Period shall be (i) in the case of any
Tax other than a Tax based upon or measured by income, the amount of such Tax
for the entire period multiplied by a fraction, the numerator of which is the
number of days in the period ending on the Closing Date and the denominator of
which is the number of days in the entire period and (ii) in the case of any Tax
based upon or measured by income, the amount which would be payable if the
taxable year ended on the Closing Date. Any credit shall be prorated based upon
the fraction employed in clause (i) of the preceding sentence. In the case of
any Tax based upon or measured by capital (including net worth or long- term
debt) or intangibles, any amount thereof required to be allocated under this
Section 12.01(d) shall be computed by reference to the level of such items on
the Closing Date. For purposes of this Agreement, "Post-Closing Period" means
any period other than a Pre-Closing Period.
(e) Except as expressly provided otherwise herein and except for the
representations contained in Section 3.11 and the covenants contained in Article
XII of this Agreement shall be the sole provision governing Tax matters and
indemnities therefor under this Agreement.
Section 12.02. Tax Contests.
(a) After the Closing, Acquirer and the Shareholders shall promptly notify
each other in writing of any demand or claim received by the Shareholders,
Acquirer or the Companies from any Tax authority or other party with respect to
Taxes for which the Shareholders are liable pursuant to Section 12.01(a). Such
notice shall contain factual information (to the extent known) describing the
asserted Tax liability in reasonable detail and shall include copies of any
notice or other document received from any Tax authority in respect of any such
asserted Tax liability.
(b) The Shareholders (or their designee) may elect to control the conduct,
through counsel of their own choosing and at its own expense, of any audit,
claim for refund and administrative or judicial proceeding involving any
asserted liability with respect to which indemnity may be sought under Section
12.01(a) (any such audit, claim for refund or proceeding relating to an asserted
Tax liability is referred to herein as a "Contest"). If the Shareholders (or
their designee) elect to control a Contest, they shall within 20 calendar days
of receipt of the notice of asserted Tax liability notify Acquirer of its intent
to do so, and the Shareholders (or their designee) shall have all rights to
settle, compromise and/or concede such asserted liability; provided, however,
that Acquirer shall have the right to consult with the Shareholders regarding
any Contest that may affect the Acquirer or the Companies for any Post-Closing
Period and provided further that the Shareholders shall not have the right to
settle, compromise and/or concede any Contest that may affect the Acquirer or
the Companies for any period after the Closing Date without Acquirer's prior
written consent, which consent shall not be unreasonably withheld. If the
Shareholders elect not to control the Contest or they fail to notify Acquirer of
their election as herein provided, Acquirer may pay, compromise or contest, at
its own expense, subject to (i) reimbursement by the Shareholders for reasonable
third party expenses and (ii) the Shareholders' indemnification obligations
under Section 12.01(a). Acquirer shall have the sole right to represent the
Companies in any other Contest.
(c) In the event that the Shareholders shall after the Closing take any
position in any Tax Return, or reach any settlement or agreement on audit, which
is in any manner inconsistent with any position taken by the Companies in any
filing, settlement or agreement made by the Companies prior to the Closing and
such inconsistent position (i) requires the payment by Acquirer or the Companies
of more Tax than would have been required to be paid had such position not been
taken or such settlement or agreement not been reached, (ii) affects the
determination of useful life, basis or method of depreciation, amortization or
accounting of any of the assets or properties of the Companies or (iii)
accelerates the time at which any Tax must be paid by Acquirer or the Companies,
then the Shareholders, in each such case, shall provide timely and reasonable
notice to Acquirer of such position and shall indemnify Acquirer and hold it
harmless from any Tax liability arising from, in connection with or otherwise
with respect to such position.
Section 12.03. Preparation of Tax Returns.
(a) Tax Periods Ending on or Before the Closing Date. The Shareholders
shall be responsible for the preparation and filing of the Tax Returns of the
Company for all taxable periods ending on or prior to the Closing Date. Tax
Returns of the Company for such period (including any "S short year" (within the
meaning of Section 1362(e) of the Code)), together with all work papers and
schedules related thereto, shall be delivered to Acquirer for its review and
comment no later than twenty days prior to the filing of such returns (taking
into account valid extensions), and shall be prepared in a manner consistent
with prior practice unless otherwise required by applicable laws. The
Shareholders shall pay (or cause to be paid) any and all Taxes due with respect
to such Tax Returns (including but not limited to any liability due with respect
to any Section 338(h)(10) Election).
(b) Tax Periods Beginning Before and Ending After the Closing Date.
Acquirer shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns of the Company for all periods which begin on or prior to the
Closing Date and end after the Closing Date. To the extent the Shareholders are
obligated to indemnify Acquirer and its Affiliates for any Taxes shown due on
such Tax Returns, (A) such Tax Returns shall be prepared in a manner consistent
with prior practice unless otherwise required by applicable laws, (B) Acquirer
shall provide each Shareholder with a draft of each such Tax Return at least 30
days prior to the due date for filing such return (taking into account valid
extensions); (C) the Shareholders shall have the right to review such Tax
Return, at their expense within the fifteen (15) day period following receipt;
and (D) Acquirer shall make any change to the Tax Return as is reasonably
requested by a Shareholder within such period. . The failure of the Shareholders
to propose any changes to any such Tax Return within such 15 days shall
constitute their approval thereof. No later than two Business Days before the
due date for payment of Taxes with respect to any Tax Return for which Acquirer
has the responsibility to file, the Shareholders shall pay to Acquirer an amount
equal to that portion of the Taxes shown on such Tax Return for which the
Shareholders have an obligation to indemnify Acquirer and its Affiliates
pursuant to the provisions of this Article XII.
Section 12.04. Cooperation and Exchange of Information. The Shareholders,
Acquirer and the Companies will provide each other with such cooperation and
information as any of them reasonably may request of another in filing any Tax
Return, amended Tax Return or claim for refund, determining a liability for
Taxes or a right to a refund of Taxes or participating in or conducting any
audit or other proceeding in respect of Taxes. Each such party shall make its
employees available on a mutually convenient basis to provide explanations of
any documents or information provided hereunder. Each such party will retain all
Tax Returns, schedules and work papers and all material records or other
documents relating to Tax matters of the Companies for the Tax period first
ending after the Closing Date and for all prior Tax periods until the later of
(a) the expiration of the statute of limitations of the Tax periods to which
such Tax Returns and other documents relate, without regard to extensions except
to the extent notified by another party in writing of such extensions for the
respective Tax periods, or (b) eight years following the due date (without
extension) for such Tax Returns. Any information obtained under this Section
12.03 shall be kept confidential, except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in conducting
an audit or other proceeding.
Section 12.05 Section 338(h)(10) Election. (a) Acquirer and the
Shareholders shall join in making elections to have the provisions of Section
338(h)(10) of the Code and similar provisions of state, local or foreign law
("Section 338(h)(10) Elections") apply to the acquisition of each of PPRX and
PRXA. Acquirer shall be responsible for the preparation and filing of all
Section 338(h)(10) Forms (as defined below). For purposes of making the Section
338(h)(10) Election, on or prior to the Closing Date, Acquirer and each
Shareholder shall execute two copies of IRS Form 8023 (or any successor form).
The Shareholders shall promptly execute and deliver to Acquirer such additional
Section 338(h)(10) Forms as Acquirer shall request or as are required by
applicable law for an effective Section 338(h)(10) Election. "Section 338(h)(10)
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 Section 338(h)(10) Election, including, without
limitation, any "statement of Section 338(h)(10) election" and IRS Form 8023
(together with any schedules or attachments thereto) that are required pursuant
to the treasury regulations promulgated under Section 338(h)(10) of the Code.
The Shareholders shall be responsible for and shall pay any income, franchise or
similar Taxes arising as a result of any Section 338(h)(10) Election or any
comparable or resulting election under state, local or foreign law. Acquirer and
the Shareholders shall file all Tax Returns in a manner consistent with the
Section 338(h)(10) Elections and shall take no position to the contrary unless
required to do so by applicable Tax laws.
(b) After the Closing, Acquirer and the Shareholders shall promptly notify
each other in writing of any demand or claim for Taxes received by the
Shareholders or the Acquirer from any Tax authority with respect to any
adjustment by such Tax authority of the allocation of purchase price set forth
in the Section 338(h)(10) Forms where, as a result of such adjustment to the
allocation of purchase price in any such demand or claim, (x) the total amount
of federal and state income tax payable by the Shareholders resulting from the
Section 338(h)(10) Elections would exceed (y) the total amount of federal and
state income tax that would have been payable by the Shareholders had the Shares
been sold and no Section 338(h)(10) Elections were made (such excess, if any, is
referred to as the "Additional Tax"). The failure of the Shareholders to
promptly notify Acquirer of any such demand or claim shall not forfeit the right
to indemnity pursuant to this Section 12.05(b) except to the extent that such
failure prejudices the ability to defend such claim. Acquirer may elect to
defend against such claim, suit, action or proceeding, at its own expense,
through counsel of its own choice, provided that such election is made in
writing to the Shareholders no later than thirty (30) days following notice to
Acquirer of any such adjustment, and further provided that counsel for any of
the Shareholders shall be allowed to participate and consult with Acquirer's
counsel as to any such defense. The Acquirer shall pay to the Shareholders an
amount such that the sum of the Purchase Price and the amount payable by the
Acquirer to the Shareholders pursuant to this Section 12.05(b) plus penalties
and interest, if any, attributable to the adjustment in the allocation of the
purchase price (the "Gross-up Payment"), net of federal and state income taxes
payable by the Shareholders in respect thereof, is equal to the amount the
Shareholders would have received had the Shares been sold and no Section
338(h)(10) Elections had been made, net of federal and state income taxes
payable by the Shareholders in respect thereof; provided, that the Acquirer
shall only be required to make a Gross-up Payment to the extent of any
Additional Tax is attributable to an adjustment in the allocation of purchase
price, and the Acquirer shall not be required to make any Gross-up Payment to
the extent any Additional Tax is attributable to any other cause, reason or
factor.
ARTICLE XIII
GENERAL PROVISIONS
Section 13.01. Taking of Necessary Action. In case at any time after the
Closing any further action is necessary or desirable to carry out the purposes
of this Agreement, each of the parties hereto agrees, subject to applicable
laws, to use all reasonable efforts promptly to take or cause to be taken all
further action and promptly to do or cause to be done all further things
(including the execution and delivery of such further instruments and documents)
as any party reasonably may request.
Section 13.02. Effect of Due Diligence. No investigation by or on behalf of
Acquirer into the business, operations, prospects, assets or condition
(financial or otherwise) of the Companies shall diminish in any way the effect
of any representations or warranties made by PPRX, PRXA or any of the
Shareholders in this Agreement or shall relieve PPRX, PRXA or any of the
Shareholders of any of their obligations under this Agreement, except in respect
of Section 3.28. No investigation by or on behalf of PPRX, PRXA or the
Shareholders into the business, operations, prospects, assets or condition
(financial or otherwise) of Acquirer shall diminish in any way the effect of any
representations or warranties made by Acquirer in this Agreement or shall
relieve Acquirer of any of its obligations under this Agreement, except in
respect of Section 5.11.
Section 13.02A. Resolution of Disputes. In the event that any dispute,
disagreement or controversy arises out of or relates to or concerns any rights,
obligations or other aspect of this Agreement, any party may notify the other
parties in writing within 30 days of the circumstances giving rise to such
dispute. If for any reason the disputing parties are not able to resolve such
dispute within 60 days after such notice is given, then any party may thereafter
submit the dispute to mandatory arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association, or such other rules
and procedures as the parties may hereafter consent to in writing. The
arbitration shall take place in New York, New York (in the case of a claim by
any Shareholder or in Portland, Maine (in the case of a claim made by Acquirer
or, after Closing, by any Company). Following the determination of the venue of
an arbitration proceeding in accordance with the preceding sentence, any other
claim asserted by a party hereunder at or about the time of the original claim
shall be arbitrated in the same venue. Except as the parties may otherwise
agree, the arbitration panel shall consist of three arbitrators selected in the
manner provided under the rules of the applicable arbitration forum. The award
of the arbitrator(s) shall be enforceable in any court of competent
jurisdiction. In any action to compel arbitration under this Section or to
enforce an arbitral award, the prevailing party shall be entitled to an award of
its reasonable expenses, including attorneys fees. A party may seek a
preliminary injunction or other preliminary judicial relief if in his judgment
such action is necessary to avoid irreparable damage. Despite any such action,
the parties will continue to participate in good faith in the procedures
specified in this Section.
Section 13.03. Successors and Assigns. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, heirs, executors, administrators and legal
representatives. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties hereto.
Section 13.04. Entire Agreement. This Agreement and the other documents
referred to herein contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby, and controls and supersedes any
prior understandings, agreements or representations by or between the parties,
written or oral, which conflicts with, or may have related to, the subject
matter hereof in any way, including without limitation that certain letter dated
October 28, 2002 by and among Acquirer, PPRX and PRXA. Provided, however, that
the confidentiality letter agreements entered into between the parties shall
remain in effect until Closing.
Section 13.05. Notices. All notices or other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by telefax communication, by recognized overnight courier
marked for overnight delivery, or by registered or certified mail, postage
prepaid, addressed as follows:
(a) If to the Companies, Portland Professional Pharmacy, Atten: Xxxx X.
Xxxxxxxx, 0000 Xxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000.
(b) If to Acquirer, 00 Xxxxxx Xxxx Xxxxx, Xxxx Xxxxxxxxxx, XX 00000, with a
copy to Xxxxxxxx Xxxxxxxx, Esq. at the same address.
(c) If to a Shareholder, to the address specified for him in Schedule I
hereto with copy to Xxxxxxx X. Xxxxx, Xxxxxxx & Xxxx, LLP, Xxx Xxxxxxxx Xxxxxx,
Xxxxxxxx, XX 00000-0000 and a copy to Xxxxx X. Xxxxx, TM Capital, Xxx Xxxxxxx
Xxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000.
(d) Or such other addresses as shall be furnished by like notice by such party.
All such notices and communications shall, when telefaxed (immediately
thereafter confirmed by telephone), be effective when telefaxed, or if sent by
nationally recognized overnight courier service, be effective one Business Day
after the same has been delivered to such courier service marked for overnight
delivery, or, if mailed, be effective when received.
Section 13.06. Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without reference to or application of any conflicts of laws principles.
Section 13.07. No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns.
Section 13.08. Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
each of the parties hereto; provided, however, that the holders of a majority of
the outstanding PPRX Common Stock and a majority of the outstanding PRXA Common
Stock shall have the right to amend any provision of this Agreement on behalf of
the Shareholders unless any nonconsenting Shareholder is adversely affected by
such amendment in a manner different from other Shareholders. No waiver by any
party of any default, misrepresentation or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence. At any time prior to the Closing, the parties
hereto, by action taken by their respective Boards of Directors and, in the case
of the Shareholders, by action taken by the holders of a majority of the
outstanding PPRX Common Stock and a majority of the outstanding PRXA Common
Stock, may (i) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties of the other party hereto contained herein or in
any document delivered pursuant hereto and (iii) waive compliance with any of
the agreements or conditions contained herein.
Section 13.09. Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
Section 13.10. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
Section 13.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 13.12. Headings. The headings used in this Agreement are for
convenience only and are not to be considered in construing or interpreting any
term or provision of this Agreement.
Section 13.13. Consent to Jurisdiction; Receipt of Process. Each party
hereby consents to the jurisdiction of, and confers non-exclusive jurisdiction
upon, any federal or state court located in New York, New York (in the case of a
claim made by any Shareholder or, before Closing, by any Company) or Portland,
Maine (in the case of a claim made by Acquirer or, after Closing, by any
Company), and appropriate appellate courts therefrom, over any action, suit or
proceeding arising out of or relating to this Agreement, or any of the
transactions contemplated hereby. Each party hereby irrevocably waives, and
agrees not to assert as a defense in any such action, suit or proceeding, any
objection which it may now or hereafter have to venue of any such action, suit
or proceeding brought in any such federal or state court and hereby irrevocably
waives any claim that any such action, suit or proceeding brought in any such
court or tribunal has been brought in an inconvenient forum. Process in any such
action, suit or proceeding may be served on any party anywhere in the world,
whether within or without the State of New York or Maine (as the case may be)
provided that notice thereof is provided pursuant to provisions for notice under
this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first written
above.
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
By:_____________________________________
Xxxxx X .Xxxx, CEO
PORTLAND PROFESSIONAL PHARMACY
By:______________________________________
Xxxx X. Xxxxxxxx, President
PORTLAND PROFESSIONAL PHARMACY ASSOCIATES
By:_____________________________________
Xxxx X. Xxxxxxxx, President
SHAREHOLDERS:
----------------------------------------
Xxxx X. Xxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxx
----------------------------------------
Xxxxxx Xxxxxx
EXHIBITS
Exhibit 9.02(d) Legal Opinion of Verrill & Xxxx, LLP
Exhibit 9.02(j) Form of Shareholder Representation Letter
Exhibit 9.02(m) Form of Employment Agreement
Exhibit 9.03(h) Registration Rights Agreement
SCHEDULES
Schedule I Shareholders
Schedule 2.03 Allocation of Purchase Price Schedule
Schedule 2.05 Earn Out Schedule
Schedule 3.0 Company Disclosure Schedule
Schedule 4.01 Ownership; Agreements Regarding Shares
Schedule 5.0 Acquirer Disclosure Schedule
EXHIBIT 9.02(j)
National Medical Health Card Systems, Inc. ("NMHC")
00 Xxxxxx Xxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
July 31, 2003
Dear Ladies and Gentlemen:
In connection with the sale of his shares of common stock (the "Shares") of
Portland Professional Pharmacy ("PPRX") and Professional Pharmacy Associates
("PRXA"; and together with PPRX, the "Companies") pursuant to the Stock Purchase
Agreement, dated the date hereof, among NMHC, the Companies and the Shareholders
party thereto, the undersigned hereby represents and warrants as of the date
hereof that he is an "accredited investor," as such term is defined in Rule
501(a) promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, and has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and risks of the
securities transactions contemplated hereby. The undersigned will execute and
deliver to NMHC such documents as NMHC may reasonably request in order to
confirm the accuracy of the foregoing.
Very truly yours,
-------------------------
EXHIBIT 9.02(m)
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 31, 2003, by and between NATIONAL
MEDICAL HEALTH CARD SYSTEMS, INC., a Delaware corporation with an office and
place of business at 00 Xxxxxx Xxxx Xxxxx, Xxxx Xxxxxxxxxx, Xxx Xxxx 00000 (the
"Company"), and ___________________ residing at_______________________________
(the "Employee").
RECITALS:
A. The Company is engaged in providing comprehensive prescription benefit
management services to the general commercial market.
B. The Company is a party to a Stock Purchase Agreement (the "Stock
Purchase Agreement") with Portland Professional Pharmacy or Portland
Professional Pharmacy Associates, each of which is a wholly-owned subsidiary of
the Company (either or both of which are referred to herein as "PPP"); and
C. The Company desires to employ the Employee and to have the benefit of
his skills and services subsequent to the closing of the Stock Purchase
Agreement; and
D. The Employee desires to enter into employment with the Company on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties,
intending legally to be bound, hereby agree as follows:
AGREEMENT:
Section 1. DEFINITIONS. For purposes of the Agreement, the following terms
have the meanings set forth below:
"Annual Salary" has the meaning set forth in Section 3.
"Board" means the Board of Directors of the Company as the same is
constituted from time to time.
"Cause" means (a) the commission by the Employee of any act, on or after
the date of the Agreement, constituting, (a) as to any material property of the
Company, theft, embezzlement, or fraud, (b) willful non-disclosure and
misappropriation of any corporate opportunity, (c) the conviction of the
Employee of a crime resulting in material injury to the business of the Company
or (d) the material breach by the Employee of the Agreement, including but not
limited to the failure by the Employee to follow all reasonable and lawful
directions of the Board or the Chief Executive Officer of the Company as to any
material matter, material non-performance by the Employee of any of his duties
or obligations hereunder the taking of any action by the Employee that would be
reasonably likely to cause material injury to the Company which breach shall not
have been cured by the Employee within thirty (30) days of receipt of written
notice of said material breach.
"Confidential Information" means information that is not generally known
within the Company's industry and that was or is used, developed or obtained by
the Company in connection with its business, including (a) products or services,
(b) fees, costs and pricing structures, (c) designs, (d) analyses, (e) drawings,
photographs and reports, (f) computer software, including operating systems,
applications and program listings, (g) flow charts, manuals and documentation,
(h) data bases, (i) accounting and business methods, (j) inventions, devices,
new developments, methods and processes, whether patentable or unpatentable and
whether or not reduced to practice, (k) customers and clients and customer or
client lists, (l) other copyrightable works, (m) all technology and trade
secrets, and (n) all similar and related information in whatever form or medium.
"Employment Term" has the meaning set forth in Section 2 of the Agreement.
"Good Reason" shall mean (a) a material diminution during the Employment
Term in the Employee's duties, responsibilities, reporting relationship or title
as set forth in Section 3.1 hereof; (b) a breach by the Company of any of the
compensation and benefits provisions set forth in Sections 4 and 5 hereof; (c) a
material breach by the Company of any of the other terms of this Agreement; (d)
relocation of the Employee's office more than 35 miles from Portland, Maine; or
(e) resignation by the Employee within the last three months of the initial
three-year Employment Term if the Company has delivered notice of nonrenewal
under Section 2 below.
"Permanent Disability" shall have occurred if as a result of physical or
mental incapacity, the Employee shall have been incapable of performing
Employee's duties hereunder for a period in excess of 26 consecutive weeks in
any calendar year, or an aggregate of 39 weeks in any 12 month period.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PBM Services" means services associated with the prescription benefit
management and Specialty Pharmacy business, including but not limited to: (i)
claims administration, (ii) establishment and administration of a pharmacy
network and benefits, (iii) mail order pharmacy services (by phone, fax or
internet), (iv) drug utilization review, (v) disease state management and
delivery of specialty pharmacy benefits, including growth hormones, transplants,
mental health, women's health, men's health, and certain respiratory ailments,
(vi) formulary creation al1d administration, (vii) rebate negotiation and
administration, (viii) therapeutic substitution programs and (ix) specialty
compounding of pharmaceutical products.
"Termination Date" means the date on which the Employee's employment with
the Company terminates, for whatever reason, including without limitation a
termination upon failure to renew this Agreement.
Section 2. CONDITION PRECEDENT, TERM. This Agreement is contingent upon the
closing of the Stock Purchase Agreement. The Employee's full-time employment
hereunder shall commence upon the closing of the Stock Purchase Agreement (the
"Effective Date"), and, unless renewed or modified by written agreement between
the Company and the Employee, the Employment Period will terminate on the third
anniversary following the Effective Date (the "Employment Term"); provided, that
(a) the Employment Period shall terminate prior to such date upon the Employee's
resignation, death or Permanent Disability and (b) the Employment Period may be
terminated by the Company at any time prior to such date, if such termination
shall be for Cause; and provided further that the Employment Term shall be
deemed renewed and extended for successive one-year periods unless the Company
or the Employee has given at least three months' written notice of an intention
not to renew this Agreement.
Section 3. POSITION AND DUTIES
3.1 During the Employment Term, the Employee shall be employed by the
Company and shall serve as a Vice President of Specialty Pharmacy Operations.
Employee shall report on a regular basis directly to the Company's President or
his designee and shall perform such duties consistent with his position as of
such nature as are usually associated with such office, and the Employee shall
and have such powers relating to the Company as shall from time to time be
assigned to him by the Board of Directors of the Company.
3.2 During the Employment Term, the Employee shall devote his full business
time, best efforts, energies, attention and ability to the business and
interests of the Company and PPP.
Section 4. COMPENSATION.
4.1 As full compensation for his services and undertakings pursuant to this
Agreement, the Employee shall receive a salary (the "Annual Salary") at the rate
of not less than _________________ Dollars ($_________) per year, subject to
adjustment as hereafter provided, payable in twenty-six (26) equal installments
or other more frequent installments in accordance with the regular pay policies
of the Company. The Annual Salary shall be subject to annual review and increase
by the Board of Directors of the Company. In addition, the Employee shall be
eligible for an annual bonus in accordance and payable with the Company's Bonus
Plan. Notwithstanding or limiting the foregoing provisions, Employee shall be
entitled to an increase in Annual Salary in the amount of _____________ thousand
($______) dollars upon PPP achieving ___________ dollars ($______________) in
EBITDA and an additional increase in Annual Salary of ________________
($_________) upon PPP achieving ____________ dollars ($____________) in EBITDA.
4.2 During the Employment Term, the Employee shall also be entitled to (a)
three weeks paid vacation annually and (b) participate in group medical
insurance and other benefits or programs hereafter established by the Company
and made available by the Company to its employees. The Company agrees to waive,
where applicable and permissible pursuant to the terms of any such plan, any
enrollment waiting period in the Company's group medical insurance plans and
retirement plans. The Employee's medical insurance coverage shall be provided
through the current medical insurance plan of PPP, at PPP's cost, or through a
Company plan providing comparable or superior benefits to the Employee. The
Employee's short- and long-term disability insurance coverage shall be provided
through the current disability insurance program of PPP, at PPP's cost, or
through a Company plan providing comparable or superior benefits to the
Employee.
4.3 The Company shall deduct from the Employee's salary, bonus or incentive
compensation any federal, state or city withholding taxes, social security
contributions and any other amounts which may be required to be deducted or
withheld by the Company pursuant to any federal, state or city laws, rules or
regulations.
Section 5. STOCK OPTIONS. On the Effective Date (as defined herein),
Employee shall be granted stock options of the Company ("Option Grant"), at an
exercise price and in accordance with a vesting schedule set forth in the Stock
Option Agreement attached hereto as Exhibit A (the "Stock Option Agreement").
All Stock Options granted under this Agreement shall qualify as incentive stock
options under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), subject to the limitations of Section 422 of the Code, except to the
extent of any deviation from such limitations in which case the affected portion
of the Option Grant shall be treated as a nonstatutory option.
In the event that the Employee shall be subject to a Justified Termination
(as defined below), any unexercised portion of the Option Grant, whether or not
already vested, shall immediately expire and become null and void as of the
Termination Date. In the event that the Employee voluntarily terminates his
employment (other than for Good Reason), any unvested portion of the Option
Grant shall immediately expire and become null and void as of the Termination
Date, and the vested portion of the Option Grant shall expire to the extent not
exercised before 90 days after the Termination Date. In the event that the
Executive shall be subject to a Termination with Severance (as defined below) or
shall be terminated as a result of his death or disability, the unvested portion
of the Option Grant shall continue to vest for the three-year period set forth
in the Stock Option Agreement and shall remain exercisable pursuant to the terms
of the Option Grant.
Section 6. TERMINATION.
6.1 Termination with Severance. Except as otherwise provided in Section 6.2
below, if the Employment Period shall be terminated by the Company prior to the
third anniversary of the Effective Date for any reason other than for Cause or
as a result of the death or Permanent Disability of the Employee, or if the
Employee terminates the Agreement for "Good Reason", the Employee shall be
entitled to receive an amount equal to the Employee's then current annual
salary, exclusive of any bonuses, and shall continue group medical insurance and
similar health benefits (the "Severance Pay"), for the period (the "Severance
Period") commencing on the Termination Date and ending on the later of (i) the
third (3rd) anniversary of the Effective Date or (ii) the one hundred eightieth
(180th) day following the Termination Date, provided the Employee has not
breached and does not breach the provisions of Sections 7 and 8 in this
Agreement. However, any Severance Pay which is payable shall immediately be
reduced by the amount of salary received by the Employee during the Severance
Period as a result of the Employee's obtaining employment with another employer.
The Company shall assist Employee in procuring new employment and Employee
agrees to consider offers from any and all prospective employers procured by the
Company, provided that employment offered is comparable in terms of duties,
responsibilities, title, and compensation (including benefits, and incentive
compensation) to the Employee's employment with the Company as of the
Commencement Date. During each month of the Severance Period, Employee agrees to
make himself available to the Company for up to six hours of strategic
consulting upon the Company's reasonable request, and Employee shall be deemed
employed as a consultant to the Company throughout the Severance Period.
6.2 Termination without Severance. If the Employment Period shall be
terminated by the Company prior to the third anniversary of the Effective Date
hereof (a) for Cause, (b) as a result of the Employee's resignation (other than
with Good Reason), (c) as a result of the death or permanent disability of the
Employee (collectively, a "Justified Termination"), the Employee shall be
entitled to receive his Annual Salary through the Termination Date and
reimbursement of all reimbursable expenses incurred by the Employee prior to the
Termination Date. A termination for Cause shall become effective on the date
designated by the Company. In the case of Justified Termination, Employee shall
not be eligible to receive, and the Company shall not be required to pay, any
Severance Pay pursuant to Section 6.1 hereof.
Section 7. COVENANT NOT TO DISCLOSE. The Employee will not at any time
disclose or use any Confidential Information of which the Employee is or becomes
aware, whether or not such information is developed by him, except to the extent
that such disclosure or use is directly related to and required by the
Employee's performance of duties assigned to the Employee pursuant to the
Agreement. The Employee will take all appropriate steps to safeguard
Confidential Information and to protect it against disclosure, misuse,
espionage, loss and theft.
Section 8. COVENANT NOT TO COMPETE; NON-INTERFERENCE.
8.1. The Employee covenants and agrees that during the Employment Term and
for a period of two (2) years following the Termination Date, he shall not,
either directly or indirectly, without the prior written consent of the Company,
on his own behalf or in the service or on behalf of others serve anywhere in New
England or the Mid- Atlantic States as an owner, manager, stockholder (except as
a holder of no more than 2% of the issued and outstanding stock of a publicly
traded company), consultant, director, officer or employee of any business
entity that provides, develops or sells prescription PBM Services that are
similar to or competitive to those provided, offered or sold by the Company; and
for a period of two (2) years following the termination for any reason of such
employment the Employee shall not, either directly or indirectly solicit, divert
or appropriate any NMHC Customer for PBM Services. For purposes hereof, "NMHC
Customer" shall mean an entity or person that the Employee knows or reasonably
should know has purchased PBM Services provided by the Company or any of its
affiliates within twelve months prior to the Termination Date, or to the
Employee's knowledge has received a proposal to from the Company offer PBM
Services during the six months prior to the Termination Date.
8.2 The Employee covenants and agrees that during his employment by the
Company, and for a period of two (2) years after the Termination Date (or) for a
period of one (1) year after the Termination Date with respect to employees who
have worked for PPP prior to the Effective Date) following termination, for any
reason, of such employment, he will not directly on his own behalf or in the
service or on behalf of others, solicit, divert or hire away, or attempt to
solicit, divert or hire away, to any competing business any person employed by
the Company, whether or not such employee is a full-time employee or a temporary
employee of the Company, and whether or not such employment is pursuant to
written agreement and whether or not such employment is for a determined period
or is at will.
Section 9. COVENANT TO REPORT; PATENT, ETC.
9.1 The Employee shall promptly communicate and disclose to the Company all
inventions, discoveries, improvements and new writings, in any form, whatsoever
that either (A) relate to any matters or business carried on or being developed
by the Company, or (B) result from or are suggested by any work done by the
Employee in the course of the Employee's employment by the Company (hereinafter
"Inventions"), including, without limitation, all software, programs, routines,
techniques, procedures, training aides and instructional manuals conceived,
developed or made by the Employee during the Employee's employment by the
Company, whether solely or jointly with others, and whether or not patentable or
copyrightable. The Employee shall also promptly communicate and disclose to the
Company all other data obtained by the Employee material to the business or
affairs of the Company in the course of the Employee's employment by the
Company.
9.2 All written materials, records and documents made by the Employee or
coming into the Employee's possession during the Employment Term concerning the
business or affairs of the Company shall be the sole property of the Company,
and, upon the termination of the Employment Term or upon the request of the
Company during the Employment Term, the Employee agrees to render to the Company
such reports of the activities undertaken by the Employee or conducted under the
Employee's direction, pursuant hereto during the Employment Term as the Company
may request.
9.3 The Employee will assign to the Company all right in the Inventions and
will assist the Company or its designee during and subsequent to the Employee's
employment, at the Company's sole expense, in filing patent and/or copyright
applications on, and obtaining for the Company's benefit patents and/or
copyrights for such Inventions in any and all countries, and will assign to the
Company all such patent and/or copyright applications, all patents and/or
copyrights which may issue thereon, said Inventions to be and remain the sole
and exclusive property of the Company or its designee whether or not patented
and/or copyrighted.
9.4 Any Invention conceived, developed or made by the Employee within one
(1) year of the termination of the Employee's employment, whether such
termination of employment is voluntary or involuntary, shall be deemed to have
arisen out of and been conceived, developed or made by the Employee during the
Employee's employment by the Company, unless established to have been conceived,
developed or made after the termination of such employment.
Section 10. REMEDIES.The Employee acknowledges that the Company will have
no adequate remedy at law if the Employee violates the terms of Section 7, 8 or
9 hereof. In such event, the Company shall have the right, in addition to any
other rights it may have, to obtain in any court of competent jurisdiction
injunctive relief to restrain any breach or threatened breach of or otherwise to
specifically enforce any of the covenants of such Sections.
Section 11. COMPLIANCE WITH OTHER AGREEMENTS.
Employee and Company represent and warrant to the other that each is under
no contract, restriction or obligation which is inconsistent with execution of
this Agreement or the performance of his/its duties hereunder. Each hereby
agrees to indemnify the other for all losses, damages, costs, fees and expenses
including attorney's fees incurred by the other in connection with any of the
following:
(a) any breach of the foregoing representations and warranties;
(b) any lawsuit or other legal proceeding in which it is claimed that the
other has breached any trust, confidence or duty of loyalty, etc.;
(c) any action or matter relating to the above representations and
warranties.
Section 12. WAIVERS.
A waiver by the Company or the Employee of a breach of any of the
provisions of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
Section 13. BINDING EFFECT; BENEFITS.
Subject to the provisions of Section 5 hereof this Agreement shall inure to
the benefit of, and shall be binding upon, the parties hereto and their
respective successors, assigns, heirs, and legal representatives, including any
corporation or other business organization with which the Company may merge or
consolidate or to which it may transfer substantially all of its PPP-related
assets. Insofar as the Employee is concerned, this Agreement, being personal,
cannot be assigned.
Section 14. NOTICES.
All notices, requests, demands and other communications which are required
or may be given under this Agreement shall be in writing and shall be deemed to
have been duly given or made when delivered in person, by courier, by facsimile
transmission (with proof of delivery), or four (4) days after dispatch by
registered or certified mail, postage paid, return receipt requested, to the
party to whom the same is so given or made, to the address of such party
hereinabove set forth and in the case of notices to the Employee, a copy shall
be similarly sent to Verrill & Xxxx, LLP, Xxx Xxxxxxxx Xxxxxx, Xxxxxxxx, XX
00000, Attn: Xxxxxxx X. Xxxxx, Esq.
Section 15. ENTIRE AGREEMENT; AMENDMENTS; SURVIVAL COVENANTS.
This Agreement contains the entire Agreement, and supersedes all prior
agreements and understandings, oral or written, between the parties hereto with
respect to the subject matter hereof. This Agreement may not be waived, changed,
amended, modified or discharged orally, but only by an agreement in writing
signed by the party against whom any waiver, change, amendment, modification or
discharge is sought. The covenants of the Employee contained in Sections 7, 8
and 9 (insofar as they relate to the Employment Term) of this Agreement and the
covenants of the Company contained in Section 6.1, if applicable, shall survive
the termination of the Employment Term.
Section 16. HEADINGS.
The headings contained in this Agreement are for reference purposes only
and shall not affect the construction or interpretation of this Agreement.
Section 17. SEVERABILITY.
The invalidity of all or any part of any Section of this Agreement shall
not render invalid the remainder of this Agreement or the remainder of such
Section. If any provision of this Agreement is so broad as to be unenforceable,
such provisions shall be interpreted to be only so broad as is enforceable.
Section 18. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall, when executed, be deemed to be an original, but all of which together
shall constitute one and the same instrument.
Section 19. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to principles relating to
conflict of laws.
Section 20. INDEMNIFICATION.
The Company and PPRX shall, to the fullest extent permitted by law and by
their respective its Certificates (or Articles, as the case may be) of
Incorporation and By-laws, indemnify the Employee and hold him harmless for any
acts or decisions made by him in good faith while performing his duties pursuant
to this Agreement.
Section 21. NO THIRD PARTY BENEFICIARY.
The Agreement will not confer any rights or remedies upon any person other
than the Company, the Employee and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
NATIONAL MEDICAL CARD SYSTEMS, INC.
BY:_______________________________
-----------------------------------
EXHBIT A
STOCK OPTION AGREEMENT (this "Agreement") made as of the 31st day of July,
2003 between NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC., a Delaware corporation
(the "Company"), and ____________ ("Optionee").
WHEREAS, the Optionee is an employee of the Company or a subsidiary thereof;
WHEREAS, the Company desires to provide to the Optionee an additional
incentive to promote the success of the Company;
NOW, THEREFORE, in consideration of the foregoing, the Company hereby
grants to the Optionee (the "Grant") the right and option to purchase Common
Shares of the Company under and pursuant to the terms and conditions of the 1999
Stock Option Plan (the "Plan") and upon and subject to the following terms and
conditions:
1. GRANT OF OPTION. The Company hereby grants to the Optionee the right and
option (the "Option") to purchase fifty thousand (50,000) Common Shares of the
Company (the "Option Shares") during the following periods:
(a) All or any part of sixteen thousand six hundred and sixty seven
(16,667) Common Shares may be purchased during the period commencing one (1)
year from the date of execution hereof and terminating at 5:00 P.M. on July 31,
2013 (the "Expiration Date").
(b) All or any part of sixteen thousand six hundred and sixty seven
(16,667) Common Shares may be purchased during the period commencing two (2)
years from the date of execution hereof and terminating at 5:00 P.M. on the
Expiration Date.
(c) All or any part of sixteen thousand six hundred and sixty six (16,666)
Common Shares may be purchased during the period commencing three (3) years from
the date of execution hereof and terminating at 5:00 P.M. on the Expiration
Date.
2. NATURE OF OPTION. Such Options to purchase the Option Shares are
intended to meet the requirements of Section 422 of the Internal Revenue Code of
1986, as amended, relating to "incentive stock options" but shall be treated as
nonstatutory options to the extent of any disqualifying disposition or other
event that disqualifies an option for incentive stock option treatment under
Section 422.
3. EXERCISE PRICE. The exercise price of each of the Option Shares shall be
$_______, the closing bid price on the date of execution hereof, (the "Option
Price"). The Company shall pay all original issue or transfer taxes on the
exercise of the Option.
4. EXERCISE OF OPTIONS. The Option shall be exercised in accordance with
the provisions of the Plan. As soon as practicable after the receipt of notice
of exercise (in the form annexed hereto as Exhibit 1) and payment of the Option
Price as provided for in the Plan, the Company shall tender to the Optionee
certificates issued in the Optionee's name evidencing the number of Option
Shares covered thereby.
5. TRANSFERABILITY. The Option shall not be transferable other than by will
or the laws of descent and distribution and, during the Optionee's lifetime,
shall not be exercisable by any person other than the Optionee.
6. INCORPORATION BY REFERENCE. The terms and conditions of the Plan are
hereby incorporated by reference and made a part hereof.
7. CHANGE IN CONTROL. In the event of a Change in Control (as hereinafter
defined), any Options granted hereunder which have not vested as of the date of
the Change in Control shall automatically vest on such date. For purposes of
this Agreement, the term "Change in Control" shall mean:
(a) the transfer, through one transaction or a series of related
transactions, either directly or indirectly, or through one or more
intermediaries, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934) of 50% or more of either
the then outstanding Common Shares or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors, or the last of any series of transfers that results in the transfer
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934) of 50% or more of either the then outstanding
Common Shares or the combined voting power of the Company's then outstanding
voting securities entitled to vote generally in the election of directors;
(b) approval by the stockholders of the Company of a merger or
consolidation, with respect to which persons who were the stockholders of the
Company immediately prior to such merger or consolidation do not, immediately
thereafter, own more than 50% of the combined voting power of the merged or
consolidated company's then outstanding voting securities, entitled to vote
generally, in the election of directors or with respect to a liquidation or
dissolution of the Company or the sale of all or substantially all of the assets
of the Company;
(c) the transfer, through one transaction or a series of related
transactions, of more than 50% of the assets of the Company, or the last of any
series of transfers that results in the transfer of more than 50% of the assets
of the Company. For purposes of this paragraph, the determination of what
constitutes more than 50% of the assets of the Company shall be determined based
on the most recent financial statements prepared by the Company's independent
accountants; or
(d) during any fiscal year, individuals who at the beginning of such year
constituted the board of directors of the Company (the "Board") and any new
director or directors whose election by the Board was approved by a vote of a
majority of the directors then still in office who either were directors at the
beginning of the year or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof.
8. CAPITAL ADJUSTMENT.
(a) If the Company is merged or consolidated with or into another
corporation where the Company is not the survivor, there shall be substituted
for the shares issuable upon exercise of the outstanding Option an appropriate
number of shares of each class of stock, other securities or other assets of the
merged or consolidated corporation which were distributed to the shareholders of
the Company in respect of the Common Stock; provided, however, that the Option
may be exercised in full by the Optionee as of the effective date of any such
merger or consolidation of the Company without regard to the vesting schedule in
Section 1(b), by the Optionee giving notice in writing to the Company of his
intention to so exercise.
(b) If the Company is liquidated or dissolved then all outstanding portions
of the Option may be exercised in full by the Optionee as of the effective date
of any such liquidation or dissolution of the Company without regard to the
vesting schedule in Section 1(b), by the Optionee giving notice in writing to
the Company of his intention to so exercise.
(c) If the outstanding shares of Common Stock shall at any time be changed
or exchanged by declaration of a stock dividend, stock split, combination or
exchange of shares, recapitalization, extraordinary dividend payable in stock of
a corporation other than the Company, or otherwise than in cash, or any other
like event by or of the Company, and as often as the same shall occur, then the
number, class and kind of shares subject to this Option and the Option Price for
such shares shall be appropriately and equitably adjusted so as to maintain the
proportionate number of shares without changing the aggregate Option Price;
provided, however, no adjustment shall be made by reason of the distribution of
subscription rights on outstanding stock.
9. NOTICES. Any notice or other communication given hereunder shall be
deemed sufficient if in writing and (i) hand delivered, (ii) sent by registered
or certified mail, return receipt requested, or (iii) sent by a nationally
recognized overnight courier addressed to the Company, 00 Xxxxxx Xxxx Xxxxx,
Xxxx Xxxxxxxxxx, Xxx Xxxx 00000, Attention: Secretary and to the Optionee at the
address indicated below. Notices shall be deemed to have been given on the date
of hand delivery, mailing or overnight delivery, except notices of change of
address, which shall be deemed to have been given when received.
10. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives,
successors and assigns.
11. ENTIRE AGREEMENT. This Agreement, together with the Plan, contains the
entire understanding of the parties hereto with respect to the subject matter
hereof and may be modified only by an instrument executed by the party sought to
be charged.
12. ARBITRATION. Except for any proceeding seeking equitable remedies in
respect hereof, any dispute or controversy under this Agreement shall be
resolved by final and binding arbitration before a single impartial arbitrator
designated and acting under the rules and regulations of the American
Arbitration Association ("AAA") located in Nassau County, Long Island. The
decision and award of the arbitrator selected in accordance with the then
obtaining rules and regulations of the AAA shall be final and binding upon the
parties thereto, and may be enforced by the prevailing party in any court of
competent jurisdiction. As part of his award, the arbitrator shall allocate the
fees of the AAA, any and all other costs of the arbitration, and the parties'
reasonable attorneys' fees and expenses, in accordance with the arbitrator's
determination of the relative merits of the parties' positions in the
arbitration. Notwithstanding any other provision of this Agreement to the
contrary, the arbitrator shall have no power to delete from, add to or modify
the terms of this Agreement, and may not award any remedy that effectively
conflicts directly or indirectly with any provision of this Agreement as
written. The arbitrator's power shall be limited to interpreting and enforcing
the terms of this Agreement as written.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
By:_______________________________
Xxxxx Xxxx, CEO
------------------------------------
Signature of Optionee
____________________________________
Name of Optionee
Exhibit 9.03(h)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") made as of July 31, 2003 by
and among NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC., a New York corporation
("NMHC"), and the individuals whose names are set forth on Schedule I hereto
(each, a "Shareholder" and, collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, NMHC has purchased Portland Professional Pharmacy from the
Shareholders pursuant to a Stock Purchase Agreement dated as of July 31, 2003
(the "Acquisition Agreement"); and
WHEREAS, the Shareholders may be entitled to receive Common Stock of NMHC
pursuant to the Earn Out provisions of the Acquisition Agreement; and
WHEREAS, the parties hereto desire to promote the interests of NMHC and the
interests of the Shareholders by establishing herein certain terms and
conditions upon which NMHC will register certain of the shares of Common Stock
issuable under the Earn Out; and
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Certain Definitions. As used herein, the following terms shall have the
following respective meanings:
"Business Day" shall have the meaning ascribed thereto in the Acquisition
Agreement.
"Changing Event shall have the meaning ascribed thereto in Section 3.3(d)
hereof.
"Common Stock" means the common stock, par value $.01 per share, of NMHC.
"Commission" shall mean the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
"Correction Event" shall have the meaning ascribed thereto in Section
3.3(d) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Holder" shall mean any holder of Registrable Securities.
"Register", "registered" and "registration" shall refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act and applicable rules and regulations thereunder and the
declaration or ordering of the effectiveness of such registration statement.
"Registrable Securities" shall mean the shares of (i) Common Stock issued
or issuable to the Holders pursuant to the Earn Out (the "Earn Out Shares") and
(ii) Common Stock issuable or issued to the Holders, in respect of the Earn Out
Shares, upon any stock split, stock dividend, merger, consolidation,
recapitalization or similar event, excluding all such shares which (x) have been
registered under the Securities Act, (y) have been publicly sold pursuant to
Rule 144, or (z) are eligible for sale without restriction under Rule 144(k).
"Registration Expenses" shall mean all expenses incurred in compliance by
NMHC with Section 3 hereof, including, without limitation, all registration,
qualification and filing fees, exchange listing fees, expenses incurred in
connection with the preparation, printing and distribution of the registration
statement and prospectus, fees and disbursements of counsel for NMHC and
independent public accountants of NMHC, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of NMHC, which shall be
paid in any event by NMHC).
"Rule 144" shall mean Rule 144, or any successor rule, under the Securities
Act.
"Rule 144(k)" shall mean Rule 144(k), or any successor rule, under the
Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting and brokers' discounts and
selling commissions applicable to the sale of Registrable Securities, transfer
taxes and all fees and disbursements of counsel for any Holder.
2. Notice of Transfers. Promptly following a transfer of any Registrable
Securities (except under circumstances described in Section 3 hereof), each
Holder agrees to give written notice to NMHC of such transfer, including the
number of Registrable Securities, the date of transfer and to whom such
Registrable Securities were transferred.
3.1 Piggyback Registration Rights. (a) If NMHC shall determine to register
any of its securities either for its own account or the account of a security
holder or holders exercising demand registration rights (other than a
registration relating solely to employee benefit or Stock Option Plan plans, a
registration relating solely to a Commission Rule 145 transaction or a
registration on any registration form which does not permit secondary sales),
NMHC will (i) notify the Holders by written notice thereof within twenty (20)
days prior to filing any registration statement; and (ii) include in such
registration and in any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made by any Holder within
ten (10) days after receipt of the written notice from NMHC described in clause
(i) above, except as set forth in Section 3.1(b) below. Such written request may
specify all or a part of a Holder's Registrable Securities.
(b) If the registration of which NMHC gives notice is for a registered
public offering involving an underwriting, NMHC shall so advise the Holders by
written notice. All Holders proposing to distribute their Registrable Securities
through such underwriting shall (together with NMHC distributing its securities
for its own account through such underwriting) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected by
NMHC. Notwithstanding any other provision of this Section 3.1, if the
representative of the underwriters advises NMHC in writing that, in its opinion,
marketing factors require a limitation on the number of shares to be
underwritten, NMHC shall so advise all Holders requesting registration, and the
number of shares that may be included in the registration and underwriting shall
be allocated first to NMHC for securities being sold for its account or to the
security holder or holders exercising demand registration rights for securities
being sold for their account, as the case may be, and then in the following
manner: (i) the securities requested to be registered by officers or directors
of NMHC (other than officers or directors who are also Holders) shall be
excluded from such registration and underwriting to the extent required by such
limitation in proportion, as nearly as practicable, to the respective amounts of
securities requested to be registered by such officers and directors, and (ii)
if a limitation on the number of shares is still required, the securities being
sold for the account of the Holders shall be excluded from such registration and
underwriting to the extent required by such limitation in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities which they
had requested to be included in such registration. If any Holder who has
requested inclusion in such registration as provided above disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to NMHC and the underwriter.
3.2. Expenses of Registration. NMHC shall bear all Registration Expenses
and the selling Holders shall bear all Selling Expenses (in proportion, as
nearly as practicable, to the Registrable Securities of each selling holder of
securities being registered) incurred in connection with any registration,
qualification or compliance pursuant to the provisions of Sections 3.
3.3. Registration Procedures. In the case of each registration effected by
NMHC pursuant to this Agreement, NMHC will keep each participating Holder
advised in writing as to the initiation of such registration and as to the
completion thereof. At its expense, NMHC will:
(a) Keep such registration statement effective until the earlier of (x) six
(6) months from the effective date of such registration statement or (y) the
date on which all of the Holders have completed the distributions described in
the registration statement relating thereto;
(b) Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to keep such registration statement
effective and free of material misstatements or omissions and to comply with the
provisions of the Securities Act with respect to the disposition of securities
covered by such registration statement and respond as promptly as practicable to
any comments received with respect thereto;
(c) Furnish to each Holder such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a selling Holder from time to time may reasonably request in order to facilitate
the disposition of Registrable Securities covered by them;
(d) Notify each seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which, the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits a fact necessary to make the statements therein not misleading in light
of the circumstances under which they were made (a "Changing Event"), and, NMHC
will as soon as possible prepare and furnish to such seller (a "Correction
Event") a reasonable number of copies of a supplement to or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue statement or
omit to state any fact necessary to make the statements therein not misleading
in the light of the circumstances under which they were made;
(e) Cause all Registrable Securities included in such registration to be
listed on each, if any, securities exchange or system on which similar
securities issued by NMHC are then listed; and
(f) Register or qualify for offer and sale the Registrable Securities by
the time the registration is declared effective by the Commission under all
applicable state securities or "blue sky" laws of the 50 states of the United
States or obtain appropriate exemptions therefrom, to keep each such
registration or qualification effective during the period the registration
statement is required to be kept effective, and to do any and all other acts and
things which may be reasonably necessary or advisable to enable each Holder to
consummate the disposition in each such jurisdiction of the Registrable
Securities owned by such Holder; provided, however, that NMHC shall not be
required to submit to the general service of process in any such jurisdiction
unless NMHC is already subject to such service in such jurisdiction;
(g) During the period that NMHC is required to keep the registration
statement effective, NMHC will advise the Holders within a reasonable time (i)
when the prospectus or any prospectus supplement or post-effective amendment
thereto has been filed, and when the same has become effective, (ii) of any
request by the Commission for any amendments to, or issuance by the Commission
of any stop order with respect to the registration statement or any prospectus
or amendment thereto, or (iii) of the issuance by any state securities
commission or other regulatory authority of any order suspending the
registration or qualification or exemption from registration or qualification or
any proceedings for that purpose;
(h) If reasonably requested by Holders' counsel or any Holder, incorporate
as promptly as practicable in a prospectus supplement or post-effective
amendment such information as such Holder or Holders' counsel reasonably
requests to be included therein, including, without limitation, with respect to
the Registrable Securities being sold by such Holder to any underwriter or
underwriters, the purchase price being paid therefor by such underwriter or
underwriters and any other terms of any underwritten offering of the Registrable
Securities to be sold in such offering, and NMHC shall promptly make all
required filings of such prospectus supplement or post-effective amendment;
(i) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates (which shall not bear any restrictive legends unless
required under applicable law) representing Registrable Securities sold under a
registration statement to the purchasers thereof, and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriter or underwriters, if any, or such Holders may request and
keep available and make available to NMHC's transfer agent prior to the
effectiveness of such registration statement a supply of such certificates;
(j) Enter into such customary agreements (including, if applicable, an
underwriting agreement in customary form) and take such other actions as the
Holders of a majority of the Registrable Securities or the underwriters retained
by the Holders participating in an underwritten public offering, if any, may
reasonably request in order to expedite or facilitate the disposition of
Registrable Securities; provided, however, that such underwriters are reasonably
acceptable to NMHC;
(k) Furnish to each Holder of Registrable Securities included in such
offering and to each underwriter, if any, if requested by such Holder or
underwriter, a signed counterpart, addressed to such Holder or underwriter, of
(i) an opinion or opinions of counsel to NMHC and (ii) a comfort letter or
comfort letters from NMHC's independent public accountants, each in customary
form and covering matters of the type customarily covered by opinions or comfort
letters, as the case may be.
4. Indemnification. (a) To the extent permitted by applicable law, NMHC
will indemnify and hold harmless each Holder, its partners, officers, directors,
trustees, employees and agents, and each person, if any, who controls any Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the partners, officers, directors, trustees,
employees and agents of such controlling person, each Holder and each
underwriter, if any, and each person who controls such underwriter within the
meaning of the Securities Act or the Exchange Act, against all claims, losses,
damages and liabilities (or actions, proceedings or settlements in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus or other document
(including any related registration statement, any amendments thereto and all
documents incorporated by reference therein) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each such person, for
any legal and other expenses as are reasonably incurred in connection by them
with investigating and defending any such claim, loss, damage, liability or
action, provided that NMHC will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission based upon written information
furnished to NMHC by such Holder or underwriter and stated to be specifically
for use therein or to the extent due to the failure of such Holder or
underwriter to provide an updated prospectus or other document to a purchaser at
a time when NMHC has informed such Holder or underwriter of a material
misstatement or omission in a prospectus or other document and has provided
updated prospectuses or other documents correcting such misstatement or
omission.
(b) Each Holder (on a several and not joint basis) will indemnify NMHC, its
officers, directors, employees and agents, and each person, if any, who controls
NMHC within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the officers, directors, employees and agents of
such controlling person, and each underwriter, if any, and each person who
controls such underwriter within the meaning of the Securities Act, and each
other Holder, against all claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus or other document, or any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each such person for any legal and other expenses as are reasonably
incurred by them in connection with investigating or defending any such claim,
loss, damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus or other
document in reliance upon and in conformity with written information furnished
to NMHC by such Holder and stated to be specifically for use therein; provided,
that in no event shall any indemnity under this Section 4(b) exceed the net
proceeds from the offering received by such Holder, and no Holder shall be
liable under this Section 4(b) for any statements or omissions of any other
Holder.
(c) Each party entitled to indemnification under this Section 4 (the
"Indemnified Party") shall give notice in writing to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such Indemnified Party's expense; provided,
however, that the Indemnifying Party shall pay the expense of one counsel for
all similarly situated Indemnified Parties if representation of such Indemnified
Parties by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between the Indemnified Parties
and any other party represented by such counsel in such proceeding, and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 4, unless such failure materially prejudices the ability of the
Indemnifying Party to defend against the claims asserted against the Indemnified
Party. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 4 is unavailable to
an Indemnified Party in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect the relative fault of NMHC, on the
one hand, and such Holder, on the other hand, in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault of NMHC,
on the one hand, and Holder, on the other hand, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of
material fact or the omission or alleged omission to state a material fact
relates to information supplied by NMHC or by such Holder and the parties'
relevant intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The parties hereto agree that it would not
be just and equitable if contribution pursuant to this Section 4(d) were based
solely upon the number of entities from whom contribution was requested or by
any other method of allocation which does not take account of the equitable
considerations referred to above in this Section 4(d). The amount paid or
payable by an Indemnified Party as a result of the losses, claims, damages and
liabilities referred to above in this Section 4(d) shall be deemed to include
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim, subject to
the provisions of Section 4(d) hereof. No person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of each Holder under this Section 4(d) are
several and not joint, and are subject to the limitation set forth in the
proviso to Section 4(b) above.
(e) The obligations of NMHC and the Holders under this Section 4 shall
survive the completion of any offering of Registrable Securities in a
registration statement, and otherwise, and the termination of this Agreement.
5. Information by Holders. Each Holder shall furnish to NMHC such
information regarding such Holder and the distribution proposed by such Holder
as NMHC may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement.
6. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of
restricted securities to the public without registration, NMHC agrees to:
(a) use its reasonable best efforts to make and keep current public
information available as those terms are understood and defined in Rule 144
under the Securities Act at all times;
(b) use its reasonable best efforts to file with the Commission in a timely
manner all reports and other documents required of NMHC under the Securities Act
and the Exchange Act; and
(c) furnish to the Holders forthwith upon request a written statement by
NMHC as to its compliance with the reporting requirements of Rule 144, and of
the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of NMHC, and such other reports and documents so filed as the
Holders may reasonably request in availing themselves of any rule or regulation
of the Commission allowing the Holders to sell any such securities without
registration.
7. No Voluntary Transfer or Assignment of Registration Rights. The rights
to cause NMHC to register securities granted to the Holders by NMHC under
Section 3 may not be voluntarily transferred or assigned by a Holder without the
prior written consent of NMHC. Nothing herein shall restrict any transfers upon
death or otherwise by operation of law.
8. Amendment; Waiver. No amendment, alteration or modification of this
Agreement shall be valid unless in each instance such amendment, alteration or
modification is expressed in a written instrument executed by Holders who own at
least a majority of the Registrable Securities. No waiver of any provision of
this Agreement shall be valid unless it is expressed in a written instrument
duly executed by the party or parties making such waiver; it being agreed and
understood that execution by Holders who own a majority of the Registrable
Securities shall constitute a waiver by all the Holders. The failure of any
party to insist, in any one or more instances, on performance of any of the
terms and conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future performance of
any such term, covenant or condition but the obligation of any party with
respect thereto shall continue in full force and effect.
9. Specific Performance, Remedies. The parties hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
by reason of a failure to perform any of the obligations under this Agreement.
Therefore, all parties hereto shall have the right to specific performance of
the obligations of the other parties under this Agreement, and if any party
hereto shall institute an action or proceeding to enforce the provisions hereof,
any person (including NMHC) against whom such action or proceeding is brought
hereby waives the claim or defense therein that such party has an adequate
remedy at law, and such person shall not urge in any such action or proceeding
the claim or defense that such remedy at law exists.
10. Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first-class, certified or
registered mail, postage prepaid, return receipt requested, or transmitted by
facsimile or delivered either by hand, by messenger or by nationally recognized
overnight courier, addressed:
(a) if to a Holder, at his address set forth on Schedule I attached hereto
or at such other address as he shall have furnished to NMHC in writing.
(b) if to NMHC, at the following address, or at such other address as NMHC
shall have furnished to the Holders,
National Medical Health Card Systems, Inc.
00 Xxxxxx Xxxx Xxxxx
Xxxx Xxxxxxxxxx, Xxx Xxxx 00000
Attn: Chief Financial Officer
with a copy to Xxxxxxxx Xxxxxxxx, Esq. at that same address.
11. Successors and Assigns. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective permitted transferees, successors and assigns of the parties hereto,
whether so expressed or not.
12. Governing Law. This Agreement is to be governed by and interpreted
under the laws of the State of New York without giving effect to the principles
of conflicts of laws thereof.
13. Titles and Subtitles. The titles of the sections of this Agreement are
for the convenience of reference only and are not to be considered in construing
this Agreement.
14. Severability. The invalidity or unenforceability of any provisions of
this Agreement shall not be deemed to affect the validity or enforceability of
any other provision of this Agreement.
15. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with respect to the subject
matter hereof and supersedes all previous agreements, arrangements and
understandings, whether written or oral, with respect to the subject matter
hereof.
16. 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 instrument.
17. Termination. This Agreement shall terminate and be of no further force
or effect upon the fourth anniversary of the date of this Agreement, except as
set forth in Section 4(e).
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first above written.
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
By:
-----------------------------------------
HOLDERS:
SCHEDULE I
Xxxx X. Xxxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Xxxxxx Xxxxxxx
00 Xxxx Xxxx Xxxx
Xxxxxxxxxxx, XX 00000
Xxxxxx Xxxxxx
00 Xxxx Xxxxx Xxxx
Xxxx, XX 00000
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
OPTION EXERCISE FORM
The undersigned hereby irrevocably elects to exercise the within Option
dated __________________ to the extent of purchasing ___________________ Common
Shares of National Medical Health Card Systems, Inc. The undersigned hereby
makes a payment of $______________ in payment therefor.
------------------------
Name of Optionee
------------------------
Signature of Optionee
------------------------
Address of Optionee
------------------------
Date
Schedule 2.05
EARN OUT SCHEDULE
This Schedule describes the Earn Out to be paid by Acquirer to the
Shareholders for the Shares. Except as otherwise provided in this Schedule,
capitalized terms have the same meanings as set forth in the Stock Purchase
Agreement (the "Agreement"), except that each reference herein to "Company"
shall mean the businesses of PPRX and PRXA collectively, in whatever form
Acquirer may choose to maintain these existing corporations.
A. Computation and Payment. Acquirer shall pay to the Shareholders, as
additional consideration for the Shares, the following Earn Out:
(i) 25% of the gross margin dollars generated from existing Company clients
or generated as a result of the Company's organic growth and 10% of the gross
margin dollars generated from Acquirer clients migrated to the Company for the
twelve months commencing August 1, 2003 and ending July 31, 2004; and
(ii) 25% of the gross margin dollars generated from existing Company
clients or generated as a result of the Company's organic growth and 10% of the
gross margin dollars generated from Acquirer clients migrated to the Company for
the twelve month period commencing August 1, 2004 or (if later) the first day of
the month following completion of integration pursuant to Section 7.06 of the
Agreement; and
(iii) 25% of the gross margin dollars generated from existing Company
clients or generated as a result of the Company's organic growth and 10% of the
gross margin dollars generated from Acquirer clients migrated to the Company for
the twelve month period commencing on the day after the end of the second earn
out period described in clause (ii) above.
The Earn Out earned pursuant to (i), (ii) and (iii) above shall be capped
at $7,000,000 in total and shall be paid in cash unless the Acquirer, in its
sole discretion as to any given installment, elects to make payment 50% in
Acquirer Common Stock and 50% in cash. Such Earn Out shall be payable within 45
days after the first, second and third anniversary of the Closing Date or 45
days from the end of any of any earn out period described above, which ever is
later, respectively, and shall be accompanied by a detailed calculation of each
component of the Earn Out. Stock delivered in payment of the Earn Out shall be
valued at the average of the high and low trading price of Acquirer Common
Stock, as published for the 15 trading days immediately preceding the applicable
anniversary of Closing.
B. Definitions. For purposes of this Schedule 2.05, the following terms
shall be defined as indicated:
"Gross margin dollars" shall mean the sales of the Company less cost of
sales, determined on a consistent basis to that applied in the preparation and
presentation of the Year-End Financial Statements for the Company's fiscal year
ended December 31, 2002 and interim statements dated June 30, 2003. Provided,
however, that Company gross margin may include direct costs of labor to mix
compounds, direct shipping expenses, and supplies utilized, if and to the extent
necessary to conform to generally accepted accounting principles. Gross margin
shall in all events include rebates on purchased products.
"Existing Company clients" shall mean and include those persons, entities
or organizations to whom or through whom PPRX or PRXA provided products or
services within the twelve-month period immediately preceding the Closing Date,
and in addition shall include any prospective customer of PPRX or PRXA for which
Company employees or sales representatives during such twelve-month period
devoted significant sales efforts as mutually agreed to by the parties.
"Acquirer clients migrated to the Company" or "migrated clients" shall mean
and include those persons, entities, or organizations to whom or through whom
Acquirer or its affiliates provided products or services within the twelve-month
period immediately preceding the Closing Date, other than persons, entities or
organizations that are existing Company clients as defined above.
"Company" shall mean PPRX and PRXA, on a combined basis. For purposes of
this Schedule if, after the Closing, Acquirer reorganizes PPRX or PRXA or the
business functions of either entity, then "Company" shall include any successor
entities or units affiliated with Acquirer, but only to the extent such
affiliated entities or units engage in the sale of products or services similar
to those offered by the Company at the time of such reorganization.
Revenues from "organic growth" shall mean and include all sales by the
Company for the relevant Earn Out Period, other than to migrated clients or
existing Company clients as defined above.
"Earn Out Periods" shall mean the three successive twelve-month periods
immediately following the Closing Date.
C. Additional Covenants. Acquirer and the Shareholders agree as follows:
1. After the Closing Acquirer and its affiliates shall, subject to the last
sentence of this paragraph, provide sufficient funds, personnel and other
resources throughout the Earn Out Periods to enable the Company to (a) continue
to conduct its present lines of business in substantially the same manner as the
business was conducted by the Company prior to the Closing Date, as well as to
enable the Company to pursue additional related business opportunities, and (b)
operate such business consistent with reasonably prudent business practice. No
violation or breach of this Schedule shall occur by reason of any decision by
the Company or Acquirer to (i) terminate, amend or modify the employment
agreements with one or more of the Shareholders, (ii) not hire any employee or
former employee of the Company, (iii) terminate any employee of Acquirer, the
Company or their respective affiliates, (iv) terminate, amend or modify the
terms of any business relationship or agreement in a manner that is consistent
with reasonably prudent business practice or (v) take any other action which is
consistent with reasonably prudent business practice.
2. During the Earn Out Periods, neither Acquirer, the Company nor their
respective affiliates shall commit any action (or failure to act) which is
inconsistent with the provisions of this Schedule, where such action (or such
failure to take action) could reasonably be expected to adversely and materially
affect the Shareholders' ability to realize the payments contemplated in this
Schedule. Notwithstanding anything to the contrary contained in this paragraph,
no violation or breach of any agreement contained in this Schedule shall occur
by reason of any decision by Acquirer to take any action that is commercially
reasonable in its reasonable discretion in light of the Acquirer's business;
provided that, with respect to decisions that could adversely and materially
affect the Shareholders' ability to realize the payments contemplated in this
Schedule, Acquirer shall obtain the written consent of the Shareholder
Representative, which consent shall not be unreasonably withheld. Provided
however, the consent of the Shareholder Representative will not be required in
connection with the Board of Directors of the Acquirer or the Shareholders of
the Acquirer, approving the sale of a majority of the capital stock of the
Acquirer or substantially all of the assets of Acquirer.
3. After the Closing, the Company shall maintain records of sales and cost
of sales in a manner reasonably calculated to capture and preserve the
information needed to calculate the Earn Out. Acquirer and the Shareholders
shall cooperate with each other regarding the exchange and provision of
information to each other about the operations of the Company's business during
the Earn Out period and in the calculations contemplated in this Schedule,
including, without limitation, reasonable access to all business records of
Acquirer or its affiliates related to the calculations.
4. Any Shareholder, by written notice, may request a review of the Earn Out
calculation. Such notice shall be given to Acquirer and the other Shareholders
within 30 days after the Shareholder receives the Earn Out payment and the
required statement setting forth Acquirer's calculation of each component of the
Earn Out. Thereafter, unless the parties have agreed on other reasonable
procedures, Acquirer shall engage its outside auditors to review the Earn Out
calculation for the latest Earn Out Period and shall submit to Acquirer and the
Shareholders a report on their findings. Any Shareholder, at his own expense,
may retain accountants or other advisors to review Acquirer's initial
calculation and/or to review the outside auditors' report. Once agreement on any
adjustment to the Earn Out calculation is reached between Acquirer and all
Shareholders, Acquirer shall promptly pay over to each Shareholder (or the
Shareholders shall each promptly refund to Acquirer, as the case may be), in
cash, the difference between the value of cash and stock initially paid to the
Shareholder and the value of cash and stock that should have been paid had the
applicable adjustment been made in the original calculation of the Earn Out. If
the parties, for any reason, are unable to agree upon the calculation of the
Earn Out within 120 days after the end of the Earn Out Period, then the matter
shall be resolved in accordance with the provisions of Section 13.02 of this
Agreement.
5. The provisions of this Schedule shall be binding on any
successor-in-interest to Acquirer, PPRX or PRXA. If Acquirer enters into any
agreement or transaction by which ownership of any substantial portion of the
business of the Company is sold or transferred (whether by merger, sale of
stock, reorganization or otherwise) to an entity or other person not affiliated
with Acquirer, and the Common Stock of such non-affiliated purchaser has a
public market capitalization of less than $100 million, then the Shareholders
may elect to receive the stock portion of the Earn Out payments in the form of
cash instead of Acquirer Common Stock.
