1
EXHIBIT 10.1
Execution Copy
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RECAPITALIZATION AGREEMENT
BY AND AMONG
TEAM HEALTH, INC.,
MEDPARTNERS, INC.,
PACIFIC PHYSICIAN SERVICES, INC.,
AND
TEAM HEALTH HOLDINGS, L.L.C.
DATED AS OF JANUARY 25, 1999
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TABLE OF CONTENTS
PAGE
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ARTICLE I -- DEFINITIONS...............................................................................1
Section 1.1 Definitions...................................................................1
Section 1.2 Cross Reference...............................................................8
ARTICLE II -- THE RECAPITALIZATION.....................................................................10
Section 2.1 Pre-Closing Estimates of Certain Amounts.....................................10
Section 2.2 Exchange of Common Stock.....................................................10
Section 2.3 Purchase of Preferred Stock and Common Stock.................................11
Section 2.4 Redemption of Certain Common Stock...........................................11
Section 2.5 Closing......................................................................12
Section 2.6 Post-Closing Adjustments.....................................................12
ARTICLE III -- CONDITIONS TO CLOSING....................................................................15
Section 3.1 Conditions to the Purchaser's Obligations....................................15
Section 3.2 Conditions to the Company's, the Parent's
and the Existing Stockholder's Obligations............................................19
ARTICLE IV -- COVENANTS BEFORE CLOSING.................................................................21
Section 4.1 Affirmative Covenants of the Company.........................................21
Section 4.2 Negative Covenants of the Company............................................23
Section 4.3 Covenants of Purchaser.......................................................23
Section 4.4 Intercompany Accounts........................................................24
Section 4.5 Distributions................................................................24
Section 4.6 Financial Information........................................................25
Section 4.7 Parent Board Approval........................................................25
Section 4.8 Cash Management from Measurement Date to Closing Date........................25
ARTICLE V -- REPRESENTATIONS AND WARRANTIES
OF THE EXISTING STOCKHOLDER............................................................26
Section 5.1 Organization and Corporate Power.............................................26
Section 5.2 Authorization of Transactions................................................27
Section 5.3 Absence of Conflicts.........................................................27
Section 5.4 Capitalization...............................................................28
Section 5.5 Financial Statements and Related Matters.....................................28
Section 5.6 Absence of Undisclosed Liabilities...........................................28
Section 5.7 Absence of Certain Developments..............................................29
Section 5.8 Real Property................................................................30
Section 5.9 Assets.......................................................................31
Section 5.10 Taxes........................................................................32
Section 5.11 Contracts and Commitments....................................................33
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Section 5.12 Proprietary Rights...........................................................35
Section 5.13 Litigation; Proceedings......................................................35
Section 5.14 Brokerage....................................................................36
Section 5.15 Governmental Licenses and Permits............................................36
Section 5.16 Employees....................................................................36
Section 5.17 Employee Benefit Plans.......................................................36
Section 5.18 Insurance....................................................................37
Section 5.19 Officers and Directors; Bank Accounts........................................38
Section 5.20 Affiliate Transactions.......................................................38
Section 5.21 Compliance with Laws.........................................................38
Section 5.22 Health Care Matters..........................................................38
Section 5.23 Environmental Matters........................................................39
Section 5.24 Disclosure...................................................................40
Section 5.25 Closing Date.................................................................40
ARTICLE VI -- REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER......................................................................41
Section 6.1 Organization.................................................................41
Section 6.2 Authorization of Transactions................................................41
Section 6.3 Absence of Conflicts.........................................................41
Section 6.4 Litigation...................................................................42
Section 6.5 Investigation by the Purchaser...............................................42
Section 6.6 Financing....................................................................42
Section 6.7 Xxxx-Xxxxx-Xxxxxx............................................................43
Section 6.8 Brokerage....................................................................43
Section 6.9 Investment...................................................................43
Section 6.10 Closing Date.................................................................43
ARTICLE VII -- TERMINATION.............................................................................43
Section 7.1 Termination..................................................................43
Section 7.2 Effect of Termination........................................................44
ARTICLE VIII -- INDEMNIFICATION AND RELATED MATTERS.....................................................44
Section 8.1 Survival.....................................................................44
Section 8.2 Indemnification..............................................................45
Section 8.3 Certain Tax Matters..........................................................52
Section 8.4 Employees; Employee Benefits.................................................56
ARTICLE IX -- ADDITIONAL AGREEMENTS...................................................................60
Section 9.1 Legend for the Restricted Securities.........................................60
Section 9.2 Press Releases and Announcements.............................................60
Section 9.3 Further Transfers............................................................61
Section 9.4 Specific Performance.........................................................61
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Section 9.5 Expenses.....................................................................61
Section 9.6 Exclusivity..................................................................61
Section 9.7 Books and Records............................................................62
Section 9.8 Noncompetition, Nonsolicitation, and Confidentiality.........................62
Section 9.9 Nonsolicitation by the Purchaser... .........................................64
Section 9.10 Use of Parent's Names and Logos..............................................64
Section 9.11 Medical Malpractice Matters..................................................65
Section 9.12 Transition Services..........................................................65
Section 9.13 EMSA Limited Partnership.....................................................67
Section 9.14 Certain Vendors..............................................................67
Section 9.15 IDX..........................................................................67
ARTICLE X -- MISCELLANEOUS..............................................................................67
Section 10.1 Amendment and Waiver.........................................................67
Section 10.2 Notices......................................................................68
Section 10.3 Binding Agreement; Assignment................................................68
Section 10.4 Severability.................................................................69
Section 10.5 No Strict Construction.......................................................69
Section 10.6 Captions.....................................................................69
Section 10.7 Entire Agreement.............................................................69
Section 10.8 Counterparts.................................................................70
Section 10.9 Governing Law................................................................70
Section 10.10 Jurisdiction and Consent to Service..........................................70
Section 10.11 Parties in Interest..........................................................70
Section 10.12 Schedules....................................................................70
INDEX OF EXHIBITS
Exhibit A - List of TH Entities
Exhibit B - Earn-Out Obligations
Exhibit C - "Knowledge" Individuals
Exhibit D - Net Working Capital Determination
Exhibit E - Preferred Stock Rights and Preferences
Exhibit F - Required Consents
Exhibit G - Form of Opinion of King & Spalding
Exhibit H - Debt and Equity Commitment Letters
Exhibit I - Form of Opinion of Xxxxxxxx & Xxxxx
Exhibit J - Farmers Insurance Proposal
Exhibit K - Special Bonus Payments
Exhibit L - Medical Malpractice Liability Insurance
Exhibit M - Certain Vendors
Exhibit N - IDX Allocation
Disclosure Letter
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RECAPITALIZATION AGREEMENT
THIS RECAPITALIZATION AGREEMENT, dated as of January 25,
1999, is made by and among Team Health, Inc., a Tennessee corporation (the
"Company"), Pacific Physician Services, Inc., a Delaware corporation (the
"Existing Stockholder"), MedPartners, Inc., a Delaware corporation (the
"Parent"), and Team Health Holdings, L.L.C., a Delaware limited liability
company (the "Purchaser"). The Company, the Existing Stockholder, the Parent,
and the Purchaser are referred to herein collectively as the "Parties" and
individually as a "Party." Certain capitalized terms used herein are defined in
Article I below.
WHEREAS, the Parent is the ultimate parent to the Existing
Stockholder, the Company, and the other entities that collectively constitute
what is commonly known as the "Team Health business," a list of which is
attached hereto as Exhibit A (the "TH Entities");
WHEREAS, as of the date hereof, certain of the TH Entities
are not Subsidiaries of the Company;
WHEREAS, prior to the Closing, the Parent will take such
actions as are necessary to cause all of the TH Entities to become Subsidiaries
of the Company (the "Internal Reorganization");
WHEREAS, the Existing Stockholder is the sole stockholder of
the Company, holding 100 shares of the Company's Common Stock, no par value
(the "Existing Common Stock"); and
WHEREAS, the Parties desire to consummate a recapitalization
of the Company on the terms and subject to the conditions set forth in this
Agreement, and desire that the transactions contemplated by this Agreement be
treated as a "recapitalization" for accounting purposes.
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties, and covenants which are to be made and
performed by the respective Parties, the Parties hereby agree as follows:
ARTICLE I -- DEFINITIONS
SECTION 1.1 DEFINITIONS. When used in this Agreement, the
following terms have the meanings set forth below:
"Acquired Companies" means the Company, each of the TH
Entities, and each of the Related Professional Corporations.
"Affiliate" of any particular Person means any other Person
controlling, controlled by, or under common control with such particular
Person, where "control" means the possession, directly or indirectly, of the
power to direct the management and policies of a Person whether through the
ownership of voting securities, contract, or otherwise.
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"Affiliated Group" means any affiliated group as defined in
Code Section 1504 that has filed a consolidated return for federal income tax
purposes (or any similar group under state, local, or foreign law).
"Agreement" means this Recapitalization Agreement, including
the Disclosure Letter and all Exhibits and Schedules hereto, as it may be
amended from time to time in accordance with its terms.
"Baseline Capital Expenditures Amount" means $10,000,000.
"Baseline Net Working Capital Amount" means $102,900,000
"Bottom Collar" means $100,900,000.
"Capital Expenditures Amount" means all expenditures made
during the period from January 1, 1998 through the close of business on the
Measurement Date for assets which, in accordance with GAAP, are required to be
capitalized and shown on the Company's consolidated balance sheet (after taking
the Internal Reorganization into account), as long as such asset is purchased
for Cash or financed by the incurrence of Indebtedness (i.e., assets which are
financed by accounts payable will not count towards the Capital Expenditures
Amount unless and then only to the extent that such accounts payable are paid
off with Cash prior to the close of business on the Measurement Date).
"Capital Stock" means (i) in the case of a corporation, any
and all shares of capital stock, (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of capital stock, (iii) in the case of a
partnership or limited liability company, any and all partnership or membership
interests (whether general or limited), (iv) in any case, any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person, and
(v) in any case, any right to acquire any of the foregoing.
"Cash" means all cash, cash equivalents, and marketable
securities.
"Cash Amount" means the book value of the Company's Cash as
of the close of business on the Measurement Date, determined on a consolidated
basis (after taking the Internal Reorganization into account) in accordance
with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended,
and any reference to any particular Code section shall be interpreted to
include any revision of or successor to that section regardless of how numbered
or classified.
"Common Stock" means the Company's Common Stock, no par
value.
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"Earn-Out Obligations" means those payment obligations of the
Acquired Companies set forth on Exhibit B to former owners of businesses which
were acquired by the Acquired Companies prior to the Closing which are in the
nature of deferred purchase prices for such businesses and are expressly
contingent on the financial or operating performance of such businesses for
periods after the Closing.
"Environmental and Safety Requirements" means all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations and all common law concerning public health and
safety, worker health and safety and pollution or protection of the
environment, including all such standards of conduct and bases of obligations
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or by-products,
asbestos, polychlorinated biphenyls (or PCBs), noise or radiation.
"Excluded Liabilities" means all liabilities and obligations
reflected on the books and records of the Acquired Companies relating to (i)
self-funded medical claims and the related tail liability incurred prior to the
Closing Date by current or former employees of InPhyNet Medical Management Inc.
and its Subsidiaries which relate to the government services or managed
healthcare divisions (or their covered dependents) and (ii) self-funded
workers' compensation claims and the related tail liability with respect to
injuries incurred prior to July 1, 1997 by current or former employees of
InPhyNet Medical Management Inc. and its Subsidiaries which relate to the
government services or managed healthcare divisions.
"GAAP" means generally accepted accounting principles of the
United States, consistently applied.
"Indebtedness" of any Person means, without duplication: (i)
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor or otherwise (other than trade payables and other current
liabilities incurred in the Ordinary Course of Business), including without
limitation all Earn-Out Obligations, and any commitment by which such Person
assures a creditor against loss, including contingent reimbursement obligations
with respect to letters of credit; (ii) indebtedness guaranteed in any manner
by such Person, including a guarantee in the form of an agreement to repurchase
or reimburse; and (iii) obligations under capitalized leases in respect of
which such Person is liable, contingently or otherwise, as obligor, guarantor
or otherwise, or in respect of which obligations such Person assures a creditor
against loss. Without limiting the generality of the foregoing, (i) the
promissory note payable to Edison Emergency Associates, P.A. dated August 1,
1997 will be treated as Indebtedness for purposes of this Agreement but will
not be treated as an Earn-Out Obligation for purposes of this Agreement and
(ii) the deferred compensation payable with respect to the EPA Deferred
Compensation Plan reflected on the Company's balance sheet and the
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deferred compensation arrangements referred to in Section 8.4(i) will not be
treated as Indebtedness for purposes of this Agreement.
"Indebtedness Amount" means the book value of the Company's
Indebtedness as of the close of business on the Measurement Date, determined on
a consolidated basis (after taking the Internal Reorganization into account) in
accordance with GAAP; provided that for purposes of such calculation (i) all
interest, prepayment penalties, premiums, fees and expenses (if any) which
would be payable if such Indebtedness was paid in full on the Measurement Date
shall be treated as Indebtedness and (ii) the aggregate amount of Earn-Out
Obligations included as Indebtedness shall be deemed to be $13,487,000,
regardless of the actual book value or expected value of the Earn-Out
Obligations at such time.
"Insider" means, any officer, director, executive employee,
stockholder, partner or Affiliate, as applicable, of any Acquired Company or
any spouse or dependent (whether natural or adopted) of any such individual or
any entity in which any of the foregoing Persons owns a 5% or greater direct or
indirect beneficial interest.
"knowledge" and "aware" and terms of similar import mean,
with respect to a Person, the actual knowledge of such Person (and if such
Person is an entity, this means the actual knowledge of the officers and
directors of such Person; provided that if the Person is the Parent, actual
knowledge also shall mean the actual knowledge of the officers and directors of
the Existing Stockholder and the Company, and for purposes of Section 5.13
only, it shall also mean the actual knowledge of those individuals listed on
Exhibit C attached hereto), after making reasonable inquiry and exercising
reasonable diligence with respect to the particular matter in question.
"Leased Real Property" means all land, building, fixtures or
other real property in which any Acquired Company has a leasehold,
subleasehold, license, concession or other real property right or interest
under the Real Property Leases.
"Leasehold Improvements" means all buildings, fixtures and
other improvements located on each Leased Real Property which are owned by any
Acquired Company, regardless of whether such improvements are subject to
reversion to the landlord or other third party upon the expiration or
termination of the Real Property Lease for such Leased Real Property.
"Licenses" means all permits, licenses, franchises,
certificates, approvals, and other authorizations of third parties or foreign,
federal, state, or local governments or other similar rights.
"Liens" means any mortgage, pledge, security interest,
encumbrance, lien, or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against the Acquired Companies,
any filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to any Acquired Company under a lease which
is not in the nature of a conditional sale or title retention
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agreement, or any subordination arrangement in favor of another Person (other
than any subordination arising in the Ordinary Course of Business).
"Loss" means, with respect to any Person, any damage,
liability, diminution in value, demand, claim, action, cause of action, cost,
damage, deficiency, imposed Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third party (including any governmental entity or any department,
agency or political subdivision thereof) against or affecting such Person or
which, if determined adversely to such Person, would give rise to, evidence the
existence of, or relate to, any other Loss and the investigation, defense or
settlement of any of the foregoing.
"Material Adverse Effect" means any material adverse effect
on the business, financial condition, operations, results of operations, or
prospects of the Acquired Companies, taken as a whole.
"Medical Malpractice Claim" means any claim for medical
malpractice arising at any time, in connection with the operation of the
business of the Acquired Companies on or prior to the Closing, for which any of
the Acquired Companies is liable, whether pursuant to law, the terms of any
contract between any of the Acquired Companies and any third party, or
otherwise.
"Measurement Date" means February 28, 1999.
"Net Working Capital Amount" means the book value of the
Company's consolidated current assets (excluding Cash, assets with respect to
Taxes, intercompany receivables and the deferred restructuring charge asset
referred to in item 4 on the Assets Schedule) minus the book value of the
Company's consolidated current liabilities (excluding Indebtedness,
intercompany payables, liabilities with respect to Taxes, and Excluded
Liabilities), in each case as of the close of business on the Measurement Date
(after taking the Internal Reorganization into account), in accordance with the
procedures set forth in Exhibit D.
"Ordinary Course of Business" means the ordinary course of
business consistent with past practice (including, without limitation, with
respect to collection of accounts receivable, purchases of supplies, repairs
and maintenance, payment of accounts payable and accrued expenses, terms of
sale, levels of capital expenditures, and operation of cash management
practices generally).
"Owned Real Property" means all land, together with all
buildings, fixtures and other improvements located thereon, and all easements
and other rights appurtenant thereto, owned by any of the Acquired Companies.
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"Permitted Liens" means (i) real estate taxes, assessments
and other governmental fees or other charges levied with respect to the Real
Property not yet due and payable as of the Closing Date; (ii) mechanics and
similar statutory liens arising or incurred in the Ordinary Course of Business
for amounts which are not delinquent and which would not, individually or in
the aggregate, have a Material Adverse Effect; (iii) zoning, entitlement,
building and other land use and similar laws or regulations imposed by any
governmental authority having jurisdiction over such parcel which are not
violated by the current use and operation thereof; (iv) easements, covenants,
conditions, restrictions and other similar matters of record affecting title to
such Real Property Leases which would not materially impair the use or
occupancy of such parcel in the operation of the Acquired Companies'
businesses; and (v) liens or encumbrances placed by a landlord or other third
party with respect to any Leased Real Property.
"Person" means and includes an individual, a partnership, a
joint venture, a limited liability company, a corporation or trust, an
unincorporated organization, a group, or a government or other department or
agency thereof, or any other entity.
"Proprietary Rights" means any and all (i) patents, patent
applications, patent disclosures, as well as any reissues, continuations,
continuations-in-part, divisions, extensions or reexaminations thereof, (ii)
trademarks, service marks, trade dress, trade names, logos, and corporate names
and registrations and applications for registration thereof, together with all
of the goodwill associated therewith, (iii) copyrights (registered or
unregistered) and copyrightable works and registrations and applications for
registration thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data, data bases, and
documentation thereof, (vi) trade secrets and other confidential information
(including, without limitation, ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, manufacturing and production processes and techniques, if any,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, financial and marketing plans, and customer and
supplier lists and information), (vii) other intellectual property rights,
(viii) copies and tangible embodiments thereof (in whatever protectable form or
medium), and (ix) license agreements related thereto.
"Real Property Leases" means all leases, subleases, licenses,
concessions and other agreements (written or oral), including, without
limitation, all amendments, extensions, renewals, guaranties and other
agreements with respect thereto, together with all security deposits
thereunder, held by the Acquired Companies for the use and occupancy of any
real property or interests therein.
"Related Professional Corporation" means each professional
corporation which has entered into a management or services agreement with the
Company, any TH Entity or any other Related Professional Corporation, other
than a professional corporation with respect to which (i) neither the Parent
nor the Company has the right to designate or replace the sole shareholder (or
a majority of the shareholders, if applicable) pursuant to an agreement between
such professional corporation and/or its shareholders, and the Parent or the
Acquired Company and (ii) neither the
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Parent nor the Company has the right to participate, directly or indirectly, in
the profits or losses of such professional corporation in accordance with the
management or services agreement, provided, that in any event, it includes the
entities listed as a "Related Professional Corporation" on the Organizational
Schedule included in the Disclosure Letter.
"Restricted Securities" means the Preferred Stock and Common
Stock issued to the Existing Stockholder pursuant to Section 2.2(a) below
(including, without limitation, the Purchased Securities) and any securities
issued with respect to such securities by way of a conversion, stock dividend,
or stock split or in connection with a combination of shares, refinancing,
merger, consolidation, or other reorganization. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have (i) been effectively registered under the Securities Act and disposed of
in accordance with the registration statement covering them, (ii) been
distributed to the public through a broker, dealer, or market maker pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act or
become eligible for sale pursuant to Rule 144(k) (or any similar provision then
in force) under the Securities Act, or (iii) been otherwise transferred and new
certificates for them not bearing the Securities Act legend set forth in
Section 9.1 have been delivered by the Company. Whenever any particular
securities of the Company cease to be Restricted Securities, the holder thereof
shall be entitled to receive from the Company, without expense, new securities
of like tenor not bearing a Securities Act legend of the character set forth in
Section 9.1.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar federal law then in force.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association, or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person or a combination
thereof, or (ii) if a limited liability company, partnership, association, or
other business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more Subsidiaries of such Person or a combination
thereof. For purposes hereof, a Person shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association, or
other business entity if such Person shall be allocated a majority of limited
liability company, partnership, association, or other business entity gains or
losses or shall be or control any managing director or general partner of such
limited liability company, partnership, association, or other business entity.
"Tail Malpractice Liability" means all liabilities and
obligations for Medical Malpractice Claims which arise out of or relate to, or
have arisen out of or relate to, events that occur in connection with the
operations of the Acquired Companies on or prior to Closing.
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"Tax" or "Taxes" means federal, state, county, local,
foreign, or other income, gross receipts, ad valorem, franchise, profits, sales
or use, transfer, registration, excise, utility, environmental, communications,
real or personal property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated, and other taxes of any kind
whatsoever (including, without limitation, deficiencies, penalties, additions
to tax, and interest attributable thereto, and also including, without
limitation, any Tax or Taxes of another Person for which any Acquired Company
is liable as a successor or as a transferee or by contract).
"Tax Return" means 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 Taxes of any
party or the administration of any laws, regulations, or administrative
requirements relating to any Taxes.
"TH JV's" means those TH Entities designated as "TH JV's" on
the Organization Schedule included in the Disclosure Letter in which neither
Parent, the Existing Stockholder nor any Acquired Company owns an interest
greater than fifty percent (50%).
"Top Collar" means $104,900,000.
"Transaction Documents" means this Agreement, and all other
agreements, instruments, certificates, and other documents to be entered into
or delivered by any Party in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
Stockholders Agreement and the Registration Agreement.
"Treasury Regulations" means the United States Treasury
Regulations promulgated pursuant to the Code.
SECTION 1.2 CROSS REFERENCE. The following terms are defined in
the following Sections of this Agreement:
Term Section
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Accounts Receivable 5.5(b)
Acquisition Proposal 9.6
Actual Capital Expenditures Amount 2.6(a)
Actual Cash Amount 2.6(a)
Actual Indebtedness Amount 2.6(a)
Actual Net Working Capital Amount 2.6(a)
Akron Premises 9.12(c)
Akron Subtenant 9.12(c)
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Akron Tenant 9.12(c)
Allocation 8.3(b)
Applicable Limitation Date 8.1
Bank Accounts 4.8(b)
Basket 8.2(b)(iii)
Bonds 4.6(b)
Bonus Participants 8.4(i)
Cap 8.2(b)(ii)
Cash Management Period 4.8(a)
CERCLA 5.23(e)
Closing 2.5
Closing Date 2.5
Closing Review 2.6(a)
Company Preface
Company 401(k) Plan 8.4(f)
Computer Systems 5.12(c)
Confidential Information 9.8(c)
Confidentiality Agreement 4.1
Consolidated Subsidiaries 8.3(b)
Debt and Equity Commitment Letters 6.6
Debt Commitment Letters 6.6
Disclosure Letter Article V
Employee 8.4(a)
Draft Computations 2.6(a)
ERISA 5.17(a)
Estimated Capital Expenditures Amount 2.1
Estimated Cash Amount 2.1
Estimated Closing Common Value 2.1
Estimated Indebtedness Amount 2.1
Estimated Redemption Consideration 2.4(b)
Existing Common Stock Recitals
Existing Stockholder Preface
Expense Letter 10.7
E&Y 1998 Audit Fees 4.6(a)
Farmers Policy 4.1(l)
Financial Statements 5.5(a)
Firm 2.6(a)
Fundamental Representations and Warranties 8.1
HSR Act 3.1(d)
Indemnification Statement 8.3(c)
Indemnified Party 8.2(f)
Indemnifying Party 8.2(f)
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Internal Reorganization Recitals
Joint Defense Proceeding 8.2(f)
Latest Balance Sheet 5.5(a)
1998 Financials 4.6(a)
Noncompete Period 9.8(a)
Objection Notice 2.6(a)
Parent Preface
Parent Board Approval 4.7
Parent Health Plan 8.4(d)
Parent's 401(k) 8.4(f)
Parties Preface
Party Preface
Plans 5.17(a)
Plantation Premises 9.12(a)
Plantation Subtenant 9.12(a)
Plantation Tenant 9.12(a)
Pre-Closing Period 8.3(a)
Pre-Closing Period Returns 8.3(c)
Preferred Stock 2.2(a)
Prime Rate 2.6(b)
Purchased Securities 2.3(a)
Purchased Securities Purchase Price 2.3(a)
Purchaser Preface
Purchaser Parties 8.2(a)
Purchaser Tax Group 8.3(a)
Real Property 5.8(d)
Redeemed Securities 2.4(a)
Redemption Consideration 2.6
Registration Agreement 3.1(n)
Retirement Benefit Transition Period 8.4(f)
Schedule Update 5.25, 6.10
Section 338(h)(10) Election 8.3(b)
Seller Group 8.3(a)
Seller Parties 8.2(c)
Seller Trademarks and Logos 9.10
Senior Managers 7.1(b)
Senior Management Agreements 7.1(b)
Solvency Opinion 3.1(o)
Xxxxx Act 5.22(b)
Stockholders Agreement 3.1(m)
Straddle Period 8.3(a)
Straddle Period Returns 8.3(c)
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Tampa Premises 9.12(b)
Tampa Subtenant 9.12(b)
Tampa Tenant 9.12(b)
Tax Benefit 8.3(c)
TH Entities Recitals
Transaction Expenses 9.5
Transition Cash Inflows 4.8(b)
Transition Cash Outflows 4.8(b)
Unregistered Proprietary Rights 5.12(a)
WARN Act 8.4(c)
Welfare Benefit Transition Period 8.4(d)
Year 2000 Compliant 5.12(c)
ARTICLE II -- THE RECAPITALIZATION
SECTION 2.1 PRE-CLOSING ESTIMATES OF CERTAIN AMOUNTS. Not later
than three days before the Closing, the Existing Stockholder, subject to the
Purchaser's reasonable approval, shall provide the Purchaser with a good faith
estimate of the Cash Amount (such estimate is referred to as the "Estimated
Cash Amount"), the Indebtedness Amount (such estimate is referred to as the
"Estimated Indebtedness Amount"), and the Capital Expenditures Amount (such
estimate is referred to as the "Estimated Capital Expenditures Amount"). For
purposes of Section 2.2 below, the "Estimated Closing Common Value" means an
amount equal to (A) $349,419,750, (B) plus the Estimated Cash Amount (whether
negative or positive), (C) less the Estimated Indebtedness Amount, (D) plus the
excess of the Estimated Capital Expenditures Amount over the Baseline Capital
Expenditures Amount or minus the excess of the Baseline Capital Expenditures
Amount over the Estimated Capital Expenditures Amount, (E) plus an amount equal
to $76,800.00 multiplied by the number of calendar days after the Measurement
Date through but not including the Closing Date, and (F) minus an amount equal
to all Cash swept by or otherwise transferred to the Parent or any of its
Affiliates or lenders (other than the Acquired Companies) during the Cash
Management Period referred to in Section 4.8 below.
SECTION 2.2 EXCHANGE OF COMMON STOCK.
(a) Exchange. On the basis of the representations,
warranties, covenants, and agreements herein, and subject to the satisfaction
or waiver of the conditions set forth herein and the terms hereof, at the
Closing the Existing Stockholder will contribute all of the Existing Common
Stock to the Company in exchange for the Company's issuance to the Existing
Stockholder of 100,000 shares of the Company's Class A Preferred Stock, par
value $.01 per share, having the rights and preferences set forth on Exhibit E
attached hereto (the "Preferred Stock") and a number of shares
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of Common Stock equal to (i)(A) the Estimated Closing Common Value minus (B)
$100,000,000, divided by (ii) $1.50.
(b) Delivery of Certificates by Existing Stockholder. At
the Closing, the Existing Stockholder will deliver to the Company, free and
clear of any Liens, one or more certificates representing the Existing Common
Stock, duly endorsed in blank or accompanied by stock powers or other
instruments of transfer duly executed in blank.
(c) Delivery of Certificates by Company. At the Closing,
upon delivery by the Existing Stockholder of the certificates representing the
Existing Common Stock, the Company will deliver to the Existing Stockholder,
free and clear of any Liens, one or more certificates representing the number
of shares of Preferred Stock and Common Stock referenced in Section 2.2(a)
above.
SECTION 2.3 PURCHASE OF PREFERRED STOCK AND COMMON STOCK.
(a) Purchase. On the basis of the representations,
warranties, covenants, and agreements herein, and subject to the satisfaction
or waiver of the conditions set forth herein and the terms hereof, at the
Closing the Existing Stockholder will sell to the Purchaser, and the Purchaser
will purchase from the Existing Stockholder, 94,299.091 shares of Preferred
Stock for a purchase price of $1,000.00 per share and 9,267,273 shares of
Common Stock for a purchase price of $1.50 per share (collectively, the
"Purchased Securities"). The aggregate purchase price for the Purchased
Securities is hereinafter referred to collectively as the "Purchased Securities
Purchase Price."
(b) Payment by the Purchaser. At the Closing, the
Purchaser shall pay to the account or accounts designated by the Existing
Stockholder, by wire transfer of immediately available funds, an amount in cash
equal to the Purchased Securities Purchase Price.
(c) Delivery of Certificates by Existing Stockholder. At
the Closing, upon delivery by the Purchaser of the Purchased Securities
Purchase Price, the Existing Stockholder will deliver to the Purchaser, free
and clear of any Liens, two or more certificates representing the Purchased
Securities, duly endorsed in blank or accompanied by stock powers or other
instruments of transfer duly executed in blank.
SECTION 2.4 REDEMPTION OF CERTAIN COMMON STOCK.
(a) Redemption. On the basis of the representations,
warranties, covenants, and agreements herein, and subject to the satisfaction
or waiver of the conditions set forth herein and the terms hereof, at the
Closing the Company will redeem and purchase from the Existing Stockholder, and
the Existing Stockholder will sell to the Company, all shares of Common Stock
held by the Existing Stockholder after taking into account the transactions in
Sections 2.2 and 2.3 above, minus 732,727 shares of Common Stock, for a
purchase price of $1.50 per share (the "Redeemed Securities"). As a result of
the transactions in Sections 2.2 and 2.3 above and this Section 2.4, the
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Existing Stockholder will hold 5,700.909 shares of Preferred Stock and 732,727
shares of Common Stock as of immediately following the Closing.
(b) Payment to Existing Stockholder. At the Closing, the
Company shall pay to the account or accounts designated by the Existing
Stockholder, by wire transfer of immediately available funds, an amount in cash
equal to the aggregate purchase price for the Redeemed Securities as set forth
in Section 2.4(a) above. The aggregate amount paid by the Company to the
Existing Stockholder under this Section 2.4(b) is referred to herein as the
"Estimated Redemption Consideration."
(c) Delivery of Certificates by Existing Stockholder. At
the Closing, upon payment by the Company of the Estimated Redemption
Consideration, the Existing Stockholder will deliver to the Company, free and
clear of any Liens, one or more certificates representing the Redeemed
Securities, duly endorsed in blank or accompanied by stock powers or other
instruments of transfer duly executed in blank.
SECTION 2.5 CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxxxx & Xxxxx, 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000,
commencing at 10:00 a.m. on the third business day following the satisfaction
or waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to
actions the respective Parties will take at the Closing itself), or at such
other place or on such other date as may be mutually agreeable to the Purchaser
and the Existing Stockholder; provided that in any event, if the Purchaser's
senior lenders require that the Closing take place at the offices of their
attorneys, the Parties agree that the Closing shall take place at such offices.
The date and time of the Closing are herein referred to as the "Closing Date."
SECTION 2.6 POST-CLOSING ADJUSTMENTS.
(a) Post-Closing Determination. Within 90 days after the
Closing Date, the Company and its auditors will conduct a review (the "Closing
Review") of the Cash Amount, the Indebtedness Amount, the Net Working Capital
Amount and the Capital Expenditures Amount and will prepare and deliver to the
Existing Stockholder a computation of such amounts (the "Draft Computations").
The Company and its auditors will make available to the Existing Stockholder
and its auditors all records and work papers used in preparing the Draft
Computations. If the Existing Stockholder disagrees with the computation of the
Cash Amount, the Indebtedness Amount, the Net Working Capital Amount or the
Capital Expenditures Amount reflected in the Draft Computations, the Existing
Stockholder may, within 30 days after receipt of the Draft Computations,
deliver a notice (an "Objection Notice") to the Company setting forth the
Existing Stockholder's calculation of the Cash Amount, the Indebtedness Amount,
the Net Working Capital Amount and the Capital Expenditures Amount. The Company
and the Existing Stockholder will use reasonable best efforts to resolve any
disagreements as to the computation of the Cash Amount, the Indebtedness
Amount,
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the Net Working Capital Amount and the Capital Expenditures Amount, but if they
do not obtain a final resolution within 30 days after the Company has received
the Objection Notice, the Company and the Existing Stockholder will jointly
retain an independent accounting firm of recognized national standing (the
"Firm") to resolve any remaining disagreements. If the Company and the Existing
Stockholder are unable to agree on the choice of the Firm, then the Firm will
be a "big-five" accounting firm (or a successor) selected by lot (after
excluding one firm designated by the Company and one firm designated by the
Existing Stockholder). The Company and the Existing Stockholder will direct the
Firm to render a determination within 30 days of its retention and the Company,
the Existing Stockholder, and their respective agents will cooperate with the
Firm during its engagement. The Firm will consider only those items and amounts
in the Draft Computations set forth in the Objection Notice which the Company
and the Existing Stockholder are unable to resolve. The Company and the
Existing Stockholder shall each submit a binder to the Firm promptly (and in
any event within 20 days after the Firm's engagement), which binder shall
contain such Party's computation of the Cash Amount, the Indebtedness Amount,
the Net Working Capital Amount and the Capital Expenditures Amount and
information, arguments, and support for such Party's position. The Firm shall
review such binders and base its determination solely on them. In resolving any
disputed item, the Firm may not assign a value to any item greater than the
greatest value for such item claimed by either party or less than the smallest
value for such item claimed by either party. The Firm's determination will be
based on the definition of the Cash Amount, the Indebtedness Amount, the Net
Working Capital Amount and the Capital Expenditures Amount included herein. The
determination of the Firm will be conclusive and binding upon the Parties. The
Existing Stockholder shall bear a percentage of the costs and expenses of the
Firm equal to the difference between the aggregate amount contested by the
Existing Stockholder as set forth on the Objection Notice and amounts actually
paid to (or by) the Existing Stockholder with respect to contested items, as a
percentage of the aggregate amount so contested. The Company shall bear the
remainder of such costs and expenses. The Cash Amount, the Indebtedness Amount,
the Net Working Capital Amount and the Capital Expenditures Amount, as finally
determined pursuant to this Section 2.6(a), is referred to herein as the
"Actual Cash Amount," the "Actual Indebtedness Amount," the "Actual Net Working
Capital Amount" and the "Actual Capital Expenditures Amount," respectively.
(b) Post-Closing Adjustment.
(i) Payments by the Company.
(A) If the Actual Cash Amount is
greater than the Estimated Cash Amount, the Company will,
within five (5) business days after the determination
thereof, pay to the Existing Stockholder an amount equal to
the sum of (A) the Actual Cash Amount minus the Estimated
Cash Amount plus (B) interest on such difference from the
Closing Date to the date of payment at an interest rate equal
to the "Prime Rate" as listed in The Wall Street Journal
(Midwest Edition) on the Closing Date (the "Prime Rate").
Such payment will be made by wire transfer or delivery of
other immediately available funds.
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(B) If the Actual Indebtedness Amount
is less than the Estimated Indebtedness Amount, the Company
will, within five (5) business days after the determination
thereof, pay to the Existing Stockholder an amount equal to
the sum of (A) the Estimated Indebtedness Amount minus the
Actual Indebtedness Amount plus (B) interest on such
difference from the Closing Date to the date of payment at an
interest rate equal to the Prime Rate. Such payment will be
made by wire transfer or delivery of other immediately
available funds.
(C) If the Actual Net Working Capital
Amount is greater than the Top Collar, the Company will,
within five (5) business days after the determination
thereof, pay to the Existing Stockholder an amount equal to
the sum of (A) the Actual Net Working Capital Amount minus
the Top Collar plus (B) interest on such difference from the
Closing Date to the date of payment at an interest rate equal
to the Prime Rate. Such payment will be made by wire transfer
or delivery of other immediately available funds.
(D) If the Actual Capital Expenditures
Amount is greater than the Estimated Capital Expenditures
Amount, the Company will, within five (5) business days after
the determination thereof, pay to the Existing Stockholder an
amount equal to the sum of (A) the Actual Capital
Expenditures Amount minus the Estimated Capital Expenditures
Amount plus (B) interest on such difference from the Closing
Date to the date of payment at an interest rate equal to the
Prime Rate. Such payment will be made by wire transfer or
delivery of other immediately available funds.
(ii) Payments by the Existing Stockholder.
(A) If the Actual Cash Amount is less
than the Estimated Cash Amount, the Existing Stockholder
will, within five (5) business days after the determination
thereof, pay to the Company an amount equal to the sum of (A)
the Estimated Cash Amount minus the Actual Cash Amount plus
(B) interest on such difference from the Closing Date to the
date of payment at an interest rate equal to the Prime Rate.
Such payment will be made by wire transfer or delivery of
other immediately available funds.
(B) If the Actual Indebtedness Amount
is greater than the Estimated Indebtedness Amount, the
Existing Stockholder will, within five (5) business days
after the determination thereof, pay to the Company an amount
equal to the sum of (A) the Actual Indebtedness Amount minus
the Estimated Indebtedness Amount plus (B) interest on such
difference from the Closing Date to the date of payment at an
interest rate equal to the Prime Rate. Such payment will be
made by wire transfer or delivery of other immediately
available funds.
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(C) If the Actual Net Working Capital
Amount is less than the Bottom Collar, the Existing
Stockholder will, within five (5) business days after the
determination thereof, pay to the Company an amount equal to
the sum of (A) the Bottom Collar minus the Actual Net Working
Capital Amount plus (B) interest on such difference from the
Closing Date to the date of payment at an interest rate equal
to the Prime Rate. Such payment will be made by wire transfer
or delivery of other immediately available funds.
(D) If the Actual Capital Expenditures
Amount is less than the Estimated Capital Expenditures
Amount, the Existing Stockholder will, within five (5)
business days after the determination thereof, pay to the
Company an amount equal to the sum of (A) the Estimated
Capital Expenditures Amount minus the Actual Capital
Expenditures Amount plus (B) interest on such difference from
the Closing Date to the date of payment at an interest rate
equal to the Prime Rate. Such payment will be made by wire
transfer or delivery of other immediately available funds.
(iii) Dispute. If, pursuant to Section 2.6(a)
above, there is a dispute as to the final determination of the Actual
Cash Amount, the Actual Indebtedness Amount, the Actual Net Working
Capital Amount or the Actual Capital Expenditures Amount, the Company
and the Existing Stockholder shall promptly pay to the other, as
appropriate, such amounts as are not in dispute, pending final
determination of such dispute pursuant to Section 2.6(a).
The Estimated Redemption Consideration, as finally adjusted pursuant to this
Section 2.6, is referred to herein as the "Redemption Consideration."
ARTICLE III -- CONDITIONS TO CLOSING
SECTION 3.1 CONDITIONS TO THE PURCHASER'S OBLIGATIONS. The
obligation of the Purchaser to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following conditions as of the
Closing Date:
(a) The representations and warranties set forth in
Article V hereof taken in their entirety shall be true and correct in all
material respects at and as of the Closing Date as though then made and as
though the Closing Date were substituted for the date of this Agreement
throughout such representations and warranties, without giving effect to any
Schedule Updates thereto other than those approved by the Purchaser pursuant to
Section 5.25; provided that, for purposes of this Section 3.1(a), those
representations and warranties that are qualified by references to "material"
or "Material Adverse Effect" shall be deemed not to include such
qualifications;
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(b) The Company, the Existing Stockholder and the Parent
shall have performed and complied in all material respects with all of the
covenants and agreements required to be performed by each of them under this
Agreement on or before the Closing;
(c) All third party consents listed on Exhibit F
attached hereto shall have been obtained on terms reasonably satisfactory to
the Purchaser (which consents will include, to the extent required by the
Company's lenders with respect to material Real Property Leases, consents to
leasehold mortgages, collateral assignments of leases, and/or waivers of
landlord liens from the landlords thereof or any other parties whose consent is
required under such Real Property Leases);
(d) All governmental filings, authorizations, and
approvals that are required for the consummation of the transactions
contemplated hereby shall have been duly made and obtained on terms reasonably
satisfactory to the Purchaser;
(e) Pursuant to a general assignment and assumption
agreement in form and substance reasonably satisfactory to the Purchaser and
the Parent, (i) the Parent and its Affiliates which are not Acquired Companies
shall have assigned to the Acquired Companies all right, title and interest of
the Parent and such Affiliates in and to any contracts, agreements,
arrangements or understandings which (A) exclusively relate to the business of
the Acquired Companies or (B) are listed on the Assigned Contracts Schedule
included in the Disclosure Letter and (ii) the Acquired Companies shall have
assumed and agreed to discharge and pay in full all liabilities and obligations
arising under all such contracts, agreements, arrangements and understandings;
provided that any assignment contemplated pursuant to this Section 3.1(e) which
would have the effect of rendering invalid any provisions of the contract,
agreement, arrangement or understanding to be assigned shall be void and of no
effect with respect to such provisions; and with respect to the Real Property
Lease for the Leased Real Property located at 000 Xxxx 00xx Xxxxxx, Xxxx
Xxxxxxxxxx, Xxxxxxx, the tenant under such Real Property Lease shall have
entered into an Assignment and Assumption of Lease in form and substance
reasonably satisfactory to the Purchaser;
(f) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable judgment, decree, injunction, order, or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded, or materially and adversely affect the right of
the Purchaser to own, operate, or control any Acquired Company, and no
judgment, decree, injunction, order, or ruling shall have been entered which
has any of the foregoing effects;
(g) Since the date hereof, there shall have been no
Material Adverse Effect (without limiting the generality of the foregoing,
since the date hereof, there shall have been no modification or change (or
threat of modification or change) of any Medicare or Medicaid law, rule,
regulation or payment policy, or any rule or policy of any third-party payor,
or any other applicable
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law or regulation, which has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; provided that the
implementation or effectiveness of the final rule entitled "Medicare Program:
Revisions to Payment Policies and Adjustments to the Relative Value Units under
the Physician Fee Schedule for Calendar Year 1999" published at 63 Fed. Reg.
58814 et seq. (November 2, 1998) shall not be deemed to have a Material Adverse
Effect);
(h) Except as otherwise specified in writing by the
Purchaser to the Existing Stockholder prior to the Closing Date, all of the
directors of each TH Entity that is not a TH JV shall have resigned and such
resignations shall be effective as of the Closing Date;
(i) The Internal Reorganization shall have occurred on
terms and pursuant to documents reasonably satisfactory to the Purchaser;
(j) The Company's charter shall have been amended to
include the provisions set forth in Exhibit E attached hereto, shall be in full
force and effect under the laws of the State of Tennessee as of the Closing as
so amended and shall not have been further amended or modified;
(k) The Purchaser shall have received an opinion, dated
the Closing Date, of King & Spalding, counsel to the Company, the Existing
Stockholder and the Parent, with respect to the matters set forth on Exhibit G
attached hereto, and the lenders providing debt financing in connection with
the transactions contemplated by this Agreement shall be entitled to rely
thereon;
(l) On or before the Closing Date, the Existing
Stockholder shall have delivered to Purchaser all of the following:
(i) a certificate from the Company in a form
reasonably satisfactory to the Purchaser, dated the Closing Date,
stating that the preconditions specified in Sections 3.1(a) through
(j) have been satisfied;
(ii) a copy of the resolutions of the board of
directors of the Company, the Existing Stockholder and the Parent,
respectively, approving the transactions contemplated by this
Agreement, certified by the Company, the Existing Stockholder and the
Parent, respectively;
(iii) a copy of the certificate of incorporation
or equivalent document for each Acquired Company, certified by the
appropriate authority in the jurisdiction in which such entity was
incorporated or organized;
(iv) a copy of the bylaws or equivalent document
for each Acquired Company, certified by such Acquired Company;
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(v) certificates from appropriate authorities,
dated as of or about the Closing Date, as to the good standing and
qualification to do business of each Acquired Company in each
jurisdiction where they are so qualified;
(vi) all stock certificates and other
instruments evidencing ownership of each of the Company's
Subsidiaries;
(vii) all minute books, stock books, ledgers and
registers, corporate seals and other corporate records relating to the
organization, ownership and maintenance of each Acquired Company;
(viii) copies of the consents, filings,
authorizations and approvals described in Sections 3.1(c) and (d) to
the extent applicable to the Company, the Existing Stockholder or the
Parent;
(ix) copies of the resignations described in
Section 3.1(h); and
(x) such other documents or instruments as the
Purchaser may reasonably request to effect the transactions
contemplated hereby;
(m) The Company, the Parent, the Purchaser and the
Existing Stockholder shall have entered into a stockholders agreement in form
and substance reasonably acceptable to all parties thereto (the "Stockholders
Agreement"), and the Stockholders Agreement shall be in full force and effect
as of the Closing;
(n) The Company, the Parent, the Purchaser and the
Existing Stockholder shall have entered into a registration agreement in form
and substance reasonably acceptable to all parties thereto (the "Registration
Agreement"), and the Registration Agreement shall be in full force and effect
as of the Closing;
(o) The Purchaser shall have received an opinion from
Valuation Research, Inc. or another reputable investment banking or valuation
firm mutually acceptable to the Parties, regarding the solvency and liquidity
of the Company immediately upon consummation of the transactions contemplated
herein (the "Solvency Opinion");
(p) The Company shall have received (i) at least $250.0
million of cash proceeds from senior and subordinated debt financings and (ii)
at least $40.0 million of unused availability under revolving loan commitments,
each on the terms and conditions set forth in the Debt Commitment Letters
attached hereto as Exhibit H;
(q) The Parent shall have obtained for the Company
insurance covering the Tail Malpractice Liability in accordance with Section
9.11 hereof;
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(r) All proceedings to be taken by the Company, the
Existing Stockholder and the Parent in connection with the consummation of the
transactions contemplated by this Agreement and all certificates, opinions,
instruments, and other documents required to be delivered by the Company, the
Existing Stockholder and the Parent to effect the transactions contemplated
hereby reasonably requested by the Purchaser shall be reasonably satisfactory
in form and substance to the Purchaser;
(s) The Company shall have extended the term of the
existing contract with La Habre Clinic for at least 12 months beyond the
expiration date of the existing contract (it being understood that the
expiration date of the existing contract is March 2000);
(t) The Parent shall have received the consent of
applicable insurance providers for the provision of the transitional benefits
required to be provided by it pursuant to Section 8.4 hereof for the periods
set forth therein; and
(u) The Company shall have paid the full year's 1998
bonus to the Company's management team prior to the Measurement Date, and the
Parent shall have fully vested and made immediately exercisable all stock
options under the Parent's 1998 Employee Stock Option Plan held by any officer
or employee of the Acquired Companies, the exercisability of which, and the
sale of the underlying stock of which, will not be restricted except to the
extent required by applicable law or the Parent's written trading policy, and
in the case of any person who is subject to such policy on the date hereof,
such options will remain exercisable until at least the fifth business day
after the date on which such exercisability and sale of the underlying stock is
permitted, and such exercisability and sale of the underlying stock will be
permitted (unless otherwise prohibited by law) commencing 72 hours after the
public release of the Parent's quarterly financial results for the quarter
ended March 31, 1999 and expiring 27 days after such commencement, and the
Parent will use commercially reasonable efforts to expeditiously facilitate
such exercise and sale upon request consistent with the level and speed of
facilitation provided by other publicly traded companies under similar
circumstances.
Any condition specified in this Section 3.1 may be waived by the Purchaser in
its sole discretion; provided that no such waiver shall be effective unless it
is set forth in a writing executed by the Purchaser.
SECTION 3.2 CONDITIONS TO THE COMPANY'S, THE PARENT'S AND THE
EXISTING STOCKHOLDER'S OBLIGATIONS. The obligation of the Company, the Existing
Stockholder and the Parent to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following conditions as of the
Closing Date:
(a) The representations and warranties set forth in
Article VI hereof taken in their entirety shall be true and correct in all
material respects at and as of the Closing Date as though then
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made and as though the Closing Date were substituted for the date of this
Agreement throughout such representations and warranties, without giving effect
to any Schedule Updates thereto other than those approved by the Existing
Shareholder or the Parent pursuant to Section 6.9; provided that, for purposes
of this Section 3.2(a), those representations and warranties that are qualified
by references to "material" shall be deemed not to include such qualifications;
(b) The Purchaser shall have performed and complied in
all material respects with all of the covenants and agreements required to be
performed by it under this Agreement on or before the Closing;
(c) All governmental filings, authorizations, and
approvals that are required for the consummation of the transactions
contemplated hereby shall have been duly made and obtained on terms reasonably
satisfactory to the Existing Stockholder;
(d) Pursuant to a general assignment and assumption
agreement in form and substance reasonably satisfactory to the Purchaser and
the Parent, (i) the Parent and its Affiliates which are not Acquired Companies
shall have assigned to the Acquired Companies all right, title and interest of
the Parent and such Affiliates in and to any contracts, agreements,
arrangements or understandings which (A) exclusively relate to the business of
the Acquired Companies or (B) are listed on the Assigned Contracts Schedule
included in the Disclosure Letter and (ii) the Acquired Companies shall have
assumed and agreed to discharge and pay in full all liabilities and obligations
arising under all such contracts, agreements, arrangements and understandings;
provided that any assignment contemplated pursuant to this Section 3.2(d) which
would have the effect of rendering invalid any provisions of the contract,
agreement, arrangement or understanding to be assigned shall be void and of no
effect with respect to such provisions; and with respect to the Real Property
Lease for the Leased Real Property located at 000 Xxxx 00xx Xxxxxx, Xxxx
Xxxxxxxxxx, Xxxxxxx, the tenant under such Real Property Lease shall have
entered into an Assignment and Assumption of Lease in form and substance
reasonably satisfactory to the Purchaser;
(e) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable judgment, decree, injunction, order, or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded, or materially and adversely affect the right of
the Parent or the Existing Stockholder to receive benefits to be enjoyed by it
under this Agreement, and no judgment, decree, injunction, order, or ruling
shall have been entered which has any of the foregoing effects;
(f) The Existing Stockholder shall have received an
opinion, dated the Closing Date, of Xxxxxxxx & Xxxxx, counsel to the Purchaser,
with respect to the matters set forth on Exhibit I attached hereto, and the
lenders providing debt financing in connection with the transactions
contemplated by this Agreement shall be entitled to rely thereon;
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(g) On or before the Closing Date, the Purchaser shall
have delivered to the Existing Stockholder all of the following:
(i) a certificate from the Purchaser in a form
reasonably satisfactory to the Existing Stockholder, dated the Closing
Date, stating that the preconditions specified in Sections 3.2(a)
through (e) have been satisfied;
(ii) a copy of the resolutions of the board of
directors of the Purchaser approving the transactions contemplated by
this Agreement, certified by the Purchaser;
(iii) a copy of the certificate of formation for
the Purchaser, certified by the Secretary of State of the State of
Delaware;
(iv) a copy of the limited liability company
agreement for the Purchaser, certified by the Purchaser;
(v) a certificate from the Secretary of State
of the State of Delaware, dated as of or about the Closing Date, as to
the good standing of the Purchaser;
(vi) copies of the consents, filings,
authorizations and approvals described in Section 3.2(c) to the extent
applicable to the Purchaser; and
(vii) such other documents or instruments as the
Existing Stockholder may reasonably request to effect the transactions
contemplated hereby;
(h) The Company, the Parent, the Purchaser and the
Existing Stockholder shall have entered into the Stockholders Agreement, and
the Stockholders Agreement shall be in full force and effect as of the Closing;
(i) The Company, the Parent, the Purchaser and the
Existing Stockholder shall have entered into the Registration Agreement, and
the Registration Agreement shall be in full force and effect as of the Closing;
(j) The Parent and the Existing Stockholder shall have
received the Solvency Opinion which shall either be addressed to the Parent and
the Existing Stockholder or permit them to rely on it;
(k) All proceedings to be taken by the Purchaser in
connection with the consummation of the transactions contemplated by this
Agreement and all certificates, opinions, instruments, and other documents
required to be delivered by the Purchaser to effect the transactions
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contemplated hereby reasonably requested by the Existing Stockholder shall be
reasonably satisfactory in form and substance to the Existing Stockholder; and
(l) The Parent shall have received the consent of
applicable insurance providers for the provision of the transitional benefits
required to be provided by it pursuant to Section 8.4 hereof for the periods
set forth therein.
Any condition specified in this Section 3.2 may be waived by the Existing
Stockholder in its sole discretion; provided that no such waiver shall be
effective unless it is set forth in a writing executed by the Existing
Stockholder.
ARTICLE IV -- COVENANTS BEFORE CLOSING
SECTION 4.1 AFFIRMATIVE COVENANTS OF THE COMPANY. Except as
otherwise contemplated by this Agreement or by the Internal Reorganization,
between the date hereof and the Closing, unless the Purchaser otherwise agrees
in writing, the Existing Stockholder shall cause each TH Entity which is not a
TH JV and shall use its reasonable best efforts as permitted under applicable
management agreements and stock transfer restriction agreements to cause each
Related Professional Corporation and TH JV to:
(a) conduct each Acquired Company's businesses and
operations only in the Ordinary Course of Business, including, without
limitation, paying accounts payable in the Ordinary Course of Business
including, without limitation, running weekly check runs;
(b) keep in full force and effect each Acquired
Company's corporate existence and use its reasonable best efforts to cause its
current insurance (or reinsurance) policies (including, without limitation,
those relating to malpractice claims) not to be canceled or terminated or any
of the coverage thereunder to lapse;
(c) manage each Acquired Company's malpractice claims
in the Ordinary Course of Business and not materially alter the Acquired
Companies' malpractice claims program;
(d) use their reasonable best efforts to carry on the
business of each Acquired Company in the same manner as presently conducted and
to keep each Acquired Company's business organization and properties intact,
including its present business operations, physical facilities, working
conditions, and employees and including each Acquired Company's present
relationships with lessors, licensors, suppliers, customers, and others having
business relations with each such Acquired Company, respectively;
(e) maintain the Real Property and other material
assets of each Acquired Company in good repair, order, and condition (normal
wear and tear excepted) consistent with current needs and replace in accordance
with prudent practices each Acquired Company's inoperable,
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worn out, or obsolete material assets with assets of comparable quality
consistent with the Ordinary Course of Business;
(f) maintain the books, accounts, and records of each
Acquired Company in accordance with GAAP, consistent with the custom and
practice as used in the preparation of the Financial Statements;
(g) promptly (once the Parent obtains knowledge thereof)
inform the Purchaser in writing of any material breaches from the
representations and warranties contained in Article V or any material breach of
any covenant hereunder by the Company, the Existing Stockholder or the Parent;
(h) cooperate with the Purchaser and use reasonable best
efforts to cause the conditions to the Purchaser's obligation to close to be
satisfied (including, without limitation, the execution and delivery of all
agreements contemplated hereunder to be so executed and delivered and the
making and obtaining of all third party and governmental notices, filings,
authorizations, approvals, consents, releases, and terminations);
(i) permit the Purchaser to conduct a reasonable due
diligence investigation concerning the financial capability, resources and
condition and creditworthiness of the Parent;
(j) cooperate with the Purchaser in the Purchaser's
investigation of the business and properties of the Acquired Companies, to
permit the Purchaser and its employees, agents, accounting, legal, and other
authorized representatives to (i) have full access to the premises, books, and
records of each Acquired Company at reasonable hours, (ii) visit and inspect
any of the properties of each Acquired Company, and (iii) discuss the affairs,
finances, and accounts of each Acquired Company with the directors, officers,
partners, key employees, key customers, key sales representatives, key
suppliers, and independent accountants of such Acquired Company, respectively;
(k) with respect to any officer or employee of any of
the Acquired Companies, if such individual is also an officer, director or
shareholder of any professional corporation (other than a Related Professional
Corporation) which is party to a management agreement with the Parent or any of
its Affiliates, accommodate such officers' or directors' resignations from such
position(s) with, and facilitate the transfer of such shareholders' shares of,
such professional corporation; and
(l) at the direction of the Purchaser, pay the
non-refundable advance deposit of $500,000 contemplated by the medical
malpractice Proposal of Insurance (the "Farmers Policy") attached hereto as
Exhibit J.
All information concerning the Parent, the Existing Stockholder or any Acquired
Company furnished or provided by the Parent, the Existing Stockholder or any
Acquired Company or any of their
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representatives to the Purchaser or its representatives (whether furnished
before or after the date of this Agreement) shall be held subject to the
confidentiality agreement previously executed by and between the Parent and the
Purchaser (the "Confidentiality Agreement").
SECTION 4.2 NEGATIVE COVENANTS OF THE COMPANY. Except as
expressly contemplated by this Agreement, by the Internal Reorganization or as
set forth in the Disclosure Letter, between the date hereof and the Closing,
unless the Purchaser otherwise agrees in writing, the Existing Stockholder
shall cause each TH Entity which is not a TH JV and shall use its reasonable
best efforts as permitted under applicable management agreements and stock
transfer restriction agreements to cause each Related Professional Corporation
and TH JV not to:
(a) take any action that would require disclosure under
Section 5.7;
(b) make any loans or enter into any transaction with any
Insider other than transactions entered into in the Ordinary Course of
Business;
(c) establish, amend or contribute to any pension,
retirement, profit sharing, or stock bonus plan or multiemployer plan covering
any of the employees of any Acquired Company, except as required by law or in
accordance with past practice;
(d) take any action designed or intended to encourage
employees of the Acquired Companies to leave their employment or otherwise not
to continue employment with such Acquired Companies;
(e) declare, pay, make, or otherwise effectuate any
dividends or distributions (other than in Cash), redemptions, equity
repurchases, or other transactions involving the Company's Capital Stock or
equity securities; or
(f) commit, or enter into any agreement to do, any of
the foregoing.
SECTION 4.3 COVENANTS OF PURCHASER. Between the date hereof and
the Closing, the Purchaser shall:
(a) promptly (once it obtains knowledge thereof) inform
the Existing Stockholder in writing of any material breaches from the
representations and warranties contained in Article VI or any material breach
of any covenant hereunder by Purchaser;
(b) provide the Parent with such documentation as the
Parent may reasonably request to confirm, to the Parent's reasonable
satisfaction, the accuracy of the representations made by the Purchaser in
Section 6.6, and the Purchaser shall permit the Parent to conduct a reasonable
due diligence investigation concerning the financial capability, resources and
condition and creditworthiness of the Purchaser;
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(c) cooperate with the Existing Stockholder and use its
reasonable best efforts to cause the conditions to the Existing Stockholder's
obligation to close to be satisfied (including, without limitation, the
execution and delivery of all agreements contemplated hereunder to be so
executed and delivered and the making and obtaining of all third party and
governmental filings, authorizations, approvals, consents, releases, and
terminations);
(d) use good faith commercially reasonable efforts to
assist the Company to obtain the debt financing contemplated by Section 6.6
below. In this regard, and without limiting the generality of the foregoing,
the Purchaser shall take all action within its control which is necessary or
appropriate and consistent with good faith commercially reasonable efforts to
secure the debt financing contemplated by the Debt Commitment Letters referred
in Section 6.6 below so as to allow the Closing to occur on or prior to March
16, 1999. The Purchaser will not amend or otherwise modify the Debt Commitment
Letters (or any term or condition thereof) in any respect that would materially
and adversely affect the ability of the Company to obtain such financing
without the prior written consent of the Parent. If the senior subordinated
note offering contemplated by the Debt Commitment Letter from DLJ Bridge
Finance, Inc., NationsBridge, L.L.C. and Fleet Corporate Finance, Inc. is not
available but the bridge financing contemplated by such Debt Commitment Letter
is available, the Purchaser agrees to cause the Company to utilize such bridge
financing so as to allow the Closing to occur on or prior to March 16, 1999;
(e) pay or reimburse the Parent for the $500,000
non-refundable advance deposit for the Farmers Policy, which obligation to pay
or reimburse the Parent shall arise upon the Parent's payment of such
non-refundable deposit and shall be satisfied by the Purchaser within two
business days of the Purchaser's receipt of written notice from the Parent of
the payment by the Parent of such non-refundable advance deposit (unless this
Agreement is terminated pursuant to Section 7.1(g), in which case the Parent
will bear such cost and promptly reimburse the Purchaser to the extent the
Purchaser has made such payment or reimbursement); and
(f) use its reasonable best efforts to assist the Parent
in obtaining releases of those guarantees and of those other commitments,
obligations and liabilities arising under those contracts, agreements,
arrangements and understandings listed on the Assigned Contracts Schedule
included on the Disclosure Letter.
SECTION 4.4 INTERCOMPANY ACCOUNTS. The Parent will cause all
intercompany liabilities owing from any Acquired Company to the Parent or its
Affiliates (except other Acquired Companies) as of the close of business on the
Measurement Date to be reclassified to capital of the Company (i.e., after the
Measurement Date the Acquired Companies shall not have any obligation to repay
such intercompany liabilities). The Acquired Companies will cause all
intercompany liabilities owing from the Parent or any of its Affiliates (other
than the Acquired Companies) to any Acquired Company as of the close of
business on the Measurement Date to be cancelled with such cancellation being
reflected as an adjustment to the equity or capital of the Acquired Companies
(i.e.,
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after the Closing neither the Parent nor any of its Affiliates (other than the
Acquired Companies) shall have any obligation to repay such intercompany
liabilities).
SECTION 4.5 DISTRIBUTIONS. The Parties agree that Parent and the
Existing Stockholder shall have the right, at or prior to the close of business
on the Measurement Date, to cause the Acquired Companies (but not the TH JV's,
except to the extent in the Ordinary Course of Business and so long as such
distributions do not create any obligations to the TH JV's or their other
owners) to distribute Cash held by the Acquired Companies (but not the TH JV's,
except to the extent in the Ordinary Course of Business and so long as such
distributions do not create any obligations to the TH JV's or their other
owners) to the Parent or the Existing Stockholder or their respective
Affiliates, by one or more cash dividends, repurchase of existing stock and/or
distributions.
SECTION 4.6 FINANCIAL INFORMATION.
(a) The Existing Stockholder and the Parent agree to use
reasonable best efforts to cause to be issued, on or before February 19, 1999,
the audited consolidated balance sheets of the Company as of December 31, 1998
and the related statements of income and cash flow (or the equivalent) for the
twelve-month period then-ended (the "1998 Financials"). The Existing
Stockholder and the Parent will assist Ernst & Young in completing the audit
(but the Existing Stockholder and the Parent are not guaranteeing the
completion date of the audit) and will assist the Purchaser by providing
available data to support any reclassifications, addbacks and/or pro forma
adjustments related thereto. If the Closing does occur, the Purchaser will
cause the Company to pay the fees and expenses of Ernst & Young for their audit
of the 1998 Financials (the "E&Y 1998 Audit Fees"). If the Closing does not
occur, the Purchaser and the Parent will each pay 50% of the E&Y 1998 Audit
Fees.
(b) The Existing Stockholder and the Parent agree to use
reasonable best efforts to provide all necessary financial data for the
offering materials to be prepared for the proposed $150,000,000 Senior
Subordinated Notes due 2009 to be issued by the Company in connection with the
transactions contemplated by this Agreement (the "Bonds") and the syndication
materials to be prepared for the Company's new senior credit facility, and
agree to permit the Purchaser's use of the information contained in the such
financial data in connection with the issuance of the Bonds and the syndication
of such senior credit facility. The Purchaser will provide the Parent with an
opportunity to review and approve such information as reflected in such
offering and syndication materials, which approval will not be unreasonably
withheld.
SECTION 4.7 PARENT BOARD APPROVAL. On or before January 27,
1999, the Parent will convene and hold a meeting of its Board of Directors for
the purpose of approving this Agreement and the transactions contemplated
hereby (the "Parent Board Approval"). The Parent's chief executive officer and
its chief financial officer shall recommend to its Board of Directors the
approval of this Agreement and the transactions contemplated hereby.
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SECTION 4.8 CASH MANAGEMENT FROM MEASUREMENT DATE TO CLOSING
DATE.
(a) Loan. On March 1, 1999, the Parent will make a cash
loan to the Company in the amount of $5.0 million. The Company will use the
proceeds of such loan solely to fund its working capital requirements for the
period beginning on the day after the Measurement Date and ending on the
Closing Date (the "Cash Management Period"). At the Closing, the Company will
repay such $5.0 million loan in full without interest.
(b) Cash Inflows. During the Cash Management Period, the
Acquired Companies will maintain one or more bank accounts and/or lock boxes
(collectively, the "Bank Accounts") for the collective receipt of all
collections on accounts receivable and all other Cash inflows of the Acquired
Companies (the "Transition Cash Inflows") and all Transition Cash Inflows will
be immediately deposited in the Bank Accounts.
(c) Cash Outflows. During the Cash Management Period,
the Acquired Companies will fund all accounts payable and other Cash outflows
(including, without limitation, making payments for the clearing of all checks
which were issued on or before the Measurement Date and taken into account as
either reductions in determining the Cash Amount or reductions in determining
the Net Working Capital Amount) of the Acquired Companies (the "Transition Cash
Outflows") through the Bank Accounts. During the Cash Management Period, except
pursuant to the loan described in Section 4.8(a) above, all Transition Cash
Outflows will be the responsibility of the Acquired Companies and will not be
funded by the Parent or its lenders.
ARTICLE V -- REPRESENTATIONS AND WARRANTIES
OF THE EXISTING STOCKHOLDER
As a material inducement to Purchaser to enter into this
Agreement, with such exceptions as are set forth in a letter (the "Disclosure
Letter") delivered by the Existing Stockholder to the Purchaser prior to
execution hereof, the Existing Stockholder hereby represents and warrants that:
SECTION 5.1 ORGANIZATION AND CORPORATE POWER.
(a) The Organization Schedule included in the Disclosure
Letter contains under the heading "Before Internal Reorganization" a complete
and accurate list for each Acquired Company of its name, its jurisdiction of
incorporation or organization, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each stockholder
or equity holder and the number of shares or other equity interests held by
each), determined as of the date hereof. The Organization Schedule included in
the Disclosure Letter also contains under the heading "After Internal
Reorganization" a complete and accurate list for each Acquired Company of its
name, its jurisdiction of incorporation or organization, other jurisdictions in
which it is
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authorized to do business, and its capitalization (including the identity of
each stockholder or equity holder and the number of shares or other equity
interests held by each), as such will exist after completion of the Internal
Reorganization and as of immediately before the Closing. No Acquired Company
owns or holds the right to acquire any Capital Stock in any other Person.
(b) Each Acquired Company is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of organization, with full organizational power and authority to
conduct its business as it is now being conducted and to own or use the
properties and assets that it purports to own or use. Each Acquired Company is
duly qualified to do business as a foreign organization and is in good standing
under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except where the
failure to be so duly qualified or licensed and in good standing would not
individually or in the aggregate have a Material Adverse Effect.
(c) The Existing Stockholder and the Parent is each a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of incorporation.
(d) The Existing Stockholder has made available to the
Purchaser correct and complete copies of the certificate of incorporation and
by-laws (or equivalent governing documents) for each Acquired Company, which
documents reflect all amendments made thereto at any time before the date
hereof. Correct and complete copies of the minute books containing the records
of meetings of the stockholders and board of directors (or equivalent parties),
the stock certificate books, and the stock record books of the Acquired
Companies have been furnished to the Purchaser. No Acquired Company is in
default under or in violation of any provision of its certificate of
incorporation or by-laws (or equivalent governing documents).
SECTION 5.2 AUTHORIZATION OF TRANSACTIONS. The Company, the
Existing Stockholder and the Parent each has all requisite corporate power and
authority to execute and deliver the Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby. The
board of directors of each of the Company and the Existing Stockholder has duly
approved the Transaction Documents to which it is a party and has duly
authorized the execution and delivery of the Transaction Documents to which it
is a party and the consummation of the transactions contemplated thereby.
Except for the Parent Board Approval and the approval of the sole shareholder
of the Company and the Existing Stockholder, which shall be received prior to
Closing, no other corporate proceedings on the part of the Company, the
Existing Stockholder or the Parent are necessary to approve and authorize the
execution and delivery of the Transaction Documents to which it is a party and
the consummation of the transactions contemplated thereby. All Transaction
Documents to which the Company, the Existing Stockholder or the Parent is a
party have been duly executed and delivered by the Company, the Existing
Stockholder or the Parent and constitute the valid and binding agreements of
the Company, the Existing Stockholder or the Parent, enforceable against the
Company, the Existing Stockholder or the Parent in accordance with their
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terms, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and as limited by general principles of equity that restrict
the availability of equitable remedies.
SECTION 5.3 ABSENCE OF CONFLICTS. The execution, delivery, and
performance of the Transaction Documents and the consummation of the
transactions contemplated thereby by the Company, the Existing Stockholder and
the Parent do not and shall not (a) conflict with or result in any breach of
any of the terms, conditions, or provisions of, (b) constitute a material
default under, (c) result in a material violation of, (d) give any third party
the right to modify, terminate, or accelerate any obligation under, (e) result
in the creation of any Lien upon the Capital Stock or assets of any of the
Acquired Companies, or (f) require any authorization, consent, approval,
exemption, or other action by or notice or declaration to, or filing with, any
court or administrative or other governmental body or agency, under the
provisions of the articles of incorporation, by-laws or similar organizational
document of the Existing Stockholder, the Parent or any Acquired Company or any
indenture, mortgage, lease, loan agreement or other agreement listed on either
the Contracts Schedule or the Benefit Plans Schedule included in the Disclosure
Letter, or any material law, statute, rule, or regulation to which the Existing
Stockholder, the Parent or any Acquired Company is subject or any material
judgment, order, or decree to which the Existing Stockholder, the Parent or any
Acquired Company is subject.
SECTION 5.4 CAPITALIZATION. The authorized Capital Stock of the
Company consists of 1,000 shares of Common Stock, no par value, of which 100
shares are issued and outstanding, all of which are owned by the Existing
Stockholder. As of immediately after the amendment to the Company's charter
contemplated in Section 3.1(j) above, the authorized Capital Stock of the
Company will consist of 12,000,000 shares of Common Stock, par value $.01 per
share, of which 1,000 shares will be issued and outstanding, and 200,000 shares
of Class A Preferred Stock, par value $.01 per share, of which no shares will
be issued or outstanding. All of the issued and outstanding Capital Stock of
the Acquired Companies have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record and owned beneficially by the
Persons and in the manner described on the Organization Schedule included in
the Disclosure Letter, free and clear of all Liens, and are not subject to, nor
were they issued in violation of, any preemptive rights or rights of first
refusal. There are no outstanding or authorized options, warrants, rights,
contracts, calls, puts, rights to subscribe, conversion rights, or other
agreements or commitments to which any Acquired Company is a party or which are
binding upon any Acquired Company providing for the issuance, disposition, or
acquisition of any Acquired Company's Capital Stock (other than this
Agreement). There are no outstanding or authorized stock appreciation, phantom
stock, or similar rights with respect to any Acquired Company. There are no
voting trusts, proxies, or any other agreements or understandings with respect
to the voting of the Capital Stock of any Acquired Company. No Acquired Company
is subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of any Acquired Company's Capital Stock.
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SECTION 5.5 FINANCIAL STATEMENTS AND RELATED MATTERS.
(a) Financial Statements. Included in the Disclosure
Letter as the Financial Statements Schedule are the following financial
statements: (i) the audited consolidated balance sheets of the Company as of
December 31, 1996 and 1997, and the related statements of income and cash flows
(or the equivalent) for the respective twelve-month periods ended December 31,
1995, 1996 and 1997; and (ii) the unaudited consolidated balance sheet of the
Company as of November 30, 1998 (the "Latest Balance Sheet"), and the related
statements of income and cash flows (or the equivalent) for the eleven-month
period then ended. Each of the foregoing financial statements (the "Financial
Statements") presents fairly, in all material respects, the Company's
consolidated financial condition and results of operations as of the times and
for the periods referred to therein, and has been prepared in accordance with
GAAP, subject in the case of unaudited consolidated financial statements to the
absence of footnote disclosure and customary year-end adjustments, none of
which will be material.
(b) Receivables. All accounts receivable that are taken
into account in determining the Net Working Capital Amount (collectively, the
"Accounts Receivable") represent or will represent valid obligations arising
from services actually performed in the Ordinary Course of Business. The
Accounts Receivable and the reserves thereto will be established in accordance
with GAAP.
SECTION 5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Acquired
Company has any material obligations or liabilities (whether accrued, absolute,
contingent, unliquidated, or otherwise, whether or not known, whether due or to
become due, and regardless of when asserted) arising out of or relating to the
operation of the Acquired Companies at or before the Closing, except (i)
obligations under contracts or commitments described on the Contracts Schedule
included in the Disclosure Letter or under contracts and commitments which are
not required to be disclosed thereon (but not liabilities for breaches
thereof), (ii) liabilities reflected on the liabilities side of the Latest
Balance Sheet, (iii) liabilities which have arisen after the date of the Latest
Balance Sheet in the Ordinary Course of Business of such Acquired Company or
otherwise in accordance with the terms and conditions of this Agreement (none
of which is a liability for breach of contract, breach of warranty, tort, or
infringement or a claim or lawsuit or an environmental liability), and (iv)
liabilities, contracts, commitments or obligations disclosed elsewhere in this
Agreement or the Disclosure Letter hereto. Without limiting the generality of
the foregoing, all fees and expenses owing or potentially owing to Coopers &
Xxxxxxx in connection with its cost savings project for the Acquired Companies
will be paid in full by the Parent on or prior to Closing.
SECTION 5.7 ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly
contemplated by this Agreement or the Internal Reorganization, since December
31, 1997, no Acquired Company has:
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(a) suffered any change that has had or could reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect or suffered any theft, damage, destruction, or casualty loss in excess
of $100,000, to its assets, whether or not covered by insurance, or suffered
any substantial destruction of books and records;
(b) subjected any portion of its properties or assets to
any Lien (other than Permitted Liens) other than Liens, which individually or
in the aggregate, would not have a Material Adverse Effect;
(c) sold, leased, assigned, or transferred (including,
without limitation, transfers to Existing Stockholder or any Insider) a portion
of its tangible assets, or canceled without fair consideration any material
debts or claims owing to or held by it, except in the Ordinary Course of
Business of the Acquired Company;
(d) sold, assigned, licensed, or transferred (including,
without limitation, transfers to Existing Stockholder or any Insider) any
material Proprietary Rights owned by, issued to, or licensed to any Acquired
Company or to the knowledge of the Parent disclosed any material confidential
information to (other than pursuant to agreements requiring the recipient to
maintain the confidentiality of such confidential information) or received any
material confidential information of any third party in violation of any
obligation of confidentiality;
(e) suffered any losses or waived any rights, the
suffering or wavier of which would result in a Material Adverse Effect;
(f) other than in the Ordinary Course of Business of the
Acquired Company, entered into, amended, or terminated any Real Property
Leases, material personal property lease, contract, agreement, license or
commitment, or taken any other action or entered into any other material
transaction;
(g) materially changed any business practice other than
in the Ordinary Course of Business of the Acquired Company;
(h) except in the Ordinary Course of Business of the
Acquired Company, paid or increased any bonuses, salaries, or other
compensation to any stockholder, director, officer, or employee or entered into
any employment, severance, or similar contract or agreement with any director,
officer, or employee;
(i) adopted, or materially increased the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of any Acquired Company;
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(j) conducted its cash management customs and practices
other than in the Ordinary Course of Business of the Acquired Company
(including, without limitation, with respect to collection of accounts
receivable, purchases of supplies, repairs and maintenance, payment of accounts
payable and accrued expenses, levels of capital expenditures and operation of
cash management practices generally);
(k) made any capital expenditures or commitments for
capital expenditures in excess of $100,000 except in the Ordinary Course of
Business of the Acquired Company;
(l) made a material change in its accounting methods; or
(m) made or committed to make any payments or other
transfers in connection with, or in contemplation of, the transactions
contemplated by this Agreement or the other Transaction Documents.
SECTION 5.8 REAL PROPERTY.
(a) The Real Property Schedule included in the
Disclosure Letter sets forth the address and the record legal description of
the land for each Owned Real Property. With respect to each parcel of Owned
Real Property: (i) the owner Acquired Company has good and marketable fee
simple title to such parcel, which shall be free and clear of all Liens as of
the Closing Date, except Permitted Liens; (ii) there are no leases, subleases,
licenses, concessions or other agreements (written or oral) granting to any
person other than the Acquired Company the right to use or occupy such parcel
or any portion thereof; and (iii) there are no outstanding options, rights of
first offer or rights of first refusal to purchase such parcel or any portion
thereof or interest therein.
(b) The Real Property Schedule included in the
Disclosure Letter sets forth the address of each Leased Real Property and a
list of all Real Property Leases (including, without limitation, all
amendments, extensions, renewals, guaranties and other agreements with respect
thereto) for each Leased Real Property. The Existing Stockholder has delivered
to Purchaser a true and complete copy of each written Real Property Lease, and
in the case of any oral Real Property Leases, a written summary of the basic
terms thereof. With respect to each of the Real Property Leases: (i) the Real
Property Lease is legal, valid, binding, enforceable and in full force and
effect, except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights and by general principles of equity that restrict the
availability of equitable remedies; (ii) the acquisition of stock and change in
control of the Acquired Companies (as the case may be) as contemplated under
this Agreement will not result in a breach of or default under the Real
Property Lease or otherwise cause the Real Property Lease to cease to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following the Closing; (iii) no Acquired Company nor, to the knowledge of the
Parent, any other party to the Real Property Lease is in material breach or
default under the Real Property Lease beyond applicable cure periods, and to
the knowledge of the Parent, no event has occurred or
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circumstance exists which, with the delivery of notice, passage of time or
both, would constitute such a material breach or default or permit the
termination, modification or acceleration of rent under the Real Property
Lease; (iv) no party to the Real Property Lease has repudiated any term
thereof, and there are no material disputes in effect with respect to the Real
Property Lease; and (v) no Acquired Company has assigned, subleased, mortgaged,
deeded in trust or otherwise transferred or encumbered the Real Property Lease
or any interest therein.
(c) Pursuant to and subject to the Real Property Leases,
the Acquired Companies have good title to the Leasehold Improvements, which
shall be free and clear of all Liens as of the Closing Date, except Permitted
Liens.
(d) The Owned Real Property, the Leased Real Property
and Leasehold Improvements (collectively, the "Real Property") include all of
the real property used by the Acquired Companies in the operation of their
businesses.
SECTION 5.9 ASSETS.
(a) Each Acquired Company owns good and marketable title
to, or a valid leasehold interest in, free and clear of all Liens other than
Permitted Liens, all of the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) which are shown on the Latest Balance
Sheet, or which have been acquired by such Acquired Company thereafter, except
for personal property and assets sold since the date of the Latest Balance
Sheet in the Ordinary Course of Business. Neither the Parent nor any of its
Subsidiaries (except Acquired Companies) owns any properties or assets (whether
real, personal, or mixed and whether tangible or intangible) which are used in
the business of any of the Acquired Companies. The Assigned Contracts Schedule
included in the Disclosure Letter contains a true, complete and correct list of
all contracts, agreements, arrangements and understandings to which the Parent
or Affiliates of the Parent (other than the Acquired Companies) are a party
which primarily relate to the business of the Acquired Companies as conducted
in the ordinary course, except those such contracts, agreements, arrangements
and understandings which exclusively relate to the business of the Acquired
Companies.
(b) The buildings, machinery, equipment, personal
properties, vehicles, and other tangible assets of the Acquired Companies
(other than the TH JV's), and to the knowledge of the Parent, the TH JV's,
located upon or used in connection with the Real Property are operated in
conformity in all material respects with all applicable laws and regulations
and are usable in the Ordinary Course of Business. The Acquired Companies
(other than the TH JV's), and to the knowledge of the Parent, the TH JV's, own,
license under valid licenses or lease under valid leases all buildings,
machinery, equipment, and other tangible assets, other than Cash (except for
equity securities of the Acquired Companies), necessary for the conduct of
their business as currently conducted.
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SECTION 5.10 TAXES.
(a) Each of the Acquired Companies has filed all
material Tax Returns required to be filed by it, and each such Tax Return has
been prepared in compliance with all applicable laws and regulations and is
true and correct in all material respects.
(b) All Taxes that are due and payable by the Acquired
Companies (whether or not shown on any Tax Return) have been paid, and each of
the Acquired Companies has properly withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
shareholder, employee, creditor, independent contractor, or other third party.
(c) No action, suit, proceeding or audit is pending
against or with respect to the Acquired Companies regarding Taxes and no
Acquired Company has received any written notice of any audit that has not
commenced.
(d) None of the Acquired Companies is a party to or
bound by any Tax allocation or Tax sharing agreement with any Person other than
the Acquired Companies.
(e) None of the Acquired Companies (A) has been a member
of an affiliated group filing a consolidated federal income Tax Return (other
than a group the common parent of which was the Parent or one of the Acquired
Companies) for any taxable year ended after December 31, 1994 or (B) has any
liability for the Taxes of any Person (other than any of the Acquired
Companies) under Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(f) No Acquired Company has received written notice from
a taxing authority in a jurisdiction where any of the Acquired Companies does
not file Tax Returns that such Person is or may be subject to taxation by such
jurisdiction.
(g) Each of the Acquired Companies has made available to
the Purchaser true, correct and complete copies of all Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by any of
the Acquired Companies for the past three (3) years.
(h) None of the Acquired Companies has consented to
extend the time in which any Tax may be assessed or collected by any taxing
authority.
(i) None of the Acquired Companies will be required to
include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing
Date as a result of any (i) change in method of accounting for a taxable period
ending on or prior to the Closing Date under Code Section 481(c) (or any
corresponding or similar provision of state, local or foreign income Tax law);
(ii) "closing
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agreement" as described in Code Section 7121 (or any corresponding or similar
provision of state, local or foreign income Tax law); or (iii) installment sale
made prior to the Closing Date.
(j) None of the Acquired Companies has filed a consent
under Code Section 341(f).
(k) None of the Acquired Companies is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute
payment" within the meaning of Code Section 280G (or any corresponding
provision of state, local or foreign income Tax law), in connection with the
transactions contemplated hereby.
SECTION 5.11 CONTRACTS AND COMMITMENTS.
(a) Except for contracts with clients, physicians and
health care service providers which involve individually less than $250,000
annually, no Acquired Company is a party to or bound by any written or oral:
(i) contract for the employment of any officer,
individual employee or other Person on a full-time, part-time,
consulting or other basis providing annual compensation in excess of
$150,000 or contract relating to loans to officers, directors or
Affiliates of such Acquired Company;
(ii) contract under which the Acquired Companies
have advanced or loaned any other Person amounts in the aggregate
exceeding $25,000, other than trade credit and advances of independent
contractor payments extended in the Ordinary Course of Business;
(iii) agreement or indenture relating to borrowed
money or other Indebtedness in excess of $1,000,000 or the mortgaging,
pledging or otherwise placing a Lien on any material asset or group of
assets of the Acquired Companies;
(iv) guaranty of any obligation in excess of
$1,000,000;
(v) lease or agreement under which any Acquired
Company is the lessee of or holds or operates any personal property
owned by any other party, except for any lease or agreement for
personal property under which the aggregate annual payments do not
exceed $100,000;
(vi) lease or agreement under which any Acquired
Company is the lessor of or permits any third party to hold or operate
any property, real or personal, owned or controlled by any Acquired
Company;
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(vii) contract or group of related contracts
(excluding purchase orders issued or received in the Ordinary Course
of Business) with the same party or group of affiliated parties the
performance of which involves consideration in excess of $250,000;
(viii) assignment, license, indemnification or
agreement with respect to any intangible property (including, without
limitation, any Proprietary Rights);
(ix) distribution or franchise agreement;
(x) agreement with a term of more than six
months, which is not terminable by the Acquired Companies upon less
than 90 days notice without penalty or which involves more than
$250,000 annually;
(xi) contract or agreement prohibiting it from
freely engaging in any business or competing anywhere in the world; or
(xii) any other agreement, entered into other
than in the Ordinary Course of Business, which is material to its
operations and business prospects or involves a consideration in
excess of $250,000 annually.
(b) All of the contracts, agreements and instruments set
forth on the Contracts Schedule included in the Disclosure Letter, and all
contracts with clients, physicians and health care service providers of the
Acquired Companies, are valid, binding and enforceable in accordance with their
respective terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; and as limited by general principles of
equity that restrict the availability of equitable remedies. Each Acquired
Company has performed all material obligations required to be performed by it
and is not in default under or in breach of nor in receipt of any claim of
default or breach under any such contract, agreement or instrument other than
defaults which would not result in a Material Adverse Effect. No event has
occurred which with the passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance by the Company or, to the
Parent's knowledge, any other party under any such contract, agreement or
instrument other than such defaults, breaches and events of noncompliance as
would not result in a Material Adverse Effect. No Acquired Company has received
written notice of the intention of any Party to cancel or terminate any
contract, agreement or instrument required to be set forth on the Contracts
Schedule included in the Disclosure Letter and, to the Parent's knowledge,
there has not been any breach or anticipated breach by the other parties to any
such contract, agreement or instrument.
(c) The Existing Stockholder has provided the Purchaser
with, or provided the Purchaser with access to, a true and correct copy of all
written contracts which are required to be disclosed on the Contracts Schedule
included in the Disclosure Letter, in each case together with all
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amendments, waivers, or other changes thereto (all of which are disclosed on
the Contracts Schedule included in the Disclosure Letter). The Contracts
Schedule included in the Disclosure Letter contains an accurate and complete
description of all material terms of all oral contracts referred to therein
(unless the oral agreement is to extend a terminated or expired written
contract substantially on the same terms of such contract).
SECTION 5.12 PROPRIETARY RIGHTS.
(a) The Proprietary Rights Schedule included in the
Disclosure Letter contains a complete and accurate list of all patented and
registered Proprietary Rights and all pending patent applications and
applications for the registration of other Proprietary Rights filed by the
Acquired Companies. The Proprietary Rights Schedule included in the Disclosure
Letter also contains a complete and accurate list of all material (i) trade
names, unregistered trademarks, service marks, copyrights, proprietary
information systems and proprietary databases owned by the Acquired Companies
(collectively, the "Unregistered Proprietary Rights"); (ii) computer software
owned and/or used by the Acquired Companies other than commercially available
"off-the-shelf" software; and (iii) licenses granted by the Acquired Companies
to any third party and all licenses granted by any third party to the Acquired
Companies, in each case identifying the subject Proprietary Rights. The Company
has made available to the Purchaser correct and complete copies of all
documents embodying the licenses applicable to the Proprietary Rights listed on
the Proprietary Rights Schedule included in the Disclosure Letter other than
for software described in clause (ii).
(b) Each Acquired Company owns and possesses free and
clear of all Liens (except Permitted Liens), all right, title, and interest in
and to, or has the right to use pursuant to a valid and enforceable license,
the Proprietary Rights necessary for the operation of such Acquired Company's
business as currently conducted; no Acquired Company has received any notice of
invalidity, infringement, or misappropriation from any third party with respect
to any such Proprietary Rights; no Acquired Company has received any notice
that any Proprietary Rights of any third parties have been interfered with,
infringed upon, or misappropriated by such Acquired Company and to the Parent's
knowledge, no grounds exist for any claim of such interference, infringement,
misappropriation or conflict; and to the knowledge of the Parent, no third
party has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Proprietary Rights of any Acquired Company.
(c) The Existing Stockholder has made available to the
Purchaser a copy of the inventory conducted by the Acquired Companies of the
hardware, software and embedded microcontrollers in noncomputer equipment (the
"Computer Systems") used by all of the Acquired Companies in their respective
businesses, in order to determine which parts of the Computer Systems are not
Year 2000 Compliant (as defined below) and to estimate the cost and time of
rendering such Computer Systems Year 2000 Compliant prior to December 31, 1999
or such earlier date on which the Computer Systems may shut down or produce
incorrect calculations or otherwise malfunction without becoming totally
inoperable. The Existing Stockholder and the Acquired
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Companies have budgeted $1,200,000 through December 31, 1999 to address
Computer Systems which are not Year 2000 Compliant. For purposes of this
Agreement, "Year 2000 Compliant" means that all of the hardware, software and
embedded microcontrollers in non computer equipment comprising Computer Systems
will correctly differentiate between years in different centuries that end in
the same two digits, and will accurately process date/time data (including, but
not limited to, calculating, comparing and sequencing) from, into and between
the twentieth and twenty-first centuries, including leap year calculations.
SECTION 5.13 LITIGATION; PROCEEDINGS. There are no actions,
suits, proceedings, orders, judgments, decrees, or investigations pending or,
to the Parent's knowledge, threatened against any Acquired Company (or against
any of their respective officers, directors, agents, or employees (in each
case, in their capacity as such)) at law or in equity, or before or by any
federal, state, municipal, or other governmental department, commission, board,
bureau, agency, or instrumentality, domestic or foreign, and to the knowledge
of the Parent, there is no reasonable basis known for any of the foregoing. No
Acquired Company is subject to any outstanding order, judgment, or decree
issued by any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or any arbitrator. There is no claim,
action, suit, proceeding or governmental investigation pending or, to the
knowledge of the Parent, threatened against the Parent or the Existing
Stockholder, by or before any court, governmental or regulatory authority or by
any third party which challenges the validity of this Agreement or which would
be reasonably likely to adversely affect or restrict the Parent's or the
Existing Stockholder's ability to consummate the transactions contemplated
hereby.
SECTION 5.14 BROKERAGE. There are no claims for brokerage
commissions, finders' fees, or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of any Acquired Company, the Existing
Stockholder or the Parent.
SECTION 5.15 GOVERNMENTAL LICENSES AND PERMITS. The License
Schedule included in the Disclosure Letter contains a complete listing and
summary description of all material Licenses owned or possessed by any Acquired
Company or used by any Acquired Company in the conduct of its business. Except
as would not result in a Material Adverse Effect, each Acquired Company owns or
possesses such right in and to all Licenses as is necessary to conduct such
Acquired Company's business as presently conducted and as proposed to be
conducted and shall use its reasonable efforts to maintain all such Licenses.
No loss or expiration of any License is pending or, to the Parent's knowledge,
threatened or reasonably foreseeable (including, without limitation, as a
result of the transactions contemplated hereby) other than expiration in
accordance with the terms thereof or as would not result in a Material Adverse
Effect.
SECTION 5.16 EMPLOYEES. To the knowledge of the Parent, no key
executive employee and no group of employees or independent contractors of any
Acquired Company has any plans to terminate his, her, or their employment or
relationship with any Acquired Company; each Acquired
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Company has complied in all material respects during the last five years with
all applicable laws relating to the employment of personnel and labor; no
Acquired Company is a party to or bound by any collective bargaining agreement,
nor has any Acquired Company experienced any material strikes, grievances,
unfair labor practices claims, or other material employee or labor disputes in
the last five years; no Acquired Company has engaged in any unfair labor
practice in the last five years; and the Parent has no any knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of any Acquired Company.
SECTION 5.17 EMPLOYEE BENEFIT PLANS.
(a) The Benefit Plans Schedule included in the
Disclosure Letter identifies all bonus, deferred or incentive compensation,
profit sharing, retirement, vacation, sick leave, hospitalization or severance
plans, "employee benefit plans" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and material
fringe benefit plans sponsored, maintained or contributed to by any Acquired
Company or with respect to which any Acquired Company has any material
liability (the "Plans"). None of the Plans are subject to Title IV of ERISA nor
provide for medical or life insurance benefits to retired or former employees
of any Acquired Company (other than as required under Code Section 4980B, or
similar state law). Each Acquired Company is not a participating or
contributing employer in any "multiemployer plan" (as defined in Section 3(37)
of ERISA) with respect to employees of the Acquired Companies nor has any
Acquired Company incurred any withdrawal liability with respect to any
multiemployer plan or any liability in connection with the termination or
reorganization of any multiemployer plan.
(b) Each such Plan is in all material respects in
compliance, and has been administered in all material respects in accordance,
with the applicable provisions of ERISA and the Code and all other applicable
laws, rules and regulations, including, but not limited to, medical
continuation under Code Section 4980B. No Acquired Company has (i) engaged in
any transaction prohibited by ERISA or the Code; (ii) breached any fiduciary
duty owed by it with respect to the Plans described above; or (iii) failed in
any material respect to file and distribute timely and properly all reports and
information required to be filed or distributed in accordance with ERISA or the
Code.
(c) All material contributions, premiums or payments
under or with respect to each Plan which are due on or before the Closing Date
have been paid.
(d) Each Plan which is intended to be qualified under
section 401(a) of the Code (i) has been amended to reflect all requirements of
the Tax Reform Act of 1986 and all subsequent legislation which is required to
be adopted prior to the Closing Date and (ii) has received from the Internal
Revenue Service a favorable determination letter which considers the terms of
the Plan as amended for such changes in law.
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(e) Each Acquired Company has not incurred and has no
reason to expect that it will incur, any liability to the Pension Benefit
Guaranty Corporation (other than premium payments) or otherwise under Title IV
of ERISA (including any withdrawal liability) or under the Code with respect to
any employee pension benefit plan that any Acquired Company or any other
entity, that together with any Acquired Company is treated as a single employer
under section 414 of the Code, maintains or ever has maintained or to which any
of them contributes, ever has contributed, or ever has been required to
contribute.
(f) Each individual who has received compensation for
the performance of services on behalf of any Acquired Company has been properly
classified as an employee or independent contractor in accordance with
applicable laws.
SECTION 5.18 INSURANCE. The Parent has made available to
Purchaser a list and brief description of each insurance policy maintained by
each Acquired Company with respect to such Acquired Company's properties,
assets, and business, together with a claims history for the past three years.
All of such insurance policies are in full force and effect, and no Acquired
Company is in default with respect to its obligations under any such insurance
policies. No Acquired Company has any self-insurance or co-insurance programs,
and the reserves set forth on the Latest Balance Sheet have been established in
the Ordinary Course of Business of the Acquired Companies.
SECTION 5.19 OFFICERS AND DIRECTORS; BANK ACCOUNTS. The Officers,
Directors, and Bank Accounts Schedule included in the Disclosure Schedule lists
all officers and directors of each Acquired Company, and all bank accounts,
safety deposit boxes, and lock boxes (designating each authorized signatory
with respect thereto) for each Acquired Company.
SECTION 5.20 AFFILIATE TRANSACTIONS. No Insider is a party to any
material agreement, contract, commitment, or transaction with any Acquired
Company or which is pertaining to the business of any Acquired Company or has
any interest in any property, real or personal or mixed, tangible or
intangible, used in or pertaining to the business of any Acquired Company.
SECTION 5.21 COMPLIANCE WITH LAWS. Each Acquired Company and
their respective officers, directors, agents (in their capacity as such), and
employees have complied in all material respects with and are in material
compliance with all applicable laws, regulations, and ordinances of foreign,
federal, state, and local governments and all agencies thereof which are
applicable to the business, business practices, or any owned or leased
properties of any Acquired Company and to which any Acquired Company may be
subject, and no material claims have been filed against any Acquired Company
alleging a violation of any such laws or regulations, and neither any Acquired
Company nor the Existing Stockholder has received notice of any such
violations.
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SECTION 5.22 HEALTH CARE MATTERS.
(a) To the knowledge of the Parent, all physicians
employed by or otherwise contracting with the Acquired Companies have and are
maintaining in good standing their license to practice medicine in the state(s)
in which they practice medicine, except where the failure to have or maintain
such license in good standing would not have a Material Adverse Effect.
(b) To the knowledge of the Parent, no Acquired Company
has submitted any claim which violates any applicable self-referral law,
including the Federal Ethics in Patient Referrals Act, 42 U.S.C. ss. 1395nn
(known as the "Xxxxx Act"), or any applicable state self-referral law, other
than claims the submission or payment of which individually or in the aggregate
would not have a Material Adverse Effect. To the knowledge of the Parent, no
Acquired Company has submitted any claim for payment to any payor source,
either governmental or nongovernmental, in violation of any false claim or
fraud law, including the "False Claim Act," 31 U.S.C. ss. 3729, or any other
applicable federal or state false claim or fraud law, other than claims the
submission or payment of which individually or in the aggregate would not have
a Material Adverse Effect.
(c) To the knowledge of the Parent, no Acquired Company
(including without limitation any manager, officer, member, partner or employee
of any Acquired Company), nor any agent acting on behalf of or for the benefit
thereof, has directly or indirectly, other than as would not result in a
Material Adverse Effect, (i) knowingly and willfully offered or paid any
remuneration, in cash or in kind, to, or made any financial arrangements with,
any past or present customers, past or present suppliers, contractors or third
party payors in order to obtain business or payments from such persons, other
than entertainment activities in the ordinary and lawful course of business,
(ii) knowingly and willfully given or agreed to give, or is aware that there
has been made or that there is any agreement to make, any gift or gratuitous
payment of any kind, nature or description (whether in money, property or
services) to any customer or potential customer, supplier or potential
supplier, contractor, third party payor or any other person other than in
connection with promotional or entertainment expenses in the ordinary and
lawful course of business, (iii) knowingly and willfully made or agreed to
make, or is aware that there has been made or that there is any agreement to
make, any contribution, payment or gift of funds or property to, or for the
private use of, any governmental official, employee or agent where either the
contribution, payment or gift is or was illegal under the laws of the United
States or under the laws of any state thereof or any other jurisdiction
(foreign or domestic) under which such payment, contribution or gift was made,
(iv) knowingly and willfully established or maintained any unrecorded fund or
asset for any purpose or made any false or artificial entries on any of its
books or records for any reason, (v) knowingly and willfully made, or agreed to
make, or is aware that there has been made or that there is any agreement to
make, any payment to any person with the intention or understanding that any
part of such payment would be used for any purpose other than that described in
the documents supporting such payment, or (vi) knowingly and willfully paid or
offered to pay any illegal remuneration for any referral to any Acquired
Company in violation of any applicable anti-kickback law, including the Federal
Anti-Kickback Statute, 42 U.S.C. ss. 1320a-7b(b), or any applicable state
anti-kickback law.
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(d) To the knowledge of the Parent, no Acquired Company
(including without limitation any of their managers, officers, or employees)
has been convicted of, charged with, or investigated for a Medicare, Medicaid
or state health program related offense, or convicted of, charged with, or
investigated for a violation of federal or state law related to fraud, theft,
embezzlement, breach of fiduciary responsibility, financial misconduct,
obstruction of an investigation or controlled substances, or has been excluded
or suspended from participation in Medicare, Medicaid or any federal or state
health program or been subject to any order or consent decree of , or criminal
or civil fine or penalty imposed by, any court or governmental agency. To the
knowledge of the Parent, no Acquired Company has arranged or contracted with
(by employment or otherwise) any individual or entity that the Acquired
Companies know or should know is excluded from participation in a Federal
Health Care Program, as defined in 42 U.S.C. ss. 1320a-7b(f), for the
provision of items or services for which payment may be made under such Federal
Health Care Program.
SECTION 5.23 ENVIRONMENTAL MATTERS.
(a) Each Acquired Company has complied in all material
respects with and is currently in compliance in all material respects with all
Environmental and Safety Requirements, and neither any Acquired Company nor the
Existing Stockholder has received any oral or written notice, report, or
information regarding any liabilities (whether accrued, absolute, contingent,
unliquidated, or otherwise) or any corrective, investigatory, or remedial
obligations arising under Environmental and Safety Requirements which relate to
any Acquired Company or any of their respective properties or facilities.
(b) Without limiting the generality of the foregoing,
each Acquired Company has obtained and complied with, and is currently in
compliance with, all permits, licenses, and other authorizations that may be
required pursuant to any Environmental and Safety Requirements for the
occupancy of such Acquired Company's respective properties or facilities or the
operation of such Acquired Company's respective businesses, except where the
failure to so obtain or comply with all such permits, licenses and other
authorizations would not have a Material Adverse Effect. A list of all such
permits, licenses, and other authorizations which are material to any Acquired
Company is set forth on the Environmental Schedule included in the Disclosure
Letter.
(c) To the knowledge of the Parent, neither this
Agreement, nor the other Transaction Documents, nor the consummation of the
transactions contemplated hereby and thereby shall impose any obligations on
any Acquired Company or otherwise for site investigation or cleanup, or
notification to or consent of any government agencies or third parties under
any Environmental and Safety Requirements (including, without limitation, any
so called "transaction- triggered" or "responsible property transfer" laws and
regulations).
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(d) To the knowledge of the Parent, none of the
following exists at any property or facility owned or leased by any Acquired
Company: (i) underground storage tanks or surface impoundments; (ii)
asbestos-containing material in any friable or potentially friable form or
condition; (iii) materials or equipment containing polychlorinated biphenyls;
or (iv) landfills.
(e) To the knowledge of the Parent, no Acquired Company
has ever treated, stored, disposed of, arranged for or permitted the disposal
of, transported, handled, or Released (as defined in CERCLA) any substance
(including, without limitation, any hazardous substance), except to the extent
in compliance with Environmental and Safety Requirements, or owned, occupied,
or operated any facility or property in a manner known to the Parent to give
rise to liabilities of any Acquired Company for response costs, natural
resource damages, or attorneys' fees pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA") or any other Environmental and Safety Requirements.
(f) To the knowledge of the Parent, without limiting the
generality of the foregoing, no facts, events, or conditions relating to the
past or present properties, facilities, or operations of any Acquired Company
shall give rise to any material corrective, investigatory, or remedial
obligations pursuant to Environmental and Safety Requirements, or give rise to
any other material liabilities (whether accrued, absolute, contingent,
unliquidated, or otherwise) pursuant to Environmental and Safety Requirements,
including, without limitation, those liabilities relating to onsite or offsite
Releases or threatened Releases of hazardous materials, substances or wastes,
personal injury, property damage, or natural resources damage.
(g) To the knowledge of the Parent, no Acquired Company
has, either expressly or by operation of law, assumed or undertaken any
liability or corrective investigatory or remedial obligation of any other
Person relating to any Environmental and Safety Requirements.
SECTION 5.24 DISCLOSURE. Neither this Agreement, the other
Transaction Documents, nor any of the schedules, attachments or exhibits
hereto, contain any untrue statement of a material fact or omit a material fact
necessary to make each statement contained herein or therein, not misleading.
SECTION 5.25 CLOSING DATE. All of the representations and
warranties contained in this Article V and elsewhere in this Agreement and all
information delivered in any schedule, attachment, or Exhibit hereto or in any
certificate delivered pursuant to this Agreement to the Purchaser are true and
correct on the date of this Agreement and shall be true and correct on the
Closing Date, except to the extent that the Existing Stockholder has advised
the Purchaser otherwise in writing before the Closing (each, a "Schedule
Update"). Each Schedule Update delivered to the Purchaser shall be taken into
account in determining whether or not a representation or warranty has been
breached for purposes of any claims for indemnification pursuant to Section
8.2(a)(i) below, as long as such Schedule Update discloses facts, events or
circumstances which occurred after the date hereof or such Schedule Update
discloses facts, events or circumstances which occurred prior to the date
hereof as to which the Company's chief executive officer, chief operating
officer and
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executive vice president of finance and administration had no knowledge as of
the date hereof. No Schedule Update shall be taken into account in determining
whether or not the conditions to Closing set forth in Article III above have
been satisfied unless the Purchaser has approved such Schedule Update.
ARTICLE VI -- REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
As a material inducement to the Company and the Existing
Stockholder to enter into this Agreement, the Purchaser hereby represents and
warrants to the Existing Stockholder that:
SECTION 6.1 ORGANIZATION. The Purchaser is a limited liability
company duly organized, validly existing, and in good standing under the laws
of the State of Delaware.
SECTION 6.2 AUTHORIZATION OF TRANSACTIONS. The Purchaser has all
requisite organizational power and authority to execute and deliver the
Transaction Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. The board of directors of the Purchaser has
duly approved the Transaction Documents to which it is a party and has duly
authorized the execution and delivery of the Transaction Documents to which it
is a party and the consummation of the transactions contemplated thereby. No
other limited liability company proceedings on the part of the Purchaser are
necessary to approve and authorize the execution and delivery of the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated thereby. All Transaction Documents to which the
Purchaser is a party have been duly executed and delivered by the Purchaser and
constitute the valid and binding agreements of the Purchaser, enforceable
against the Purchaser in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights; and as limited
by general principles of equity that restrict the availability of equitable
remedies.
SECTION 6.3 ABSENCE OF CONFLICTS. The execution, delivery, and
performance of the Transaction Documents and the consummation of the
transactions contemplated thereby by the Purchaser do not and shall not (a)
conflict with or result in any breach of any of the terms, conditions, or
provisions of, (b) constitute a material default under, (c) result in a
material violation of, (d) give any third party the right to modify, terminate,
or accelerate any obligation under, or (e) require any authorization, consent,
approval, exemption, or other action by or notice or declaration to, or filing
with, any court or administrative or other governmental body or agency, under
the provisions of the certificate of formation or limited liability company
agreement of the Purchaser or any material indenture, mortgage, lease, loan
agreement, or other material agreement or instrument to which the Purchaser is
bound or affected, or any material law, statute, rule, or regulation to which
the Purchaser is subject or any material judgment, order, or decree to which
the Purchaser is subject.
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SECTION 6.4 LITIGATION. There is no claim, action, suit,
proceeding or governmental investigation pending or, to the knowledge of the
Purchaser, threatened against the Purchaser, by or before any court,
governmental or regulatory authority or by any third party which challenges the
validity of this Agreement or which would be reasonably likely to adversely
affect, delay or restrict the Purchaser's ability to consummate the
transactions contemplated hereby.
SECTION 6.5 INVESTIGATION BY THE PURCHASER. The Purchaser has
conducted its own independent review and analysis of the business, operations,
technology, assets, liabilities, results of operations, financial condition and
prospects of the Acquired Companies and acknowledges that Parent and the
Existing Stockholder have provided the Purchaser with access to the personnel,
properties, premises and records of each of the Acquired Companies for this
purpose. In entering into this Agreement, the Purchaser has relied solely upon
the representations, warranties and other provisions of the Transaction
Documents and its own investigation and analysis, and the Purchaser (a)
acknowledges that none of the Parent, the Existing Stockholder or the Acquired
Companies nor any of their respective directors, officers, employees,
Affiliates, controlling Persons, agents or representatives makes or has made
any representation or warranty, either express or implied, as to the accuracy
or completeness of any of the information provided or made available to the
Purchaser or its directors, officers, employees, Affiliates, controlling
Persons, agents or representatives, and (b) agrees, to the fullest extent
permitted by law, that none of the Parent, the Existing Stockholder or the
Acquired Companies nor any of their respective directors, officers, employees,
Affiliates, controlling Persons, agents or representatives shall have any
liability or responsibility whatsoever to the Purchaser or its directors,
officers, employees, Affiliates, controlling Persons, agents or representatives
on any basis (including, without limitation, in contract or tort, under federal
or state securities laws or otherwise) based upon any information provided or
made available, or statements made, to the Purchaser or its directors,
officers, employees, Affiliates, controlling Persons, agents or representatives
(or any omissions therefrom), including, without limitation, in respect of the
specific representations and warranties of Parent and the Existing Stockholder
set forth in this Agreement, except as and only to the extent expressly set
forth in this Agreement.
SECTION 6.6 FINANCING. Attached hereto as Exhibit H are true and
correct copies of the senior and subordinated debt financing commitment letters
(the "Debt Commitment Letters") issued to the Purchaser by (i) Fleet National
Bank, NationsBank, N.A. and DLJ Capital Funding, Inc., and (ii) DLJ Bridge
Finance, Inc., NationsBridge, L.L.C. and Fleet Corporate Finance, Inc. and the
equity financing commitment letters issued to the Purchaser by (i) Madison
Dearborn Capital Partners II, L.P., (ii) Cornerstone Equity Investors IV, L.P.
and (iii) Healthcare Equity Partners, L.P. (together with the Debt Commitment
Letters, the "Debt and Equity Commitment Letters"), respectively, on or about
January 22, 1999 in order to consummate the transactions contemplated hereby,
and to fund the working capital requirements of the Company after the Closing.
The Purchaser acknowledges that the Debt and Equity Commitment Letters have
been delivered by the Purchaser to the Parent and the Existing Stockholder to
materially induce the Parent and the Existing Stockholder to enter into this
Agreement.
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SECTION 6.7 XXXX-XXXXX-XXXXXX. Within the meaning of the
Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of 1976, as amended, and the
rules promulgated thereunder (16 C.F.R. xx.xx. 801-803), the Purchaser is its
own ultimate parent entity, the total assets of the Purchaser are less than
$10,000,000 and the annual net sales of the Purchaser are less than
$10,000,000.
SECTION 6.8 BROKERAGE. There are no claims for brokerage
commissions, finders' fees, or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Purchaser.
SECTION 6.9 INVESTMENT. The Purchaser (a) understands that the
Purchased Securities have not been registered under the Securities Act, or
under any state securities laws, and are being offered and sold in reliance
upon federal and state exemptions for transactions not involving any public
offering, (b) is acquiring the Purchased Securities solely for its own account
for investment purposes, and not with a view to the distribution thereof, and
(c) is an accredited investor within the meaning of Regulation D promulgated
under the Securities Act; provided that, nothing contained herein shall prevent
the Purchaser or subsequent holder of Restricted Securities from transferring
such securities in compliance with the provisions of Section 9.1.
SECTION 6.10 CLOSING DATE. All of the representations and
warranties contained in this Article VI and elsewhere in this Agreement and all
information delivered in any schedule, attachment, or Exhibit hereto or in any
certificate delivered pursuant this Agreement to the Parent or Existing
Stockholder are true and correct on the date of this Agreement and shall be
true and correct on the Closing Date, except to the extent that the Existing
Stockholder has advised the Purchaser otherwise in writing before the Closing
(each, a "Schedule Update"). Each Schedule Update delivered to the Existing
Stockholder or the Parent shall be taken into account in determining whether or
not a representation or warranty has been breached for purposes of any claims
for indemnification pursuant to Section 8.2(c)(i) below, as long as such
Schedule Update discloses facts, events or circumstances which occurred after
the date hereof or such Schedule Update discloses facts, events or
circumstances which occurred prior to the date hereof as to which the Purchaser
had no knowledge as of the date hereof. No Schedule Update shall be taken into
account in determining whether or not the conditions to Closing set forth in
Article III above have been satisfied unless the Existing Stockholder or the
Parent has approved such Schedule Update.
ARTICLE VII -- TERMINATION
SECTION 7.1 TERMINATION. This Agreement may be terminated at any
time before the Closing:
(a) by mutual written consent of the Parent and the
Purchaser;
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(b) by the Purchaser if the representations and
warranties set forth in Article V hereof taken in their entirety are not true
and correct in all material respects on the date made or deemed made; provided
that, for purposes of this Section 7.1(b), those representations and warranties
that are qualified by references to "material" or "Material Adverse Effect"
shall be deemed not to include such qualifications;
(c) by the Parent if the representations and warranties
set forth in Article VI hereof taken in their entirety are not true and correct
in all material respects on the date made or deemed made; provided that, for
purposes of this Section 7.1(c), those representations and warranties that are
qualified by references to "material" shall be deemed not to include such
qualifications;
(d) by the Purchaser if the Company, the Existing
Stockholder or the Parent shall have failed to perform and comply in all
material respects with all of the covenants and agreements required to be
performed by each of them under this Agreement on or before the Closing;
(e) by the Parent if the Purchaser shall have failed to
perform and comply in all material respects with all of the covenants and
agreements required to be performed by it under this Agreement on or before the
Closing;
(f) by the Parent or the Purchaser if events have
occurred which have made it impossible to satisfy a condition precedent to the
terminating Party's obligations to consummate the transactions contemplated
hereby unless such terminating Party's willful or knowing breach of this
Agreement has caused the condition to be unsatisfied;
(g) by the Parent or the Purchaser if the Parent Board
Approval is not obtained on or before January 27, 1999 unless such terminating
Party's willful or knowing breach of this Agreement has caused such approval to
not be obtained; or
(h) by the Parent or the Purchaser if the Closing has
not occurred on or before March 16, 1999; provided, however, that neither the
Purchaser nor the Existing Stockholder shall be entitled to terminate this
Agreement pursuant to this Section 7.1(h) if such Party's willful or knowing
breach of this Agreement has prevented the consummation of the transactions
contemplated hereby at or before such time.
SECTION 7.2 EFFECT OF TERMINATION. In the event of termination
of this Agreement by either the Existing Stockholder or the Purchaser as
provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability on the part of any Party to any other Party under this
Agreement, except that the provisions of this Section 7.2, Sections 9.2, 9.5
and 9.9 and Article X (other than Section 10.3) shall continue in full force
and effect and except that nothing herein shall relieve any Party from
liability for any breach of this Agreement before such termination.
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ARTICLE VIII -- INDEMNIFICATION AND RELATED MATTERS
SECTION 8.1 SURVIVAL. All representations, warranties,
covenants, and agreements set forth in this Agreement or in any writing or
certificate delivered in connection with this Agreement shall survive the
Closing Date and the consummation of the transactions contemplated hereby and
shall not be affected by any examination made for or on behalf of any Party,
the knowledge of any of such Party's officers, directors, stockholders,
employees, or agents, or the acceptance of any certificate or opinion.
Notwithstanding the foregoing, no Party shall be entitled to recover for any
Loss pursuant to Section 8.2(a)(i) or (iv) or Section 8.2(c)(i) unless written
notice of a claim thereof is delivered to the other Party before the Applicable
Limitation Date. For purposes of this Agreement, the term "Applicable
Limitation Date" shall mean the date which is 18 months after the Closing Date;
provided that the Applicable Limitation Date with respect to the following
Losses shall be as follows: (i) with respect to any Loss arising from or
related to (A) a breach of the representations and warranties of the Existing
Stockholder set forth in Section 5.22 (Health Care Matters), or (B) matters
described in Section 8.2(a)(iv), the Applicable Limitation Date shall be the
date which is three years after the Closing Date; (ii) with respect to any Loss
arising from or related to a breach of the representations and warranties of
the Existing Stockholder set forth in Section 5.10 (Taxes) and Section 5.17
(Employee Benefits Matters), the Applicable Limitation Date shall be the date
of expiration of the statute of limitations applicable to the statute,
regulation or other authority which gave rise to such Loss, and (iii) with
respect to any Loss arising from or related to a breach of the representations
and warranties of the Existing Stockholder set forth in Section 5.1
(Organization and Corporate Power), Section 5.2 (Authorization of
Transactions), Section 5.3 (Absence of Conflicts), Section 5.4 (Capitalization)
or Section 5.14 (Brokerage) and with respect to any Loss arising from or
related to a breach of the representations and warranties of the Purchaser set
forth in Section 6.1 (Organization), Section 6.2 (Authorization of
Transactions), Section 6.3 (Absence of Conflicts) or Section 6.7 (Brokerage),
there shall be no Applicable Limitation Date (i.e., such representations and
warranties shall survive forever). The representations and warranties described
in clause (iii) of the preceding sentence are referred to as the "Fundamental
Representations and Warranties."
SECTION 8.2 INDEMNIFICATION.
(a) Indemnification by the Existing Stockholder and the
Parent. The Existing Stockholder and the Parent shall jointly and severally
indemnify the Purchaser and the Acquired Companies, and each of the Purchaser's
and the Acquired Companies' respective officers, directors, stockholders,
employees, agents, representatives, affiliates, successors, and assigns
(collectively, the "Purchaser Parties") and hold each of them harmless from and
against and pay on behalf of or reimburse such Purchaser Parties in respect of
any Loss which any such Purchaser Party may suffer, sustain, or become subject
to, as a result of or relating to:
(i) the breach of any representation or
warranty made by the Company, the Existing Stockholder or the Parent
contained in this Agreement or in any certificate delivered by the
Company, the Existing Stockholder or the Parent with respect thereto
in
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connection with the Closing (in each case, determined without regard
to any qualifications therein referencing the terms "materiality,"
"Material Adverse Effect," or other terms of similar import or effect
and, in the case of Sections 5.22(a), (b) and (c), also, determined
without regard to any qualifications therein referencing the term
"knowledge", but determined with regard to any qualifications therein
referencing the terms "knowingly and willfully");
(ii) the breach of any covenant or agreement
made by Company contained in this Agreement to be performed by the
Company prior to or at the Closing;
(iii) the breach of any covenant or agreement
made by the Existing Stockholder or the Parent contained in this
Agreement;
(iv) any claim or audit by any governmental
authority or agent thereof (including, without limitation, any fiscal
intermediary or carrier) or qui tam relator pertaining to any
healthcare program (including, without limitation, with respect to
xxxxxxxx under Medicare, Medicaid and CHAMPUS), arising out of the
operation of the Acquired Companies on or before the Closing Date;
(v) any matter listed under the heading
"General Litigation" on the Litigation Schedule included in the
Disclosure Letter to the extent not covered by third party insurance;
(vi) any matter listed under the heading "Dollar
One Litigation" on the Litigation Schedule included in the Disclosure
Letter to the extent not covered by third party insurance;
(vii) Medical Malpractice Claims which arise out
of or relate to, or have arisen out of or relate to, events that occur
in connection with the operations of the Acquired Companies on or
prior to the Closing, to the extent not covered by the insurance
policies referenced in Section 9.11 hereof or any other applicable
professional liability insurance policy maintained for the benefit of
the Acquired Companies (collectively, the "Applicable Insurance
Policies"); provided that the indemnity provided in this clause (vii)
will not apply to Medical Malpractice Claims that would have been
covered by the Applicable Insurance Policies, but for (A) the
insolvency, bankruptcy or liquidation of the applicable insurer or any
other similar event which renders the applicable insurer unable or
incapable of paying all or any part of a Loss associated with a
Medical Malpractice Claim; (B) the post-Closing breach of the
Applicable Insurance Policy by an Acquired Company, an Affiliate
thereof or an insured (other than the Parent, the Existing Stockholder
or their Affiliates) under such insurance policy or the failure
following the Closing of an Acquired Company, an Affiliate thereof or
an insured (other than the Parent, the Existing Stockholder or their
Affiliates) under such insurance policy to comply with the applicable
covenants and agreements of such
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insurance policy; or (C) an express exclusion from coverage or express
limitation on coverage, other than a per occurrence, per doctor or
aggregate limitation set forth in the Applicable Insurance Policy
which places a cap or limit on the liability of the applicable
insurance company for such Medical Malpractice Claim; provided
however, that for purposes of the exclusions from coverage and
limitations on coverage contemplated by this clause (C), the Parties
agree that the express exclusions and limitations (other than per
occurrence, per doctor or aggregate limitations or the endorsement(s)
excluding InPhyNet entities) set forth in the St. Xxxx policy
referenced on Exhibit L hereto shall control and be deemed applicable
to all of the Applicable Insurance Policies for purposes of this
clause (C), notwithstanding the actual limitations and exclusions set
forth in such other Applicable Insurance Policies; or
(viii) any Excluded Liabilities.
The Existing Stockholder and the Parent hereby acknowledge that they and their
Affiliates will have no claims or rights to contribution or indemnity from the
Acquired Companies or their officers and directors with respect to any amounts
paid by any of them pursuant to this Section 8.2(a).
(b) Limitations on Indemnification by the Existing
Stockholder and the Parent. The indemnification provided for in Section 8.2(a)
above is subject to the following limitations:
(i) The Existing Stockholder and the Parent
will be liable to the Purchaser Parties with respect to claims
referred to in Sections 8.2(a)(i) and (iv) only if a Purchaser Party
gives the Existing Stockholder written notice thereof within the
Applicable Limitation Date.
(ii) The aggregate amount of all payments made
by the Existing Stockholder and the Parent in satisfaction of claims
for indemnification pursuant to Sections 8.2(a)(i), (iv) and (v) shall
not exceed $50,000,000 (the "Cap"); provided, however, that the Cap
shall not apply with respect to any Losses resulting from or relating
to breaches of any Fundamental Representations and Warranties and such
Losses shall not count towards satisfaction of the Cap.
(iii) The Existing Stockholder and the Parent
shall not be liable to indemnify any Purchaser Parties pursuant to
Sections 8.2(a)(i), (iv) and (v) unless and until the Purchaser
Parties have collectively suffered Losses by such breaches or pursuant
to such Sections in excess of a $3,700,000 aggregate basket ("Basket")
(at which point, subject to the other limitations herein, the Existing
Stockholder and the Parent will be liable to the Purchaser Parties for
all Losses in excess of such Basket); provided, however, that the
Basket shall not apply with respect to any Losses resulting from or
relating to breaches of any Fundamental Representations and Warranties
and such Losses shall not count towards satisfaction of the Basket.
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(iv) The Purchaser Parties shall take all
reasonable steps to mitigate all indemnifiable liabilities and damages
upon and after becoming aware of any event which could reasonably be
expected to give rise to any liabilities or damages that are
indemnifiable hereunder.
(v) If the Existing Stockholder's or the
Parent's indemnification obligation under this Section 8.2 arises in
respect of any indemnifiable event (A) for which a Purchaser Party
receives indemnification from the Existing Stockholder or the Parent
and (B) which results in any Tax benefit to such Purchaser Party for
any taxable period (or portion thereof) beginning and ending after the
Closing Date which would not, but for such indemnifiable event, be
available, such Purchaser Party shall pay, or shall cause to be paid,
to the Existing Stockholder or the Parent an amount equal to the
actual Tax saving produced by such Tax benefit reduced by the amount
of any Tax detriment to such Purchaser Party as a result of the
receipt of such indemnification. Tax benefits and detriments shall be
taken into account as and when actually realized. The amount of any
such Tax saving for any taxable period shall be the amount of the
reduction in Taxes payable to a Tax authority by such Purchaser Party
with respect to such Tax period (net of any Tax detriment resulting
from the receipt of the indemnity payment) as compared to the Taxes
that would have been payable to a Tax authority by such Purchaser
Party with respect to such Tax period in the absence of such Tax
benefit.
(vi) Any payment made by the Existing
Stockholder or the Parent to a Purchaser Party pursuant to this
Section 8.2 in respect of any indemnifiable event shall be net of any
insurance proceeds or proceeds from indemnification by third parties
realized by and paid to such Purchaser Party or an Acquired Company in
respect of such claim. Such Purchaser Party shall use its reasonable
efforts to make insurance claims relating to any indemnifiable event
for which it is seeking indemnification pursuant to this Section 8.2;
provided that such Purchaser Party shall not be obligated to make such
an insurance claim if the cost of pursuing such an insurance claim
together with any corresponding increase in insurance premiums or
other chargebacks to such Purchaser Party, as the case may be, would
exceed the value of the claim for which such Purchaser Party is
seeking indemnification. To the extent the Acquired Companies are
party to agreements (through assignment in accordance with the
provisions of this Agreement, or otherwise) pursuant to which the
Acquired Companies have the right to indemnification with respect to
an indemnifiable event for which a Purchaser Party is seeking
indemnification pursuant to this Section 8.2, the Purchaser Parties
shall use their reasonable efforts to make claims (or cause the
Acquired Companies to make claims) against such third parties for
indemnification against such Losses.
(vii) From and after the Closing, the
indemnification rights provided in Section 8.2(a) of this Agreement
shall be the sole and exclusive remedy of the Purchaser
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Parties with respect to any dispute arising out of or related to this
Agreement or any Loss which any Purchaser Party may suffer, sustain or
become subject to, as a result of or relating to this Agreement and
the transactions contemplated hereby, except for (A) the right to seek
specific performance of any of the agreements contained herein, and
(B) except in the case where the Company, the Existing Stockholder or
the Parent has defrauded the Purchaser Parties.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Purchaser delivers written notice of a claim to the Existing
Stockholder no later than the Applicable Limitation Date, the Existing
Stockholder shall be required to indemnify the Purchaser Parties for all Losses
(subject to the Basket and Cap limitations) which the Purchaser Parties may
incur in respect of the matters which are the subject of such claim, regardless
of when incurred. Notwithstanding any implication to the contrary contained in
this Agreement, the limits on indemnification set forth in this Agreement shall
not apply to claims for damages arising from fraud.
(c) Indemnification by the Purchaser. The Purchaser
shall indemnify the Parent, the Existing Stockholder and the Company, and hold
the Parent, the Existing Stockholder, the Company, and the Parent's, the
Existing Stockholder's and the Company's respective officers, directors,
stockholders, employees, agents, representatives, affiliates, successors, and
assigns (collectively, the "Seller Parties") harmless from and against and pay
on behalf of or reimburse such Seller Parties in respect of any Loss which such
Seller Party may suffer, sustain, or become subject to, as a result of or
relating to:
(i) the breach of any representation or
warranty made by the Purchaser contained in this Agreement or in any
certificate delivered by the Purchaser with respect thereto in
connection with the Closing (in each case, determined without regard
to any qualifications therein referencing the terms "materiality," or
other terms of similar import or effect); or
(ii) the breach of any covenant or agreement
made by the Purchaser contained in this Agreement.
(d) Limitations on Indemnification by the Purchaser. The
indemnification provided for in Section 8.2(c) above is subject to the
following limitations:
(i) The Purchaser will be liable to the Seller
Parties with respect to claims referred to in Section 8.2(c)(i) only
if a Existing Stockholder gives the Purchaser written notice thereof
within the Applicable Limitation Date;
(ii) The Seller Parties shall take all
reasonable steps to mitigate all indemnifiable liabilities and damages
upon and after becoming aware of any event which
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could reasonably be expected to give rise to any liabilities or
damages that are indemnifiable hereunder.
(iii) Any payment made by the Purchaser to a
Seller Party pursuant to this Section 8.2 in respect of any
indemnifiable event shall be net of any insurance proceeds realized by
and paid to such Seller Party in respect of such claim. Such Seller
Party shall use its reasonable efforts to make insurance claims
relating to any indemnifiable event for which it is seeking
indemnification pursuant to this Section 8.2; provided that such
Seller Party shall not be obligated to make such an insurance claim if
such Seller Party in its reasonable judgment believes the cost of
pursuing such an insurance claim together with any corresponding
increase in insurance premiums or other chargebacks to such Seller
Party, as the case may be, would exceed the value of the claim for
which such Seller Party is seeking indemnification.
(iv) From and after the Closing, the
indemnification rights provided in Section 8.2(c) of this Agreement
shall be the sole and exclusive remedy of the Seller Parties with
respect to any dispute arising out of or related to this Agreement or
any Loss which any Seller Party may suffer, sustain or become subject
to, as a result of or relating to this Agreement and the transactions
contemplated hereby, except for (A) the right to seek specific
performance of any of the agreements contained herein, and (B) except
in the case where the Purchaser has defrauded the Seller Parties.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Existing Stockholder delivers written notice of a claim to the
Purchaser no later than the Applicable Limitation Date, the Purchaser shall be
required to indemnify the Seller Parties for all Losses which the Seller
Parties may incur in respect of the matters which are the subject of such
claim, regardless of when incurred. Notwithstanding any implication to the
contrary contained in this Agreement, the limits on indemnification set forth
in this Agreement shall not apply to claims for damages arising from fraud.
In the event a Purchaser Party has a claim for indemnification pursuant to
Section 8.2(a) for which (A)(i) the Parent agrees in writing that the Purchaser
Party is entitled to indemnification or (ii) a final non-appealable order of a
court of competent jurisdiction is rendered in favor of the Purchaser Party and
(B) the Parent has failed to satisfy such claim in full within ten business
days of notice of the issuance of such final, non-appealable court order or the
date of the written agreement with respect thereto, then the Company may, at
its option, cause the Parent and Existing Stockholder to satisfy such
indemnification obligation by canceling a number of shares of Preferred Stock
held by the Existing Stockholder having a liquidation value (plus accrued and
unpaid dividends thereon) equal to the indemnification obligation. In the event
of a cancellation of shares of Preferred Stock in accordance with this
paragraph, then from and after such time, the Existing Stockholder shall no
longer have any rights as a holder of such shares, and such shares shall be
deemed cancelled in accordance with the applicable provisions hereof, whether
or not the certificates therefor have been
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delivered to the Company. The certificates representing the Existing
Stockholder's Preferred Stock will bear the following legend: "THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN CANCELLATION OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A RECAPITALIZATION AGREEMENT, DATED AS OF
JANUARY 25, 1999, AS AMENDED AND MODIFIED FROM TIME TO TIME, BY AND AMONG THE
ISSUER AND CERTAIN INVESTORS. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE
HOLDER HEREOF AT THE ISSUER'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." This
paragraph is not intended to create a security interest within the meaning of
the Uniform Commercial Code or other preference or encumbrance but rather is
intended to cancel all or a portion of the Preferred Stock retained by the
Existing Stockholder under the specific circumstances described in this
paragraph.
(e) Indemnification by the Company. The Company shall
indemnify the Purchaser Parties and the Seller Parties and hold each of them
harmless from and against and pay on behalf of or reimburse such Purchaser
Parties and Seller Parties in respect of any Loss which any such Purchaser
Party or Seller Party may suffer, sustain, or become subject to, as a result of
or relating to the breach of any covenant or agreement made by the Company
contained in this Agreement to be performed by the Company after the Closing.
(f) Procedures.
(i) If a party hereto seeks indemnification
under this Article VIII (including any indemnification for Taxes
pursuant to Section 8.3), such party (the "Indemnified Party") shall
promptly give written notice to the other party (the "Indemnifying
Party") after receiving written notice of any action, lawsuit,
proceeding, investigation, or other claim against it (if by a third
party) or discovering the liability, obligation, or facts giving rise
to such claim for indemnification, describing the claim, the amount
thereof (if known and quantifiable), and the basis thereof; provided
that the failure to so notify the Indemnifying Party shall not relieve
the Indemnifying Party of its obligations hereunder except to the
extent such failure shall have prejudiced the Indemnifying Party. In
that regard, if any action, lawsuit, proceeding, investigation, or
other claim shall be brought or asserted by any third party which, if
adversely determined, would entitle the Indemnified Party to indemnity
pursuant to this Article VIII, the Indemnified Party shall promptly
notify the Indemnifying Party of the same in writing, specifying in
detail the basis of such claim and the facts pertaining thereto and
the Indemnifying Party shall be entitled to participate in the defense
of such action, lawsuit, proceeding, investigation, or other claim
giving rise to the Indemnified Party's claim for indemnification at
its expense, and at its option (subject to the exceptions in
paragraphs (ii) and (iii) below) shall be entitled to control and
appoint lead counsel of such defense with reputable counsel reasonably
acceptable to the Indemnified Party; provided that, as a condition
precedent to the Indemnifying Party's right to assume control of such
defense, it must first agree in writing to be fully responsible for
all Losses
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relating to such claims and to provide full indemnification to the
Indemnified Party for all Losses relating to such claims subject to
the terms hereof.
(ii) Except as provided in paragraph (iii)
below, if the claim which the Indemnifying Party seeks to assume
control (A) involves claims for non-monetary relief (except where
non-monetary relief is merely incidental to a primary claim or claims
for monetary damages), (B) involves criminal allegations, (C) is one
in which the Indemnifying Party is also a party and joint
representation would be inappropriate or there may be legal defenses
available to the Indemnified Party which are different from or
additional to those available to the Indemnifying Party; or (D)
involves a claim which, upon petition by the Indemnified Party, the
appropriate court rules that the Indemnifying Party failed or is
failing to vigorously prosecute or defend, then the Indemnifying Party
shall not have the right to assume control of such defense and shall
pay the fees and expenses of counsel retained by the Indemnified
Party.
(iii) If the claim which the Indemnifying Party
seeks to assume control (i) involves claims for both monetary and
non-monetary relief (except where non-monetary relief is merely
incidental to a primary claim or claims for monetary damages), or (ii)
involves both monetary claims and criminal allegations (each, a "Joint
Defense Proceeding"), the Indemnifying Party and the Indemnified Party
will jointly participate in and control the defense of such Joint
Defense Proceeding, and the Indemnifying Party will pay the reasonable
fees and expenses of legal counsel jointly retained by the
Indemnifying Party and the Indemnified Party in connection with such
Joint Defense Proceeding.
If the Indemnifying Party is permitted to assume and control
the defense and elects to do so, the Indemnified Party shall have the right to
employ counsel separate from counsel employed by the Indemnifying Party in any
such action and to participate in the defense thereof, but the fees and
expenses of such counsel employed by the Indemnified Party shall be at the
expense of the Indemnified Party unless the employment thereof has been
specifically authorized by the Indemnifying Party in writing.
If the Indemnifying Party shall control the defense of any
such claim, the Indemnifying Party shall obtain the prior written consent of
the Indemnified Party (which shall not be unreasonably withheld) before
entering into any settlement of a claim or ceasing to defend such claim, if
pursuant to or as a result of such settlement or cessation, injunction, or
other equitable relief will be imposed against the Indemnified Party or any of
the Indemnified Party's respective affiliates or if such settlement does not
expressly unconditionally release the Indemnified Party from all liabilities
and obligations with respect to such claim.
If the Indemnified Party shall control the defense of any
such claim, the Indemnifying Party shall not be bound by any settlement or
compromise of such claim or any consent to the entry
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of any judgment with respect to such claim without the prior written consent of
the Indemnifying Party (which shall not be unreasonably withheld).
With reference to the indemnification by the Parent and the
Existing Stockholder pursuant to Section 8.2(a)(vii) hereof, the parties agree
as follows:
(i) The Acquired Companies shall have the
responsibility for timely reporting of all Medical Malpractice Claims
to the appropriate insurance carrier, and/or state fund, based on a
schedule of insurance and state funds to be provided by the Parent.
Any Medical Malpractice Claim received by the Parent or any of its
Affiliates (other than an Acquired Company) will be promptly
transmitted to the Company's designated claims manager.
(ii) The Company will provide the Parent with
copies of any notification received by any insurance carrier, and/or
state fund, stating any of the following: (i) that a particular case
has the potential to exceed the applicable policy limit; or (ii) that
there is a reservation of rights or declination of coverage. In the
event of such notification, and at the request of the Parent, the
Company will provide the Parent with copies of the claim files of the
Acquired Companies and any other relevant information reasonably
available. Upon request, the Company will assist the Parent in taking
reasonable steps to protect the interests of the Parent and, with
respect to excess policy limit losses, to exercise reasonable efforts
to cause the carrier to settle such claim, if appropriate, within the
policy limit.
(g) Tax Treatment. Amounts paid to or on behalf of the
Existing Stockholder or the Company as indemnification shall be treated as
adjustments to the Redemption Consideration for Tax purposes.
SECTION 8.3 CERTAIN TAX MATTERS.
(a) Certain Definitions. As used in this Agreement:
"Purchaser Tax Group" means the Affiliated Group of which the Purchaser is the
common parent.
"Pre-Closing Period" means any taxable period, including that portion of any
Straddle Period, which ends on or before the Closing Date.
"Seller Group" means the Affiliated Group of which the Parent is the common
parent.
"Straddle Period" means any taxable period that includes (but does not end on)
the Closing Date.
(b) Section 338(h)(10) Elections. The Existing
Stockholder will join with Purchaser in making a timely election under Section
338(h)(10) of the Code, and any applicable
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corresponding or similar provisions of state or local law (the "Section
338(h)(10) Election") to treat the transaction hereunder as the deemed sale of
the assets of the Acquired Companies which are members of the Seller Group (the
"Consolidated Subsidiaries"), for federal and state income tax purposes. The
Existing Stockholder and the Purchaser shall jointly prepare Internal Revenue
Service Form 8023 with respect to the Consolidated Subsidiaries, and such other
forms and schedules as are necessary or required to make the Section 338(h)(10)
Election, and the Existing Stockholder and the Purchaser shall execute such
Form 8023, and shall take all such other acts as are necessary to make or
perfect such Section 338(h)(10) Election. The Existing Stockholder and the
Purchaser will use their reasonable best efforts to agree on the allocation of
the "MADSP" among the assets of the Consolidated Subsidiaries pursuant to the
applicable Treasury Regulations under Section 338 of the Code (the
"Allocation") and will use the Allocation in reporting the deemed purchase and
sale of the assets of the Consolidated Subsidiaries for federal and state
income tax purposes. If the parties are unable to agree upon the Allocation
within 90 days before the due date of filing any Tax Return for which the
Allocation is relevant, the Allocation shall be made by the Firm.
(c) Return Filing, Refunds, Credits and Transfer Taxes.
(i) Except with regard to Tax Returns for
Straddle Periods, the Parent shall prepare, or cause to be prepared,
and file, or cause to be filed, on a timely basis all Tax Returns of
or including each Consolidated Subsidiary for all Pre-Closing Periods
(the "Pre- Closing Period Returns"). The Parent shall pay, or cause to
be paid, all Taxes shown to be due on the Pre-Closing Period Returns.
(ii) The Company shall prepare, or cause to be
prepared, and shall file, or cause to be filed, on a timely basis all
Tax Returns other than the Pre-Closing Period Returns with respect to
each Consolidated Subsidiary, including Tax Returns, if any, for the
Straddle Period (the "Straddle Period Returns"). The Company shall
pay, or cause to be paid, all Taxes shown to be due on such Tax
Returns.
(iii) The Company shall provide the Parent with
copies of any Straddle Period Returns at least 30 days prior to the
due date thereof (giving effect to any extensions thereto),
accompanied by a statement calculating in reasonable detail the
Parent's indemnification obligation pursuant to Section 8.3(e) hereof
(the "Indemnification Statement"). The Parent shall have the right to
review such Straddle Period Returns and Indemnification Statement
prior to the filing of such Straddle Period Returns. If the Parent
disputes any amounts shown due on such Tax Returns or the amount
calculated in the Indemnification Statement, the Parent and the
Company shall consult and resolve in good faith any issues arising as
a result of the review of such Straddle Period Return and
Indemnification Statement. If the Parent agrees to the Indemnification
Statement amount, the Parent shall pay to the Company an amount equal
to the Taxes shown on the Indemnification Statement less any amounts
paid by the Parent or any Consolidated Subsidiary on or before the
Closing Date with respect to estimated taxes thereto not later
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than three days before the due date (including any extensions thereof)
for payment of Taxes with respect to such Straddle Period Return. If
the Parties are unable to resolve any dispute within 15 days after the
Parent's receipt of such Straddle Period Return and Indemnification
Statement, such dispute shall be resolved by the Firm, which shall
resolve any issue in dispute as promptly as practicable. If the Firm
is unable to make a determination with respect to any disputed issue
prior to the due date (including any extensions) for the filing of the
Straddle Period Return in question, (A) the Company shall file, or
shall cause to be filed, such Straddle Period Return without such
determination having been made and (B) the Parent shall pay to the
Company, not later than three days before the due date (including any
extensions thereof) for the payment of Taxes with respect to such
Straddle Period Return, an amount determined by the Parent as the
proper amount chargeable to the Parent pursuant to this Section 8.3.
Upon delivery to the Parent and the Company by the Firm of its
determination, appropriate adjustments shall be made to the amount
paid by the Parent in accordance with the immediately preceding
sentence in order to reflect the decision of the Firm. The
determination by the Firm shall be final, conclusive and binding on
the parties.
(iv) The Parent and the Company shall reasonably
cooperate, and shall cause their respective Affiliates, officers,
employees, agents, auditors and representatives reasonably to
cooperate, in preparing and filing all Tax Returns (including amended
returns and claims for refund), including maintaining and making
available to each other all records necessary in connection with Taxes
and in resolving all disputes and audits with respect to all taxable
periods relating to Taxes. The Company and the Parent recognize that
the Parent will need access, from time to time, after the Closing
Date, to certain accounting and tax records and information held by
each Consolidated Subsidiary to the extent such records and
information pertain to events occurring prior to the Closing Date;
therefore, the Company agrees that from and after the Closing Date the
Company shall, and shall cause each other Consolidated Subsidiary to,
(A) retain and maintain such records until such time as the Parent
determines that such retention and maintenance is no longer necessary
and (B) allow the Parent and its agents and representatives (and
agents and representatives of its Affiliates) to inspect, review and
make copies of such records as the Parent may deem necessary or
appropriate from time to time. The Company shall indemnify Parent from
and against any penalties, additions to tax or interest imposed on
Parent as a result of any failure of the Company to provide records or
other information regarding Taxes with respect to the Company or any
Consolidated Subsidiary in a timely manner.
(v) The Company shall not, and shall cause each
other Consolidated Subsidiary not to, dispose of or destroy any of the
business records and files of such Consolidated Subsidiary relating to
Taxes in existence on the Closing Date without first offering to turn
over possession thereof to the Parent by written notice to the Parent
at least 30 days prior to the proposed date of such disposition or
destruction.
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(vi) Any refunds and credits of Taxes of any
Consolidated Subsidiary or similar benefit (including any interest or
similar benefit) received from or credited thereon by the applicable
tax authority (a "Tax Benefit") with respect to (A) any taxable period
ending on or before the Closing Date or (B) Taxes for which the Parent
has indemnified the Company under this Agreement, shall be for the
account of the Parent, and if received or utilized by the Company or
another Consolidated Subsidiary, shall be paid to the Parent within
five business days after the Company or such other Consolidated
Subsidiary receives such refund or utilizes such credit. Except as
provided in the next sentence, any refunds or credits of any
Consolidated Subsidiary with respect to any Straddle Period shall be
apportioned between the Parent, on the one hand, and the Company, on
the other hand, on the basis of an interim closing of the books. In
the case of a refund or credit attributable to any Taxes that are
imposed on a periodic basis and are attributable to the Straddle
Period, other than Taxes based upon or related to gross or net income
or receipts, the refund or credit of such Taxes of a Consolidated
Subsidiary for the Pre-Closing Period shall be deemed to be the amount
of such refund or credit for the Straddle Period multiplied by a
fraction the numerator of which is the number of days in the Straddle
Period ending on the Closing Date and the denominator of which is the
number of days in the Straddle Period. Any Tax Benefit not described
in clauses (A) or (B) of the first sentence of this Section 8.3(c)(vi)
shall be for the account of the Company only.
(vii) Notwithstanding any other provisions of
this Agreement to the contrary, all sales, use, transfer, gains,
stamp, duties, recording and similar Taxes incurred in connection with
the transactions contemplated by this Agreement shall be split equally
between the Company and the Existing Stockholder, and the Company
shall, at its own expense, accurately file or cause to be filed all
necessary Tax Returns and other documentation with respect to such
Taxes. If required by applicable law, the Existing Stockholder will
join in the execution of any such Tax Returns or such other
documentation.
(d) Elections. The Company shall not, and shall cause
each other Consolidated Subsidiary not to, make, amend or revoke any Tax
election if such action would adversely affect the Parent or any Person (other
than a Consolidated Subsidiary) as to whom or with whom the Parent has filed a
consolidated return with respect to any taxable period ending on or before the
Closing Date or for the Pre-Closing Period or any Tax refund with respect
thereto.
(e) Tax Indemnification.
(i) The Company shall indemnify, defend and
hold harmless the Parent and its Affiliates, at any time after the
Closing, from and against any liability for Taxes of the Company or
any other Consolidated Subsidiary for any taxable period ending after
the Closing Date except for Straddle Periods, in which case the
Company's indemnity will cover only that portion of any such Taxes
that is not attributable to the Pre-Closing Period.
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(ii) The Parent shall indemnify, defend and hold
harmless the Acquired Companies and their Affiliates, at any time
after the Closing, from and against any liability for (i) Taxes of any
Acquired Company, except as provided in Section 8.3(c)(vii) hereof,
for the Pre-Closing Period (including the portion of any Straddle
Period ending on the Closing Date) and (ii) Taxes imposed pursuant to
Treasury Regulation Section 1.1502-6 with respect to the taxable
income of any member of the Seller Group (other than the Consolidated
Subsidiaries) for any taxable period.
(iii) In determining the responsibility of the
Parent and the Company for Taxes attributable to any Straddle Period,
Taxes based upon or related to gross or net income or receipts shall
be apportioned on the basis of an interim closing of the books as of
the Closing Date, and all other Taxes shall be prorated on a daily
basis.
SECTION 8.4 EMPLOYEES; EMPLOYEE BENEFITS.
(a) For the six month period following the Closing, the
Company shall cause each Acquired Company to provide each individual who is
actively employed by such Acquired Company on the Closing Date (each, an
"Employee") with salary, bonuses and benefits that are substantially comparable
in the aggregate to the salary, bonuses and benefits provided to each such
Employee immediately prior to the Closing (excluding special retention and
other similar bonuses paid or payable with respect to the year 1998 or in
connection with the transactions contemplated hereby), provided that no Person,
in providing such substantially comparable salary, bonuses and benefits, shall
be required to continue to employ any such Employee during such six-month
period or to provide or maintain any particular plan or benefit which was
provided to or maintained for Employees prior to the Closing. The Acquired
Companies shall treat all pre-Closing service completed by an Employee with any
Acquired Company or any Affiliate thereof, and any predecessor thereto, the
same as post-Closing service completed with such Acquired Company for vesting
and eligibility purposes, including waiting periods relating to preexisting
conditions under medical plans, vacations, severance pay, early retirement or
any subsidized benefit provided for under any employee benefit plan (including,
but not limited to, any "employee benefit plan" as defined in Section 3(3) of
ERISA) maintained by the Company on or after the Closing Date. Prior to the
Closing, the Existing Stockholder shall furnish the Purchaser with a list of
the length of service with each Acquired Company or its Affiliates for each of
the Employees. For purposes of computing deductible amounts (or like
adjustments or limitations on coverage) under any employee welfare benefit plan
(including, without limitation, any "employee welfare benefit plan" as defined
in Section 3(1) of ERISA), expenses and claims previously recognized for
similar purposes under the applicable welfare benefit plan of any Acquired
Company or any Affiliate shall be credited or recognized under the comparable
plan maintained after the Closing Date by the Acquired Companies.
(b) After the Closing Date, the Company shall be
responsible for, and shall indemnify and hold harmless Parent, the Existing
Stockholder and their Affiliates and their officers,
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directors, employees, Affiliates and agents and the fiduciaries (including plan
administrators) of the Plans, from and against, any and all claims, losses,
damages, costs and expenses (including, without limitation, attorneys' fees and
expenses) and other liabilities and obligations relating to or arising out of
(i) all salaries, bonuses, commissions, vacation entitlements and other
benefits accrued but unpaid as of the Closing and taken into account in
determining the Net Working Capital Amount, (ii) the employee benefit
liabilities assumed by the Company under this Agreement, and (iii) any claims
of, or damages or penalties sought by, any Employee, or any governmental entity
on behalf of or concerning any Employee, with respect to any act or failure to
act by the Company or any Acquired Company after the Closing Date to the extent
arising from the employment, discharge, layoff or termination of any Employee.
The foregoing notwithstanding, nothing in this Section 8.4(b) shall be deemed
to limit the responsibility of the Existing Stockholder or the Parent for the
representations and warranties of the Existing Stockholder set forth in Article
V hereof or the indemnification of the Purchaser Parties with respect thereto
in accordance with Section 8.2 hereof.
(c) The Company shall, for a period of six months
following the Closing Date, operate the Acquired Companies in compliance with
the Worker Adjustment Retraining and Notification Act, 29 U.S.C. ss. 2101 et.
seq. (the "WARN Act") and any other applicable similar state or local law
concerning plant closings. In the event the Company's actions should trigger
any notice requirement under the WARN Act or any other applicable similar state
or local law concerning plant closings during the 90 days following the Closing
Date, the Company shall be solely responsible for providing appropriate notice
under such plant closing law. The Company shall indemnify the Parent and the
Existing Stockholder for any claims, losses, damages, costs or expenses arising
out of the Company's failure to provide proper notice pursuant to the WARN Act
or other law regarding plant closings or otherwise comply with the WARN Act or
such other laws regarding plant closings.
(d) During the period commencing on the Closing Date and
ending on the date the Acquired Companies reasonably can arrange for health,
dental, short-term disability, long-term disability, life, accidental death and
dismemberment and business travel accident insurance independent of the
insurance provided to the employees of the Acquired Companies under the
MedPartners, Inc. Health and Welfare Benefits Plan (the "Parent Health Plan")
immediately prior to the Closing Date (but in no event later than September 30,
1999) (the "Welfare Benefit Transition Period"), the Parent shall permit the
employees of the Acquired Companies (and their covered dependents), including
those employees (and their covered dependents) who become eligible for such
insurance during the Welfare Benefit Transition Period, to participate in the
health, dental, short-term disability, long-term disability, life, accidental
death and dismemberment and business travel accident insurance in which
employees of the Acquired Companies participated immediately prior to the
Closing Date; provided (i) the Acquired Companies shall pay all costs
associated with the provision of such insurance (to the extent not paid for by
employees of the Acquired Companies), including any incidental administrative
costs incurred by the Parent and its Subsidiaries and any reasonable costs
incurred as a result of any changes in the form of payroll data which is
provided by the Acquired Companies to the plan administrators; (ii) the
Acquired Companies shall promptly provide all data the Parent requests with
respect to the participation of such persons in such
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insurance and (iii) the Acquired Companies shall comply with all notice
requirements associated with the provision of such insurance, including any
notice requirements imposed by third party administrators in connection with
payroll data. The Parent agrees to use reasonable best efforts to cooperate
with the Company to provide it with comprehensive health claims data with
respect to the Acquired Companies, and the Company agrees to reimburse the
Parent for all reasonable out-of-pocket expenses incurred by the Parent in
providing such data. Parent shall exercise reasonable efforts prior to the
Closing Date to obtain the consents of the Parent's applicable insurance
providers to such Welfare Benefit Transition Period insurance. The sole role of
the Parent in permitting the employees of the Acquired Companies (and their
covered dependents) to participate in such insurance subsequent to the Closing
Date shall be to facilitate the transition of health, dental, short-term
disability, long-term disability, life, accidental death and dismemberment and
business travel accident insurance coverage for such individuals and the Parent
shall not be deemed a plan fiduciary in such role, except as required under
applicable law. As provided under the Parent Health Plan, health and dental
insurance coverage will be provided based on covered expenses incurred prior to
the end of the Welfare Benefit Transition Period, and short-term disability,
long-term disability, life, accidental death and dismemberment and business
travel accident insurance coverage will be provided based on covered claims
incurred prior to the end of the Welfare Benefit Transition Period. The
Acquired Companies shall jointly and severally indemnify and hold harmless
Parent and its Subsidiaries from all liabilities, other than liabilities
arising due to Parent's or its Subsidiaries' gross negligence or willful
misconduct, arising in connection with the provision of, or the failure to
provide, such insurance and the benefits covered under such insurance by the
Parent's applicable insurance providers. Nothing in this paragraph (d) shall
preclude amendment of the Parent Health Plan in any manner after the Closing
Date, to the extent permitted by the Parent Health Plan, except where such
amendment would cut-back the coverages of employees of the Acquired Companies
on a basis which is inconsistent with that applicable to Parent's employees.
(e) COBRA. Any individual who is receiving or is
otherwise entitled to elect to receive medical continuation coverage under
Parent's Health Plan pursuant to Section 4980B of the Code as of Closing Date
shall continue to be eligible to participate under such plan, in accordance
with Section 4980B of the Code, and the Acquired Companies shall have no
obligation or liability to provide continuation coverage with respect to such
individuals.
(f) 401(k) Retirement Plans. During the period from the
Closing Date until the date that the Acquired Companies reasonably arrange for
participation in a Company-sponsored 401(k) plan (the "Company 401(k) Plan") by
employees of the Acquired Companies, but in no event later than September 30,
1999 (the "Retirement Benefit Transition Period"), the Parent shall permit and
shall cause its Subsidiaries to permit the employees of Acquired Companies who
participated in the Pacific Physician Services Profit Sharing and Retirement
Plan or the InPhyNet Administrative Services, Inc. 401(k) Retirement Plan (the
"Parent's 401(k) Plans") immediately prior to the Closing Date, as well as
other employees of the Acquired Companies who become eligible during the
Retirement Benefit Transition Period, to participate under the Parent's 401(k)
Plans during the Retirement Benefit Transition Period. The Acquired Companies
shall reimburse Parent and its
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Subsidiaries for the reasonable cost (internal and external) of the provision
and administration of benefits under the Parent's 401(k) Plans for the current
and former employees of the Acquired Companies during the Retirement Benefit
Transition Period. For purposes of participation in the Parent's 401(k) Plans,
the Acquired Companies shall adopt the Parent's 401(k) Plans. The Company
401(k) Plan shall recognize service credited under Parent's 401(k) Plans for
all purposes, including vesting. As soon as practicable after the last day of
the Retirement Benefit Transition Period, the Acquired Companies' current and
former employees' vested and nonvested account balances (including earnings
through the date of transfer) under the Parent's 401(k) Plans shall be
transferred to one or more tax-qualified defined contribution plans specified
by the Company, in accordance with the requirements of Code Section 414(l) and
Title I of ERISA.
(g) Workers' Compensation. Except as set forth as in
Section 8.4(j), Parent shall retain all liability and obligation with respect
to workers' compensation claims (filed before, on or after the Closing Date)
relating to injuries incurred prior to the Closing Date, except for those
claims relating to occupational illnesses and diseases that occur over a period
of time which have accident dates that transcend the Closing Date, in which
case proportional liability shall be determined by the Parent's and the
Company's respective insurance carriers and third party administrators.
(h) Flexible Spending Account Plans. On or prior to the
Closing Date, the Company shall adopt, or cause its Subsidiaries to adopt, a
health-care and dependent-care reimbursement account plan for the benefit of
current employees of the Acquired Companies who participate in the health-care
and dependent-care reimbursement accounts under the Parent Health Plan. On or
prior to the Closing Date, the Parent shall spinoff, or shall cause its
Subsidiaries to spinoff, the health-care and dependent-care reimbursement
account balances held under the Parent Health Plan for employees of the
Acquired Companies for 1999 and shall transfer, in cash, the related assets
(and liabilities) and recordkeeping information to the Company. The Company
thereafter shall have all liability and obligation with respect to
reimbursement of such employees under such accounts with respect to eligible
health-care and dependent-care expenses incurred in 1999; provided, that, the
Parent shall, at its option, act as a third party administrator with respect to
such accounts during the Welfare Benefit Transition Period.
(i) Special Bonus Plan. Subject to any deferred
compensation arrangements agreed to in writing between the Company and any of
the senior managers of the Company identified on Exhibit K attached hereto (the
"Bonus Participants"), at the Closing the Company shall make the special bonus
payments to the Bonus Participants in the amounts identified on Exhibit K
attached hereto, and such special bonuses shall not be taken into account as
deductions in determining the Net Working Capital Amount and shall not
constitute Indebtedness for purposes of this Agreement. The Company shall at
the Closing assume and shall thereafter discharge and pay in full any and all
liabilities of the Parent and its Affiliates (other than the Acquired
Companies) with respect to such deferred compensation arrangements for the
Bonus Participants.
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(j) Self-funded InPhyNet Coverages. The Acquired
Companies shall be responsible for all liabilities and obligations relating to
(i) self-funded medical claims incurred prior to the Closing Date by current or
former employees of InPhyNet Medical Management Inc. and its Subsidiaries which
relate to the Team Health division (or their covered dependents) and (ii) self-
funded workers' compensation claims with respect to injuries incurred prior to
July 1, 1997 by current or former employees of InPhyNet Medical Management Inc.
and its Subsidiaries which relate to the Team Health division. The Parent shall
be responsible for all liabilities and obligations relating to (i) self-funded
medical claims incurred prior to the Closing Date by current or former
employees of InPhyNet Medical Management Inc. and its Subsidiaries which relate
to the government services or managed healthcare divisions (or their covered
dependents) and (ii) self- funded workers' compensation claims with respect to
injuries incurred prior to July 1, 1997 by current or former employees of
InPhyNet Medical Management Inc. and its Subsidiaries which relate to the
government services or managed healthcare divisions.
(k) MedStock Plan. The Parent shall, on a timely basis,
reimburse any amounts due to employees of the Acquired Companies in accordance
with the terms of the MedStock Plan.
(l) The Parent and the Company shall act in good faith
and cooperate, and shall cause their Subsidiaries to act in good faith and
cooperate, to timely and efficiently effect the actions and transaction
contemplated by this Section 8.4, including any government filings necessary to
effect the transfer of assets and liabilities contemplated by this Section 8.4,
and the Parent and its Subsidiaries shall provide such information as is
reasonably requested by the Company, including, without limitation, participant
claim histories, for the purposes of putting replacement plans and coverages
into effect.
ARTICLE IX -- ADDITIONAL AGREEMENTS
SECTION 9.1 LEGEND FOR THE RESTRICTED SECURITIES.
(a) Restricted Securities are transferable only pursuant
to (i) public offerings registered under the Securities Act, (ii) Rule 144 or
Rule 144A of the Securities and Exchange Commission (or any similar rule or
rules then in force) if such rule is available and (iii) subject to the
conditions specified in Section 9.1(b) below, any other legally available means
of transfer.
(b) In connection with the transfer of any Restricted
Securities (other than a transfer described in clauses (i) or (ii) of Section
9.1(a) above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together
with an opinion of counsel which (to the reasonable satisfaction of the
Company) is knowledgeable in securities law matters to the effect that such
transfer of Restricted Securities may be effected without registration of such
Restricted Securities under the Securities Act. In addition, if the holder of
the Restricted Securities delivers to the Company an opinion of counsel that no
subsequent transfer of such Restricted Securities shall require registration
under the Securities Act,
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the Company shall promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the Securities
Act legend set forth in Section 9.1(d). If the Company is not required to
deliver new certificates for such Restricted Securities not bearing such
legend, the holder thereof shall not transfer the same until the prospective
transferee has confirmed to the Company in writing its agreement to be bound by
the conditions contained in this Section 9.1(b) and Section 9.1(d) below.
(c) If any Restricted Securities become eligible for
sale pursuant to Rule 144(k), the Company shall, upon the request of the holder
of such Restricted Securities, remove the legend set forth in Section 9.1(d)
below from the certificates for such Restricted Securities.
(d) Each certificate or instrument representing
Restricted Securities shall be imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR
ANY STATE SECURITIES LAWS. THE TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE RECAPITALIZATION AGREEMENT, DATED AS OF
JANUARY 25, 1999, AS AMENDED AND MODIFIED FROM TIME TO TIME,
BY AND AMONG THE ISSUER AND CERTAIN INVESTORS, AND THE ISSUER
RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO
SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED
BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE."
SECTION 9.2 PRESS RELEASES AND ANNOUNCEMENTS. Before the Closing
Date, no press releases related to this Agreement and the transactions
contemplated herein, or other announcements to the employees, customers, or
suppliers of any Acquired Company shall be issued by any Party without the
mutual approval of all Parties, except for any public disclosure which any
Party in good faith believes is required by law or regulation (in which case
the disclosure shall be prepared jointly by the Existing Stockholder and the
Purchaser). After the Closing Date, no press releases related to this Agreement
and the transactions contemplated herein, or other announcements to the
employees, customers, or suppliers of any Acquired Company shall be issued by
the Parent or the Existing Stockholder without the prior approval of the
Purchaser, except for any public disclosure which the Parent or the Existing
Stockholder in good faith believes is required by law or regulation (in which
case the disclosure shall be prepared jointly by the Existing Stockholder and
the Purchaser); provided that after the Closing Date, the Parent shall be
permitted to make customary disclosures pursuant to documents filed with the
Securities and Exchange Commission.
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SECTION 9.3 FURTHER TRANSFERS. Each Party shall execute and
deliver such further instruments of conveyance and transfer and take such
additional action as any other Party may reasonably request to effect,
consummate, confirm, or evidence the consummation of the transactions
contemplated hereby.
SECTION 9.4 SPECIFIC PERFORMANCE. The Parties hereto acknowledge
and agree that in the event of a breach of this Agreement, money damages may be
inadequate and the non-breaching party may have no adequate remedy at law.
Accordingly, the Parties agree that each Party shall have the right, in
addition to any other rights and remedies existing in its favor, to enforce its
rights and the other Party's obligations hereunder not only by an action or
actions for damages but also by an action or actions for specific performance,
injunctive, and/or other equitable relief.
SECTION 9.5 EXPENSES. The Parties shall pay all of their own
fees, costs, and expenses (including, without limitation, fees, costs and
expenses of legal counsel, investment bankers, brokers, or other
representatives and consultants and appraisal fees, costs, and expenses)
incurred in connection with the negotiation of this Agreement and the other
agreements contemplated hereby, the performance of its obligations hereunder
and thereunder, and the consummation of the transactions contemplated hereby
and thereby (collectively, the "Transaction Expenses"); it being understood
that if the transactions contemplated hereby are consummated, the Company shall
reimburse the Purchaser and its investors for all of their Transaction
Expenses. At the request of the Existing Stockholder, the Transaction Expenses
for which the Existing Stockholder and the Parent are liable pursuant to this
Section 9.5 may be deducted from the Redemption Consideration and paid directly
to the Existing Stockholder's and Parent's legal counsel, investment bankers
and other agents and representatives. To the extent that any Acquired Company
pays or becomes liable with respect to any Transaction Expenses of the Parent,
the Existing Stockholder or any Acquired Company and such Transaction Expenses
are not otherwise taken into account as deductions in determining the Net
Working Capital Amount, the Redemption Consideration shall be reduced
dollar-for-dollar; provided that there shall be no such reduction to the
Redemption Consideration for legal fees and expenses to counsel for the Senior
Managers in connection with the negotiation and execution of the Senior
Management Agreements.
SECTION 9.6 EXCLUSIVITY. Until this Agreement is terminated by
its terms, no Seller Party shall (and no Seller Party shall cause or permit any
Insider or agent or any other Person acting on its behalf to), discuss or
negotiate with any other Person a possible sale of all or part of any Acquired
Company's securities or assets (except for dispositions of assets in the
Ordinary Course of Business), whether such transaction takes the form of a sale
of stock, merger, liquidation. dissolution, reorganization, recapitalization,
consolidation. sale of assets or otherwise (an "Acquisition Proposal"), or
provide any information to any other Person concerning any Acquired Company
(other than information which the Acquired Companies provide to other Persons
in the Ordinary Course of Business). The Seller Parties and their agents and
other Persons acting on their behalf (a) do not have any agreement, arrangement
or understanding with respect to any Acquisition Proposal (except this
Agreement), (b) shall cease and cause to be terminated any and all discussions
with third
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parties regarding any Acquisition Proposal, and (c) shall promptly notify the
Purchaser if any Acquisition Proposal, or any inquiry or contact with any
person or entity with respect thereto, is made.
SECTION 9.7 BOOKS AND RECORDS. Unless otherwise consented to in
writing by the Parent or the Purchaser (as the case may be), the Purchaser and
the Parent will not, for a period of ten years following the date hereof,
destroy, alter, or otherwise dispose of any of the books and records of any
Acquired Company acquired by the Purchaser hereunder or retained by the Parent
or any of its Affiliates without first offering to surrender to the Parent or
the Purchaser such books and records or any portion thereof of which the Parent
or the Purchaser may intend to destroy, alter, or dispose. The Purchaser and
the Parent will allow the other party's representatives, attorneys, and
accountants access to such books and records, upon reasonable request for
during such party's normal business hours, for the purpose of examining and
copying the same in connection with any matter whether or not related to or
arising out of this Agreement or the transactions contemplated hereby.
SECTION 9.8 NONCOMPETITION, NONSOLICITATION, AND
CONFIDENTIALITY. From and after the Closing:
(a) Noncompetition. In consideration of the mutual
covenants provided for herein to the Parent and the Existing Stockholder at the
Closing, during the period beginning on the Closing Date and ending on the
fifth anniversary of the Closing Date (the "Noncompete Period"), none of the
Parent, the Existing Stockholder or any of their then Affiliates shall engage
(whether as an owner, operator, manager, employee, officer, director,
consultant, advisor, representative, or otherwise) directly or indirectly in
any business that provides outsourced staffing or those related billing
services being provided by the Acquired Companies as conducted on the date
hereof to hospitals and clinics anywhere within the United States; provided
that ownership of less than 5% of the outstanding stock of any publicly traded
corporation shall not be deemed to be engaging solely by reason thereof in any
of its businesses; provided further that the Parent and the Existing
Stockholder shall not be deemed to be in breach of this Section 9.8(a) solely
as a result of owning a direct or indirect interest in a business whose other
owner engages in the activities prohibited hereunder. The Parties hereto agree
that the covenant set forth in this Section 9.8 is reasonable with respect to
its duration, geographical area, and scope. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section 9.8
is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(b) Nonsolicitation. Except as otherwise agreed by the
Company and the Parent, the Parent and the Existing Stockholder agree that,
during the Noncompete Period, they will not (and
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they will cause their Affiliates to not) directly or indirectly contact,
approach, or solicit for the purpose of offering employment to or hiring
(whether as an employee, consultant, agent, independent contractor, or
otherwise) or hire any employee or independent contractor of any Acquired
Company at any time during the six month period before the Closing Date or
during the Noncompete Period, without the prior written consent of the Company;
provided that nothing in this Section 9.8(b) shall prohibit the Parent, the
Existing Stockholder or their Affiliates from taking any action otherwise
prohibited by this Section 9.8(b) with respect to any employee whose employment
is first terminated or independent contractor whose engagement is first
terminated by an Acquired Company.
(c) Confidentiality. Each of the Existing Stockholder
and the Parent shall treat and hold as confidential any information concerning
the business and affairs of the Acquired Companies (including, without
limitation, all Proprietary Rights and all information learned in connection
with activities under Section 9.12 hereof, but excluding tax returns and
related records) that is not already generally available to the public (the
"Confidential Information"), refrain from using any of the Confidential
Information except in connection with this Agreement, and at any time upon the
request of the Purchaser deliver promptly to the Purchaser or destroy, at the
request and option of the Purchaser, all tangible embodiments (and all copies)
of the Confidential Information which are in its possession or under its
control. In the event that the Existing Stockholder or the Parent is requested
or required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, it shall notify the
Purchaser promptly of the request or requirement so that the Purchaser may seek
an appropriate protective order or waive compliance with the provisions of this
Section 9.8(c). If, in the absence of a protective order or the receipt of a
waiver hereunder, the Parent or the Existing Stockholder is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal or
else stand liable for contempt, it may disclose the Confidential Information to
the tribunal; provided that it shall use its best efforts to obtain, at the
request and expense of the Purchaser, an order or other assurance that
confidential treatment shall be accorded to such portion of the Confidential
Information required to be disclosed as the Purchaser shall designate.
(d) Trade Names. The Parent and the Existing Stockholder
shall not use or permit any of its Affiliates to use the "Team Health" name,
the names "Team Health Radiology", "Team Health Radiology Services", "Team
Health West", Team Health Southeast", "Park Med Occupational Services",
"Doctor's Essential Services, Inc.", "DESI" or "InPhyNet", any names of the
Acquired Companies other than names containing the term "EMSA", or any names or
symbols confusingly similar thereto in any manner anywhere in the world after
Closing.
(e) Remedy for Breach. The Parent and Existing
Stockholder acknowledge and agree that in the event of a breach of any of the
provisions of this Section 9.8, monetary damages shall not constitute a
sufficient remedy. Consequently, in the event of any such breach, the Company,
the Purchaser, and/or their respective successors or assigns may, in addition
to other
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rights and remedies existing in their favor, apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive or
other relief in order to enforce or prevent any violations of the provisions
hereof, in each case without the requirement of posting a bond or proving
actual damages.
SECTION 9.9 NONSOLICITATION BY THE PURCHASER. Except as
otherwise agreed by the Purchaser and the Parent, for a period of two years
following the date hereof, (a) if this Agreement is terminated for any reason
pursuant to Article VII, the Purchaser shall not, directly or indirectly,
actively solicit or induce any employee, agent or contractor of any Acquired
Company, the Existing Stockholder or the Parent to leave such employment and
become an employee, agent or contractor of the Purchaser or any of its
Affiliates if the Purchaser had contact with such employee, agent or contractor
in connection with the transactions contemplated herein and (b) neither the
Purchaser, nor any Acquired Company shall, directly or indirectly, actively
solicit or induce any employee, agent or contractor of the Parent or any
Affiliate thereof (other than an Acquired Company) to leave such employment and
become an employee, agent or contractor of the Purchaser, any Acquired Company
or any of their respective Affiliates; provided that nothing in this Section
9.9 shall prohibit the Purchaser, any Acquired Company or any of their
Affiliates from taking any action otherwise prohibited by this Section 9.9 with
respect to any Person whose employment is first terminated by the Parent, an
Acquired Company or an Affiliate thereof, as the case may be. This Section 9.9
supersedes Paragraph 5 of the Confidentiality Agreement.
SECTION 9.10 USE OF PARENT'S NAMES AND LOGOS. Except as expressly
set forth in this Section 9.10, it is expressly agreed that the Purchaser is
not purchasing, acquiring or otherwise obtaining any right, title or interest
in the names "MedPartners, Inc.", "EMSA" or any tradenames, trademarks,
identifying logos or service marks related thereto or employing the word
"MedPartners" or "EMSA" or any part or variation of any of the foregoing or any
confusingly similar tradename, trademark or logo (collectively, the "Seller
Trademarks and Logos"). Except as expressly set forth in this Section 9.10, the
Purchaser agrees that, neither it nor any of its Affiliates shall make any use
of the Seller Trademarks and Logos from and after the Closing Date. At or prior
to the Closing, the Existing Stockholder shall cause the name of each Acquired
Company that contains the word "MedPartners" or "EMSA" to be changed to a name
that does not contain such words. In recognition of the fact that certain of
the Acquired Companies' assets have imprinted thereon the Seller Trademark and
Logos, the Company shall remove, within one year after the Closing, such name
or logotype from, or render the same illegible on, all assets of the Acquired
Companies on which they are imprinted or legible or, in the alternative, shall
discontinue use of such assets. Subject to the foregoing, during the one year
period following Closing, the Acquired Companies are granted a non-exclusive,
nonassignable royalty-free license to use all assets utilizing the Seller
Trademark and Logos. The Acquired Companies shall not assert any claim of
ownership of, or any claim to, any goodwill or reputation associated with the
Seller Trademarks and Logos by reason of the Acquired Companies' use of the
Seller Trademarks and Logos pursuant to this Section 9.10 or otherwise. The
Company shall not take action in derogation of any of the rights of the Parent
to the Seller Trademarks and Logos. The Acquired Companies shall maintain
quality standards for all assets
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utilizing the Seller Trademarks and Logos that are substantially equivalent to
the standards currently used by the Parent in connection with such assets.
SECTION 9.11 MEDICAL MALPRACTICE MATTERS. The Parent and the
Purchaser agree that on or prior to the Closing Date, the Parent shall acquire
(at its sole cost and expense) for the benefit of the Purchaser, insurance
policies covering the Tail Malpractice Liability in the amounts and reflecting
the terms and conditions set forth on Exhibit L attached hereto and such other
terms and conditions as are reasonable and customary for the industry and
mutually acceptable to the Parent and the Purchaser.
SECTION 9.12 TRANSITION SERVICES.
(a) Plantation Premises. With respect to the Leased Real
Property located at 0000 Xxxxx Xxxx Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxx (the
"Plantation Premises"), the Parent shall cause its Affiliate, MedPartners
Acquisition Corporation, as the current tenant under such Real Property Lease
(the "Plantation Tenant"), to sublease to the Plantation Subtenant (as defined
below) that portion of the Plantation Premises which is used and occupied by
one or more of the Acquired Companies as of the date of this Agreement (such
Acquired Companies are referred to collectively herein as the "Plantation
Subtenant"), from the Closing Date until March 1, 2000, which term shall be
renewed automatically thereafter for successive periods of one (1) month each
until the Plantation Tenant or the Plantation Subtenant provide written notice
of non-renewal to the other party at least six months prior to the expiration
of the initial term or any renewal term, at a monthly rent equal to (i) $
41,947, payable on or prior to the first day of each calendar month (except for
the initial partial month, which shall be payable at Closing), plus (ii) 27.15%
of all excess expenses for the Plantation Premises which are charged to
Plantation Tenant under such Real Property Lease, payable upon delivery to the
Plantation Subtenant of documentation evidencing such charges (which amounts in
clauses (i) and (ii) shall be prorated on a per diem basis for the initial
month if less than a full calendar month), and which otherwise shall be on the
same terms and conditions as currently used or occupied by the Plantation
Subtenant.
(b) Tampa Premises. With respect to the Leased Real
Property located at 0000 Xxxxxxxx Xxxxxxxx Xxxxxxxx, Xxxxx, Xxxxxxx (the "Tampa
Premises"), the Parent shall cause its Affiliate, MedPartners of Florida, Inc.
(the "Tampa Tenant"), as the current tenant under such Real Property Lease, to
sublease to the Tampa Subtenant (as defined below) that portion of the Tampa
Premises which is used and occupied by one or more of the Acquired Companies as
of the date of this Agreement (such Acquired Companies are referred to
collectively herein as the "Tampa Subtenant"), from the Closing until the last
day of the sixth (6th) calendar month after the Closing Date, which term shall
be renewed automatically thereafter for successive periods of one (1) month
each until the Tampa Tenant or the Tampa Subtenant provide written notice of
non-renewal to the other party at least thirty (30) days prior to the
expiration of the initial term or any renewal term, at a monthly rent equal to
(i) $ 6,652, payable on or prior to the first day of each calendar month
(except for the initial partial month, which shall be payable at Closing), plus
(ii) 100% of all excess
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expenses for the Tampa Premises which are charged to Tampa Tenant under such
Real Property Lease, payable upon delivery to Tampa Subtenant of documentation
evidencing such charges (which amounts in clauses (i) and (ii) shall be
prorated on a per diem basis for the initial month if less than a full calendar
month), and which otherwise shall be on the same terms and conditions as
currently used or occupied by the Tampa Subtenant.
(c) Akron Premises. With respect to the Leased Real
Property located at 0000 Xxxxxxxxx Xxxx, Xxxxx, Xxxx (the "Akron Premises"),
the Acquired Company which is the tenant under such Real Property Lease (the
"Akron Tenant"), shall sublease to the Akron Subtenant (as defined below) that
portion of the Akron Premises consisting of approximately 3,738 square feet
which is used and occupied by the Parent or one or more of the Affiliates as of
the date of this Agreement (the "Akron Subtenant"), from the Closing Date until
the last day of the sixth (6th) full calendar month after the Closing, which
term shall be renewed automatically thereafter for successive periods of one
(1) month each until Akron Tenant or the Akron Subtenant provide written notice
of non-renewal to the other party at least thirty (30) days prior to the
expiration of the initial term or any renewal term, at a monthly rent equal to
(i) $ 4,707 payable on or prior to the first day of each calendar month (except
for the initial partial month, which shall be payable at Closing), plus (ii)
11.69% of excess expenses for the Akron Premises which are charged to Akron
Tenant under such Real Property Lease plus (iii) 11.69% of electricity expenses
which are charged to the Akron Tenant under such Real Property Lease, payable
upon delivery to Akron Subtenant of documentation evidencing such charges
(which amounts in clauses (i) and (ii) shall be prorated on a per diem basis
for the initial month if less than a full calendar month), and which otherwise
shall be on the same terms and conditions as currently used or occupied by the
Akron Subtenant.
(d) Plantation Phone System. The Parent agrees to
provide to the Acquired Companies, for as long as one of the Acquired Companies
is the Plantation Subtenant, access to the existing telephone system at the
Plantation Premises, in the manner, cost and at a relative level of service
consistent with that provided by the Parent to the Acquired Companies
immediately prior to the date hereof.
(e) Wide Area Network. The Parent agrees to provide to
the Acquired Companies, for the longer of six (6) months following the Closing
or until the Acquired Companies are no longer accessing the Parent's SAP R/3
software pursuant to paragraph (f) below, access to the Parent's wide area
network via MCI frame-relay circuits, in the manner, cost and at a relative
level of service consistent with that provided by the Parent to the Acquired
Companies immediately prior to the date hereof.
(f) SAP R/3 Software. The Parent agrees to provide to
the Acquired Companies, accounting, finance and related support services,
including but not limited to full access to and use of the Parent's SAP R/3
software and related systems, through the date which is six (6) months
following the Closing, in the manner, cost (with the access and use cost in no
event exceeding $10,000 per month) and at a relative level of service
consistent with that provided by the Parent to
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the Acquired Companies immediately prior to the date hereof; provided that to
the extent any support services cannot be provided by the Parent itself and
Parent is required to obtain the services of a third party to provide such
support, the Acquired Companies shall reimburse the Parent for all amounts paid
to such third parties for such support. If the Company desires to use the SAP
R/3 software and related systems beyond the date which is six (6) months
following the Closing, the Parent will (at the Company's sole cost and expense)
reasonably cooperate in good faith with the Company in negotiating satisfactory
arrangements with SAP America, Inc.
(g) DEC 8420 Services. The Acquired Companies agree to
provide to the Parent, for three (3) months following the Closing, systems
hardware support related to its COMPAQ (DEC) Alpha model 8420, including but
not limited to digital equipment maintenance and operations support, in the
manner and at a relative level of service consistent with that provided by the
Acquired Companies to the Parent as of the end of the third quarter of 1998,
for the amount of $48,115 per month, payable monthly.
(h) PC & Network Support. The Acquired Companies agree
to provide to the Parent, for three (3) months following the Closing, PC and
Local Area Network support, in the manner and at a relative level of service
consistent with that provided by the Acquired Companies to the Parent as of the
end of the third quarter of 1998, for the amount of $7,600 per month, payable
monthly.
(i) DEC 4100 Services. The Acquired Companies agree to
provide to the Parent, for three (3) months following the Closing, information
technology support related to its COMPAQ (DEC) Alpha model 4100, including but
not limited to server hardware and systems maintenance, computer operations
support and software applications support, in the manner and at a relative
level of service consistent with that provided by the Acquired Companies to the
Parent as of the end of the third quarter of 1998, for the amount of $9,708 per
month, payable monthly.
SECTION 9.13 EMSA LIMITED PARTNERSHIP. The Parties agree that
from and after the Closing Date, the Parent shall cause EMSA Limited
Partnership to enter into an agreement to provide that any and all payments
received by EMSA Limited Partnership related to third-party payor contracts be
forwarded immediately to EMSA Contracting Services, Inc.
SECTION 9.14 CERTAIN VENDORS. Prior to the Closing Date, those
vendors specified on Exhibit M hereto that have supplied goods or services to
the Acquired Companies through the Parent's centralized purchasing programs
shall be notified that, from and after the Closing Date, all goods and services
ordered by the Acquired Companies are for the account of the Acquired Companies
and that the Parent has no obligation with respect thereto. To the extent
deemed appropriate by the Acquired Companies, on or prior to the Closing Date,
the Acquired Companies shall enter into purchase contracts with such vendors,
under which the Parent shall have no liability.
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SECTION 9.15 IDX. Prior to the Closing Date, the Parent and the
Acquired Companies shall enter into an agreement with IDX Systems Corporation
which shall provide for IDX licenses to be allocated in accordance with Exhibit
N attached hereto.
ARTICLE X -- MISCELLANEOUS
SECTION 10.1 AMENDMENT AND WAIVER. This Agreement may be amended
and any provision of this Agreement may be waived, provided that any such
amendment or waiver shall be binding upon a Party only if such amendment or
waiver is set forth in a writing executed by the Purchaser and the Existing
Stockholder. No course of dealing between or among any Persons having any
interest in this Agreement shall be deemed effective to modify, amend, or
discharge any part of this Agreement or any rights or obligations of any Party
under or by reason of this Agreement.
SECTION 10.2 NOTICES. All notices, demands, and other
communications given or delivered under this Agreement shall be in writing and
shall be deemed to have been given, (i) when received if given in person, (ii)
on the date of electronic confirmation of receipt if sent by telex, facsimile
or other wire transmission, (iii) three days after being deposited in the U.S.
mail, certified or registered mail, postage prepaid, or (iv) one day after
being deposited with a reputable overnight courier. Notices, demands, and
communications to the Parties shall, unless another address is specified in
writing, be sent to the address or telecopy number indicated below:
Notices to the Parent or the Existing Stockholder
or, before the Closing, notices to the Company: with a copy to
c/o MedPartners, Inc. King & Spalding
3000 Galleria Tower 000 Xxxxxxxxx Xxxxxx
Xxxxx 0000 Xxxxxxx, Xxxxxxx 00000-0000
Xxxxxxxxxx, Xxxxxxx 00000 Fax No. (000) 000-0000
Fax No. (000) 000-0000 Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Attention: Legal Services
Notices to the Purchaser
or, after the Closing, notices to the Company: with a copy to:
Team Health Holdings, L.L.C. Xxxxxxxx & Xxxxx
c/o Madison Dearborn Partners 000 Xxxx Xxxxxxxx
Three First Xxxxxxxx Xxxxx, Xxxxx 0000 Xxxxxxx, Xxxxxxxx 00000
Xxxxxxx, Xxxxxxxx 00000 Attention: Xxxxxxx X. Perl, Esq.
Attention: Xxxxxxx Xxxxxxxx Fax No. (000) 000-0000
Fax No. (000) 000-0000
and
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Cornerstone Equity Investors, LLC
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxx X. X'Xxxxx
Fax No. (000) 000-0000
and
Healthcare Equity Partners
000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxxx X'Xxxxx
Fax No. (000) 000-0000
SECTION 10.3 BINDING AGREEMENT; ASSIGNMENT. This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of
the Parties and their respective successors and permitted assigns; provided
that neither this Agreement nor any of the rights, interests, or obligations
hereunder may be assigned by any Party without the prior written consent of the
other Parties; provided that
(a) the Purchaser may at any time before the Closing,
assign, in whole or in part, its rights and obligations pursuant to this
Agreement to one or more of its Affiliates; provided that the Purchaser will
nonetheless remain liable for all of its obligations hereunder;
(b) the Purchaser and the Company may each assign its
rights under this Agreement for collateral security purposes to any lender
providing financing to the Purchaser, the Company, or any of their Affiliates
and any such lender may exercise all of the rights and remedies of the
Purchaser and the Company hereunder; and
(c) the Purchaser and the Company may assign its rights
under this Agreement, in whole or in part, to any subsequent purchaser of the
Purchaser or any Acquired Company or any material portion of its assets
(whether such sale is structured as a sale of stock, a sales of assets, a
merger, or otherwise); provided that the Purchaser and the Company will
nonetheless remain liable for all of its obligations hereunder.
SECTION 10.4 SEVERABILITY. Whenever possible, each provision of
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
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SECTION 10.5 NO STRICT CONSTRUCTION. The language used in this
Agreement shall be deemed to be the language chosen by the Parties to express
their mutual intent, and no rule of strict construction shall be applied
against any Person. The Parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties hereto, 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 10.6 CAPTIONS. The captions used in this Agreement are
for convenience of reference only and do not constitute a part of this
Agreement and shall not be deemed to limit, characterize, or in any way affect
any provision of this Agreement, and all provisions of this Agreement shall be
enforced and construed as if no caption had been used in this Agreement.
SECTION 10.7 ENTIRE AGREEMENT. This Agreement and the documents
referred to herein contain the entire agreement between the Parties and
supersede any prior understandings, agreements, or representations by or
between the Parties, written or oral, which may have related to the subject
matter hereof in any way; provided that if the Agreement is terminated pursuant
to Section 7.1(g), the expense reimbursement letter dated November 20, 1998
between the Parent and certain of the Purchaser's stockholders shall remain in
full force and effect.
SECTION 10.8 COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original but all of
which taken together shall constitute one and the same instrument.
SECTION 10.9 GOVERNING LAW. All questions concerning the
construction, validity, and interpretation of this Agreement shall be governed
by and construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.
SECTION 10.10 JURISDICTION AND CONSENT TO SERVICE. Without
limiting the jurisdiction or venue of any other court, each of Parties (a)
agrees that any suit, action or proceeding arising out of or relating to this
Agreement may be brought solely in the state or federal courts of New York; (b)
consents to the exclusive jurisdiction of each such court in any suit, action
or proceeding relating to or arising out of this Agreement; (c) waives any
objection which it may have to the laying of venue in any such suit, action or
proceeding in any such court; and (d) agrees that service of any court paper
may be made in such manner as may be provided under applicable laws or court
rules governing service of process.
SECTION 10.11 PARTIES IN INTEREST. Nothing in this Agreement,
express or implied, is intended to confer on any Person, other than the Parties
and their respective successors and assigns, any rights or remedies under or by
virtue of this Agreement.
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SECTION 10.12 SCHEDULES. Information disclosed in the Disclosure
Letter shall be deemed to be disclosed for purposes of qualifying any
representation and warranty in Article V to the extent that such information is
reasonably apparent on its face as being applicable to such representation and
warranty.
* * * * *
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IN WITNESS WHEREOF, the Parties have executed this
Recapitalization Agreement as of the date first written above.
TEAM HEALTH, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
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Its:
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MEDPARTNERS, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
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Its:
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PACIFIC PHYSICIAN SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
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Its:
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TEAM HEALTH HOLDINGS, L.L.C.
By: /s/ Xxxxxxx X. Xxxxxxxx
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Its: Vice President and Assistant Secretary
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