EXHIBIT 2.2
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
AVETA HOLDINGS, LLC ON THE ONE HAND,
AND
AVETA HEALTH, INC.
ON THE OTHER HAND
DATED: AUGUST 22, 2005
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.................................................... 2
1.1. Certain Definitions........................................... 2
1.2. Accounting Terms.............................................. 8
1.3. Monetary Terms................................................ 8
ARTICLE II PURCHASE AND SALE OF THE SHARES............................... 8
2.1. Agreement to Sell............................................. 8
2.2. Closing....................................................... 8
2.3. Purchase Price................................................ 8
2.4. Adjustment to Purchase Price.................................. 8
2.5. Intercompany Payables......................................... 10
2.6. Release of Guarantees......................................... 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER................. 11
3.1. Organization, Power, Standing................................. 11
3.2. Due Authorization, Execution, Enforceability.................. 11
3.3. No Conflict; Third Party Consents............................. 11
3.4. Government Authorizations..................................... 12
3.5. Capitalization................................................ 12
3.6. Equity Interests.............................................. 13
3.7. Financial Information......................................... 13
3.8. Events Subsequent to Date of Company Latest Balance Sheet..... 14
3.9. Accounts Receivable........................................... 15
3.10. Company Material Contracts.................................... 16
3.11. Real Property and Tangible Personal Property.................. 17
3.12. Intellectual Property......................................... 17
3.13. Tax Matters................................................... 18
3.14. Litigation.................................................... 19
3.15. Employees..................................................... 19
3.16. Employee and Labor Relations.................................. 19
3.17. Company Benefit Plans......................................... 20
3.18. Environmental Matters......................................... 21
3.19. Compliance with Law........................................... 22
3.20. Government Healthcare Matters................................. 22
3.21. Insurance..................................................... 23
3.22. Brokers....................................................... 23
3.23. Transactions with Related Parties............................. 24
3.24. Absence of Certain Business Practices......................... 24
3.25. Providers..................................................... 24
3.26. Disclosure.................................................... 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER....................... 25
4.1. Organization, Power, Standing................................. 25
4.2. Due Authorization, Execution, Enforceability.................. 25
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4.3. No Conflict; Third Party Consents............................. 25
4.4. Government Authorizations..................................... 26
4.5. Litigation.................................................... 26
4.6. Brokers....................................................... 26
4.7. Disclosure.................................................... 26
4.8. Investment Representations.................................... 26
4.9. Independent Investigation; Access............................. 27
4.10. No Government Recommendation.................................. 27
ARTICLE V CONDITION PRECEDENT TO CLOSING/CLOSING DELIVERIES.............. 28
5.1. Conditions Precedent to the Obligations of Buyer/Closing
Deliveries of Buyer........................................ 28
5.2. Conditions Precedent to the Obligations of the Company/Closing
Deliveries of the Company.................................. 30
ARTICLE VI COVENANTS..................................................... 32
6.1. Examinations and Investigations............................... 32
6.2. Conduct of Business........................................... 33
6.3. Payment of Dividends.......................................... 33
6.4. Commercially Reasonable Efforts............................... 33
6.5. Regulatory and Other Approvals; Consents...................... 34
6.6. Publicity..................................................... 34
6.7. Confidentiality............................................... 35
6.8. Certain Tax Matters........................................... 35
6.9. Update to Schedules........................................... 36
ARTICLE VII TERMINATION OF AGREEMENT..................................... 37
7.1. Termination................................................... 37
7.2. Effect of Termination......................................... 37
ARTICLE VIII SURVIVAL; INDEMNIFICATION................................... 38
8.1. Survival of Indemnification Rights............................ 38
8.2. Seller Indemnification Obligations............................ 38
8.3. Buyer Indemnification Obligations............................. 39
8.4. Indemnification Procedure..................................... 39
8.5. Calculation of Indemnity Payments............................. 40
8.6. Tax Treatment of Indemnification.............................. 40
8.7. Indemnification Amounts....................................... 40
8.8. Exclusive Remedies............................................ 41
8.9. No Double Recovery............................................ 41
8.10. Insurance..................................................... 41
8.11. Disclosure and Knowledge...................................... 41
ARTICLE IX MISCELLANEOUS................................................. 42
9.1. Expenses...................................................... 42
9.2. Governing Law................................................. 42
9.3. Jurisdiction; Service of Process.............................. 42
9.4. Attorneys' Fees............................................... 42
9.5. Waiver; Remedies Cumulative................................... 42
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9.6. Notices....................................................... 43
9.7. Assignment.................................................... 44
9.8. No Third-Party Beneficiaries.................................. 44
9.9. Amendments.................................................... 44
9.10. Interpretation; Exhibits and Schedules........................ 44
9.11. Entire Agreement.............................................. 44
9.12. Severability.................................................. 44
9.13. Mutual Drafting............................................... 44
9.14. Counterparts; Facsimile....................................... 44
EXHIBITS
Exhibit A - Opinion of Buyer's Legal Counsel
Exhibit B - Opinion of Company's Legal Counsel
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated this 22nd day of
August, 2005, is by and between (i) Aveta Health, Inc., a corporation organized
under the laws of the state of Tennessee ("Seller" or "Aveta Health") and (ii)
Aveta Holdings, LLC, Inc., a limited liability company organized under the laws
of the State of Delaware ("Buyer"), concerning the sale of the stock of NAMM
Holdings Inc. a corporation organized under the laws of the state of Delaware
("NAMM Holdings" or the "Company"), and its subsidiaries, North American Medical
Management California, Inc., a corporation organized under the laws of Tennessee
("NAMM California"), PrimeCare Medical Network, Inc., a corporation organized
under the laws of the state of California ("PMNI"), and NAMM Illinois, Inc., a
corporation organized under the laws of Delaware ("NAMM Illinois" and, together
with PMNI and NAMM California, individually referred to as a "Subsidiary" and
collectively referred to as the "Subsidiaries"). Capitalized terms used herein
are defined in Article I hereof.
RECITALS
WHEREAS, the Company and the Subsidiaries are in the business of operating
Medicare Advantage organizations and/or providing certain related services,
including (i) operating or managing a Medicare Advantage Plan, (ii) performing
or arranging for medical services for Medicare Advantage Plan(s) and other
health plans, either on a capitated, risk sharing, or fee for service basis or
(iii) providing medical management services to physician organizations
(collectively, the "Business") in California and Illinois;
WHEREAS, the Buyer, through its subsidiary, MMM Healthcare, Inc., a
corporation organized under the laws of the Commonwealth of Puerto Rico ("MMM"),
is engaged in the Business in Puerto Rico;
WHEREAS, the Seller is the holder of one hundred (100) shares of the common
stock, $.01 par value of NAMM Holdings which shares constitute all of the issued
and outstanding shares of capital stock of NAMM Holdings (all such shares of
common stock held by the Seller being hereinafter referred to as the "Shares").
WHEREAS, the Seller at or prior to the Closing hereunder will effect a
reorganization (the "Reorganization") so that NAMM Holdings will own all of the
issued and outstanding capital stock of each of the Subsidiaries;
WHEREAS, the Buyer desires to acquire from the Seller all of the Shares,
and the Seller desire to sell the Shares to the Buyer, on the terms and subject
to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the following
capitalized terms have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accounts Receivable" means all accounts receivable and other rights to
payment to which a Person may be entitled and arising from the sale of goods or
services.
"Action or Proceeding" means any action, hearing, proceeding, arbitration,
claim, suit, opposition, challenge, cancellation, proceeding or charge (whether
civil, criminal, administrative or investigative) commenced, brought or
conducted by any Person, or any investigation or audit by any Governmental or
Regulatory Body.
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. For
purposes of the preceding sentence, the term "control" (including, with
correlative meaning, the terms "controlled by" and "under common control with"),
as used with respect to any Person, means the possession, directly or
indirectly, of the ability or power to direct or cause the direction of the
management (other than day to day administrative management) and policies of
such Person, through the ownership of voting securities, by contract or
otherwise; provided, however, that neither the Buyer nor any Affiliate of the
Buyer shall be deemed an Affiliate of the Seller, the Company or any Subsidiary
and visa versa.
"Agency Audits" means any audits and all other state, state or federal
audits, recoupments and overpayments, false claims, fine or penalty actions, in
each case including any threatened or preliminary reports, audits, recoupments
and overpayments, false claims, fine or penalty actions (i) covering any of the
following: HMO enrollment, newborn eligibility payments, downward substitution
of (lower) acuity care providers, death audits (payments for deceased Members),
recipients enrolled in counties with no certificates of authority, recipients
ineligible for HMO coverage, coordination of benefits, patient responsibility,
deductibles, dual payments to another provider, and non-compliance with the
Medicare HMO/managed care contract or applicable Laws, including but not limited
to non-compliance with quality assurance requirements, reporting requirements,
emergency room and other claim payment requirements, marketing practices
requirements, employee compensation requirements, member grievance requirements
or similar matters, or (ii) conducted or threatened to be conducted by the CMS.
"Agreement" has the meaning set forth in the Recitals.
"Business" means the business of business of operating Medicare Advantage
organizations and/or providing certain related services, including (i) operating
or managing a Medicare Advantage Plan, (ii) performing or arranging for medical
services for Medicare Advantage Plan(s) and other health plans, either on a
capitated, risk sharing, or fee for service basis or (iii) providing medical
management services to physician organizations.
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"Business Day" means a day other than a Saturday or a Sunday or other day
on which commercial banks in New York or California are authorized or required
by law to close.
"Business Employee" means each individual who, on the Closing Date, is
actively employed by a Person in the Business.
"Buyer" has the meaning set forth in the Preamble.
"CMS" means the Centers for Medicare and Medicaid Services.
"COBRA" means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of
the Code and any similar state Law.
"Code" means the United States Internal Revenue Code of 1986, as amended,
or any successor law and all regulations issued pursuant thereto or any
successor law.
"Company" has the meaning set forth in the Preamble.
"Company Audited Financial Statements" has the meaning set forth in Section
3.7.
"Company Benefit Plans" means all "employee pension benefit plans" (as
defined in Section 3(2) of ERISA), "employee welfare benefit plans" (as defined
in Section 3(1) of ERISA), bonus, deferred compensation, stock bonus, stock
purchase, restricted stock, stock option, employment, termination, change in
control, retention, consulting, severance or other employee or fringe plans,
programs, policies, arrangements and contracts sponsored, maintained or required
to be contributed to, by the Company or any Subsidiary for the benefit of any
current or former directors, officers, employees or independent contractors of
the Company or any Subsidiary or with respect to which the Company or any
Subsidiary has any Liabilities.
"Company Financial Statements" means the Company Audited Financial
Statements and/or the Company Unaudited Financial Statements.
"Company Latest Balance Sheet" has the meaning set forth in Section 3.7.
"Company Material Contracts" has the meaning set forth in Section 3.10.
"Company Material Intellectual Property" has the meaning set forth in
Section 3.12.
"Company Material Provider" has the meaning set forth in Section 3.25.
"Company Stock" means shares of the Company's common stock, $.01 par value
per share.
"Company Unaudited Financial Statements" has the meaning set forth in
Section 3.7.
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"Contracts" means all executory contracts, agreements, subcontracts,
indentures, notes, bonds (including surety bonds), loans, instruments, leases,
mortgages, franchises, licenses, assignments, purchase orders, sale orders,
proposals, bids, understandings or commitments, whether written or verbal, to
which a Person is a party or by which its assets or property are bound.
"DGCL" means the Delaware General Corporation Law.
"Environment" means ambient air (including indoor air), surface water,
ground water, land surface or subsurface strata.
"Environmental Claim" means, with respect to any Person, any written notice
or other claim by any Person alleging or asserting liability for investigatory
costs, cleanup costs, Governmental or Regulatory Body response costs, damages to
natural resources or other property, personal injuries, fines or penalties
arising out of, based on or resulting from (a) the presence or Release into the
Environment of any Hazardous Material or (b) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law.
"Environmental Law" means any applicable international, state of the United
States of America, national, provincial, regional, federal, state, municipal or
local legal requirement, statute, regulation, code or ordinance, as enacted and
in effect on or prior to the Closing Date, concerning pollution or protection of
the Environment, including without limitation all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
Release, threatened Release, control or cleanup of any Hazardous Materials,
substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means United States generally accepted accounting principles.
"Governmental Authorization" means any consent, license, registration,
authorization or permit issued, granted, given or otherwise made available by or
under the authority of any Governmental or Regulatory Body or pursuant to any
Law.
"Governmental or Regulatory Body" means any court, tribunal, arbitrator or
any government or political subdivision thereof, whether federal, state, county,
local or foreign, or any agency, authority, official or instrumentality of any
such government or political subdivision.
"Hazardous Material" means any element, compound, substance or other
material (including, without limitation, any pollutant, contaminant, hazardous
waste, hazardous substance, chemical substance or product) that is listed,
classified, or regulated pursuant to any Environmental Law, including, without
limitation, any petroleum product, byproduct or additive, asbestos,
asbestos-containing material, or presumed asbestos-containing material, medical
waste, biohazardous waste, chlorofluorocarbon, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive material or radon.
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"XXX Xxx" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Intellectual Property" means (i) all copyrightable works, all copyrights
and all applications, registrations and renewals thereof, (ii) all service and
trade marks or trade names and all applications, registrations and renewals
thereof, (iii) all inventions (whether patentable or unpatentable and whether or
not reduced to practice), all improvements thereto and all patents, patent
applications and patent disclosures, together with all reissuances, divisions,
continuations, continuations-in-part, substitutes, extensions and reexaminations
thereof, (iv) all proprietary formulations, know-how, show-how, confidential
business information, trade secrets, research and development results,
compositions, techniques, processes, technical data, designs, drawings,
diagrams, specifications, catalogs, customer and supplier lists and contact
information, pricing and cost information, business and marketing plans and
proposals, and quality control, testing, operations, logistical, maintenance and
other technical information and technology, (v) all mask works and all
applications, registrations and renewals in connection therewith, (vi) all
computer software (including but not limited to source code, executable code,
data, databases and related documentation), whether purchased, licensed or
internally developed, (vii) all copies and tangible embodiments thereof in
whatever form or medium and (viii) all other intellectual property rights.
"Knowledge of the Buyer" and phrases of similar import mean and shall be
limited to the actual knowledge of Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxxx
X'Xxxxxxx, Xxxxxx Xxxxxx and Xxxxxxxx Xxxx, and, in addition, in each such case,
the knowledge a reasonably prudent person would be expected to have acting in
such person's capacity in the conduct of the business of the Buyer.
"Knowledge of the Company" and phrases of similar import mean and shall be
limited to the actual knowledge of Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxxx
X'Xxxxxxx, Xxxxxx Xxxxxx, Xxxxxxxxx Xxxxxxxx and Xxxxxxxx Xxxx, and, in
addition, in each such case, the knowledge a reasonably prudent person would be
expected to have acting in such person's capacity in the conduct of the Business
of the Company and the Subsidiaries.
"Law" means any law, statute, rule, regulation, ordinance and other
pronouncement having the effect of law of the United States of America, any
foreign country or any domestic or foreign state, county, city or other
political subdivision or of any Governmental or Regulatory Body.
"Liabilities" means any direct or indirect liability, indebtedness, claim,
loss, damage, deficiency, obligation, penalty, responsibility, cost or expense,
fixed or unfixed, xxxxxx or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, or unaccrued, or absolute or contingent.
"Lien" means any mortgage, lien, pledge, charge, security interest, claim,
contractual restriction, easement, right-of-way, option, conditional sale or
installment contract or encumbrance of any kind.
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"Material Adverse Effect" means any event, change or effect that,
individually or in the aggregate, has, or is reasonably likely to have, a
materially adverse effect on the business, assets, financial condition or
results of operations of a Person and its subsidiaries, taken as a whole, but
excluding (i) effects or changes that are generally applicable to the industries
or markets in which the Person or any if its subsidiaries operates or arising
from or relating to changes in Law, (ii) changes in the United States or world
financial markets or general economic conditions, or (iii) changes or effects
arising from terrorism, hurricane, attack, war, riot, insurrection, other armed
conflict or civil disorder which do not directly damage the assets or facilities
of the Person or any of its subsidiaries.
"Medicare Advantage Organization" means an organization holding a contract
with CMS to offer a Medicare Advantage Plan to eligible beneficiaries of
Medicare.
"Member" means an individual enrolled in any Medicare Advantage plan or
other health plan and for whose health care the Company or any Subsidiary has
contractually agreed to be responsible.
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Body, in each case whether preliminary or final.
"Ordinary Course of Business" means an action taken by a Person if: (a)
such action is in the ordinary course of business and consistent with the past
practices of such Person; and (b) if so required by applicable Law, such action
is authorized by the board of directors of such Person (or by any Person or
group of Persons exercising similar authority).
"Permitted Lien" means (i) any Lien for Taxes not yet due or delinquent or
being contested in good faith by appropriate proceedings, (ii) any statutory
Lien arising in the Ordinary Course of Business by operation of Law with respect
to an obligation or liability that is not yet due or delinquent or that would be
released upon payment when due without penalty, (iii) any mortgage or security
interest shown on the Company Financial Statements as securing specified
liabilities or obligations, with respect to which no default exists or with
respect to which no event has occurred that with notice or lapse of time or both
would result in a default, (iv) any imperfection of title or similar Lien, if
any, which does not materially detract from the value or impair the current use
of the property subject thereto or materially impair the operation of the
Business, (v) any Lien created subsequent to the date of the Company Latest
Balance Sheet or Buyer Latest Balance Sheet, as applicable, pursuant to any
lease of property, real or personal, the obligations under which are capitalized
on the Company Financial Statements, (vi) any Lien created pursuant to any other
such lease to the extent that the then present value of the minimum rental
commitment thereunder should be capitalized on a balance sheet of the lessee in
accordance with GAAP, (vii) any Lien created to secure purchase money
indebtedness, and (viii) any other immaterial Liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
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"Person" means any individual, corporation, partnership, limited liability
company, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental or Regulatory Body or other entity.
"Real Property" means all real property (including buildings, structures
and improvements located thereon, fixtures contained therein and appurtenances
thereto) owned or leased by a Person.
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, deposit, disposal, dumping, discharge, dispersal, leaching, escaping,
emanation, seepage or migration of any Hazardous Material in, into or onto the
Environment.
"SAP" means statutory accounting principles prescribed by any Governmental
or Regulatory Body to which a Person may be subject.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" has the meaning set forth in the Preamble.
"Tangible Property" means the facilities, machinery, equipment, furniture,
buildings and other tangible property used in the Business of a Person.
"Tax" of "Taxes" (and with correlative meanings "Taxable" or "Taxing")
mean, with respect to any Person, all U.S. federal, state, local, provincial,
foreign or other taxes, customs, tariffs, imposts, levies, duties, government
fees or other like assessments or charges of any kind, including all income,
franchise, sales, use, ad valorem, transfer, license, recording, employment
(including federal and state income tax withholding, backup withholding, FICA,
FUTA or other payroll taxes), environmental, excise, severance, stamp,
occupation, premium, prohibited transaction, property, value-added, net worth,
or any other taxes and any interest, penalties and additions imposed with
respect to such amounts.
"Tax Return" means all U.S. federal, state, local, provincial and foreign
returns, declarations, claims for refunds, forms, statements, reports,
schedules, information returns or similar statements or documents, and any
amendments thereof (including, without limitation, any related or supporting
information or schedule attached thereto) required to be filed with any Taxing
Authority in connection with the determination, assessment or collection of any
Tax or Taxes.
"Taxing Authority" means any government or subdivision, agency, commission
or authority thereof, or any quasi-governmental or private body having
jurisdiction over the assessment, determination, collection or other imposition
of Taxes.
"Transaction Documents" means (i) this Agreement, including the Schedules
and Exhibits, and (ii) all other agreements and instruments to be executed by
Buyer or Seller at or prior to the Closing as specifically required pursuant to
this Agreement.
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1.2 Accounting Terms. All accounting terms shall have the meaning specified
by GAAP or SAP unless otherwise specified.
1.3 Monetary Terms. All references to "Dollars" or "$" shall mean U.S.
Dollars unless otherwise specified.
ARTICLE II
PURCHASE AND SALE OF THE SHARES
2.1 Agreement to Sell. Subject to the terms and conditions of this
Agreement and on the basis of the representations, warranties, covenants and
agreements herein contained, the Seller hereby agrees to sell, assign, transfer
and convey to the Buyer and the Buyer hereby agrees to purchase, acquire and
accept from the Seller, the Shares.
2.2 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Aveta Health, 000
Xxxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 or such other
mutually agreeable location at 10:00 a.m. on the first Business Day (the
"Closing Date") after the satisfaction or waiver of the conditions set forth in
Article V hereof (other than those conditions that by their nature are to be
satisfied at the Closing, provided that such conditions are so satisfied or
waived at the Closing).
2.3 Purchase Price. The aggregate purchase price (the "Purchase Price") for
the Shares shall be Ninety Five Million Seven Hundred Fifty Six Thousand Dollars
($95,756,000.00), subject to adjustment pursuant to Section 2.4, payable within
three (3) calendar days of Closing by wire transfer to an account designated by
Seller.
2.4 Adjustment to Purchase Price Subject to the terms and conditions of
this Section 2.4, the Purchase Price shall be adjusted as follows:
(a) At least five Business Days before the Closing Date, the Seller shall
prepare and deliver to the Buyer a statement (the "Estimated Closing Statement")
setting forth an estimate as of the Closing Date of the "Closing WC" and
"Closing TNE" (as hereinafter defined). The Purchase Price shall be increased by
the amount reflected on the Estimated Closing Statement of (i) Closing WC minus
(ii) Closing TNE (the "Closing WC Amount").
(b) "Closing WC" shall mean the amount by which, as of the Closing Date,
the total amount of current assets of the Company and the Subsidiaries on a
consolidated basis exceeds the total amount of current liabilities of the
Company and the Subsidiaries on a consolidated basis, excluding all amounts owed
to the Company or any Subsidiary by Aveta Health, Inc.
(c) "Closing TNE" shall mean the sum of (i) One Million Dollars
($1,000,000.00), plus (ii) the amount required to be maintained by PMNI as of
the Closing Date as its minimum tangible net equity pursuant to and calculated
in accordance with Section 1300.76 of the regulations promulgated pursuant to
the Xxxx-Xxxxx Health Care Service Plan Act of 1975.
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(d) The Estimated Closing Statement to be delivered by Seller to Buyer
hereunder shall (i) be made in good faith, (ii) include such information, work
papers, methodology and assumptions as are reasonably necessary to assess the
basis for the estimate, and (iii) be prepared in accordance with GAAP applied on
a basis consistent with the accounting principles used in the preparation of the
combined Audited Financial Statements for the year ended December 31, 2004 of
PCI, NAMM California and NAMM Illinois (except for principles of GAAP to the
effect that estimates included in financial statements are not updated to
reflect current information).
(e) In the event that Buyer shall dispute any item or calculation set forth
in, or to be used in the preparation of, the Estimated Closing Statement, Buyer
shall, by written notice delivered not less than two Business Days before the
Closing Date, so notify Seller of such dispute and the basis therefor, in which
event Buyer and Seller shall negotiate in good faith and attempt to agree upon
the Estimated Closing Statement, and (i) if they are able to agree, the mutually
agreed upon Estimated Closing Statement shall be the Estimated Closing Statement
for purposes of Section 2.4(a) above and (ii) if they are unable to agree, then
the Estimated Closing Statement as designated and delivered by Seller shall be
the Estimated Closing Statement for purposes of Section 2.4(a) above.
Notwithstanding the foregoing, neither any failure by Buyer to object to the
Estimated Closing Statement nor any agreement by the parties as to the Estimated
Closing Statement shall be deemed to be or construed as a waiver of any of
party's rights with respect to the calculation or determination of the
Adjustment Payment (as defined below).
(f) Within 15 days following the end of the sixth month after Closing, the
Buyer shall deliver to the Seller a statement (the "Statement of Actual WC")
setting forth a recalculated (i) Closing WC and (ii) Closing TNE, adjusted to
reflect actual accounting entries through the date of recalculation and actual
amounts paid by the Company and the Subsidiaries through the date of such
statement for medical claims. The Statement of Actual WC shall (i) be made in
good faith, (ii) include such information, work papers, methodology and
assumptions as are reasonably necessary to assess the basis for the Statement
and (iii) be prepared in accordance with GAAP applied on a basis consistent with
the accounting principles used in the preparation of the combined Audited
Financial Statements for the year ended December 31, 2004 of PCI, NAMM
California and NAMM Illinois (except for principles of GAAP to the effect that
estimates included in financial statements are not updated to reflect current
information).
(g) If within 20 days after the Statement of Actual WC is delivered to the
Seller, the Seller shall not have given written notice to the Buyer setting
forth in detail any objections to the Statement of Actual WC, then such
Statement shall be final and binding upon the parties. If within such 20-day
period, the Seller shall give written notice to Buyer setting forth in detail
any objections to such Statement, then Buyer and the Seller shall use reasonable
efforts to reach agreement as to all such objections within the 20-day period
following Buyer's receipt of such notice of objection. If the parties shall
reach agreement on the objections of the Seller during such 20-day period, then
the Statement of Actual WC, as so agreed to by the parties, shall be final and
binding upon the parties.
(h) If the parties are unable to reach agreement within such 20-day period,
then the resolution of all unresolved matters shall be resolved by KPMG LLP, or
if KPMG LLP is
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unwilling or unable perform such role, then another firm of independent
certified public accountants of national reputation that is mutually acceptable
to Buyer and the Seller (the "Reviewing Accountants"). In resolving any dispute,
the Reviewing Accountants shall use the methodology of determining Closing WC
and Closing TNE as provided herein, except that the actual amounts paid by the
Company through the date that determination is made by the Reviewing Accountants
shall be used. The Reviewing Accountants shall be instructed to resolve any
matters in dispute as promptly as practicable. The determination of the
Reviewing Accountants will be final and binding.
(i) The Seller and the Buyer shall each pay one-half of the fees and
expenses of the Reviewing Accountants and shall cooperate with each other and
the Reviewing Accountants in connection with the matters contemplated by this
Section 2.4, including by furnishing such information and access to books,
records (including, without limitation, subject to entering into customary
agreements respecting such access, accountants work papers), personnel and
properties as may be reasonably requested.
(j) The fact that the dispute resolution procedures specified in this
Section 2.4 shall have been or may be invoked shall not excuse any party from
performing its obligations under the Agreement and during the pendency of any
such procedure all parties shall continue to perform their respective
obligations in good faith.
(k) If the aggregate amount reflected on the Statement of Actual WC as the
Closing WC Amount is greater than the aggregate amount reflected on the
Estimated Closing Statement as the Closing WC Amount, the Buyer shall pay such
difference to Seller by delivering immediately available funds equal to such
difference within five (5) Business Days of the date the Statement of Actual WC
is finally determined. If the aggregate amount reflected on the Statement of
Actual WC as the Closing WC Amount is less than the aggregate amount reflected
on the Estimated Closing Statement as the Closing WC Amount, the Seller shall
pay such difference to the Buyer by delivering immediately available funds equal
to such difference within five (5) Business Days of the date the Statement of
Actual WC is finally determined (such payment, to or from the Buyer, the
"Adjustment Payment").
2.5 Intercompany Payables. Effective as of the Closing, all intercompany
payables and other amounts owed or owing by the Seller to the Company or any
Subsidiary shall be deemed released, discharged and satisfied in full, and the
Company and the Subsidiaries shall execute and deliver to the Seller a full and
complete release therefor.
2.6 Release of Guarantees. At or prior to Closing, and as a condition
precedent thereto for the benefit of Seller, Buyer shall deliver to Seller a
full and complete release of any and all guarantees, sureties, indemnities and
other similar instruments pursuant to which the Seller is or may become liable
to any Person for amounts payable by or obligations of the Company or any
Subsidiary.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as set forth on the Seller's Disclosure Schedule attached hereto
(the section numbers of which are numbered to correspond to the Section numbers
of this Agreement to which they refer, it being understood that an item included
in the Disclosure Schedule in reference to any Section or subsection of this
Article III shall be deemed to relate to each other Section or subsection of
this Article III to the extent such relationship is reasonably apparent) and as
updated on the Closing Date pursuant to Section 6.9, the Seller represents and
warrants to Buyer as follows:
3.1 Organization, Power and Good Standing. Each of the Seller, the Company
and the Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the state of incorporation. Except for the
interest of the Company in the Subsidiaries, neither the Company nor any
Subsidiary has an equity or other ownership interest in any other corporation,
limited liability company, partnership, joint venture or other business entity
or Person whatsoever. Each of the Company and the Subsidiaries has full
corporate power and authority to own its properties and to carry on its
business as it is now being conducted. Each of the Company and the Subsidiaries
is duly qualified to transact business and is in good standing in each
jurisdiction wherein the nature of the business done or the property owned,
leased or operated by it requires such qualification, except where the failure
to be so qualified or be in good standing would not have a Material Adverse
Effect. The Seller has previously made available to Buyer copies of the
certificate of incorporation and by-laws of each of the Company and the
Subsidiaries and neither the Company nor any of the Subsidiaries is in default
in the performance, observation or fulfillment of its obligations under such
organizational documents.
3.2 Due Authorization, Execution, Enforceability. The Seller has full power
and authority to execute this Agreement and the Transaction Documents to which
it is a party. The execution and delivery by the Seller of this Agreement and
the Transaction Documents to which it is a party, the performance by it of its
obligations hereunder and thereunder, and the consummation by it of the
transactions contemplated herein and therein have been duly and validly
authorized by all necessary corporate action on the part of the Seller. This
Agreement has been, and each of the other Transaction Documents to which the
Seller is a party, when executed, will be, duly executed and delivered by the
Seller and constitute the legal, valid and binding obligations of the Seller,
enforceable against it in accordance with their respective terms, except as such
enforcement may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors, and (ii) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law)
(collectively, the "Enforceability Exceptions").
3.3 No Conflict; Third Party Consents. Except as set forth on the Seller's
Disclosure Schedule, the execution and delivery of this Agreement do not, and
the execution and delivery of the other Transaction Documents will not, and the
consummation of the transactions contemplated herein and therein will not (with
or without notice or lapse of time or both), (i) violate or conflict with the
provisions of the Certificate of Incorporation or Bylaws of the Seller, the
Company or any of the Subsidiaries, (ii) except as would not cause a Material
Adverse
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Effect, result in the imposition of any Lien (other than a Permitted Lien) upon
any of the properties or assets of the Company or any of the Subsidiaries, cause
the acceleration or material modification of any obligation under, create in any
party the right to terminate, constitute a default or breach of, or violate or
conflict with the terms, conditions or provisions of, any Company Material
Contract, or (iii) except as would not cause a Material Adverse Effect, result
in a breach or violation by the Seller, the Company or any of the Subsidiaries
of any of the terms, conditions or provisions of any Law or Order. Except as set
forth on Seller's Disclosure Schedule, no consent, approval or authorization of,
or registration or filing with, any Person under any Material Contract is
required in connection with the consummation of the transactions contemplated
herein, except where the failure to obtain the same would not cause a Material
Adverse Effect. In furtherance of the foregoing, except as set forth in Seller's
Disclosure Schedule, there are no Company Material Contracts that contain a
change of control provision or otherwise require consent or grant the right to
terminate by reason of the transactions contemplated herein.
3.4 Government Authorizations. Except where the failure will not cause a
Material Adverse Effect, the execution, delivery and performance by the Seller
of this Agreement and the other Transaction Documents to which it is a party and
the consummation of the transactions contemplated herein and therein do not and
will not require, on the part of the Seller, the Company or any of the
Subsidiaries, any Governmental Authorization or any filing with or notification
to any Governmental or Regulatory Body except as required by the HSR Act or as
set forth on Seller's Disclosure Schedule.
3.5 Capitalization.
(a) The authorized capital stock of the Company consists of one hundred
(100) shares of Company Stock, par value $0.01 per share, all of which shares
are issued and outstanding and held of record by the Seller. All of the
outstanding shares of Company Stock have been duly authorized and validly issued
and are fully paid and nonassessable. There are no securities, notes, bonds or
other instruments convertible into or exchangeable for capital stock of all
classes of the Company and there are no options, warrants or contracts to which
the Company is party and there are no unsatisfied preemptive rights or other
obligations relating to the issuance, sale or transfer of any equity securities
or other securities of the Company. None of the outstanding equity securities or
other securities of the Company was issued in violation of the Securities Act,
other applicable securities laws or regulations or the Company's Articles of
Incorporation or Bylaws.
(b) Neither the Seller nor the Company is a party to any agreements
or understandings with respect to the voting (including voting trusts and
proxies), sale or transfer (including agreements imposing transfer restrictions)
of any shares of capital stock of the Company.
(c) The Seller has heretofore made available to Buyer true and complete
copies of the Certificate of Incorporation and By-laws of the Company and the
Subsidiaries. The minute books of each of the Company and the Subsidiaries have
been made available to Buyer for its
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inspection. The stock books of each the Company and the Subsidiaries have been
made available to Buyer for its inspection.
3.6 Equity Interests. Except for the Company's ownership of the
Subsidiaries, neither the Company nor any of the Subsidiaries owns, directly or
indirectly, any capital stock or other equity securities of any Person or have
any direct or indirect equity or ownership interest in any Person.
3.7 Financial Information.
(a) Seller's Disclosure Schedule includes (i) the unaudited balance sheet
of the Company and the Subsidiaries on a consolidated basis as of May 31, 2005
("Company Latest Balance Sheet"), and the related statement of income of the
Company and the Subsidiaries on a consolidated basis for the five month period
then ended (together with the Company Latest Balance Sheet, the "Company
Unaudited Financial Statements") and (ii) the audited consolidated balance sheet
of PrimeCare International, Inc., NAMM California, PMNI, NAMM Illinois and their
subsidiaries as of December 31, 2004 and 2003, and the audited statements of
income, changes in shareholders' equity and cash flow of the Company for the
years then ended (the "Company Audited Financial Statements"). Except as set
forth in Seller's Disclosure Schedule, the Company Financial Statements (i)
fairly present (subject, in the case of unaudited financial statements, to
normal and recurring year-end adjustments and to the absence of footnote
disclosures, none of which would, alone or in the aggregate, be materially
adverse to the financial condition, operating results, assets or operations of
the Company and the Subsidiaries taken as a whole) in all material respects the
financial condition and results of operations, changes in shareholders' equity
and cash flow of the Company at and as of the dates thereof and for the periods
covered thereby, (ii) were compiled from books and records regularly maintained
by management of the Company used to prepare the financial statements of the
Company and the Subsidiaries, and (iii) were prepared in accordance with GAAP
and SAP, consistently applied, and the accounting methods, standards, policies,
practices, estimation methodologies, assumptions and procedures described
therein or set forth in Seller's Disclosure Schedule (subject, in the case of
unaudited financial statements, to normal and recurring year-end adjustments and
to the absence of footnote disclosures, none of which would, alone or in the
aggregate, be materially adverse to the financial condition, operating results,
assets or operations of the Company and the Subsidiaries taken as a whole and
prepared as if the Company had acquired PrimeCare International, Inc., NAMM
California, PMNI, NAMM Illinois and their subsidiaries on January 1, 2005).
(b) The Company Unaudited Financial Statements include all material
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation. The statements of operations included in the Company
Unaudited Financial Statements do not include any material item of special or
non-recurring income, except as specifically identified therein.
(c) Except as set forth in the Company Unaudited Financial Statements and
in the Seller's Disclosure Schedule, each of the Company and the Subsidiaries
has, and at the Closing shall have, no Liabilities required in accordance with
GAAP or SAP to be reflected on the
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Company Latest Balance Sheet other than (i) obligations pursuant to or in
connection with this Agreement or the transactions contemplated hereby, (ii)
Liabilities incurred in the Ordinary Course of Business since May 31, 2005 and
(iii) Liabilities for which the failure to pay or satisfy in accordance with its
terms would not have a Material Adverse Effect. None of the Liabilities incurred
by the Company since May 31, 2005 could reasonably be expected to have a
Material Adverse Effect.
3.8 Events Subsequent to Date of Company Latest Balance Sheet. Except as
permitted by Section 6.2 or otherwise hereunder, or as consented to in writing
by Buyer (and excluding the Reorganization and other transactions contemplated
herein) or as would not have a Material Adverse Effect, since the date of the
Company Latest Balance Sheet:
(a) Each of the Company and the Subsidiaries has conducted its business in
the Ordinary Course of Business;
(b) Each of the Company and the Subsidiaries has not, except in the
Ordinary Course of Business, sold, leased, transferred, or assigned any of its
properties, rights or assets having a value in excess of two hundred fifty
thousand dollars ($250,000), individually or one million dollars ($1,000,000)
in the aggregate;
(c) Each of the Company and the Subsidiaries has not, except in the
Ordinary Course of Business, entered into any Contract, or agreed to any
material modification, amendment or extension of any Contract, requiring or
likely to require payments to or from the Company and the Subsidiaries in any
one year of more than one million dollars ($1,000,000), individually or five
million dollars ($5,000,000) in the aggregate;
(d) Each of the Company and the Subsidiaries has not, except in the
Ordinary Course of Business (i) entered into any agreement with any employee or
consultant, including without limitation, any Contract relating to employment,
compensation, benefits, termination, retention or severance, pursuant to which
the Company or any Subsidiary is or may become obligated to pay annual wages or
compensation in excess of two hundred fifty thousand dollars ($250,000) to any
employee or consultant; or (ii) granted or announced any increase in the
salaries, bonuses or other benefits payable by the Company and the Subsidiaries
to any of its employees, other than pursuant to any plans, programs or
agreements existing on the date hereof, or normal merit increases to
non-executive officers of the Company or any of the Subsidiaries, in each case,
consistent with the past practices or as a result of any legally-required
changes;
(e) Each of the Company and the Subsidiaries has not (i) made any material
election with respect to Taxes of the Company which was not disclosed on an
income Tax Return, (ii) agreed to an extension or waiver of the limitation
period to any claim or assessment in respect of Taxes or (iii) filed any claim
for a material Tax refund or amended any income or other Tax Return, in any
material respect;
(f) Each of the Company and the Subsidiaries has not made any loan or
advance to any shareholder, officer, director, employee or consultant, other
than advancements of expenses in the Ordinary Course of Business;
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(g) Each of the Company and the Subsidiaries has not made any redemption or
other acquisition of any of its capital stock or made any declaration, setting
aside or payment of any dividend or distribution of any kind with respect to any
equity securities other than from a Subsidiary to the Company;
(h) Each of the Company and the Subsidiaries has not made any material
change to any accounting method or practice or any material change to any
methods of reporting income, deductions or other items for tax purposes;
(i) Each of the Company and the Subsidiaries has not had any cancellation
or termination or received notice of cancellation or termination by a Company
Material Provider, healthcare facility, customer or supplier of its relationship
or a material part of its relationship with the Company or any of the
Subsidiaries other than terminations or cancellations which individually or in
the aggregate would not have a Material Adverse Effect;
(j) Each of the Company and the Subsidiaries has not materially amended its
certificate of incorporation or bylaws;
(k) Each of the Company and the Subsidiaries has not reclassified,
combined, split, or subdivided any outstanding shares of its capital stock or
securities carrying the right to acquire or which are convertible into or
exchangeable or exercisable for, with or without additional consideration, such
capital stock;
(l) Each of the Company and the Subsidiaries has not acquired stock or
other securities or all or any portion of the business of any Person;
(m) Each of the Company and the Subsidiaries has not acquired the assets of
any Person, except acquisitions of assets in the Ordinary Course of Business or
otherwise not in excess of $250,000 in the aggregate;
(n) Each of the Company and the Subsidiaries has not incurred any
indebtedness for borrowed money in excess of $500,000 in the aggregate;
(o) Each of the Company and the Subsidiaries has not merged or consolidated
with any corporation or other entity or acquired any capital stock of any
Person, or consummated any business combination transaction, in each case,
whether in a single transaction or series of related transactions;
(p) Each of the Company and the Subsidiaries has not created, assumed or
suffered to be incurred any Lien of any kind on any of its properties or assets,
other than Permitted Liens and other Liens having a value, in the aggregate, not
in excess of $500,000; and
(q) Each of the Company and the Subsidiaries has not committed to do any of
the foregoing.
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3.9 Accounts Receivable. All Accounts Receivable of the Company and the
Subsidiaries that are reflected on the Company Latest Balance Sheet represent,
as of such date, valid receivables and were incurred in the Ordinary Course of
Business for bona fide transactions.
3.10 Material Contracts. Seller's Disclosure Schedule sets forth a list, as
of June 30, 2005, of each of the following Contracts (collectively, the "Company
Material Contracts"):
(a) Contracts for the future acquisition or sale of any assets involving
two hundred fifty thousand dollars ($250,000), individually or one million
dollars ($1,000,000) in the aggregate, in the case of any related series of
Contracts;
(b) Contracts relating to joint ventures or partnerships;
(c) Contracts (other than Contracts with physicians, hospitals, and other
healthcare providers or otherwise arising in the Ordinary Course of Business)
calling for future aggregate purchase prices or payments to or from the Company
in any one year of more than two hundred fifty thousand dollars ($250,000),
individually or one million dollars ($1,000,000) in the aggregate, in the case
of any related series of Contracts;
(d) Contracts containing covenants of the Company or any of the
Subsidiaries prohibiting or materially limiting the operation or conduct of
the Business or the right to compete in any line of business or prohibiting or
restricting its ability to conduct business with any Person or in any
geographical area, in each case, if such covenants would cause a Material
Adverse Effect;
(e) Contracts relating to the future acquisition by the Company or any of
the Subsidiaries of any operating business, the capital stock of any other
Person or any other assets or property (real or personal) for a purchase price
of more than two hundred fifty thousand dollars ($250,000), individually or one
million dollars ($1,000,000) in the aggregate, in the case of any related series
of Contracts;
(f) Contracts requiring the future payment by or to the Company or any of
the Subsidiaries of a royalty, "finders' fee," brokerage commission, override or
similar commission or fee of more than two hundred fifty thousand dollars
($250,000), individually or one million dollars ($1,000,000) in the aggregate in
any one year (except for payments made in the Ordinary Course of Business);
(g) All collective bargaining agreements and all Contracts relating to
employment, compensation, benefits, termination, retention or severance (other
than standard employee manuals and the like) pursuant to which the Company or
any Subsidiary is obligated to pay wages or compensation to any individual in
excess of two hundred fifty thousand dollars ($250,000);
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(h) Contracts relating to the creation of Liens (other than the Permitted
Liens) or the guarantee of the payment of liabilities or performance of
obligations of any other Person by the Company or any of the Subsidiaries other
than in the Ordinary Course of Business;
(i) Contracts pursuant to which any Person has been granted by the Company
or any of the Subsidiaries the right to use or purchase any Tangible Property or
Intellectual Property and involving the future payment of amounts in excess of
two hundred fifty thousand dollars ($250,000), individually or one million
dollars ($1,000,000) in the aggregate in any year other than in the Ordinary
Course of Business;
(j) Contracts pursuant to which any Person has granted to the Company or
any of the Subsidiaries the right to use or purchase any Tangible Property or
Intellectual Property and involving the future payment of amounts in excess of
two hundred fifty thousand dollars ($250,000), individually or one million
dollars ($ 1,000,000) in the aggregate in any year other than in the Ordinary
Course of Business;
(k) any stock option agreement, restricted stock agreement, phantom stock
agreement, stock appreciation rights or similar agreement, arrangement or
understanding;
(l) all Contracts between the Seller and the Company or any of the
Subsidiaries; and
(m) any other material Contract not entered into in the Ordinary Course of
Business.
The Seller has made available to Buyer true, correct and complete copies of
all of the Company Material Contracts. With respect to each Company Material
Contract: (i) such Company Material Contract is legal, valid, binding and
enforceable in all material respects (except as such enforcement may be limited
by the Enforceability Exceptions), and in full force and effect with respect to
the Company or Subsidiary party thereto and, to the Knowledge of the Seller,
each other party thereto; (ii) the Company or Subsidiary party thereto is not in
breach or material default thereunder, except in immaterial respects that, in no
event would give rise to a right of termination; and (iii) to the Knowledge of
the Seller, no other party thereto is in breach or default thereof.
3.11 Real Property and Tangible Personal Property.
(a) Seller's Disclosure Schedule lists all of the Real Property owned in
fee or leased by the Company or any of the Subsidiaries. Seller's Disclosure
Schedule sets forth a true, correct and complete list, as of the date of this
Agreement, of all Contracts pursuant to which the Company occupies or uses such
Real Property. The Seller has made available to Buyer true, correct and complete
copies of all such Contracts.
(b) The Company and the Subsidiaries has good and marketable title to, or a
valid leasehold interest in, all of its material assets, free and clear of any
Liens, other than Permitted Liens.
-17-
3.12 Intellectual Property.
(a) Except as listed on Seller's Disclosure Schedule, the Company and/or
the Subsidiaries is the owner of or has the license or right to use, all of the
material copyrights, patents, trade secrets, trademarks and other proprietary
rights currently necessary for and utilized in its operations or under
development by or on behalf of the Company and the Subsidiaries (collectively,
the "Company Material Intellectual Property").
(b) To the Knowledge of the Seller, none of the Company Material
Intellectual Property infringes upon or conflicts with the rights of any other
Person. Within the last 12 months, none of the Company and the Subsidiaries has
received notice that any Person claims such infringement or conflict or claims
any ownership interest in any of the Company Material Intellectual Property.
3.13 Tax Matters.
(a) The Company and the Subsidiaries has or will have timely filed with the
appropriate Taxing Authority (taking into account all available extensions) all
Tax Returns concerning material Taxes applicable to it that are required to be
filed by applicable Law in all jurisdictions in which such Tax Returns are
required to be filed prior to the date hereof or the Closing Date, as the case
may be, and all such Tax Returns were or will be true, accurate and complete
in all material respects, and all Taxes shown as due on such Tax Returns have
been paid in full or have been reserved for on the Company Financial
Statements.
(b) There are no material Liens with respect to any Taxes upon any material
assets of the Company and the Subsidiaries, other than (i) Taxes, the payment of
which is not yet due, or (ii) Taxes or charges being contested in good faith by
appropriate proceedings.
(c) None of the Tax Returns of the Company and the Subsidiaries are
currently the subject of audit by any Taxing Authority and, to the Knowledge of
the Seller, there are no threatened audits, examinations, investigations,
appeals, litigation or other proceedings with respect to Taxes of the Company
and the Subsidiaries.
(d) None of the Company and the Subsidiaries has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
The Company and the Subsidiaries is not a party to or bound by any tax
allocation or sharing agreement. Except as set forth in the Seller's Disclosure
Schedule, none of the Company and the Subsidiaries (i) has been a member of an
affiliated group filing a consolidated income tax return or (ii) has any
liability for the Taxes of any person (other than the Company and the
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, state, local, or foreign law), as a transferee or successor,
by contract, or otherwise. No written claim has ever been made by a Taxing
Authority in a jurisdiction where the Company and the Subsidiaries does not file
Returns that the Company and the Subsidiaries is or may be subject to taxation
by that jurisdiction, and the Company and the Subsidiaries has not received any
notice, or request for information, from any such Taxing Authority.
-18-
(e) With respect to periods or portions thereof ending on or prior to the
Closing Date, the Company and the Subsidiaries has complied (and until the
Closing will comply) with all applicable laws relating to the payment and
withholding of Taxes (including withholding and reporting requirements under
Sections 1441 through 1464, 3401 through 3406, 6041 and 6049 of the Code and
similar provisions under any other laws) and, within the time and in the manner
prescribed by law, has withheld from wages, fees and other payments and paid
over to the proper governmental or regulatory authorities all amounts required,
except where the failure to do so would not have a Material Adverse Effect.
(f) No waivers of statutes of limitations in respect of Taxes have been
given or requested in writing with respect to the Company and the Subsidiaries.
(g) None of the assets of the Company and the Subsidiaries (i) is
"tax-exempt use property" within the meaning of Section 168(h) of the Code, (ii)
is property which is required to be treated as being owned by any other person
pursuant to the so-called "safe harbor lease" provisions of former Section
168(f)(8) of the Code; or (iii) directly or indirectly secures any debt the
interest on which is tax exempt under Section 103(a) of the Code.
3.14 Litigation. Except as set forth on Seller's Disclosure Schedule or
arising in the Ordinary Course of Business and for which there is adequate
insurance coverage available (subject to applicable retentions): (a) there is no
Action or Proceeding pending or, to the Knowledge of the Seller, threatened
against the Company and the Subsidiaries or any of its properties, assets,
licenses or Medicare or Medicaid contracts or provider agreements, or any
director, manager, officer or employee of the Company and the Subsidiaries, in
his or her capacity as such; and (b) there is no Order to which the Company and
the Subsidiaries is subject for which the failure to comply would have a
Material Adverse Effect. This Section 3.14 shall not apply to matters under
Environmental Law, which are exclusively the subject of Section 3.18.
3.15 Employees. Seller's Disclosure Schedule sets forth a true, correct and
complete list, as of the date hereof, of the names of each Business Employee
whose annual salary exceeds $250,000.
3.16 Employee and Labor Relations. Except as set forth on Seller's
Disclosure Schedule:
(a) The Company and the Subsidiaries is not a party to any collective
bargaining agreement with respect to any current or former employee of the
Company and the Subsidiaries.
(b) The Company and the Subsidiaries has complied in all material respects
with all Laws relating to employment, employment practices and wages and hours,
except where the failure to comply would not have a Material Adverse Effect;
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(c) There has not been pending or existing during the one year period
preceding the date of this Agreement any strike, slowdown, work stoppage or
lockout involving the Company and the Subsidiaries;
(d) There is no unfair labor practice charge or complaint against the
Company and the Subsidiaries currently pending before the National Labor
Relations Board or similar governmental agency within or outside of the United
States, and no such charge or complaint has been made against the Company during
the one year period preceding the date of this Agreement;
(e) No application or petition for an election of or for certification of a
collective bargaining agent relating to the Company and the Subsidiaries is
pending; and
(f) There has been no charge of discrimination filed against the Company
and the Subsidiaries with the Equal Employment Opportunity Commission or similar
Governmental or Regulatory Body during the one year period preceding the date of
this Agreement.
3.17 Company Benefit Plans.
(a) Seller's Disclosure Schedule sets forth a true, correct and complete
list of all Company Benefit Plans. The Company has made available to Buyer
complete and accurate copies of (i) each Company Benefit Plan (or, in the case
of any unwritten Company Benefit Plan, a brief description thereof), (ii) the
most recent annual report on Form 5500 filed with the Internal Revenue Service
with respect to any Company Benefit Plan (if any such report was required) and
(iii) each trust agreement and group annuity contract relating to any Company
Benefit Plan.
(b) There has been no prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Code (for which a statutory, regulatory,
individual or class exemption does not exist), with respect to any of the
Company Benefit Plans; and each Company Benefit Plan has been administered in
material compliance with its terms and the applicable provisions of ERISA and
all other applicable Laws. Neither the Company nor any entity that is treated
with the Company as a single employer under Section 414 of the Code ("Company
ERISA Affiliate") maintains or contributes to any Company Benefit Plan that is
subject to the provisions of Title IV of ERISA. Neither the Company nor any
Company ERISA Affiliate has any unsatisfied material liability under the Code,
ERISA or any other law in respect of any Company Benefit Plan (except for
liabilities to pay contributions and/or benefits in the normal course of plan
operation). Each Company Benefit Plan that is an employee pension plan that is
intended to be qualified under Section 401(a) of the Code is subject to a
determination letter from the Internal Revenue Service stating it is so
qualified and the Seller has no Knowledge of facts that would be reasonably
likely to cause revocation of such letter. There are no material pending or, to
the Knowledge of the Seller, threatened claims, suits or arbitrations involving
any Company Benefit Plan except any routine claim for benefits under a Company
Benefit Plan.
(c) No manager, officer or employee of the Company and the Subsidiaries
will be entitled to any additional economic benefit (including, without
limitation, the acceleration of the
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time of payment or vesting of any economic benefit) as a result of the
consummation of the transactions contemplated by this Agreement.
(d) None of the Company and the Subsidiaries is a party to any Contract
that, individually or in the aggregate, or when taken together with any payment
that may be made under this Agreement or any agreements contemplated by this
Agreement, could give rise to the payment of any "excess parachute payment"
within the meaning of Section 280G of the Code.
(e) Neither the Company nor any Company ERISA Affiliate has incurred (i)
any liability under Title IV of ERISA, (ii) any liability under Section 412 of
the Code, (iii) any material liability as a result of the failure to comply with
the requirements of COBRA; or (iv) any material liability under Title I of ERISA
for failure to comply with the requirements of law or breach of fiduciary duty.
(f) The Company and the Subsidiaries has paid in full all amounts that are
required under the terms of each Company Benefit Plan or funding arrangement to
have been paid as of the date of this Agreement. The Company and the
Subsidiaries have accrued all liabilities with respect to each employee or
former employee in each Company Benefit Plan in accordance with GAAP.
(g) The Company and the Subsidiaries and each Company Benefit Plan have
properly classified individuals providing services to the Company and the
Subsidiaries as independent contractors, leased employees or employees, as the
case may be.
(h) No Company Benefit Plan provides benefits to any non-U.S. employees.
3.18 Environmental Matters.
(a) To the Knowledge of the Seller, the Company and the Subsidiaries is in
compliance with all applicable Environmental Laws, except where the failure to
comply would not have a Material Adverse Effect;
(b) During the past three (3) year period, the Company and the Subsidiaries
have not received any Environmental Claim that relates in any way to any
Hazardous Materials stored or disposed on, in, under or from, or generated by or
derived or transported from, any of the Real Property of the Company and the
Subsidiaries which is presently outstanding and unresolved;
(c) The Company and the Subsidiaries have all Governmental Authorizations
required for the conduct of their respective businesses under applicable
Environmental Laws, and the Company and the Subsidiaries are in compliance with
all such Governmental Authorizations, except, in each case, where the failure to
do so would not have a Material Adverse Effect;
(d) None of Company and the Subsidiaries is a party to, or subject to the
terms of, any Order that imposes a material liability or obligation under any
Environmental Law;
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The representations in this Section 3.18 are the sole and exclusive
representations of the Seller with respect to all matters arising under or
relating to any Environmental Law.
3.19 Compliance with Law.
(a) Except as set forth on Seller's Disclosure Schedule, the Company and
the Subsidiaries are not in violation in any material respect of any Law or
Order to which it is subject, except for violations which will not cause a
Material Adverse Effect.
(b) The Company and the Subsidiaries possess all Governmental
Authorizations necessary to carry on the business and operations of the Company
and the Subsidiaries as presently conducted, except for such Governmental
Authorizations for which the failure to possess will not have a Material Adverse
Effect. All such Governmental Authorizations have been legally obtained, have
been maintained by the Company, are valid and in full force and are listed in
Seller's Disclosure Schedule. The Company and the Subsidiaries have not received
any notice, written or verbal that any of such Governmental Authorizations will
be cancelled, withdrawn or not renewed at expiration. The execution, delivery
and consummation of the transactions contemplated under this Agreement will not
result in any revocation or termination of any such Governmental Authorizations.
This Section 3.19 shall not apply to matters under Environmental Law or
government healthcare matters, which are exclusively the subject of Sections
3.18 and 3.20, respectively.
3.20 Government Healthcare Matters.
(a) Seller's Disclosure Schedule contains a true and complete list of each
material Contract, including all material amendments, with CMS, or any other
Governmental or Regulatory Body to which the Company and the Subsidiaries is a
party. Each of the Company and the Subsidiaries (i) is in compliance with all
such Contracts, (ii) is not in breach or default of such Contracts and (iii) is
currently meeting all conditions of participation for any and all of its
operations, in each such case other than any non-compliance, breach, default or
failure to meet such conditions which the Company reasonably expects would not
result in the termination of such Contract or, with respect to each such
Contract, the imposition of a fine or corrective action which would require
expenditures in excess of $100,000 in any instance or $250,000 in the aggregate.
(b) Seller's Disclosure Schedule contains (i) a list of the dates of all
surveys performed by any Governmental or Regulatory Body to which the Company
and the Subsidiaries was a party at any time since January 1, 2005, and any
deficiencies for which a plan of correction was required and (ii) a list of all
notices of material noncompliance, requests for material remedial action, return
of overpayment or imposition of fines (whether ultimately paid or otherwise
resolved) by any Governmental or Regulatory Body or as a result of the Company
and the Subsidiaries' participation in the Medicare or Medicaid programs at any
time since January 1, 2005. The Company and the Subsidiaries have prepared and
submitted timely all corrective action plans required to be prepared and
submitted in response to any survey and has
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implemented or will timely implement all of the corrective actions described in
such corrective action plans.
(c) Seller's Disclosure Schedule sets forth a true, accurate and complete
list of all reports regarding all Agency Audits since January 1, 2005. Except as
set forth in Seller's Disclosure Schedule, the Seller has no Knowledge, nor has
it been notified of, that the Company and the Subsidiaries it is currently
subject to any, ongoing Agency Audits.
(d) The Company and the Subsidiaries have not materially violated, and are
not in material violation of, the Medicare provisions of the Social Security
Act. The Company and the Subsidiaries have not violated, and are not in
violation of, the anti-kickback provisions of the Social Security Act, the Xxxxx
anti-referral provisions of the Social Security Act, the False Claims Act, or
the Civil Monetary Penalty Law of the Social Security Act, or similar state or
state laws or applicable record keeping, inventory and other requirements and
regulations. Neither the Company and the Subsidiaries nor the Seller is party
to a Corporate Integrity Agreement, consent order, consent decree or other
settlement agreement with any Governmental or Regulatory Body.
(e) The Company and the Subsidiaries are each a Covered Entity, as such
terms are defined in the Federal Privacy Regulations. The Company and the
Subsidiaries are substantially in compliance with and have not materially
violated any currently applicable provisions of the administrative
simplification section of the Health Insurance Portability and Accountability
Act of 1996, as codified at 42 U.S.C. Sections 1320d through d-8 (collectively,
"HIPAA"), any currently applicable provisions of the regulations contained in 45
C.F.R. Parts 160 and 164, as amended (collectively, the "Federal Privacy
Regulations"), and any currently applicable provisions of the regulations
contained in 45 C.F.R. Parts 160 and 162, as amended (collectively, the "Federal
Transaction Regulations"), and in each instance, the Company and the
Subsidiaries have taken commercially reasonable steps as of the date hereof to
be in compliance with HIPAA and the Federal Privacy Regulations on and after
April 14, 2003.
The representations in this Section 3.20 are the sole and exclusive
representations of the Seller with respect to all matters arising under or
relating to any government healthcare matter.
3.21 Insurance. Seller's Disclosure Schedule contains a true and complete
list of all liability, property, workers' compensation, directors' and officers'
liability, fidelity bond, reinsurance, medical malpractice and other insurance
policies currently in effect that insure the business, operations or employees
of the Company and the Subsidiaries. Each policy listed in Seller's Disclosure
Schedule is valid and binding and in full force and effect, all premiums due
thereunder have been paid and the Company has not received any notice of
cancellation or termination in respect of any such policy. There are no material
pending claims with respect to the Company and the Subsidiaries or their
properties or assets under any such insurance policy. To the Knowledge of the
Seller, the consummation of the transactions contemplated hereunder will not
give rise to a right of termination of any such policy by the insurance company
issuing the same prior to the expiration of the term of such policy.
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3.22 Brokers. Except as set forth in Seller's Disclosure Schedule, no
Person has any valid claim against the Company for a finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
in this Agreement.
3.23 Transactions with Related Parties. Except as set forth in Seller's
Disclosure Schedule or as arising in the Ordinary Course of Business and on
arm's length terms or (i) employment relationships between the Company and the
Subsidiaries and their employees and (ii) remuneration by the Company and the
Subsidiaries for services rendered as a director, officer, employee or manager,
since January 1, 2005, the Company and the Subsidiaries have not purchased,
leased or otherwise acquired any property or obtained any services from, or
sold, leased or otherwise disposed of any property or furnished any services to
any of its agents, representatives, shareholders, employees, officers or
directors or to any Person related thereto by birth, marriage or economic
relationship.
3.24 Absence of Certain Business Practices. Neither the Company and the
Subsidiaries the Seller, nor to the Knowledge of the Seller, any Person acting
for or on behalf of any of them, has directly or indirectly (a) made any
contribution or gift, which contribution or gift is in violation of any
applicable Law; (b) made any bribe, rebate, payoff, influence payment, kickback
or other payment to any Person, private or public, regardless of form, whether
in money, property or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, (iii) to
obtain special concessions or for special concessions already obtained for or in
respect of the Company and the Subsidiaries or any Affiliate of the Company, or
(iv) in violation of any Law; (c) established or maintained any fund or asset
that has not been properly recorded in the books and records of the Company and
the Subsidiaries or made any false or fictitious entries on the books and
records of the Company and the Subsidiaries, or (d) offered, paid, solicited or
received any remuneration in violation of any federal or state program,
including the Medicare and Medicaid Patient and Program Protection Act of 1987,
the Medicare and Medicaid Anti-Kickback Act, as amended, the Federal False
Claims Act, similar state or state laws or state, state or Federal Laws limiting
certain physician referrals.
3.25 Providers. The Seller has previously made available to Buyer true and
correct copies of Contracts (the "Company Material Provider Agreements") with
the Company and the Subsidiaries and its 20 largest physician, physician group,
or hospital or other healthcare facility providers on the basis of revenues for
the twelve months ended December 31, 2004 (the "Company Material Providers").
The Company and the Subsidiaries have not received written notice in the past
ninety (90) days, and to the Knowledge of the Seller there is no reason to
believe, that any Company Material Provider intends to terminate a Company
Material Provider Agreement or cancel its relationship with the Company and the
Subsidiaries. The Company and the Subsidiaries are not in violation of any of
the material terms or conditions of any Company Material Provider Agreement,
other than violations which, individually or in the aggregate, could not
reasonably be expected to result in the termination of such Company Material
Provider Agreement.
3.26 Disclosure. No representation or warranty contained in this Article
III contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make
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the statements herein or therein, in the light of the circumstances under which
they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth on the Buyer's Disclosure Schedule attached hereto (the
section numbers of which are numbered to correspond to the Section numbers of
this Agreement to which they refer, it being understood that an item included on
Buyer's Disclosure Schedule referenced in any Section or subsection of this
Article IV shall be deemed to relate to each other Section or subsection of this
Article IV to the extent such relationship is reasonably apparent) and as
updated on the Closing Date pursuant to Section 6.9, Buyer represents and
warrants to the Seller as follows:
4.1 Organization, Power and Good Standing. Buyer is a limited liability
company, and MMM is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware and the commonwealth of Puerto
Rico, respectively. Buyer has full limited liability company power, and MMM has
full corporate power, and authority to own its properties and to carry on its
business as it is now being conducted. Buyer and MM are duly qualified to
transact business and is in good standing in each jurisdiction wherein the
nature of the business done or the property owned, leased or operated by it
requires such qualification, except where the failure to be so qualified or be
in good standing would not have a Material Adverse Effect. The Buyer has
previously made available to Buyer a copy of the Buyer's Operating Agreement and
the Buyer is not in default in the performance, observation or fulfillment of
its obligations under such organizational document.
4.2 Due Authorization, Execution, Enforceability. The Buyer has full power
and authority to execute this Agreement and the Transaction Documents to which
it is a party. The execution and delivery by the Buyer of this Agreement and the
Transaction Documents to which it is a party, the performance by it of its
obligations hereunder and thereunder, and the consummation by it of the
transactions contemplated herein and therein have been duly and validly
authorized by all necessary limited liability company action on the part of the
Buyer. This Agreement has been, and each of the other Transaction Documents to
which the Buyer is a party, when executed, will be, duly executed and delivered
by the Buyer and constitute the legal, valid and binding obligations of the
Buyer, enforceable against it in accordance with their respective terms, except
as such enforcement may be limited by the Enforceability Exceptions.
4.3 No Conflict; Third Party Consents. Except as set forth on the Buyer's
Disclosure Schedule, the execution and delivery of this Agreement do not, and
the execution and delivery of the other Transaction Documents will not, and the
consummation of the transactions contemplated herein and therein will not (with
or without notice or lapse of time or both), (i) violate or conflict with the
provisions of the Operating Agreement of the Buyer, (ii) except as would not
cause a Material Adverse Effect, result in the imposition of any Lien (other
than a Permitted Lien) upon any of the properties or assets of the Buyer, cause
the acceleration or material modification of any obligation under, create in any
party the right to terminate, constitute a default or breach of, or violate or
conflict with the terms, conditions or provisions of,
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any Buyer Material Contract, or (iii) except as would not cause a Material
Adverse Effect, result in a breach or violation by the Buyer of any of the
terms, conditions or provisions of any Law or Order. Except as set forth on
Buyer's Disclosure Schedule, no consent, approval or authorization of, or
registration or filing with, any Person under any Material Contract is required
in connection with the consummation of the transactions contemplated herein,
except where the failure to obtain the same would not cause a Material Adverse
Effect.
4.4 Government Authorizations. Except where the failure will not cause a
Material Adverse Effect, the execution, delivery and performance by the Buyer of
this Agreement and the other Transaction Documents to which it is a party and
the consummation of the transactions contemplated herein and therein do not and
will not require, on the part of the Buyer, the Buyer, any Governmental
Authorization or any filing with or notification to any Governmental or
Regulatory Body except as required by the HSR Act or as set forth on Buyer's
Disclosure Schedule.
4.5 Litigation. Except as set forth on Buyer's Disclosure Schedule or
arising in the Ordinary Course of Business and for which there is adequate
insurance coverage available (subject to applicable retentions): (a) there is no
Action or Proceeding pending or, to the Knowledge of the Buyer, threatened
against Buyer, MMM or any of its properties, assets, licenses or Medicare or
Medicaid contracts or provider agreements, or any director, manager, officer or
employee of Buyer or MMM, in his or her capacity as such; and (b) there is no
Order to which Buyer is subject for which the failure to comply would have a
Material Adverse Effect.
4.6 Brokers. Except as set forth in Buyer's Disclosure Schedule, no Person
has any valid claim against the Buyer for a finder's fee, brokerage commission
or similar payment in connection with the transactions contemplated in this
Agreement.
4.7 Disclosure. No representation or warranty contained in this Article IV
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein, in the light
of the circumstances under which they were made, not misleading.
4.8 Investment Representations.
(a) The Buyer is an "accredited investor" as such term is defined in Rule
501(a) promulgated under the Securities Act (an "Accredited Investor");
(b) The Buyer has such knowledge, skill and experience in financial,
investment and business matters to be capable of evaluating the merits and risks
of the purchase of the shares of Company Stock and to make an informed decision
relating thereto and to protect its own interests in connection with the
transactions contemplated hereby;
(c) The Buyer will acquire its interest in the Shares for its own account,
for investment purposes only and not with an intent or view towards the further
sale or distribution thereof within the meaning of the Securities Act in any
transaction that would violate the
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registration requirements of the securities laws of the U.S. or of any state or
jurisdiction, including any foreign jurisdiction or state of the United States;
(d) The Buyer is aware that the Shares have not been registered under the
Securities Act and that the Shares may not be transferred, sold, assigned,
hypothecated or otherwise disposed of by the owner thereof unless such
transaction is the subject of a registration statement filed with and declared
effective under the Securities Act or unless an exemption from the registration
requirements under the Securities Act is available. The Buyer hereby represents
and warrants and hereby agrees that all offers and sales of the Shares or any
portion thereof or interest therein owned by the Buyer shall be made only
pursuant to such registration or to an exemption from registration;
(e) The Buyer acknowledges that the purchase or acquisition of its interest
in the Shares involves a high degree of risk;
(f) The Buyer understands that the Shares are being offered, exchanged and
sold pursuant to this Agreement in reliance on exemptions from the registration
requirements of the Securities Act and state securities laws, and that the
Seller is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the applicability of such exemptions and the
suitability of the Buyer to acquire its interest in the Shares; and
(g) In evaluating its investment, the Buyer has consulted its own
investment and/or legal and/or tax advisors.
4.9 Independent Investigation; Access. The Buyer acknowledges that, in
making the decision to purchase the Shares and to acquire its ownership interest
in the Company, it has relied upon independent investigations made by it and has
been given access and the opportunity to examine contracts and documents and an
opportunity to ask questions of and to receive answers from Seller concerning
the Company and the Subsidiaries, and the terms and conditions of such
securities. The Buyer and its advisors, if any, have been furnished with access
to all available materials relating to the business, finances and operations of
the Company and the Subsidiaries which have been requested. The Buyer and its
advisors, if any, have received answers to all such inquiries. Except as set
forth in this Agreement and the other Transaction Documents, the Seller has not
made any representation or warranty to the Buyer on which it has relied to enter
into this Agreement and to consummate the transactions contemplated hereby.
4.10 No Government Recommendation or Approval. The Buyer understands that
no federal or state agency has passed on or made or will pass on or make any
recommendation or endorsement of the Shares or any finding or determination
concerning the fairness or advisability of an investment in such securities.
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ARTICLE V
CONDITION PRECEDENT TO CLOSING/CLOSING DELIVERIES
5.1 Conditions Precedent to the Obligations of Buyer and Closing Deliveries
of Buyer.
(a) The obligations of Buyer to enter into and complete the Closing
hereunder are subject to the fulfillment on or prior to the Closing Date of the
following conditions, any one or more of which may be waived by Buyer:
(i) The representations and warranties of the Seller made in this Agreement
shall be true and correct in all material respects (except for those
representations and warranties which are qualified as to materiality, which
representations and warranties shall be true and correct in all respects) as of
the date of this Agreement and as of the Closing Date, as though made on such
date, except for those representations and warranties which refer to facts
existing at a specific date, which shall be true and correct in all material
respects as of such date; provided that this condition to Closing shall be
deemed satisfied if the Seller has breached a representation or warranty as a
consequence of the occurrence after the date hereof of any fact, event or
circumstance inconsistent with such representation or warranty contained in
Article III, which individually or together with all other facts, events or
circumstances arising after the date hereof and inconsistent with any
representation or warranty contained in Article III, has not had, or would not
reasonably be expected to result in, a Material Adverse Effect and would not
cause the transactions contemplated herein to violate any Law or Order. The
Seller shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement to be performed or complied
with by the Seller at or prior to the Closing. The Seller shall have delivered
to Buyer a certificate, dated the Closing Date, and signed on its behalf by its
Chief Executive Officer and Chief Financial Officer confirming the matters set
forth in the two preceding sentences with respect to itself.
(ii) All approvals and consents shall have been obtained under the HSR Act
in accordance with Section 6.5, or all waiting periods (and any extension
thereof) under the HSR Act applicable to the transactions contemplated herein
shall have expired or shall have been terminated.
(iii) As of the Closing Date, no action, suit or proceeding shall be
pending wherein an unfavorable judgment, decree or order would (a) have the
effect of preventing, materially delaying, making illegal, imposing material
limitations or conditions on or otherwise materially interfering with the
performance of this Agreement or the consummation of any of the transactions
contemplated hereby, or (b) declare unlawful the transactions contemplated by
this Agreement or cause such transactions to be rescinded.
(iv) No temporary restraining order, preliminary or permanent injunction,
cease and desist order or other order issued by any Governmental or Regulatory
Body prohibiting or preventing the transactions contemplated by this Agreement
shall be in effect.
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(v) All approvals and actions of or by, and all notices to, all
Governmental or Regulatory Bodies which are necessary to consummate the
transactions contemplated herein shall have been obtained or taken place, other
than such approvals, actions and notices if the failure to obtain the same,
individually or in the aggregate, would not have a Material Adverse Effect.
(vi) Any and all consents, waivers, approvals, authorizations and notices
from Persons other than a Governmental or Regulatory Body which are necessary to
consummate the transactions contemplated herein shall have been obtained or
delivered, except any such consents, waivers, approvals, authorizations and
notices if the failure to obtain the same, individually or in the aggregate,
would not have a Material Adverse Effect; provided, however, that the consents,
waivers, approvals, authorizations and notices set forth on Seller's Disclosure
Schedule under the heading "Not Required" need not be obtained prior to the
Closing and the consents, waivers, approvals, authorizations and notices set
forth on Seller's Disclosure Schedule under the heading "Required" shall be
obtained prior to Closing in any event and without qualification.
(vii) All corporate proceedings of the Seller required for the consummation
of the transactions contemplated herein, including the Reorganization, and all
documents and instruments required therefore shall be reasonably satisfactory in
form and substance to Buyer and Buyer shall have received from the Company all
such documents and instruments, or copies thereof, certified if requested, as
may be reasonably requested.
(viii) Seller shall have effected the Reorganization in a manner reasonably
satisfactory to the Buyer and the Company shall be the holder of all of the
issued and outstanding shares of capital stock of the Subsidiaries.
(ix) The deliveries set forth in Section 5.2(b) shall have been made by the
Seller.
(b) At or prior to Closing, Buyer shall deliver to the Seller or such other
Person as specified below the following:
(i) Evidence reasonably satisfactory to Seller that (1) a financial
institution reasonably satisfactory to Seller is holding immediately available
United States federal funds in the appropriate amount of the Purchase Price as
contemplated by Sections 2.3 and 2.4 hereof, (2) Buyer has irrevocably
instructed such financial institution to wire transfer said Purchase Price to an
account designated by Seller as provided in Section 2.3 hereof and (3) said
financial institution has acknowledged its unconditional agreement to comply
with such instruction.
(ii) Good standing certificate for the Buyer, dated no earlier than ten
(10) days before the Closing Date, from the applicable jurisdiction of
incorporation, formation or organization, as the case may be.
(iii) Certified copies of the certificate of incorporation, organization or
formation, as the case may be, and each amendment thereto, of Buyer, from the
appropriate Governmental or
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Regulatory Body of its jurisdiction of incorporation, formation or organization,
as the case may be.
(iv) The legal opinion of counsel to Buyer in the form attached as Exhibit
A.
(v) Copies of the resolutions duly adopted by the Board of Directors (or
comparable body) of Buyer authorizing Buyer to execute, deliver and perform this
Agreement and the Transaction Documents and to consummate the transactions
contemplated hereby and thereby, certified by an officer of Buyer as in full
force and effect, without modification or rescission, on and as of the Closing
Date.
(vi) Certificate of the Secretary of Buyer as to the incumbency and
signatures of the officers of such entities executing this Agreement and the
Transaction Documents.
(vii) All other agreements, certificates, instruments, certifications and
documents contemplated by this Agreement or reasonably requested by the Company
in order to fully consummate the transactions contemplated by this Agreement and
carry out the purposes and intent of this Agreement.
5.2 Conditions Precedent to the Obligations of the Seller/Closing
Deliveries of the Seller.
(a) The obligations of the Seller to enter into and complete the Closing
are subject to the fulfillment on or prior to the Closing of the following
conditions, any one or more of which may be waived by the Seller:
(i) The representations and warranties of Buyer made in this Agreement
shall be true and correct in all material respects (except for those
representations and warranties which are qualified as to materiality, which
representations and warranties shall be true and correct in all respects) as of
the date of this Agreement on and as of the Closing Date, as though made on such
date, except for those representations and warranties which refer to facts
existing at a specific date, which shall be true and correct in all material
respects (except for those representations and warranties which are qualified as
to materiality, which representations and warranties shall be true and correct
in all respects) as of such date; provided that this condition to Closing shall
be deemed satisfied if Buyer has breached a representation or warranty as a
consequence of the occurrence after the date hereof of any fact, event or
circumstance inconsistent with such representation or warranty contained in
Article IV which individually or together with all other facts, events or
circumstances arising after the date hereof and inconsistent with any
representation or warranty contained in Article IV, has not had, or would not
reasonably be expected to result in, a Material Adverse Effect and would not
cause the transactions contemplated herein to violate any Law or Order. Buyer
shall have performed or complied in all material respects with all obligations
and covenants required by this Agreement to be performed or complied with by
Buyer at or prior to the Closing. Buyer shall have delivered to the Seller a
certificate, dated the Closing Date, and signed by an authorized officer of
Buyer confirming the matters set forth in the two preceding sentences with
respect to Buyer.
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(ii) All approvals and consents shall have been obtained under the HSR Act
in accordance with Section 6.5 or all waiting periods (and any extension
thereof) under the HSR Act applicable to the transactions contemplated herein
shall have expired or shall have been terminated.
(iii) As of the Closing Date, no action, suit or proceeding shall be
pending wherein an unfavorable judgment, decree or order would (a) have the
effect of preventing, materially delaying, making illegal, imposing material
limitations or conditions on or otherwise materially interfering with the
performance of this Agreement or the consummation of any of the transactions
contemplated hereby, or (b) declare unlawful the transactions contemplated by
this Agreement or cause such transactions to be rescinded.
(iv) No temporary restraining order, preliminary or permanent injunction,
cease and desist order or other order issued by any Governmental or Regulatory
Body prohibiting or preventing the transactions contemplated by this Agreement
shall be in effect.
(v) All approvals and actions of or by, and all notices to, all
Governmental or Regulatory Bodies which are necessary to consummate the
transactions contemplated herein shall have been obtained or taken place, other
than such approvals, actions and notices if the failure to obtain the same,
individually or in the aggregate, would not have a Material Adverse Effect.
(vi) Any and all consents, waivers, approvals, authorizations and notices
from Persons other than a Governmental or Regulatory Body which are necessary to
consummate the transactions contemplated herein shall have been obtained or
delivered, except any such consents, waivers, approvals, authorizations and
notices if the failure to obtain the same, individually or in the aggregate,
would not have a Material Adverse Effect; provided, however, that the consents,
waivers, approvals, authorizations and notices listed on Buyer's Disclosure
Schedule under the heading "Not Required" need not be obtained prior to the
Closing and the consents, waivers, approvals, authorizations and notes listed on
Buyer's Disclosure Schedule under the heading "Required" shall be obtained prior
to Closing in any event and without qualification.
(vii) Buyer each shall have executed and delivered each of the Transaction
Documents to which it is a party.
(viii) All corporate proceedings of Buyer required for the consummation of
the transactions contemplated herein and all documents and instruments required
therefore shall be reasonably satisfactory in form and substance to the Seller
and the Seller shall have received from Buyer all such documents and
instruments, or copies thereof, certified if requested, as may be reasonably
requested.
(ix) The deliveries set forth in Section 5.1(b) shall have been made by
Buyer.
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(x) The Company and the Subsidiaries shall have executed and delivered to
the Seller a full and complete release of all intercompany payables and other
amounts owed or owing by the Seller to the Company or any Subsidiary.
(xi) Buyer shall have delivered to Seller a full and complete release of
any and all guarantees, sureties, indemnities and other similar instruments
pursuant to which the Seller is or may become liable to any Person for amounts
payable by or obligations of the Company or any Subsidiary.
(b) At or prior to Closing, the Seller shall deliver to Buyer the
following:
(i) A good standing certificate for the Seller dated no earlier than ten
(10) days before the Closing Date, from the applicable Governmental or
Regulatory of the state of Tennessee.
(ii) A certified copy of the certificate of incorporation, organization or
formation, as the case may be, and each amendment thereto, of the Seller, from
its jurisdiction of incorporation, formation or organization, as the case may
be.
(iii) Copies of the resolutions duly adopted by the Board of Directors of
Seller authorizing the Seller to execute, deliver and perform this Agreement and
Transaction Documents and to consummate the transactions contemplated herein
contemplated hereby and thereby, certified by the Secretary of the Seller, as in
full force and effect, without modification or rescission, on and as of the
Closing Date.
(iv) Certificates of the Secretary (or another authorized signatory) of the
Seller as to the incumbency and signatures of the officers of the Seller
executing this Agreement and the Transaction Documents.
(v) A stock certificate evidencing the Shares, together with a stock power,
duly executed in blank;
(vi) The minute books, equity transfer books and seal of the Seller.
(vii) The legal opinion of counsel to the Seller in the form attached as
Exhibit B.
(viii) All other agreements, certificates, instruments, certifications and
documents contemplated by this Agreement or reasonably requested by Buyer in
order to fully consummate the transactions contemplated by this Agreement and
carry out the purposes and intent of this Agreement.
ARTICLE VI
COVENANTS
6.1 Examinations and Investigations. The Seller shall with respect to the
Company and the Subsidiaries afford the Buyer and its employees, advisors and
representatives access
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during normal business hours throughout the period prior to the Closing or
earlier termination of this Agreement to all of the books, records, assets,
properties, business and operations of the Company and the Subsidiaries for the
purpose of making such examination of the books and records, financial condition
and operations of the Company and the Subsidiaries as the Buyer may reasonably
request. Any such investigation and examination shall be conducted at reasonable
times upon reasonable prior notice and under reasonable circumstances; provided,
however, that such investigation shall not unreasonably interfere with the
business operations of the Company and the Subsidiaries, and no party shall be
required to grant access or furnish information to the extent that such access
or the furnishing of such information is prohibited by any applicable Law.
6.2 Conduct of Business. From the date hereof through the earlier of the
Closing Date or the termination of this Agreement in accordance with its terms,
and except as otherwise arising or contemplated in connection with the
consummation of the transactions contemplated herein, the Seller shall cause the
Company and the Subsidiaries to (unless the prior consent of Buyer (such consent
not to be unreasonably withheld or delayed) has been obtained):
(a) conduct its businesses in the Ordinary Course of Business or, in the
case in which there is no past practice, as its Board of Directors, as the case
may be, reasonably determines;
(b) take all reasonable steps to preserve and protect its material assets
and properties;
(c) cause all transactions between it, on the one hand, and third parties,
on the other hand, to take place on arm's length terms;
(d) ensure that, except in the Ordinary Course of Business or as required
by Law, no change is made to any agreement with any key employee or consultant,
including without limitation, any Contract relating to employment, compensation,
benefits, termination, retention, or severance;
(e) comply in all material respects, with all Laws and Orders applicable to
it;
(f) not acquire or agree to acquire by merging or consolidating with, or by
purchasing all or substantially all the assets of, or by any other manner, any
business or any Person;
(g) except for normal increases relating to non-executive employees in the
Ordinary Course of Business, not increase the compensation of any director,
officer or other employee or pay any benefit or amount not required under a
Company Benefit Plan or written employment agreement as in effect on the date of
this Agreement to any such Person; and
(h) refrain from taking any action that would result in a breach or
inaccuracy in the representations and warranties set forth herein.
6.3 Payment of Dividends. Notwithstanding the foregoing or any other
provision in this Agreement or any of the Transaction Documents, the Company and
each Subsidiary is expressly permitted, at any time prior to the date of this
Agreement and subsequent to the date of
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this Agreement through and until the Closing, to declare, set aside and pay
dividends and other distributions to the Seller (directly or indirectly);
provided that, after giving effect to such dividends, if and to the extent
required by Law, the Company's and the Subsidiaries' surplus complies with the
minimum surplus requirements of SAP on the Closing Date.
6.4 Commercially Reasonable Efforts. Subject to the terms and conditions
herein provided, the Seller, on the one hand, and Buyer, on the other hand,
agree to use their respective commercially reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, to consummate and
make effective the transactions contemplated herein as promptly as practicable.
Each party agrees to use commercially reasonable efforts to cause the conditions
to its obligations to consummate the transactions contemplated by this Agreement
to be satisfied.
6.5 Regulatory and Other Approvals; Consents.
(a) HSR Act. The Seller, on the one hand, and Buyer, on the other hand,
will as promptly as practicable, but in no event later than five (5) Business
Days following the delivery by the Seller of all information with respect to it
and its Affiliates required therefore and/or as reasonably requested by Buyer,
file with the United States Federal Trade Commission (the "FTC") and the United
States Department of Justice (the "DOJ") the notification and report form, if
any, required for the transactions contemplated herein and any supplemental
information requested in connection therewith pursuant to the HSR Act. Any such
notification and report form and supplemental information will be in substantial
compliance with the requirements of the HSR Act. The Seller, on the one hand,
and Buyer, on the other hand, shall furnish to the other such necessary
information and reasonable assistance as the other may request in connection
with its preparation of any filing or submission which is necessary under the
HSR Act. The Seller, on the one hand, and Buyer, on the other hand, shall keep
each other apprised of the status of any communications with, and inquiries or
requests for additional information from, the FTC and the DOJ and shall comply
promptly with any such inquiry or request. The Seller, on the one hand, and
Buyer, on the other hand, will use their respective commercially reasonable
efforts to obtain any clearance required under the HSR Act for the transactions
contemplated herein, and to request early termination under the HSR Act;
provided, however, that commercially reasonable efforts shall not include the
Seller or the Buyer entering into a consent decree containing its or their
agreement to hold separate or divest any assets in order for the Closing to
occur. In addition to the foregoing, the Seller, on the one hand, and Buyer, on
the other hand, shall file as soon as practicable following the date hereof any
required notifications under any applicable foreign antitrust or competition law
or regulation.
(b) Other Authorizations and Consents. As promptly as practicable after the
date hereof, the Seller, on the one hand, and Buyer, on the other hand, shall
make all other filings with Governmental or Regulatory Bodies, and use
reasonable best efforts to obtain all permits, approvals, authorizations and
consents of all third parties, required to consummate the transactions
contemplated herein. The Seller, on the one hand, and Buyer, on the other hand,
shall furnish promptly to each other all information that is not otherwise
available to the other party and that such party may reasonably request in
connection with any such filing.
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6.6 Publicity. The Seller, on the one hand, and Buyer, on the other hand,
agree that, from the date hereof through the Closing Date, no public release or
announcement concerning the transactions contemplated herein shall be issued
without the prior written consent of the other such parties, except as such
release or announcement may be required by any Law or Order, in which case the
party required to make the release or announcement shall allow the other party
reasonable time to comment on such release or announcement in advance of such
issuance, to the extent practicable under the circumstances.
6.7 Confidentiality. The parties acknowledge that the information being
provided to one another in connection with the transactions contemplated herein
is subject to the terms of the Confidentiality Agreement, the terms of which are
incorporated herein by reference.
6.8 Certain Tax Matters.
(a) The Buyer shall be responsible for payment of all transfer, excise,
stamp, sales, use, recording or similar taxes or fees arising out of the
transactions contemplated hereunder.
(b) Other than as set forth in Section 6.8(a) and subject to the
limitations upon Seller's indemnification obligations contained herein, the
Seller shall be liable for and shall indemnify the Company and the Subsidiaries
and the Buyer for Taxes of the Seller and the Subsidiaries for any taxable years
or periods that end on or before the Closing Date and, with respect to any
taxable years or periods beginning before and ending after the Closing Date, the
portion of such taxable years or periods ending on and including the Closing
Date (except to the extent such Taxes are reflected, by accrual or otherwise, in
the Closing WC set forth in the Statement of Actual WC).
(c) Following the Closing Date, the Buyer shall be liable for and shall
indemnify the Seller for Taxes of the Company and the Subsidiaries for any
taxable years or periods that begins after the Closing Date and, with respect to
any taxable years or periods beginning before and ending after the Closing Date,
the portion of the taxable years or periods beginning on the day after the
Closing Date.
(d) For purposes of Sections 6.8 (b) and (c), whenever it is necessary to
determine the liability for Taxes for a portion of a taxable year or period that
begins before and ends after the Closing Date, the determination of such Taxes
for the portion of year or period ending on, and the portion of the year or
period beginning after, the Closing Date, shall be determined using the closing
of books method. Any payment under this Section 6.8 will be treated for Tax
purposes as an adjustment to the Purchase Price.
(e) The Seller at its expense shall cause the Seller to file when due all
Tax returns that are required to be filed by the Seller for taxable years or
periods ending on or before the Closing Date, and the Buyer shall file or cause
to be filed when due all other Tax returns that are required to be filed by or
with respect to the Company and the Subsidiaries.
(f) After the date hereof, the Buyer and the Seller shall:
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(i) assist in all reasonable respects (and cause their respective
Affiliates to assist) the other party in preparing any Tax returns, tax
elections, or other tax filings which such party is responsible for preparing
and filing in accordance with this Section 6.8;
(ii) cooperate in all reasonable respects in preparing for any audits of,
or disputes with Taxing Authorities regarding, and Tax returns of the Company
and the Subsidiaries;
(iii) make available to the other party and to any Taxing Authority as
reasonably requested all information, records and documents relating to Taxes of
or relating to the Company and the Subsidiaries, except to the extent determined
by counsel for the party involved to be privileged or work product;
(iv) provide timely notice to the other party in writing of any pending or
threatened Tax audit or assessments of or related to the Seller for taxable
periods for which the other may have a liability under this Section 6.8;
(v) file on a timely basis, all Tax elections, reports, returns and other
items required hereunder and assist in all reasonable respects (and cause their
respective Affiliates to assist) the other party in preparing and filing all
such elections, reports returns and other items; and
(vi) furnish the other with copies of all correspondence received from any
Taxing Authority in connection with any Tax audit or information request with
respect to any such taxable period.
(g) Tax Advice and Reliance. None of the parties (nor any of the parties'
respective counsel, accountants or other representatives) has made or is making
any representations to any other party (or to any other party's counsel,
accountants or other representatives) concerning the consequences of the
transactions contemplated by this Agreement under applicable Tax Laws. Each
party has relied solely upon the Tax advice of its own employees or of
representatives engaged by such party and not on any such advice provided by any
other party hereto.
(h) Indemnification for Post-Closing Transactions. Buyer agrees to
indemnify the Seller for any additional tax owed by the Seller resulting from
any transaction engaged in by Buyer occurring on or after the Closing Date.
6.9 Update to Schedules. The Seller shall give prompt written notice to
Buyer, and Buyer shall give prompt written notice to the Seller, of (i) the
occurrence (including the discovery of facts after the execution of this
Agreement not known as of the date hereof to the disclosing party) or
non-occurrence of any event, the occurrence or non-occurrence of which would, or
would be reasonably likely to, cause, (x) any representation or warranty
contained in Article III or IV hereof to be untrue or inaccurate in any material
respect or (y) any covenant or agreement contained in this Agreement not to be
complied with in any material respect and (ii) any failure to satisfy any
condition to the consummation of the transactions contemplated by this
Agreement; provided however that, except as otherwise provided herein, the
delivery of any notice pursuant to this Section shall not (x) operate to in any
way modify or cure any breach of the representations and warranties made by the
Seller or Buyer herein or (y) limit or otherwise
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affect the remedies available hereunder to the party receiving such notice,
including the right not to consummate the transactions contemplated by this
Agreement if the matters referred to in the notice would cause any of the
conditions to the receiving party's obligations not to be fulfilled.
ARTICLE VII
TERMINATION OF AGREEMENT
7.1 Termination. This Agreement may be terminated prior to the Closing as
follows:
(a) By the mutual written consent of the Seller, on the one hand, and
Buyer, on the other hand;
(b) by the Buyer in the event of a material breach of this Agreement by the
Seller which would cause the conditions to the Buyer's obligations hereunder not
to be satisfied and which has not been cured within 30 days after the giving of
written notice to the Seller or a material breach which is incapable of being
cured prior to September 30, 2005;
(c) by the Seller in the event of a material breach of this Agreement by
the Buyer which would cause the conditions to the Seller's obligations hereunder
not to be satisfied and which has not been cured within 30 days after the giving
of written notice to the Buyer or which is incapable of being cured prior to
September 30, 2005;
(d) By either the Seller, on the one hand, or Buyer, on the other hand, if
the Closing shall not have occurred by September 30, 2005; provided, however,
that the right to terminate this Agreement under this subsection (d) shall not
be available to Buyer, on the one hand, or to the Seller, on the other hand, if
either of such parties seeking such termination has failed to fulfill any
obligation under this Agreement and such failure shall have been the cause of,
or resulted in, the failure of the Closing to occur prior to such date; or
(e) By either the Seller, on the one hand, or Buyer, on the other hand, if
(i) the transactions contemplated hereby shall violate any Order that shall have
become final and nonappealable or (ii) there shall be a Law which makes the
transactions contemplated hereby illegal or otherwise prohibited.
7.2 Effect of Termination. Each party's right of termination under Section
8.1 is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of such right of termination will not be an election
of remedies. In the event of termination of this Agreement pursuant to Section
7.1, all obligations of the parties under this Agreement will terminate, except
that the obligations of the parties in this Section 7.2, Section 6.6 (relating
to publicity) and Section 6.7 (relating to confidentiality) will survive;
provided, however, that, if this Agreement is terminated because of a breach of
this Agreement by a non-terminating party or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of the non-terminating party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies in respect of any such prior breach will survive such termination
unimpaired.
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ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Survival of Indemnification Rights. Subject to the limitations and
other provisions of this Agreement, the representations and warranties of the
Seller and the Buyer contained in this Agreement shall survive the Closing and
remain in full force and effect for a period of eighteen (18) months following
the Closing Date and, if a claims notice has been provided by such date, shall
remain in fall force and effect until final resolution thereof; provided,
however, the following representations and warranties shall survive and remain
in full force and effect for the period indicated:
(i) Sections 3.2 and 4.2 (Due Authorization) and 3.5 (Capitalization),
indefinitely; and
(ii) Sections 3.13 (tax matters) until sixty (60) calendar days after
expiration of the applicable statute of limitations (including any extension
thereof).
The provisions of this Article VIII shall survive for so long as any other
Section of this Agreement shall survive.
This Section 8.1 shall not limit any (a) covenant or agreement of the
parties which by its terms contemplates performance after the Closing or the
bringing of any cause of action claiming based upon or arising out of a breach
thereof, or (b) any Loss (as defined below) that resulted from any fraudulent
acts.
8.2 Seller Indemnification Obligations. Subject to the provisions of this
Article VIII, from and after the Closing, the Seller (the "Seller Indemnifying
Party") shall indemnify, defend and hold harmless Buyer and its parents and
subsidiaries and their directors, officers, employees, shareholders, members,
managers, agents, affiliates and assigns (collectively, the "Buyer Indemnified
Parties") from and against and pay on behalf of or reimburse such party in
respect of, as and when incurred, all actual losses, liabilities, demands,
claims, actions or causes of action, costs, damages, judgments, debts,
settlements, assessments, deficiencies, Taxes, penalties, fines or expenses,
whether or not arising out of any claims by or on behalf of a third party,
including, without limitation, interest, penalties, reasonable attorneys' fees
and expenses and all reasonable amounts paid in investigation, defense or
settlement of any of the foregoing (collectively, "Losses") which any such party
may suffer, sustain or become subject to, as a result of, in connection with, or
relating to or by virtue of:
(i) any breach of the covenants of the Seller set forth herein;
(ii) any breach of or inaccuracy in the representations and warranties of
the Seller set forth herein; or
(iii) enforcing Buyer's rights under this Agreement.
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8.3 Buyer Indemnification Obligations. Subject to the provisions of this
Article VIII, from and after the Closing, the Buyer (the "Buyer Indemnifying
Party") shall indemnify, defend and hold harmless the Seller and its parents and
subsidiaries and their directors, officers, employees, shareholders, members,
managers, agents, affiliates and assigns (collectively, the "Seller Indemnified
Parties") from and against and pay on behalf of or reimburse such party in
respect of, as and when incurred, all Losses which any such party may suffer,
sustain or become subject to, as a result of, in connection with, or relating to
or by virtue of:
(i) any breach of the covenants of the Buyer set forth herein;
(ii) any breach of or inaccuracy in the representations and warranties of
the Buyer set forth herein; or
(iii) enforcing the Seller's rights under this Agreement.
8.4 Indemnification Procedure.
(a) If the Buyer Indemnified Parties or the Seller Indemnified Parties
intend to seek indemnification pursuant to Section 8.2 or Section 8.3 hereof, as
applicable (the "Indemnified Party"), such Indemnified Party shall promptly
notify the other part(ies) required to provide indemnification pursuant to such
Section 8.2 or Section 8.3 hereof, as applicable (the "Indemnifying Party"),
in writing of such claim. The Indemnified Party will provide the Indemnifying
Party with prompt notice of any third party claim in respect of which
indemnification is sought. The failure to provide either such notice will not
affect any rights hereunder except to the extent the Indemnifying Party is
materially prejudiced thereby.
(b) If such claim involves a claim by a third party against an Indemnified
Party, the Indemnifying Party, may, within thirty (30) calendar days after
receipt of such notice and upon notice to the Indemnified Party, assume, through
counsel of its own choosing and at its own expense, the settlement or defense
thereof, and the Indemnified Parties shall reasonably cooperate in connection
therewith; provided that the Indemnified Parties may participate at its own cost
in such settlement or defense through counsel chosen by it; provided further
that if the Indemnified Party reasonably determines that representation by the
indemnifying Party's counsel of the indemnifying Party and the Indemnified
Parties may present such counsel with a conflict of interests, then the
Indemnifying Party shall pay the reasonable fees and expenses of the Indemnified
Party's counsel. Notwithstanding anything in this Section 9.4 to the contrary,
no Indemnifying Party may, without the prior written consent of the Indemnified
Party, settle or compromise any action or consent to the entry of any judgment,
such consent not to be unreasonably withheld or delayed, unless the Indemnified
Party obtains a complete release and is not required to pay any sum or make any
admission whatsoever or take any other action in connection with such settlement
other than delivering a customary release and discontinuance in which case no
such consent shall be required, and such settlement, compromise or, consent will
have no adverse, binding effect on the Indemnified Party or its Affiliates. The
Indemnified Party shall not pay or settle any such claim without the
Indemnifying Party's consent, such consent not to be unreasonably withheld. If
the Indemnifying Party is not contesting such claim in good faith, then the
Indemnified Party may conduct and control, through counsel of its own choosing
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and at the expense of the Indemnifying Party, the settlement or defense thereof,
and the Indemnifying Party shall cooperate with it in connection therewith. The
failure of the Indemnified Party to participate in, conduct or control such
defense shall not relieve the Indemnifying Party of any obligation it may have
hereunder.
8.5 Calculation of Indemnity Payments. The amount of any Loss for which
indemnification is provided under this Article VIII shall be (a) increased to
take account of any net Tax cost actually incurred by the Indemnified Party
arising from the receipt or accrual of indemnity payments hereunder (grossed up
for such increase), and (b) reduced to take account of any net Tax benefit
actually realized by the Indemnified Party arising from the incurrence of the
Loss that gave rise to such indemnity claim.
8.6 Tax Treatment of Indemnification. Unless otherwise required by Law, for
all Tax purposes the parties hereto agree to treat (and shall cause each of
their respective Affiliates to treat) any indemnity payment under this Agreement
as an adjustment to the Purchase Price, and no party shall take any position
inconsistent with such characterization.
8.7 Indemnification Amounts.
(a) Notwithstanding any provision to the contrary contained in this
Agreement, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party for any Losses pursuant to this Article VIII to the extent
they are the result of any breach of any representation or warranty made by or
on behalf of the Indemnifying Party unless and until the dollar amount of all
Losses in the aggregate exceed five million dollars ($5,000,000) (the "Basket
Amount"), in which case the Indemnifying Party will be obligated to indemnify
the Indemnified Party for the total amount of Losses including any amounts which
would otherwise not be required to be paid by reason of this Section 8.7(a).
(b) Notwithstanding anything to the contrary contained herein, in no event
shall the aggregate indemnification obligations of the Seller or any Seller
Indemnifying Party pursuant to Section 8.2 or otherwise arising under this
Agreement exceed twenty million dollars ($20,000,000); provided further that
notwithstanding the foregoing, the Indemnified Party's right to seek
indemnification hereunder for any Losses as a result of, in connection with, or
relating to or by virtue of: (y) criminal activity or fraud of the other party,
or (z) any breach of or inaccuracy in the representations, Warranties or
covenants set forth in Section 3.2 (Due Authorization), 3.5 (Capitalization),
Section 3.13 (tax matters), or Section 6.8 (Certain Tax Matters) shall not be
subject to, or limited by, the limits contained in this Section 8.7(b).
(c) Except to the extent payable to a third party asserting a third party
indemnification claim, under no circumstances shall an indemnifying party be
liable for any consequential, indirect or punitive damages for any
misrepresentation or breach of any provision of or any other matter arising
pursuant to this Agreement or the Transaction Documents.
(d) For purposes of computing any Loss under this Article VIII with respect
to any representation, warranty, covenant or agreement that is qualified as to
materiality or Material Adverse Effect, the amount of the Loss shall be the
entire Loss arising by reason of the breach of
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such representation, warranty, covenant or agreement and not merely the amount
of such Loss in excess of an amount that constitutes a material Loss or in
excess of an amount that constitutes a Material Adverse Effect; it being
understood and agreed that, notwithstanding anything to the contrary contained
in this Section 8.7, the Basket Amount shall continue to remain applicable.
8.8 Exclusive Remedies. Except as described in Section 8.7 and with respect
to claims as a result of, in connection with, relating to or by virtue of
Section 6.8, criminal acts or fraud, for which the parties hereto may seek
specific performance or injunctive relief, the sole and exclusive remedy of a
party to this Agreement from and after the Closing for any claim arising under
this Agreement against the other parties hereto shall be the indemnification
provisions of this Article VIII.
8.9 No Double Recovery. If any Person has been actually indemnified or
reimbursed for all or a portion of Losses under any provision of this Agreement
other than Section 8.2 or Section 8.3, then the amount of Losses under Section
8.2 or Section 8.3 shall be reduced by the amount so indemnified or reimbursed
under such other section.
8.10 Insurance. In the event any Losses by an Indemnified Party are covered
by insurance in favor of such Indemnified Party or an Affiliate of such
Indemnified Party, the Indemnified Party shall not be entitled to recover from
the Indemmfying Party (and shall refund amounts received up to the amount of
indemnification actually received) with respect to such Losses to the extent,
and only to the extent, of the amount by which the insurance payment in fact
recovered by the Indemnified Party in respect of such indemnification claim
exceeds all costs and expenses incurred in connection with such recovery and any
efforts relating thereto. The Company and the Subsidiaries, Buyer and the Seller
shall seek full recovery under all insurance policies covering any Loss to the
same extent as they would if such Loss were not subject to indemnification
hereunder. If an insurance or other recovery is made by the Company any
Subsidiary, the Buyer or the Seller or any of their Affiliates with respect to
any Loss for which any such Person has been indemnified hereunder, then a refund
equal to the aggregate amount of the recovery (net of all direct collection
expenses) shall be made promptly to the party that had made the original
indemnification payment. Any such payments shall be treated as an adjustment to
the Purchase Price.
8.11 Disclosure and Knowledge. Notwithstanding anything contained herein,
neither the Seller, on the one hand, nor the Buyer, on the other hand, shall be
liable for any breach of any representation or warranty made by it in this
Agreement if, and to the extent, it has fully disclosed such breach to the other
party prior to the Closing Date and such other party elects to consummate the
transactions described herein notwithstanding such breach (it being the intent
and agreement of the parties that the election by a party to consummate the
transactions described herein with Knowledge of a breach of a representation or
warranty by the other party shall constitute the waiver of such breach).
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ARTICLE IX
MISCELLANEOUS
9.1 Expenses. Whether or not the transactions contemplated hereby are
consummated each party to this Agreement will bear its respective fees, costs
and expenses incurred in connection with the preparation, negotiation, execution
and performance of this Agreement or the transactions contemplated hereby
(including without limitation legal, accounting and other professional fees).
Without limiting the foregoing, Buyer will pay and be solely responsible for all
filing fees payable under the HSR Act and any foreign antitrust or competition
law or regulation Each of the Seller, on the one hand, and Buyer, on the other
hand, agree to indemnify and hold the other harmless from any claim or demand
for commissions or other compensation by any broker, finder, financial
consultant or similar agent employed by the other party.
9.2 Governing Law. This Agreement will be governed by and construed in
accordance with the internal laws of the State of Delaware applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles that would require the application of any
other law.
9.3 Jurisdiction; Service of Process. Any Action or Proceeding arising out
of or relating to this Agreement or any transaction contemplated hereby may be
brought in the federal and state courts located in the State of Delaware, and
each of the parties irrevocably submits to the exclusive jurisdiction of such
courts in any such Action or Proceeding, waives any objection it may now or
hereafter have to venue or to convenience of forum, agrees that all claims in
respect of the Action or Proceeding shall be heard and determined only in any
such court and agrees not to bring any action or proceeding arising out of or
relating to this Agreement or any transaction contemplated hereby in any other
court. The parties agree that either or both of them may file a copy of this
paragraph with any court as written evidence of the knowing, voluntary and
bargained agreement between the parties irrevocably to waive any objections to
venue or to convenience of forum. Process in any Action or Proceeding referred
to in the first sentence of this Section may be served on any party anywhere in
the world.
9.4 Attorneys' Fees. If any Action or Proceeding for the enforcement of
this Agreement is brought with respect to or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions
hereof, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees, expenses and other costs incurred in that Action or
Proceeding, in addition to any other relief to winch it may be entitled.
9.5 Waiver; Remedies Cumulative. The rights and remedies of the parties to
this Agreement are cumulative and not alternative. Neither any failure nor any
delay by any party in exercising any right, power or privilege under this
Agreement or any of the other Transaction Documents will operate as a waiver of
such right, power or privilege, and no single or partial exercise of any such
right, power or privilege will preclude any other or further exercise of such
right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, except as
otherwise provided herein (a) no claim or right arising out of this Agreement or
any of the other Transaction Documents can be discharged by one party, in whole
or in part, by a waiver or renunciation of the claim or right unless in writing
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signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of that party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or any of
the other Transaction Documents.
9.6 Notices. All notices or other communications hereunder shall be in
writing and shall be deemed given (a) when delivered personally to the
recipient, (b) one (1) Business Day after being sent to the recipient by
reputable overnight courier service (charges prepaid), (c) upon
machine-generated acknowledgment of receipt after transmittal by facsimile if so
acknowledged to have been received by 5:00 p.m. on a Business Day at the
location of receipt and otherwise on the next following Business Day, provided
that such notice, demand or other communication is also deposited within 24
hours thereafter with a reputable overnight courier service (charged prepaid)
for delivery to the same recipient, or (d) five (5) days after being mailed to
the recipient by certified or registered mail, return receipt requested and
postage prepaid, to the parties at the following addresses (or at such other
addresses for a party as shall be specified by like notice):
if to Buyer, to:
c/o North American Medical Management California, Inc.
0000 X. Xxxxxx Xxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Telecopy: _________________________
Telephone: ________________________
Attention.: _______________________
if to the Seller, to:
Aveta Health, Inc.
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxx
Telecopy: 000-000-0000
Telephone: 000-000-0000
with a copy to:
Aveta Health, Inc.
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: General Counsel
Telecopy: 000-000-0000
Telephone: 000-000-0000
9.7 Assignment. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that this Agreement and
the rights and obligations hereunder shall not be assignable or transferable by
any party without the prior written consent of the other parties
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hereto, except that Buyer's rights hereunder may be assigned for collateral
purposes to any financing party and may be assigned to any Affiliate of Buyer.
9.8 No Third-Party Beneficiaries. Except as expressly provided in this
Agreement, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any Person, other than the parties hereto and such assigns,
any legal or equitable rights, remedy or claim hereunder.
9.9 Amendments. No amendment to this Agreement shall be effective unless it
shall be in writing and signed by each of the parties hereto.
9.10 Interpretation; Exhibits and Schedules. The headings contained in this
Agreement, in any Exhibit or Schedule hereto and in the table of contents to
this Agreement, are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Except when the context
otherwise requires, references to Sections, Articles, Exhibits or Schedules
contained herein refer to Sections, Articles, Exhibits or Schedules of this
Agreement. All Exhibits and Schedules annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein. Any capitalized terms used in any Schedule or Exhibit, but not otherwise
defined therein, shall have the meaning as defined in this Agreement.
9.11 Entire Agreement. This Agreement (including any Exhibit or Schedule
attached hereto) and the Transaction Documents contain the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior oral and written agreements and understandings
relating to such subject matter.
9.12 Severability. If any provision of this Agreement or the application of
any such provision to any Person or circumstance shall be held invalid, illegal
or unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof.
9.13 Mutual Drafting. The parties hereto are sophisticated and have been
represented by lawyers who have carefully negotiated the provisions hereof. As a
consequence, the parties do not intend that the presumptions of any laws or
rules relating to the interpretation of contracts against the drafter of any
particular clause should be applied to this Agreement and therefore waive their
effects.
9.14 Counterparts; Facsimile. This Agreement may be executed in one or more
counterparts, including by facsimile, all of which shall be considered one and
the same agreement, and shall become effective when one or more such
counterparts have been signed by each of the parties and delivered to the other
party.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Stock Purchase Agreement on the date first above
written.
AVETA HEALTH, INC. AVETA HOLDINGS, LLC
By: Care Enterprises III, LLC, its
Managing Member
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Xxxxxx X. Xxxxxx, Vice President
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx
Executive Vice President
