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STOCK PURCHASE AGREEMENT
BETWEEN
PREFERRED HEALTH CHOICE, INC.
AND
UNITED PAYORS & UNITED PROVIDERS, INC.
OCTOBER 22, 1996
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STOCK PURCHASE AGREEMENT
Agreement made as of October 22, 1996, but effective as of September
30, 1996, between Preferred Health Choice, Inc., an Illinois Corporation ("PHC")
and a wholly-owned indirect subsidiary of Pioneer Financial Services, Inc., a
Delaware corporation ("PFS"), and United Payors & United Providers, Inc., a
Delaware corporation ("Buyer").
RECITALS
WHEREAS, PHC owns an aggregate of 8,499,998 shares (the "Shares") of
Common Stock, without par value, constituting all of the issued and outstanding
capital stock of National Health Services, Inc., a Wisconsin corporation
("NHS");
WHEREAS, NHS owns an aggregate of 1,000 shares of capital stock of
Healthcare Review Corporation, a Kentucky corporation ("HRC"), which shares
represent all of the issued and outstanding shares of capital stock of HRC;
WHEREAS, NHS and PFS desire to enter into a Health Care Administrative
Services Agreement, dated as of October 24, 1996 (the "Services Agreement");
WHEREAS, NHS and National Group Life Insurance Company, an Illinois
corporation and an affiliate of PHC ("NGL"), desire to enter into a Lease, dated
as of October 24, 1996 (the "Lease ");
WHEREAS, Buyer desires to acquire from PHC, and PHC desires to sell to
Buyer, all of the Shares.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and covenants herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
THE TRANSACTION
1.1 On the terms and subject to the conditions set forth herein, at the
closing (the "Closing") on the Closing Date (as hereinafter defined):
(a) PHC shall sell, transfer and assign to Buyer, and Buyer shall
purchase from PHC, the Shares for a purchase price (the
"Purchase Price") of Five Million Dollars ($5,800,000) and the
warrants (the "Warrants") described in the forms of the
Warrant Certificates attached as Exhibits A-l and A-2 hereto
(the "Warrant Certificates").
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(b) Buyer shall pay the Purchase Price as follows:
(i) Buyer shall pay to PHC Five Million Dollars
in the form of a wire transfer to a bank account
designated by PHC of readily available U.S. funds,
(ii) Buyer shall (A) issue to PHC the Warrants, (B)
execute and deliver to PHC the Warrant Certificates,
and (C) thereafter perform its obligations under the
Warrant Certificates fully and in a timely manner.
(c) The parties shall deliver the documents and instruments and
take the actions referred to in Article VII hereof.
(d) The closing shall be held at the offices of Buyer at 2:00
p.m., local time, on October 23, 1996 or at such other date,
time and place as the parties may agree in writing (the
"Closing Date"); however, the transactions contemplated herein
shall be deemed for all purposes to have taken place, and to
be effective, as of September 30, 1996.
1.2 On the terms, and subject to the conditions set forth
herein, immediately following the Closing:
(a) PFS and NHS shall enter into the Services Agreement.
(b) NGL and NHS shall enter into the Lease.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PHC
Except as may otherwise be set forth in a letter (the "PHC DISCLOSURE
LETTER") delivered to Buyer concurrently with the execution and delivery of this
Agreement and initialed for identification purposes by Buyer and PHC, PHC hereby
represents and warrants to Buyer, its successors and assigns as follows:
2.1 Organization and Qualification.
-------------------------------- Paragraph 2.1 of the PHC
Disclosure Letter lists the name and jurisdiction of incorporation of NHS,
HRC and each of NHS' other direct and indirect Subsidiaries (the subsidiaries
listed in paragraph 2.1 of the PHC Disclosure Letter are herein referred to
collectively as the "Subsidiaries" and individually as a "Subsidiary"). PHC, NHS
and each Subsidiary is a corporation and in good standing as a domestic
corporation under the laws of the state of its incorporation, and, to the
knowledge of PFS, is duly qualified to do business as a foreign corporation
and is in good standing in each other jurisdiction in which the character
of its properties or the nature of its business makes such qualification
necessary, except in jurisdictions, if any, where the failure to be so qualified
would not prevent PHC from fulfilling
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its obligations hereunder or constitute or would result in a Material Adverse
Event with respect to NHS. As used in this Agreement, the term "MATERIAL ADVERSE
EVENT" when used in reference to NHS and/or its Subsidiaries shall mean any
event, circumstance, condition, development or occurrence causing, resulting in
or having (or, with the passage of time, reasonably likely to cause, result in
or have) a material adverse effect on the condition (financial or otherwise),
business, properties, business relationships, prospects or results of operations
of NHS and its Subsidiaries taken as a whole. NHS and each Subsidiary has the
requisite corporate power and authority to own, use or lease its respective
properties and to carry on its respective business as now being conducted.
2.2 Capitalization of NHS.
---------------------- The authorized, issued and outstanding
capital stock of NHS and each Subsidiary are as set forth in paragraph 2.2 of
the NHS Disclosure Letter. All of the issued and outstanding shares of capital
stock of NHS and each Subsidiary have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights (whether created
by statute or otherwise). Except as disclosed in paragraph 2.2 of the NHS
Disclosure Letter, there are no options, warrants or other rights, commitments
or agreements of any character which call for the issuance of shares of capital
stock of NHS or any Subsidiary or any securities, instruments or rights
convertible into or exchangeable for shares of capital stock or other securities
of NHS or any Subsidiary. Neither NHS nor any Subsidiary has any obligation,
contingent or otherwise, to register any securities of NHS or any Subsidiary
under the federal securities laws.
2.3 Title to Shares.
---------------- All of the issued and outstanding shares of
capital stock of NHS are, and immediately prior to the Closing Date will be,
owned of record and beneficially by PHC, free and clear of all liens, charges,
pledges, encumbrances, equities, rights of first refusal, options or other
claims of any nature, except liens for current taxes not yet delinquent. All of
the issued and outstanding shares of capital stock of each Subsidiary are, and
immediately prior to the Closing Date will be, owned of record and beneficially
by NHS, free and clear of all liens, charges, pledges, encumbrances, equities,
rights of first refusal, options or other claims of any nature, except liens for
current taxes not yet delinquent.
2.4 Authority.
---------
(a) PHC has the requisite corporate power and authority to
execute and deliver this Agreement an to fulfill its
obligations hereunder. The execution and delivery of
this Agreement by PHC and the performance of its obligations
hereunder have been duly and validly authorized by the Board
of Directors and sole shareholder of PHC, and no other
corporate proceedings on the part of PHC are necessary, as
matter of law or otherwise, in connection therewith. This
Agreement has been duly and validly executed and delivered by
PHC and, assuming this Agreement constitutes the valid and
binding obligations of Buyer, this Agreement constitutes a
valid and binding agreement of PHC, enforceable against PHC
in accordance with its terms, except (a) as such enforcement
may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in
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effect relating to creditors' rights, and (b) as the remedy of
specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding
therefore may be brought. All corporate action on the part of
PHC, its Board of Directors and its sole shareholder which is
necessary, as a matter of law or otherwise, for the execution,
delivery and performance of this Agreement by PHC has been
duly and validly taken.
(b) PFS has the requisite corporate power and authority to execute
and deliver the Services Agreement and to fulfill its
obligations thereunder. The execution and delivery of the
Services Agreement by PFS and the performance of its
obligations thereunder have been duly and validly authorized
by the Executive Committee of the Board of Directors of
PFS, and no other corporate proceedings on the part of PFS
are necessary, as a matter of law or otherwise, in
connection therewith. When executed and delivered by PFS
as provided herein, the Services Agreement will have been
duly and validly executed and delivered by PFS and, validly
executed by NHS, will constitute a valid and binding agreement
of PFS, enforceable against PFS in accordance with its
terms, except (a) as such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights, and (b) as the remedy of specific performance
and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the
court before which any proceeding therefore may be brought.
All corporate action on the part of PFS, and its Board of
Directors which is necessary, as a matter of law or otherwise,
for the execution, delivery and performance of the Services
Agreement by PFS has been duly and validly taken.
(c) NGL has the requisite corporate power and authority to
execute and deliver the Lease and to fulfill its obligations
thereunder. The execution and delivery of the Lease by NGL and
the performance of its obligations thereunder have been duly
and validly authorized by the Board of Directors of NGL, and
no other corporate proceedings on the part of NGL are
necessary, as a matter of law or otherwise, in
connection therewith. When executed and delivered by NGL as
provided herein, the Lease will have been duly and validly
executed and delivered by NGL and, assuming the Lease
constitutes the binding obligations of NHS, the Lease will
constitute a valid and binding agreement of NGL, enforceable
against NGL in accordance with its terms, except (a) as such
enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and (b)
as the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefore may be brought. All corporate action
on the par of NGL and it Board of Directors which is
necessary, as a matter of law or otherwise, for the execution,
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delivery and performance of this Agreement by NGL
has been duly and validly taken.
2.5 No Other Investments or Subsidiaries.
------------------------------------- NHS has no equity
interest or investment in any entity other than the Subsidiaries.
2.6 Financial Statements.
--------------------- PHC has furnished to Buyer true and
complete copies of its consolidated balance sheet dated August 31, 1996 and its
consolidated statement of operations for the eight month period ended August 31,
1996. Such financial statements are in accordance with the books and records of
the entities covered thereby, and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis and
present fairly the consolidated financial position of NHS and its Subsidiaries
as of the end of the period covered and the consolidated results of operations
for the period covered in conformity with generally accepted accounting
principles. As used in this Agreement, the "Latest NHS Balance Sheet" shall mean
the August 31, 1996 consolidated balance sheet of NHS attached as Schedule 1 to
paragraph 2.6 of the PHC Disclosure Letter.
2.7 Absence of Certain Changes.
----------------------------- Except as contemplated by this
Agreement or disclosed in the PHC Disclosure Letter, since the date of the
Latest NHS Balance Sheet, NHS and each Subsidiary has conducted its respective
business only in, and has not engaged in any transaction other than according
to, the ordinary and usual course of such business consistent with prior
practices, and, since such date, there has not been (a) any Material Adverse
Event with respect to NHS or its Subsidiaries: (b) any declaration, setting
aside or payment of any dividend or other distribution with respect to the
capital stock of NHS or any Subsidiary; (c) any change in the accounting
principles, practices or methods of NHS or any Subsidiary; (d) any labor dispute
or difficulty which is reasonably likely to result in any Material Adverse Event
with respect to NHS or any Subsidiary; (e) any asset of NHS or any Subsidiary
having a value of $50,000 or more sold or disposed of, subjected to any lien,
charge or other encumbrance; (f) any amendment or termination of any contract or
agreement to which NHS or any Subsidiary is a party which involves the payment
(in any form) by or to NHS or such Subsidiary of $100,000 or more in any
twelve-month period; (g) any repurchase of issuances or other changes to the
outstanding capital stock of NHS or any Subsidiary; or (h) any increase in the
compensation payable or which could become payable by NHS or any Subsidiary to
any of their respective directors, officers, employees or consultants, or any
amendment of any employee benefit plan.
2.8 Absence of Undisclosed Liabilities.
---------------------------------- To the knowledge of PHC,
except and to the extent reserved against or reflected in the Latest NHS Balance
Sheet or disclosed in the PHC Disclosure Letter: (a) neither NHS nor any
Subsidiary had, at such date, any liabilities or obligations (contingent or
otherwise) in excess of $50,000 in the aggregate which were required by
generally accepted accounting principles, consistently applied, to be reserved
against or reflected therein, and (b) since the date of the Latest NHS Balance
Sheet, except in the ordinary course of its business, neither NHS nor any
Subsidiary has incurred any liabilities or obligations in excess of $50,000 in
the aggregate which, had they been incurred prior to such date, would
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have been required by such principles, so applied, to have been reserved against
or reflected in the Latest NHS Balance Sheet.
2.9 Consents and Approvals: No Violation.
------------------------------------------------ Except as
disclosed in the PHC Disclosure Letter, the execution and delivery of this
Agreement, the Services Agreement and the Lease do not and the consummation of
the transactions contemplated hereby will not:
(a) conflict with any provision of the articles of incorporation
or bylaws of PLI, NGL, PHC, NHS or any Subsidiary:
(b) require PLI, NGL, PHC, NHS or any Subsidiary to obtain any
consent, approval, authorization or permit of or from, or
filing with or notification to, any governmental or regulatory
authority except as contemplated herein;
(c) conflict with, result in the breach of or constitute a default
(or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions
of any note, lease, mortgage, license, agreement or other
instrument or obligation to which NHS or any Subsidiary is a
party or by which NHS or any Subsidiary or any of their
respective assets may be bound which are required to be
disclosed in paragraphs 2.11, 2.14 or 2.15 of the PHC
Disclosure Letter; or
(d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to PLI, NGL, PHC, NHS or any Subsidiary.
2.10 Certain Fees and Expenses.
--------------------------- No person or entity has been
authorized by PHC, NHS or any Subsidiary to act for PHC, NHS or any Subsidiary
in connection with the transactions provided for in this Agreement in a way
which would entitle such person to receive from NHS or any Subsidiary any
broker's fees, commissions, finder's fees, investment banking or financial
advisory fees in connection with this Agreement (or for reimbursement of any
expenses related thereto).
2.11 Employment and Similar Agreements.
------------------------------------ Paragraph 2.11 of the
PHC Disclosure Letter sets forth (a) all written employment, severance, bonus,
consulting or indemnification arrangements, agreements, understandings or plans
between NHS or any Subsidiary and any of their respective directors, officers or
employees (including without limitation any such arrangements, agreements,
understandings or plans which are conditioned upon a change of control involving
NHS or any Subsidiary); (b) all written compensatory arrangements, agreements,
understandings or plans between NHS or any Subsidiary and any consultant
(including without limitation any such arrangements, agreements, understandings
or plans which are conditioned upon a change of control involving NHS); and (c)
a list of current employees of NHS and each Subsidiary which reflects, among
other things, the current compensation of each such employee.
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2.12 Litigation.
---------- Except as disclosed in paragraph 2.12 of the PHC
Disclosure Letter, as of the date hereof, there is no claim, action or
proceeding, including without limitation any claim of indemnification, pending
or, to the knowledge of PHC, NHS or any Subsidiary, threatened against or
relating to NHS or any Subsidiary. Neither NHS nor any Subsidiary or any of
their respective officers, directors or employees has been permanently or
temporarily enjoined by any order, judgment or decree of any court or any other
governmental or regulatory authority from engaging in or continuing any conduct
or practice in connection with the business, assets, properties or affairs of
NHS or any Subsidiary. There is not in existence on the date hereof any order,
judgment or decree of any court or other tribunal or other governmental or
regulatory authority enjoining or requiring NHS or any Subsidiary to take any
action of any kind with respect to its business, assets, properties or affairs.
2.13 Taxes.
----- Except as disclosed in paragraph 2.13 of the PHC Disclosure
Letter: NHS and each Subsidiary, either on their own or as part of a
consolidated group of corporations, have timely filed accurate, true and
complete copies of all income, franchise, license, sales, payroll and property
tax returns and reports that are or have been required to be filed with the
United States and with the jurisdictions in which they are qualified to do
business or are required to file tax returns or reports and have paid in full
all taxes, interest, penalties, assessments or deficiencies that are or have
been due or payable or are or have been claimed by any taxing authority to be
due and payable (whether or not it is currently known that such taxes are or
have been due and payable). NHS and each Subsidiary have, to the extent
required, made estimated payments against all taxes that have not yet become due
and payable and have withheld or collected, and, to the extent required, paid
over to the proper governmental authorities, all taxes, assessments and fees
required by law to have been withheld or collected. NHS and each Subsidiary have
duly paid or provided for all taxes with respect to any period prior to the date
of this representation and warranty. There are no liens for taxes, assessments,
fees or other governmental charges upon any of the assets or properties of NHS
and each Subsidiary. Neither NHS nor any Subsidiary has waived or been granted
an extension which is still effective, for any applicable limitation period for
the assertion of any tax liability for any federal income tax year.
2.14 Benefit Plans.
------------- Each employee benefit plan covering employees of
NHS or any Subsidiary which is maintained or contributed to by NHS or any
Subsidiary conforms in all material respects to, and its administration is in
conformity in all material respects with, all applicable laws and regulations;
no liability or penalty under the Employment Retirement Income Security Act of
1974, as amended, has been or will be incurred by NHS or any Subsidiary with
respect to any such plan; full payment has been made of all amounts which NHS or
any Subsidiary is required to have paid as contributions to such plans; there is
not in the aggregate any accumulated funding deficiency with respect to such
plans; and the current value of accrued benefits of each such plan does not
exceed the current value of such plan's assets.
2.15 Contracts.
--------- Paragraph 2.15 of the PHC Disclosure Letter lists all
agreements, contracts, licenses, leases, and understandings, whether written or
oral, which either (a) involve payment (in any form) by or to NHS or any
Subsidiary of $100,000 or more in any twelve-month period or (b) are material to
NHS (except that such list may exclude agreements which are listed
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elsewhere in the PHC Disclosure Letter). All such agreements contracts,
licenses, leases and understandings are in full force and effect and no party
thereto has given any notice of termination with respect thereto (except notices
of termination which have been withdrawn). Neither NHS nor any Subsidiary is in
material breach of any agreement, contract, license, lease or understanding
which is described or required to be described in the PHC Disclosure Letter, nor
does any event exist which, with notice or passing of time or both, would
constitute or result in a material breach by NHS or any Subsidiary of any such
agreement, contract, license, lease or understanding. To the knowledge of PHC,
NHS and each Subsidiary, the other party or parties to each such agreement,
contract, license, lease or understanding has complied with all material
commitments and obligations on its or their part.
2.16 Intellectual Property Rights.
----------------------------
(a) As used in this Agreement, "INTELLECTUAL PROPERTY RIGHTS"
includes United States and foreign inventions, invention
disclosures, patents, inventors' certificates, utility models,
trademarks, service marks, trade names, copyrights, trade secrets
(including processes and software programs), registrations and
applications therefor, and past, present and future causes of
action and remedies therefor. To the knowledge of PHC, NHS and
each Subsidiary, NHS and each Subsidiary has full right, title
and interest in or to use (as currently used) all Intellectual
Property Rights which are material to the conduct of its business
as now conducted, and the consummation of the transactions
contemplated hereby will not alter or impair in an adverse manner
such Intellectual Property Rights. Paragraph 2.16 of the PHC
Disclosure Letter lists all Intellectual Property Rights,
including computer software (whether owned by or licensed to NHS
or any Subsidiary) which is material to the conduct of the
business of NHS as now conducted.
(b) To the knowledge of PHC, NHS and each Subsidiary, neither NHS nor
any Subsidiary is in default under any material agreement
pursuant to which it is licensing Intellectual Property Rights of
a third party or granting licenses to its own Intellectual
Property Rights. Neither NHS nor any Subsidiary has notified any
other party of an alleged default of any such agreement. Neither
PHC, NHS nor any Subsidiary has received any communications
alleging that NHS or any Subsidiary has violated any other
person's Intellectual Property Rights or has engaged in unfair
competition against such person.
(c) To the knowledge of PHC, NHS and each Subsidiary, NHS and each
Subsidiary do not infringe (nor has it misappropriated) any third
party's Intellectual Property Rights and neither NHS nor any
Subsidiary has any material liability for any past infringement
or misappropriation. No material dispute or disagreement
involving NHS or any Subsidiary exists or is, to the knowledge of
NHS or any Subsidiary, threatened with regard to any third party
Intellectual Property Right, including any allegation of
Intellectual Property Rights infringement or misappropriation or
of
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any breach or default of an Intellectual Property Rights
license or similar agreement.
2.17 Properties, Liens.
------------------- Except for statutory mechanics and
materialmen's liens and liens for current taxes not yet delinquent, NHS and each
Subsidiary own or lease, free and clear of any liens, claims, charges, options
or other encumbrances (it being understood that, with respect to leased
properties, such representation regarding the absence of liens claims, charges,
options or other encumbrances relates only to the leasehold interest of NHS or
any Subsidiary, as applicable), all tangible and intangible properties, real and
personal, material to the operation of their respective businesses as now
conducted whether or not reflected in the Latest NHS Balance Sheet (except
property sold or disposed of in the ordinary course of business since the date
of the Latest NHS Balance Sheet) and all such property acquired or used since
such date, and to the knowledge of NHS or any Subsidiary, there has not been any
violation of any law, regulation or ordinance (including without limitation
laws, regulations and ordinances relating to health, fire, safety, zoning,
environmental, building, city planning or similar issues) relating to such
properties or businesses which may reasonably be expected to result in a
Material Adverse Event. There are no proceedings affecting any of such
properties pending or threatened which may reasonably be expected to, materially
and adversely, curtail the use of such property for the purpose for which it was
acquired or the purpose for which it is now used. Paragraph 2.17 of the PHC
Disclosure Letter lists all real property owned or leased by NHS or any
Subsidiary.
2.18 Compliance with Applicable Laws.
-------------------------------- To the knowledge of PFS, NHS
and each Subsidiary holds all licenses, permits and authorizations necessary for
the lawful conduct of its business, as now conducted, except for such licenses,
permits and authorizations the absence of which will not result in a Material
Adverse Event; and neither PHC, NHS nor any Subsidiary has received any notice
from any authority or person which asserts that NHS or any Subsidiary lacks any
license, permit or authorization necessary for the lawful conduct of its
business, or that NHS or any Subsidiary is in violation of any material law,
ordinance or regulation of material significance to NHS or any subsidiary.
2.19 Environmental Liability.
----------------------- To the knowledge of PHC, NHS or any
Subsidiary:
(a) The businesses of NHS and each Subsidiary have been and are
operated in material compliance with all applicable statutory or
regulatory requirements of all federal, state and local
governmental authorities with jurisdiction over the environment
or over workplace health and safety, and neither NHS nor any
Subsidiary have caused or allowed the generation, treatment,
storage, release or disposal of hazardous substances except in
accordance with such statutes and regulations as they existed at
the time of such generation, treatment, storage, release or
disposal.
(b) Neither PHC, NHS nor any Subsidiary has received any written
notice or, to the best knowledge of PHC, NHS or any Subsidiary,
any other communication, from any governmental authority
alleging or concerning any violation by NHS or any
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Subsidiary of, or responsibility or liability of NHS or any
Subsidiary, any statute or regulation relating to the
environment. There are no pending or threatened, claims, suits,
proceedings or investigations with respect to the businesses or
operations of NHS or any Subsidiary alleging or concerning
any violation of or responsibility or liability under any
statutes or regulations relating to the environment, nor does
PHC, NHS or any Subsidiary have any knowledge of any fact or
condition which might reasonably be expected to give rise
to such a claim, suit, proceeding or investigation.
(c) There are no pending or threatened actions, proceedings or
investigations seeking to revoke or deny renewal of any of
such approvals, permits and licenses; nor does PHC, NHS or any
Subsidiary have knowledge of any fact or condition which might
reasonably be expected to give rise to any action, proceeding
or investigation to revoke or deny renewal of such approvals,
permits or licenses if such revocation or denial would
constitute a Material Adverse Event.
2.20 Insurance.
--------- NHS and each Subsidiary has in place insurance
coverage of the types, in the coverage amounts and subject to retention,
deductible or other similar terms as described in paragraph 2.20 of the PHC
Disclosure Letter. PFS management reasonably believes such coverage to be
appropriate and adequate.
2.21 Service Agreements.
------------------- To the knowledge of PHC, NHS and each
Subsidiary, all charges made to customers of NHS or any Subsidiary have been
properly computed and billed in material compliance with applicable agreements
and procedures in place with respect to such customers, and no such customer has
any right to any material refund, price or fee adjustments offset or similar
right with respect to any such charges.
2.22 Minute Books and Stock Records.
--------------------------------- PHC has delivered or made
available to Buyer true and complete copies of the minute books and stock
records of NHS and each Subsidiary, which contain a complete and correct records
of all stock transactions of each such company and of all meetings of the Boards
of Directors of each such company (and committees thereof) and all meetings of
their stockholders and all actions by written consent without a meeting by such
Boards of Directors (and committees) and their stockholders since the date of
incorporation and reflect accurately in all material respects all actions by
such directors and by stockholders with respect to all transactions referred to
in such minutes.
2.23 Certain Relationships.
---------------------- Neither PHC, NHS nor any Subsidiary
has any knowledge that any material customer of NHS or any Subsidiary currently
plans to terminate its relationship with any such company.
2.24 Affiliated Transactions.
----------------------- Section 2.24 of the PHC Disclosure
Letter lists all transactions which are now in effect between NHS or any
Subsidiary, on the one hand, and any person or entity affiliated with NHS or
any Subsidiary (other than NHS or a Subsidiary), on the other hand,
including without limitation any charge for services (administrative or
otherwise).
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2.25 Full Disclosure.
---------------- PHC has delivered, or made available to Buyer,
copies of all written instruments, agreements and other documents referred to in
the PHC Disclosure Letter except as otherwise indicated. All instruments,
agreements, schedules and other documents referred to in the PHC Disclosure
Letter delivered or to be delivered, or made available, to Buyer pursuant to
this Agreement are true and complete in all material respects. No representation
or warranty made in this Article II as supplemented by the PHC Disclosure Letter
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated herein or therein or
necessary to make such representation or warranty in light of the circumstances
in which it is made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as may otherwise be set forth in a letter ("BUYER DISCLOSURE
LETTER") delivered to PHC concurrently with the execution of this Agreement and
initialed for identification purposes by PHC and Buyer, Buyer hereby represents
and warrants to PHC, its successors and assigns as follows:
3.1 Organization and Qualification.
-------------------------------- Buyer is a corporation duly
organized, validly existing and in good standing as a domestic corporation under
the laws of the state of Delaware, is duly qualified to do business as a foreign
corporation and is in good standing in each other jurisdiction in which the
character of its properties or the nature of its business makes such
qualification necessary, except in jurisdictions, if any, where the failure to
be so qualified would not constitute or result in a Material Adverse Event or
result in a Material Adverse Event. As used in this Agreement, the term
"MATERIAL ADVERSE EVENT" when used in reference to Buyer shall mean any event,
circumstance, condition, development or occurrence causing, resulting in or
having a material adverse effect on the condition (financial or otherwise),
business, properties, business relationships, prospects or results of operations
of Buyer taken as a whole. Buyer has the requisite corporate power and authority
to own, use or lease its respective properties and to carry on its respective
business as now being conducted.
3.2 Capitalization of Buyer.
-----------------------
(a) The authorized, issued and outstanding capital stock of Buyer is
as set forth in paragraph 3.2 of the Buyer Disclosure Letter. All
of the issued and outstanding shares of capital stock of Buyer
have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights (whether created by
statute or otherwise). Except as disclosed in paragraph 3.2 of
the Buyer Disclosure Letter, there are no options, warrants or
other rights, commitments or agreements of any character which
call for the issuance of shares of capital stock of Buyer or any
securities, instruments or rights convertible into or
exchangeable for shares of capital stock or other securities of
Buyer. Neither Buyer nor any
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affiliate thereof has any obligation, contingent or otherwise,
to register any securities of Buyer under the federal
securities laws.
(b) The Warrants have been duly authorized, and when issued as
contemplated herein, will be duly and validly issued; and the
capital stock of Buyer to be issued to the holder or holders
of the Warrants upon the exercise of the Warrants will, when
so issued, be duly authorized validly issued and nonassessable
and will not be subject to preemptive rights.
3.3 Authority Relative to this Agreement.
------------------------------------
(a) Buyer has the requisite corporate power and authority to execute
and deliver this Agreement and the Warrant Certificates and to
fulfill its obligations hereunder and thereunder. The execution
and delivery of this Agreement and the Warrant Certificates by
Buyer and the performance of its obligations hereunder and
thereunder have been duly and validly authorized by the Executive
Committee of the Board of Directors of Buyer, and no other
corporate proceedings on the part of Buyer are necessary, as a
matter of law or otherwise, in connection therewith. This
Agreement has been, and the Warrant Certificates when executed
and delivered as provided herein, shall have been, duly and
validly executed and delivered by Buyer and, assuming this
Agreement, constitutes the valid and binding obligations of PHC,
this Agreement constitutes, and the Warrant Certificates will
constitute, valid and binding agreements of Buyer, enforceable
against Buyer in accordance with their respective terms, except
(a) as such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights, and (b) as the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(b) When executed and delivered as provided herein, the Services
Agreement and the Lease will have been duly and validly
authorized, executed and delivered by NHS and, assuming the
Services Agreement and the Lease constitute the valid and binding
obligations of the other parties thereto, the Services Agreement
and the Lease will constitute valid and binding agreements of
NHS, enforceable against NHS in accordance with their respective
terms, except (a) as such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights, and (b) as the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
3.4 Financial Statements.
--------------------- Buyer has furnished to PHC the consolidated
balance sheets of Buyer as of December 31, 1995 and June 30, 1996 and the
consolidated statements of
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operations and cash flows of Buyer for the year ended December 31, 1995 and the
six month periods ended June 30, 1995 and June 30, 1996. Such financial
statements, with the notes thereto, are, and, except as disclosed in paragraph
3.4 of the Buyer Disclosure Letter will be, in accordance with the books and
records of Buyer and have been, or will be, prepared in accordance with
generally accepted accounting principles applied on a consistent basis and
present fairly the financial condition of Buyer as of the end of each period
covered and the results of its operations and cash flows for each of the periods
in accordance with generally accepted accounting principles. As used in this
Agreement, the "LATEST BUYER BALANCE SHEET" shall mean the June 30, 1996 balance
sheet of Buyer attached as Schedule l to paragraph 3.4 of the Buyer Disclosure
Letter.
3.5 Absence of Certain Changes.
----------------------------- Except as contemplated by this
Agreement or disclosed in paragraph 3.5 of the Buyer Disclosure Letter, since
the date of the Latest Buyer Balance Sheet, Buyer has conducted its business
only in, and has not engaged in any transaction other than according to, the
ordinary and usual course of such business consistent with prior practices, and,
since such date, there has not been (a) any Material Adverse Event with respect
to Buyer; (b) any declaration, setting aside or payment of any dividend or other
distribution with respect to the capital stock of Buyer; (c) any change in the
accounting principles, practices or methods of Buyer; (d) any labor dispute or
difficulty which is reasonably likely to result in any Material Adverse Event
with respect to Buyer; (e) any asset of Buyer having a value of $100,000 or more
sold or disposed of, subjected to any lien, charge or other encumbrance; (f) any
amendment or termination of any contract or agreement to which Buyer is party
which involves the payment (in any form) by or to Buyer of $250.000 or more in
any twelve-month period; or (g) any repurchase of, issuances or other changes to
the outstanding capital stock of Buyer.
3.6 Absence of Undisclosed Liabilities.
------------------------------------ To the knowledge of Buyer,
except and to the extent reserved against or reflected in the Latest Buyer
Balance Sheet: (a) Buyer had, at such date, no material liabilities or
obligations (contingent or otherwise) which were required by generally accepted
accounting principles, consistently applied, to be reserved against or reflected
therein, and (b) since the date of the Latest Buyer Balance Sheet, except in the
ordinary course of its business, Buyer has not incurred any material liabilities
or obligations which, had they been incurred prior to such date, would have been
required by such principles, so applied, to have been reserved against or
reflected in the Latest Buyer Balance Sheet.
3.7 Financial Capability.
-------------------- Buyer has, and on and after the Closing
Date will have, the financial capability to effect the consummation of the
transactions contemplated in this Agreement and, the Warrant Certificates.
3.8 Consents and Approvals: No Violation.
---------------------------------------- Except as disclosed in
paragraph 3.5 of the Buyer Disclosure Letter, the execution and delivery of this
Agreement and the Warrant Certificates, and the execution and delivery of the
Services Agreement and the Lease by NHS do not, and the consummation of the
transactions contemplated hereby and thereby will not:
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(a) conflict with any provision of the articles or certificate of
incorporation or bylaws of Buyer;
(b) require Buyer to obtain any consent, approval, authorization or
permit of or from, or make any filing with or notification to,
any governmental or regulatory authority;
(c) conflict with, result in the breach of or constitute a default
(or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of
any note, lease, mortgage, license, agreement or other instrument
or obligation to which Buyer is a party or by which Buyer or any
of its assets may be bound; or
(d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Buyer.
3.9 Certain Fees and Expenses.
--------------------------- No person or entity has been
authorized by Buyer to act for Buyer in connection with the transactions
provided for in this Agreement in a way which would entitle such person to
receive from PHC (or NHS or any Subsidiary prior to the Closing) any broker's
fees, commissions, finder's fees, investment banking or financial advisory fees
in connection with this Agreement (or for reimbursement of any expenses related
thereto).
3.10 Litigation.
---------- Except as disclosed in paragraph 3.10 of the Buyer
Disclosure Letter, as of the date hereof, there is no claim action or proceeding
including without limitation any claim of indemnification, pending or, to the
best knowledge of Buyer, threatened against or relating to Buyer which if
adversely decided would result in a Material Adverse Event with respect to
Buyer. Neither Buyer nor any of its respective officers, directors or employees
has been permanently or temporarily enjoined by any order, judgment or decree of
any court or any other governmental or regulatory authority from engaging in or
continuing any conduct or practice in connection with the business, assets,
properties or affairs of Buyer. There is not in existence on the date hereof any
order, judgment or decree of any court or other tribunal or other governmental
or regulatory authority enjoining or requiring Buyer to take any action of any
kind with respect to its business, assets, properties or affairs.
3.11 Taxes.
----- Buyer, either on its own or as part of a consolidated
group of corporations, has timely filed accurate, true and complete copies of
all income, franchise, license, sales, payroll and property tax returns and
reports that are or have been required to be filed with the United States and
with the jurisdictions in which it is qualified to do business or is required to
file tax returns or reports and has paid in full all taxes, interest, penalties,
assessments or deficiencies that are or have been due or payable or are or have
been claimed by any taxing authority to be due and payable (whether or not it is
currently known that such taxes are or have been due and payable). Buyer has, to
the extent required, made estimated payments against all taxes that have not yet
become due and payable and has withheld or collected, and, to the extent
required, paid over to the proper governmental authorities, all taxes,
assessments and fees required by law to
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have been withheld or collected. Buyer has duly paid or provided for all taxes
with respect to any period prior to the date of this representation and
warranty. There are no liens for taxes, assessments, fees or other governmental
charges upon any of the assets or properties of Buyer. Buyer has not waived or
been granted an extension which is still effective, for applicable limitation
period for the assertion of any tax liability for any federal income tax year.
3.12 Benefit Plans.
------------- Each employee benefit plan covering employees of
Buyer which is maintained or contributed to by Buyer conforms in all material
respects to, and its administration is in conformity in all material respects
with, all applicable laws and regulations; no liability or penalty under the
Employment Retirement Income Security Act of 1974, as amended. has been or will
be incurred by Buyer with respect to any such plan; full payment has been made
of all amounts which Buyer is required to have paid as contributions to such
plans; there is not in the aggregate any accumulated funding deficiency with
respect to such plans; and the current value of accrued benefits of each such
plan does not exceed the current value of such plan's assets.
3.13 Intellectual Property Rights.
----------------------------
(a) As used in this Agreement "INTELLECTUAL PROPERTY RIGHTS" includes
United States and foreign inventions, invention disclosures,
patents, inventors' certificates, utility models, trademarks,
service marks, trade names, copyrights, trade secrets (including
processes and software programs), registrations and applications
therefor, and past, present and future causes of action and
remedies therefor. To the knowledge of Buyer, Buyer has full
right, title and interest in or to use (as currently used) all
Intellectual Property Rights which are material to the conduct of
its business as now conducted, and the consummation of the
transactions contemplated hereby will not alter or impair in an
adverse manner such Intellectual Property Rights.
(b) To the knowledge of Buyer, Buyer is not in default under any
material agreement pursuant to which it is licensing Intellectual
Property Rights of a third party or granting licenses to its own
Intellectual Property Rights. Buyer has not notified any other
party of an alleged default of any such agreement. Buyer has not
received any communications alleging that Buyer has violated any
other person's Intellectual Property Rights or has engaged in
unfair competition against such person.
(c) To the best knowledge of Buyer, Buyer is not infringing (nor has
it misappropriated) any third party's Intellectual Property
Rights and does not have any material liability for any past
infringement or misappropriation. No material dispute or
disagreement involving Buyer exists or is, to the knowledge of
Buyer, threatened with regard to any third party Intellectual
Property Right, including any allegation of Intellectual Property
Rights infringement or misappropriation by
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Buyer or of any breach or default by Buyer of an Intellectual
Property Rights license or similar agreement.
3.14 Properties, Liens.
------------------ Except for statutory mechanics and
materialmen's liens and liens for current taxes not yet delinquent, Buyer owns
or leases, free and clear of any liens, claims, charges, options or other
encumbrance (it being understood that, with respect to leased properties, such
representation regarding the absence of liens, claims, charges, options or other
encumbrances relates only to the leasehold interest of Buyer), all tangible and
intangible properties, real and personal, material for the operation of its
business as currently conducted whether or not reflected in the Latest Buyer
Balance Sheet (except property sold or disposed of in the ordinary course of
business since the date of the Latest Buyer Balance Sheet) and all such property
acquired or used since such date, and, to the knowledge of Buyer, there has not
been any violation of any law, regulation or ordinance (including without
limitation laws, regulations and ordinances relating to health, fire, safety,
zoning, environmental, building, city planning or similar issues) relating to
such properties or businesses which may reasonably be expected to result in a
Material Adverse Event. There are no proceedings affecting any of such
properties pending or threatened which may reasonably be expected to, materially
and adversely, curtail the use of such property for the purpose for which it was
acquired or the purpose for which it is now used.
3.15 Compliance with Applicable Laws.
------------------------------- Except as disclosed in paragraph
3.10 of the Buyer Disclosure Letter Buyer has not received any notice from any
authority or person which asserts that Buyer lacks any license, permit or
authorization necessary for the lawful conduct of its business, or that Buyer is
in violation of any material law, ordinance or regulation of material
significance to Buyer.
3.16 Environmental Liability.
----------------------- To the knowledge of Buyer:
(a) The business of Buyer has been and is operated in material
compliance with all applicable statutory or regulatory
requirements of all federal, state and local governmental
authorities with jurisdiction over the environment or over
workplace health and safety. Buyer has not caused or allowed the
generation, treatment, storage, release or disposal of hazardous
substances except in accordance with such statutes and
regulations as they existed at the time of such generation,
treatment, storage, release or disposal.
(b) Buyer has not received any written notice or, to the knowledge of
Buyer, any other communication, from any governmental authority
alleging or concerning any violation by Buyer of, or
responsibility or liability of Buyer under, any statute or
regulation relating to the environment. There are no pending or
threatened claims, suits, proceedings or investigations with
respect to the business or operations of Buyer alleging or
concerning any violation of or responsibility or liability under
any statutes or regulations relating to the environment, nor does
Buyer have any
16
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knowledge of any fact or condition which might reasonably be
expected to give rise to such a claim, suit, proceeding or
investigation.
(c) There are no pending or threatened, actions, proceedings or
investigations seeking to revoke or deny renewal of any of such
approvals, permits and licenses; nor does Buyer have knowledge of
any fact or condition which might reasonably be expected to give
rise to any action, proceeding or investigation to revoke or deny
renewal of such approvals, permits or licenses if such revocation
or denial would constitute a Material Adverse Event with respect
to Buyer.
3.17 Insurance.
--------- Buyer has in place insurance coverage of such types,
in such coverage amounts and subject to such retention, deductible or other
terms as management reasonably believes to be appropriate.
3.18 Service Agreements.
------------------ To the knowledge of Buyer, all charges made
to customers of Buyer have bee properly computed and billed in material
compliance with applicable agreements and procedures in place with respect to
customers, and no such customer has any right to any material refund price or
such fee adjustments offset or similar right with respect to any such charges.
3.19 Minute Books and Stock Records.
------------------------------- Buyer has made available to PHC
true and complete copies of the minute books of Buyer, which contain a complete
and correct record of all stock transactions of Buyer and all meetings of the
Boards of Directors of Buyer (and committees thereof) and all meetings of its
stockholders and all actions by written consent without a meeting by such Boards
of Directors (and committees) and its stockholders since the date of
incorporation and reflect accurately in all material respects all actions by
such directors and by stockholders with respect to all transactions referred to
in such minutes.
3.20 Certain Relationships.
---------------------- Buyer has no knowledge that any
material customer of Buyer currently plans to terminate or alter in any manner
materially detrimental to Buyer its relationship with Buyer.
3.21 Full Disclosure.
---------------- Buyer has delivered, made available to PHC,
copies of all written instruments, agreements and other documents referred to in
the Buyer Disclosure Letter except as otherwise indicated. All instruments,
agreements, schedules and other documents delivered or to be delivered, or made
available, to PHC pursuant to this Agreement are true and complete in all
material respects. No representation or warranty made in this Article III as
supplemented by the Buyer Disclosure Letter contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
required to be stated herein or therein or necessary to make such representation
or warranty, in light of the circumstances in which it is made, not misleading.
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ARTICLE IV
CONDUCT OF BUSINESS OF NHS AND EACH SUBSIDIARY PRIOR TO CLOSING
During the period from the date of this Agreement until the Closing,
PHC agrees (except as expressly contemplated by this Agreement or the PHC
Disclosure Letter or to the extent that Buyer shall otherwise consent in
writing, such consent not to be unreasonably withheld or delayed) to take such
actions or refrain from taking such actions, as the case may be, which are
necessary to maintain compliance with the following covenants:
4.1 Ordinary Course.
---------------- NHS and each Subsidiary shall carry on their
respective businesses in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted and use all reasonable
efforts consistent with past practice and policies to preserve intact their
present business organizations, keep available the services of their employees
and preserve their relationships with customers, suppliers licensor, lessors,
lessees and others having business dealings with them to the end that their
goodwill and ongoing businesses shall be unimpaired at the Closing. NHS and each
Subsidiary will continue to maintain a standard system of accounting established
and administered in accordance with generally accepted accounting principles.
Neither NHS nor any Subsidiary will prepay any costs, fees or charges to NHS or
any Subsidiary, or incur any new liability for any costs, fees or charges to NHS
or any Subsidiary except in the ordinary course.
4.2 Dividends: Changes in Stock.
---------------------------- Neither NHS nor any Subsidiary will
(a) declare or pay any dividends on or make other distributions in respect of
any shares of its capital stock, (b) split, combine or reclassify any shares of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for any shares of its capital stock or
(c) propose to do any of the foregoing.
4.3 Issuance or Repurchase of Securities.
---------------------------------------- Neither NHS nor any
Subsidiary will issue, pledge, deliver or sell or authorize or propose the
issuance, pledge, delivery or sale of, or repurchase or propose the repurchase
of, any shares of its capital stock, or any options, warrants or other rights to
purchase or acquire, or securities convertible into or exchangeable for, any
such shares.
4.4 Governing Documents.
-------------------- Neither NHS nor any Subsidiary will
propose or adopt any amendment to their respective charter documents.
4.5 Acquisitions.
------------ Neither NHS nor any Subsidiary will acquire or agree
to acquire (a) any business or any corporation partnership association or other
business organization or division thereof (whether by merger, stock purchase,
asset acquisition or otherwise); (b) any capital stock of any person or entity;
or (c) any asset having a value of $50,000 or more.
4.6 Dispositions.
------------ Neither NHS nor any Subsidiary will sell, lease
or otherwise dispose of any asset having a value of $50,000 or more.
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4.7 Incurrence of Indebtedness.
--------------------------- Neither NHS nor any Subsidiary
will incur, guarantee, become subject to, or agree to incur, guarantee or become
subject to any obligation or liability (absolute or contingent), except current
liabilities incurred, and obligations under contracts entered into, in the
ordinary course of business consistent with prior practice; provided, however,
that neither NHS nor any Subsidiary shall enter into any material lease or
extension of any material lease with respect to any real or personal property or
issue or sell, or guaranty the repayment of, any debt securities or otherwise
incur any indebtedness for borrowed money.
4.8 Employees.
--------- Neither NHS nor any Subsidiary will make any
change in the compensation payable or to become payable to any of its officers,
directors, employees, agents or consultants (other than increases in
compensation called for by the terms of any employment or other agreement
currently in effect which are in the ordinary course of business and consistent
with prior practice), or enter into to or amend any employment, severance,
termination or other agreement with or make any loans to any of its officers,
directors, employees, agents or consultants or make any change in its existing
borrowing or lending arrangements for or on behalf of any of such persons,
whether contingent on consummation of the transactions contemplated hereby or
otherwise.
4.9 Benefit Plans.
------------- Neither NHS nor any Subsidiary will (a) pay, agree
to pay or make any accrual or arrangement for payment of any employee benefit
pursuant to any existing plan, agreement or arrangement to any officer, director
or employee except in the ordinary course of business and consistent with past
practice; (b) pay or agree to pay or make any accrual or arrangement for payment
to employees of any amount relating to unused vacation or sick days, except in
the ordinary course of business and consistent with past practice; (c) adopt or
commit itself to adopt or agree to, or pay, grant, issue or accrue salary or
benefits pursuant to, any additional pension, profit-sharing, bonus, extra
compensation, incentive, deferred compensation stock purchase, stock option,
stock appreciation right, group insurance, severance pay, retirement or other
employee benefit plan, agreement or arrangement, or any employment or consulting
agreement with or for the benefit of any director, officer, employee, agent or
consultant, whether past or present; or (d) amend in any material respect any
such existing plan, agreement or arrangement.
4.10 Additional Matters.
------------------ Neither NHS nor any Subsidiary will:
(a) enter into any new agreements, commitments or contracts which
either (i) involve payment by NHS of $50,000 or more in any
twelve-month period or (ii) are outside the ordinary course of
business;
(b) pay any obligation or liability (absolute or contingent) other
than current liabilities in the ordinary course of business;
(c) cancel or agree to cancel any material debts or claims;
(d) waive or relinquish any rights of substantial value;
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(e) otherwise make any material change in the conduct of its business
or operations;
(f) settle any litigation or other claims involving the payment by
NHS of more than $25,000 in any one instance and $100,000 in the
aggregate;
(g) make any investment in any third person or entity; or
(h) agree in writing or otherwise to take any of the foregoing
actions or to take any action which NHS reasonably believes would
constitute a Material Adverse Event with respect to NHS or any
Subsidiary.
ARTICLE V
CONDUCT OF BUSINESS OF BUYER PRIOR TO CLOSING
During the period from the date of this Agreement until the Closing,
Buyer agrees (except as expressly contemplated by this Agreement or the Buyer
Disclosure Letter or to the extent that PHC shall otherwise consent in writing,
such consent not to be unreasonably withheld or delayed) to take such actions or
refrain from taking such actions, as the case may be, which are necessary to
maintain compliance with the following covenants:
5.1 Ordinary Course.
---------------- Buyer shall carry on its business in the usual,
regular and ordinary course, in substantially the same manner as heretofore
conducted and use all reasonable efforts consistent with past practice and
policies to preserve intact its present business, keep available the services of
its key employees and preserve its relationships with material customers,
suppliers, licensors, lessors, lessees and others having business dealings with
it to the end that its goodwill and ongoing business shall be unimpaired at
Closing. Buyer will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
5.2 Dividends: Changes in Stock.
--------------------------- Buyer will not (a) declare or pay any
dividends on or make other distributions in respect of any shares of its capital
stock, (b) split, combine or reclassify any shares of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any shares of its capital stock or (c) propose to do any of
the foregoing.
5.3 Issuance or Repurchase of Securities.
------------------------------------ Buyer will not issue, pledge,
deliver or sell or authorize or propose the issuance, pledge, delivery or sale
of, or repurchase, or propose the repurchase of, any shares of its capital
stock, or any options, warrants or other rights to purchase or acquire, or
securities convertible into or exchangeable for, any such shares.
5.4 Governing Documents.
------------------- Buyer will not propose or adopt any
amendment to its charter documents.
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5.5 Other Extraordinary Transactions.
---------------------------------- Buyer will not enter into or
consummate any other transaction or agreement which would have the effect of
preventing consummation of the transactions contemplated hereby or which would
result in a Material Adverse Effect with respect to Buyer.
ARTICLE VI
ADDITIONAL COVENANTS
6.1 Access to Information.
---------------------
(a) Between the date of this Agreement and the Closing, PHC shall (i)
give Buyer and its authorized representatives full access, during
normal business hours and upon reasonable notice, to all plants,
offices, warehouses and other facilities and to all contracts,
internal reports, data processing files and records, federal,
state, local and foreign tax returns and records, commitments,
books, records and affairs of NHS and each Subsidiary, whether
located on the premises of NHS or at another location, (ii)
permit Buyer and its authorized representatives to make such
inspections as Buyer may reasonably require, (iii) furnish Buyer
such financial, operating, technical and product data and other
information with respect to the business, properties and
operations of NHS and each Subsidiary as Buyer from time to time
may reasonably request, including without limitation financial
statements and schedules, (iv) provide Buyer and their authorized
representatives the opportunity, during normal business hours and
upon reasonable notice, to interview employees, vendors,
customers, sales representatives, distributors and other personnel
of NHS and its Subsidiaries; and (v) assist and cooperate with
Buyer and its authorized representatives in the development of
integration plans for implementation by Buyer following the
Closing.
(b) Between the date of this Agreement and the Closing, Buyer shall
furnish PHC and its authorized representatives such financial and
other information with respect to the business as PHC from time
to time may reasonably request, including without limitation
financial statements and schedules.
(c) All information and documents obtained pursuant to this Section
6.1, shall be subject to the terms of the Confidentiality
Agreement between the parties dated September 1, 1996, which
remains in full force and effect and shall survive any
termination of this Agreement. From and after the Closing Date,
the provisions of such Confidentiality Agreement shall in no way
limit the right of Buyer or any of its affiliates to make use of
any information concerning NHS or any Subsidiary.
6.2 Governmental Filings.
--------------------- PHC and Buyer shall, as promptly as
reasonably practicable, make all filings necessary under any applicable
federal, state, local and foreign laws
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and to obtain any required regulatory approvals, clearances or expirations of
waiting periods in connection with the transactions contemplated by this
Agreement. Each party shall use all reasonable efforts to cooperate with the
other party in preparing its respective governmental filings and in obtaining
all required regulatory approvals, clearances and expirations of waiting
periods.
6.3 Notice of Defaults.
------------------
(a) PHC will give prompt notice to Buyer of (i) any written notice of
default received by NHS or any Subsidiary subsequent to the date
of this Agreement and prior to the Closing under any instrument
or agreement to which NHS or any Subsidiary is a party or by
which either of them or any of their properties is bound, and
(ii) any suit, action or proceeding instituted or, to the best
knowledge of NHS or any Subsidiary, threatened against or
affecting NHS or any Subsidiary subsequent to the date of this
Agreement and prior to the Closing.
(b) Buyer will give prompt notice to NHS of any suit, action or
proceeding instituted or, to the best knowledge of Buyer
threatened against or affecting Buyer subsequent to the date of
this Agreement and prior to the Closing which might adversely
affect Buyer's ability to consummate the transactions
contemplated hereunder.
6.4 Communications.
-------------- No party will furnish any written
communications to the public generally if the subject matter thereof relates to
the transactions contemplated by this Agreement without the prior written
approval of the other parties as to the content thereof, which approval shall be
provided promptly and shall not be unreasonably withheld. Nothing in this
Section 5.4, however, shall be deemed (a) to prohibit any disclosure reasonably
required by any applicable law or by any competent governmental or regulatory
authority or (b) to prevent either party from disclosing the general nature of
the transactions contemplated hereby without identifying the other party or any
of its affiliates. Immediately following the Closing, Buyer shall notify all
employees of NHS and the Subsidiaries of the purchase of NHS by Buyer in a
manner and in form and substance reasonably satisfactory to PHC.
6.5 Expenses.
-------- Whether or not the transactions contemplated hereby are
consummated, all costs and expenses (including without limitation, fees and
expenses of counsel and accountants) incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expense except as otherwise specifically set forth herein; provided,
however, that Buyer shall bear all expenses relating to the obtaining of all
regulatory approvals required in connection with the consummation of the
transactions hereunder.
6.6 Brokers or Finders.
-------------------- Neither Buyer nor PHC nor any of their
respective affiliates shall enter into any agreement or arrangement with any
agent, broker, investment banker or other firm or person pursuant to which such
person shall be entitled to any broker or finder's fee or
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any other commission or similar fee from any other party in connection
with any of the transactions contemplated by this Agreement.
6.7 Additional Actions.
------------------- Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all reasonable action and to do, or cause to be
done, all things reasonably necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the transactions contemplated
by this Agreement as promptly as reasonably practicable. In case at any time
after the Closing any further action is necessary or desirable to carry out the
purposes of this Agreement, each party to this Agreement, to the extent within
such party's reasonable control, shall take all such necessary action.
6.8 Interim Financial Statements.
----------------------------
(a) As promptly as practicable following the end of each month prior
to the Closing, and at the Closing, PHC shall deliver to Buyer
monthly financial statements of NHS and its Subsidiaries in a
format consistent with its past practices which is reasonably
acceptable to Buyer.
(b) As promptly as practicable following the end of each month prior
to the Closing, and at the Closing, Buyer shall deliver to PHC
monthly financial statements of Buyer and its subsidiaries in a
format consistent with its past practices which is reasonably
acceptable to PHC.
6.9 Warrant Certificates, Services Agreement and Lease.
----------------------------------------------------- Buyer
shall perform fully and in a timely manner its obligations under the Warrant
Certificates and shall cause NHS to perform fully and in a timely manner its
obligations under the Services Agreement and the Lease.
6.10 Employee Benefit Plan Contributions.
----------------------------------- PHC shall, on a timely
basis, make all contributions to, and pay all costs and expenses related to, all
employee benefit plans covering employees of NHS insofar as such contributions,
costs or expenses have historically been at the expense of PHC and are
attributable to any period through the Closing Date (whether the obligation to
fund such contributions, costs or expenses becomes fixed prior to or after the
Closing Date).
6.11 Tax Matters.
----------- The following Tax provisions shall apply after the
Effective Date:
(a) Section 338(h)(10) Election. At the request of the Buyer, PHC or
its affiliates, if applicable, will join with PHC in making an
election under Section 338(h)(10) of the Internal Revenue Code of
1986, as amended (the "IRC") (and any corresponding elections
under state or local law) (collectively, a "Section 338(h)(10)
Election") with respect to the acquisition of the stock of NHS
hereunder. In the event the Section 338(h)(10) Election is made,
the parties shall timely comply with the election requirements,
allocation of purchase price
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requirements, tax return filing requirements and other applicable
provisions of Treas. Reg. 1.338(h)(10) and applicable provisions
cross-referenced therein. The parties shall bear their respective
administrative expenses of complying with the requirements of the
Section 338(h)(10) Election. Buyer shall reimburse PHC within 15
days after request therefor for up to $50,000 in the aggregate of
any financial loss or detriment incurred by PHC or its affiliates
as a result of the Section 338(h)(10) Election.
(b) Cooperation on Tax Matters.
--------------------------
(i) PHC and Buyer shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with
the filing of tax returns and any audit, litigation or
other proceeding with respect to taxes. Such cooperation
shall include the retention and (upon the other party's
request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually
convenient basis to provide additional information and
explanation of any material provided hereunder. PHC and
the Buyer agree (A) to retain all books and records with
respect to tax matters pertinent to NHS relating to any
taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent
notified by PHC or the Buyer, any extensions thereof) of the
respective tax periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B)
to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and
records and, if the other party so requests, PHC or Buyer,
as the case may be, shall allow the other party to take
possession of such books and records.
(ii) PHC and Buyer further agree, upon request, to use
their best efforts to obtain any certificate or other
document from any governmental authority or any other
person or entity as may be necessary to mitigate,
reduce or eliminate any tax that could be imposed
(including, but not limited to, with respect to the
transactions contemplated hereby).
(iii) Except as otherwise stated herein, PHC and Buyer
shall each have the right to control any and all
disputes and proceedings with tax authorities arising
in respect of taxes for which it may be the subject
of an indemnification claim under this Agreement or
under which it may be entitled to a tax reimbursement,
refund or credit.
6.12 Reimbursement of Intercompany Amounts.
------------------------------------- Within fifteen (15) days
after request therefor, supported by appropriate documentation:
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(a) Buyer shall, or shall cause NHS or its Subsidiaries, to pay (to
the extent unpaid) (x) all amounts payable by NHS or its
Subsidiaries to PFS or its subsidiaries which are reflected on
the Closing Balance Sheet, and (y) all amounts advanced,
allocated or to be allocated, or otherwise owed to PFS or its
subsidiaries by NHS or its Subsidiaries for or with respect to
the period from September 30, 1996 through the Closing Date.
(b) PHC shall, or shall cause PFS and its Subsidiaries to pay (to the
extent unpaid) (x) all accounts payable by PFS and its
subsidiaries to NHS or its Subsidiaries which are reflected on
the Closing Balance Sheet, and (y) all amounts owed by PFS or its
subsidiaries to NHS or its Subsidiaries for or with respect to
the period from September 30, 1996 through the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE
TRANSACTION
7.1 Conditions to the Obligations of Both Parties.
------------------------------------------------ The respective
obligations of PHC and Buyer to effect the transactions contemplated to occur at
the Closing hereunder shall be subject to the satisfaction on or prior to the
Closing of the following conditions:
(a) Governmental Approvals.
---------------------- All material authorizations, consents,
orders or approvals of, or declarations or filings with, or
expiration of waiting periods imposed by, any competent federal,
state, local or foreign governmental or regulatory authority
necessary for the consummation of the transactions contemplated
by this Agreement shall have been filed, occurred or been
obtained.
(b) Legal Action.
------------- No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the
consummation of the transactions contemplated hereby shall have
been issued by any federal, state or foreign court or other
competent governmental or regulatory authority and remain in
effect, and no litigation seeking the issuance of such an order
or injunction, or seeking substantial damages against any party
hereto if the transactions contemplated hereby are consummated,
shall be pending which, in the good faith judgment of the
President of PHC or NHS (acting upon advice of their respective
counsel) has a reasonable probability of resulting in such order,
injunction or substantial damages. In the event any such order or
injunction shall have been issued, each party agrees to use its
reasonable efforts to have any such injunction lifted.
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(c) Statutes.
-------- No federal, state, local or foreign statute, rule or
regulation shall have been enacted which would make the
consummation of the transactions contemplated hereby illegal.
7.2 Further Conditions to the Obligations of Buyer.
----------------------------------------------------- The
obligations of Buyer to effect the transactions contemplated hereby are subject
to the satisfaction on or prior to the Closing of the following conditions,
unless waived by Buyer:
(a) Representations and Warranties.
---------------------------------- The representations and
warranties of PHC set forth in this Agreement shall be true and
correct in all material respects as of the Closing as though made
at and as of the Closing, and Buyer shall have received a
certificate (the "PHC Bring-Down Certificate"), dated the date of
Closing to the foregoing effect signed by an authorized officer
of PHC. The PHC Bring-Down Certificate will also include
certified copies of resolutions of the Board of Directors and
sole shareholder of PHC approving the transactions contemplated
by this Agreement.
(b) Performance of Obligations of PHC.
------------------------------------ PHC shall have performed in
all material respects all obligations required to be performed by
it under this Agreement prior to the Closing, and the PHC
Bring-Down Certificate shall include a statement to such effect.
(c) No Litigation.
-------------- There shall not have been instituted and be
continuing or, to the knowledge of PHC, NHS or any Subsidiary
threatened, against NHS or any Subsidiary any claim, action or
proceeding the result of which could reasonably be expected to
result in a Material Adverse Event with respect to NHS or any
Subsidiary (except such matters, if any, as were disclosed in the
PHC Disclosure Letter).
(d) No Material Adverse Event.
------------------------- No Material Adverse Event with respect
to NHS or any Subsidiary (except such matters, if any, as were
described in the NHS Disclosure Letter) shall have occurred.
(e) Resignations of Officers and Directors.
----------------------------------------- There shall have been
tendered to Buyer the written resignation of each officer and
each member of the Board of Directors of NHS and each Subsidiary
from their capacities as officers or directors, effective at the
Closing.
(f) Third-Party Approvals.
---------------------- Any and all consents (or novations) from
third parties relating to contracts, licenses, leases and other
agreements and instruments disclosed or required to be disclosed,
pursuant to Section 2.15 hereof, to the extent reasonably
required to preserve the benefits of such contracts, licenses,
leases and other agreements and instruments following the
Closing, shall have been obtained.
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(g) Delivery of Share Certificates.
---------------------------------- The stock certificate(s)
representing all issued and outstanding Shares shall have been
delivered to Buyer, duly assigned to Buyer, in form and substance
reasonably satisfactory to Buyer and its counsel.
(h) Employment.
---------- Xxxxxxx X. Xxxx shall have entered into an employment
agreement with Buyer or NHS.
(i) PHC shall have received from A. Xxxxx Xxxx III, counsel to PHC,
PFS and NGL, a signed legal opinion to the following effects: (i)
NHS and each Subsidiary is a corporation duly organized, validly
existing and in good standing as a domestic corporation under the
laws of the jurisdiction of its incorporation; (ii) this
Agreement, has been, and, when executed and delivered by PFS and
NGL, respectively, as contemplated herein the Services Agreement
and the Lease will have been duly executed and delivered by PHC,
PFS or NGL, as the case may be, and, assuming this Agreement, the
Services Agreement and the Lease constitute binding obligations
of the other parties thereof, constitute, or will constitute, as
the case may be, valid and binding obligations of PHC, PFS or
NGL, as the case may be, enforceable against PHC, PFS or NGL, as
the case may be, in accordance with the respective terms of such
agreements, except (A) as such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights, (B) as the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought, and (C) insofar as the
enforceability of indemnification provisions contained in any of
such agreements may be limited by public policy considerations;
(iii) all of the issued and outstanding shares of capital stock
of NHS and each Subsidiary are owned of record as set forth in
paragraph 2.2 of the PHC Disclosure Letter; (iv) the execution
and delivery of this Agreement, the Services Agreement and the
Lease by PHC, PFS or NGL, as the case may be, and the performance
of their respective obligations hereunder and thereunder have
been duly and validly authorized by all requisite corporate
action on the part of PHC, PFS or NGL, as the case may be; and
(v) such counsel is not aware of any pending or threatened
litigation involving NHS or any Subsidiary except for such
matters, if any, as are listed in the PHC Disclosure Letter.
7.3 Further Conditions to the Obligations of PHC.
--------------------------------------------- The obligations
of PHC to effect the transactions contemplated hereby are subject to the
satisfaction on or prior to the Closing of the following conditions, unless
waived by PHC.
(a) Representations and Warranties.
-------------------------------- The representations and
warranties of Buyer set forth in this Agreement shall be
true and correct in all material respects as of the Closing as
though made at and as of the Closing, and PHC shall have
received a certificate to the foregoing effect signed by an
authorized officer of Buyer (the "Buyer Bring-Down Certificate").
The Buyer Bring-Down Certificate will also
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include certified copies of resolutions of the Board of
Directors of Buyer approving the transactions contemplated by
this Agreement.
(b) Performance of Obligations of Buyer.
----------------------------------- Buyer shall have performed
in all material respects all obligations required to be performed
by Buyer under this Agreement prior to the Closing, and the
Buyer Bring-Down Certificate shall include a statement to such
effect.
(c) Delivery of Closing Consideration.
---------------------------------- Buyer shall have delivered to
PHC the cash and the Warrant Certificates referred to in Section
1.1(b) above.
(d) No Litigation.
-------------- There shall not have been instituted and be
continuing or, to the knowledge of Buyer threatened, against
Buyer any claim, action, or proceeding which materially and
adversely affects Buyer's ability to fulfill its obligations
hereunder or which could reasonably be expected to result in a
Material Adverse Event with respect to Buyer (except such
matters, if any, as were described in of the Buyer Disclosure
Letter).
(e) No Material Adverse Event.
--------------------------- No Material Adverse Event with
respect to Buyer (except such matters, if any, as were
described in the Buyer Disclosure Letter) shall have occurred.
(f) Third-Party Approvals.
---------------------- Any and all consents (or novations)
required from third parties relating to contracts, licenses,
leases and other agreements and instruments material to NHS and
the Subsidiary, taken as a whole, to the extent reasonably
required to preserve the benefits of such contracts, licenses,
leases and other agreements and instruments following the
Closing, shall have been obtained.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination.
----------- This Agreement may be terminated at any time prior
to the Closing:
(a) By Mutual Consent.
----------------- By mutual consent of PHC and Buyer;
(b) By PHC or Buyer.
--------------- By either PHC, on the one hand, or Buyer, on the
other hand:
(i) if the Closing shall not have occurred on or before October
25, 1996; provided the failure of the transactions to
be consummated by the applicable date is not caused by any
breach of this Agreement by the party seeking such
termination;
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(ii) if a court of competent jurisdiction or other competent
governmental or regulatory authority shall have issued
an order, decree or ruling, or taken any other action
permanently restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby and
such order, decree, ruling or other action shall have become
final and not appealable; or
(iii) if any statute, rule or regulation is enacted, promulgated
or deemed applicable to the consummation of the transactions
contemplated hereby by any competent governmental or
regulatory authority which makes the consummation of such
transactions illegal.
(c) By PHC.
------ By PHC, if a material default under or a material breach
of this Agreement by Buyer shall have occurred and be continuing
thirty (30) days after receipt of written notice thereof from
PHC;
(d) By Buyer.
-------- By Buyer if a material default under or a material
breach of this Agreement by PHC shall have occurred and be
continuing thirty (30) days after receipt of written notice
thereof from Buyer.
8.2 Effect of Termination.
----------------------- In the event of termination of this
Agreement as provided in Section 8.1 above, this Agreement shall forthwith
terminate and there shall be no liability or obligation on the part of either
party hereto or their respective officers, directors, employees or agents,
except that (a) nothing set forth herein shall relieve a party hereto from
liability for its breach of this Agreement and (b) the confidentiality
provisions referred to in Section 6.l(c) shall survive any such termination.
8.3 Amendment.
--------- This Agreement may not be amended except by an
instrument in writing signed by or on behalf of each of the parties hereto.
8.4 Extension: Waiver.
----------------- At any time prior to the Closing, to the extent
legally allowed, PHC, on the one hand, and Buyer, on the other hand, (a) may
extend the time for the performance of any of the obligations or other acts of
the other party hereto, (b) may waive any inaccuracies in the representations
and warranties made by the other party contained herein or in any document
delivered pursuant hereto and (c) may waive the other party's compliance with
any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by or
on behalf of PHC or Buyer (as applicable) and shall be effective only to the
extent set forth in such instrument. No extension or waiver of any single
condition, covenant, agreement, representation, warranty, breach, default or
other matter hereunder shall be deemed an extension or waiver of any other
condition, covenant, agreement, representation, warranty, breach, default or
other matter theretofore or thereafter occurring.
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ARTICLE IX
INDEMNIFICATION
9.1 Indemnification By PHC.
----------------------- Subject to the limitations contained in
this Section 9.1, PHC shall, from and after the Closing Date, jointly and
severally, indemnify, defend and hold harmless Buyer and NHS and their
respective officers directors, agents, employees and representatives, successors
and assigns (collectively, "Buyer Indemnified Parties") from and against any and
all claims, actions, suits, proceedings, demands, assessments, judgments,
losses, expenses, liabilities, damages, recoveries and deficiencies, including
without limitation interest, penalties and reasonable attorneys' fees, expert
witness fees, costs and other expenses (collectively, "Losses") borne by or
asserted against any of such indemnified parties in any way relating to, arising
out of or resulting from:
(a) any misrepresentation or breach of warranty made by PHC in
this Agreement;
(b) any breach by PHC of any covenant or agreement contained in this
Agreement; and
(c) the matters referred to in paragraph 2.12 of the PHC Disclosure
Letter; and
(d) no Buyer Indemnified Party shall have the right to recover
from PHC based on claims for indemnification made under Section
9.1 (a) or 9.1 (b) or for breach of the representations or
warranties of PHC in Article II of this Agreement: (i) unless and
until the aggregate Losses on a cumulative basis attributable
to such claims exceed $300,000, and then only to the extent of
such excess, and (ii) if such claim is asserted with respect to
claims under Section 9.1(a) or with respect to the
representations and warranties of PHC in Article II of this
Agreement, such claim is asserted prior to the date such
representations and warranties terminate pursuant to Section 10.1
below.
9.2 Indemnification By Buyer.
------------------------
(a) Buyer shall, from and after the Closing Date, jointly and
severally, indemnify, defend and hold harmless PHC, its officers,
directors, agents, employees and representatives, successors and
assigns (collectively, "PHC Indemnified Parties") from and against
any and all claims, actions, suits, proceedings, demands,
assessments, judgments, losses, expenses, liabilities, damages,
recoveries and deficiencies, including without limitation
interest, penalties and reasonable attorneys' fees, expert
witness fees, costs and other expenses (collectively, "Losses")
borne by or asserted against any of such indemnified parties
in any way relating to, arising out of or resulting from:
(i) misrepresentation or breach of warranty made by Buyer in this
Agreement, the Warrant Certificates; and
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(ii) any breach by Buyer of any covenant or agreement contained
in this Agreement, or the Warrant Certificates.
(b) No PHC Indemnified Party shall have the right to recover from
Buyer based on claims for indemnification made under Section
9.2(a) or for breach of the representations or warranties of
Buyer in Article III of this Agreement if such claim is asserted
with respect to claims under Section 9.2(a) or the
representations and warranties of Buyer in Article III of this
Agreement, such claim is asserted prior to the date such
representations and warranties terminate pursuant to Section 10.1
below.
9.3 Third Party Claims.
-------------------- Notice and Opportunity to Settle. The
following provisions shall be applicable in the event that any Buyer or PHC
Indemnified Party asserts indemnity rights pursuant to this Article VIII
relating to any third party claim:
(a) Within 30 days after the receipt by the party entitled to
indemnity hereunder (the "Indemnified Party") of any claim or
demand (including but not limited to, notice of any action, suit
or proceeding) by any third party against an Indemnified Party
which gives rise to a right to claim of indemnification
hereunder, the affected Indemnified Party shall give the other
(collectively, the "Indemnifying Party") written notice of such
claim or demand; provided, however, that the failure to give such
notice shall not relieve the Indemnifying Party of its
obligations hereunder except to the extent that such failure is
materially prejudicial to the Indemnifying Party.
(b) The Indemnifying Party shall have the right (without prejudice
to the right of any Indemnified Party to participate at
its own expense through counsel of its own choosing), to defend
against such claim or demand at its expense and through counsel
of its own choosing (the choice of such counsel to be subject to
the reasonable consent of the affected Indemnified Parties) and
to control such defense if it gives written notice of its
intention to do so within 15 days of the receipt of the notice
referred to in Section 9.3(a) above. If the Indemnifying Party
shall decline or fail to assume the defense of such claim or
demand, the affected Indemnified Parties shall have the right to
assume control of such defense at the expense of the Indemnifying
Party. The Indemnified Parties shall cooperate fully in the
defense of such claim or demand and shall make available to the
Indemnifying Party or its counsel all pertinent information under
their control relating thereto. The Indemnifying Party agrees to
cooperate with the Indemnified Parties in order to enable their
counsel to participate in the defense and to deliver to the
Indemnified Parties copies of all pleadings and other information
within the Indemnifying Party's knowledge or possession
reasonably requested by the Indemnified Parties that is relevant
to the defense of any such claim or demand. The Indemnifying
Party and the Indemnified Parties and their respective counsel
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shall maintain confidentiality with respect to all such
information consistent with the conduct of a defense hereunder.
(c) The Indemnifying Party shall have the right to elect to
settle any such claim or demand for monetary damages only at its
sole expense and provided the settlement includes an
unconditional release of all Indemnified Parties, subject to the
consent of the affected Indemnified Parties; provided further,
that if the affected Indemnified Parties fail to give such
consent within 20 days of being requested to do so, the affected
Indemnified Parties shall, at their expense, assume the defense
of such claim or demand and regardless of the outcome of such
matter, the Indemnifying Party's liability hereunder shall be
limited to the amount of any such proposed settlement plus costs
and expenses incident to the defense and settlement of such claim
or demand.
(d) In the event the Indemnifying Party assumes the defense of a
claim or demand, the Indemnified Parties shall have the right
thereafter to take over control of the defense of any claim
or demand from the Indemnifying Party at any time and to elect to
settle such claim or demand; provided, however, that in such
case, unless Otherwise agreed by the Indemnifying Party, the
Indemnifying Party shall have no indemnification obligations with
respect to such claim, demand or settlement except for the costs
and expenses of such Indemnifying Party incurred in the defense
of the claim or demand.
(e) With respect to claims or demands arising under Section 9.1(a),
9.1(b) or the representations and warranties of PHC in Article
II above, the provisions of this Section 9.3 are subject
to the $300,000 deductible set forth in Section 9.1(d) hereof.
Until such deductible has been exhausted, Buyer and PHC shall
cooperate with each other in the handling and/or settlement of
any claim of indemnification covered by this Section 9.3 such
that Losses attributable to such claim will be properly allocated
to PHC up to the amount of any unused portion of such deductible.
ARTICLE X
GENERAL PROVISIONS
10.1 Investigation Will Not Affect Representations and Warranties:
----------------------------------------------------------------
Survival.
-------- No investigation made by or for any party hereto prior to the Closing
shall affect or modify any representations and warranties made to that party by
another party. All representations and warranties of the parties made herein
shall survive the Closing and shall expire 18 months after the Closing Date
except that Sections 2.1, 2.2, 2.3, 2.4, 2.9, 2.25, 3.1, 3.2, 3.3, 3.8 and 3.21
(only to the extent Sections 2.25 or 3.21 relate one or more such other listed
Sections) shall survive indefinitely. Except as otherwise expressly provided
herein, all covenants and obligations of the
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respective parties hereunder shall survive the Closing indefinitely until fully
satisfied in accordance with this Agreement.
10.2 Notices.
------- All notices and other communications hereunder shall be
in writing and shall be deemed given upon personal delivery, facsimile
transmissions (with written or facsimile confirmation of receipt), telex or
delivery by an overnight express courier service (delivery, postage or freight
charges prepaid), or on the fourth day following deposit in the United States
mail (if sent by registered or certified mail, return receipt requested,
delivery postage or freight charges prepaid), addressed to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Buyer, to: Mr. S. Xxxxxx Xxxxx
United Payors & United Providers, Inc.
0000 Xxxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
(b) if to PHC, to: Xxxxx X. Xxxx, Xx.
Preferred Health Choice, Inc.
0000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
FAX: (000) 000-0000
with a copy to: A. Xxxxx Xxxx III
Pioneer Financial Services, Inc.
0000 Xxxx Xxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
FAX: (000) 000-0000
10.3 Interpretation.
-------------- When a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference shall be to an Article,
Section, Exhibit or Schedule to this Agreement unless otherwise indicated. All
Exhibits referred to herein are hereby incorporated by reference herein. The
words "include," "includes" and "including" when used herein shall be deemed in
each case to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever a representation or warranty herein is made to the
"knowledge," "best knowledge" or awareness of a party, it shall refer to facts
within the actual knowledge of such party and such party's officers, provided
that, in the case of each party, such references shall be deemed to impose upon
such party a duty to conduct a reasonable investigation concerning the existence
of such facts, as well as an investigation of reasonably available corporate
records concerning such facts.
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10.4 Counterparts.
------------ This Agreement may be executed in two counterparts,
each of which shall be considered one and the same document and shall become
effective when the counterparts have been signed by each of the parties and
delivered to the other party, it being understood that each party need not sign
the same counterpart.
10.5 Miscellaneous.
------------- This Agreement and the Exhibits, Schedules,
documents, instruments and other agreements specifically referred to herein (a)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof;
(b) are not intended to confer upon any other person any rights or remedies
hereunder (except indemnification rights conferred upon Indemnified Parties in
Article VIII of this Agreement); and (c) shall not be assigned by operation of
law or otherwise except as otherwise specifically set forth herein; provided,
however, any party hereto may assign any of its rights and obligations hereunder
to any wholly-owned, direct or indirect subsidiary, but no such assignment shall
relieve such party of its obligations hereunder. Each party hereby acknowledges
and agrees that it has not replied upon any statement, representation or
warranty relating to the matters covered by this Agreement other than those
contained herein.
10.6 Governing Law.
------------- This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Illinois without giving effect to its conflict of law provisions.
10.7 Severability.
------------ In case any provision in this Agreement shall be
found by a court of competent jurisdiction to be invalid, illegal or
unenforceable, such provision shall be construed and enforced as if it had been
narrowly drawn so as not to be invalid, illegal or unenforceable, and the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
10.8 Successors and Assigns.
---------------------- This Agreement shall be binding upon the
parties hereto and their respective successors and permitted assigns and shall
inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
10.9 Time of the Essence.
------------------- The parties agree that time is of
the essence of each provision of this Agreement.
10.10 Attorneys' Fees.
--------------- In the event of any dispute with respect to the
subject matter of this Agreement, the prevailing party shall be entitled to such
party's reasonable attorneys' fees and court costs incurred in resolving or
settling the dispute, in addition to any and all other damages to which such
party may be entitled.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
PREFERRED HEALTH CHOICE, INC.
By: /s/ Xxxxx X. Xxxx, Xx.
----------------------
Its: Authorized Signatory
--------------------
UNITED PAYORS AND UNITED PROVIDERS, INC.
By: /s/ S. Xxxxxx Xxxxx
--------------------------
Its: Vice President & Secretary
--------------------------
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EXHIBIT A-l
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR
LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. IN
PARTICULAR, NO SALE, OFFER TO SELL OR TRANSFER OF SUCH WARRANTS OR THE
SECURITIES UNDERLYING SUCH WARRANTS SHALL BE MADE UNLESS A REGISTRATION
STATEMENT UNDER THE ACT WITH RESPECT TO SUCH SECURITIES IS IN EFFECT OR, TO THE
COMPANY'S REASONABLE SATISFACTION, AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT IS THEN APPLICABLE TO SUCH SECURITIES.
WARRANT TO PURCHASE 150,000 SHARES
OF COMMON STOCK OF
UNITED PAYORS & UNITED PROVIDERS, INC.
ISSUED TO
PREFERRED HEALTH CHOICE, INC.
DATED: October 23, 1996
NO. 1
(INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)
THIS IS TO CERTIFY THAT Preferred Health Choice, Inc., an Illinois corporation
("PHC"), (or its registered assigns, herein referred to as the "Warrantholder")
is entitled, upon the due exercise hereof and subject to the terms and
conditions hereof, at any time commencing on the date of this certificate
("Commencement Date"), and ending on the third anniversary of the Commencement
Date (the "Expiration Date"), to purchase from United Payors & United Providers,
Inc, a Delaware corporation (the "Company"), and the Company shall issue and
sell to the Warrantholder, the number of shares of common stock, $.01 par value
per share (the "Common Stock"), of the Company (said number of shares as
adjusted as provided herein being hereinafter referred to as the "Shares") set
forth above upon surrender hereof, with the form of election to purchase
included herein completed and duly executed, at the office of the Company, and
upon simultaneous payment therefor at an exercise price per Share equal to
$16.00 (said amount as adjusted herein being hereinafter referred to as the
"Purchase Price") in cash and/or check payable to the order of the Company. The
number and Purchase Price of the Shares are subject to adjustment as provided
herein.
1. The Warrantholder hereby represents to the Company that the
Warrantholder is taking the Warrants for investment and not with a view to a
distribution of the Warrants or the underlying Common Stock. Nevertheless, the
Company and the Warrantholder acknowledge and agree that Warrantholder may sell,
transfer, assign, hypothecate or otherwise dispose of this
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Warrant after the Commencement Date, provided such sale, transfer, assignment,
hypothecation or other disposition is in accordance with applicable federal and
state securities laws. In connection therewith the Company may require an
opinion of counsel and/or other documentation as are reasonably necessary to
evidence compliance with such laws.
2. Subject to the restrictions set forth in Section 3 hereof, upon
surrender of this Warrant, and payment of the Purchase Price as aforesaid, the
Company shall issue and deliver with all reasonable dispatch the certificate(s)
for the Shares to or upon the written order of the holder of this Warrant and in
such name or names as such holder may designate. Such certificate(s) shall
represent the number of Shares issuable upon the exercise of the Warrants
embodied herein, together with a cash amount (if the holder has so elected in
accordance with the provisions of Section 9 hereof) in respect of any fraction
of a Share otherwise issuable upon such surrender.
Certificate(s) representing the Shares shall be deemed to have been
issued and the person so designated to be named therein shall be deemed to have
become a holder of record of such Shares as of the date of the surrender of this
Warrant and payment of the Purchase Price as aforesaid; provided, however that
if, at the date of surrender of this Warrant and payment of such Purchase Price,
the transfer books for the Shares or other classes of stock purchasable upon the
exercise of this Warrant shall be closed, the certificate(s) for the Shares in
respect of which this Warrant is then exercised shall be issuable as of the date
on which such books shall next be opened, and until such date the Company shall
be under no duty to deliver any certificate(s) for such Shares. This Warrant
shall be exercisable, at the election of the registered holder hereof, either as
an entirety or from time to time for part of the number of Shares specified
herein, but in no event shall fractional Shares be issued with regard to the
exercise of this Warrant. In the event that this Warrant is exercised at any
time prior to the close of business on the Expiration Date, a new Warrant shall
be issued to such holder for the remaining number of Shares purchasable pursuant
hereto. The Company shall cancel this Warrant when it is surrendered upon
exercise.
Prior to due presentment for registration of transfer of this Warrant,
the Company shall deem and treat the Warrantholder in whose name this Warrant
shall be issued as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing on this Warrant made by anyone other than
the Company) for the purpose of any exercise hereof, of any distribution to the
holder hereof, and for all other purposes, and the Company shall not be affected
by any notice to the contrary.
3. The Company shall pay all documentary stamp taxes, if any,
attributable to the initial issuance of the Shares issuable upon the exercise of
this Warrant, provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue or delivery of any certificates for Shares in a name other than that of
the Warrantholder upon the exercise of this Warrant, and in such case the
Company shall not be required to issue or deliver any certificates for Shares
until or unless the person or persons
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requesting the issuance have paid to the Company the amount of such tax or have
established to the Company's satisfaction that such tax has been paid.
4. In case this Warrant shall be mutilated, lost, stolen or destroyed,
the Company shall issue and deliver, in exchange and substitution for and upon
cancellation of the mutilated Warrant, or in lieu of and substitution for the
Warrant lost, stolen or destroyed, a new Warrant of like tenor and representing
an equivalent number of Shares purchasable upon exercise, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction of such Warrant and reasonable indemnity or bond, if requested, also
reasonably satisfactory to the Company. Applicants for such substitute Warrant
shall also comply with such other reasonable conditions and pay such other
reasonable charges as the Company may prescribe.
5. (a) For the purpose of enabling it to satisfy any obligation to
issue Shares upon the exercise of this Warrant, the Company shall at all times
through the Expiration Date, reserve and keep available, free from preemptive
rights and out of its aggregate authorized but unissued shares of Common Stock,
the number of Shares deliverable upon the exercise of this Warrant.
(b) Before taking any action which would cause an adjustment pursuant
to the terms set forth herein reducing the portion of the Purchase Price
attributable to the Shares below the then par value (if any) of such Shares, the
Company shall take any corporate action which may, in the opinion of its counsel
(which may be counsel regularly engaged by the Company), be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Shares at the Purchase Price as so adjusted.
(c) The Company covenants that all Shares issued upon exercise of the
Warrants shall, upon issuance in accordance with the terms hereof, be fully paid
and nonassessable and free from all preemptive rights and taxes, liens, charges
and security interests created by the Company with respect to the issuance and
holding thereof.
(d) After the Expiration Date, no Shares shall be subject to
reservation in respect to this Warrant.
6. Unless this Warrant is surrendered and payment made as herein
provided before the Expiration Date, this Warrant will become wholly void and
all rights evidenced hereby will terminate.
7. Subject to the provisions of Section 2 above, this Warrant may be
exchanged for a number of Warrants of the same tenor as this Warrant for the
purchase in the aggregate of the same number of Shares of the Company as are
purchasable upon exercise of this Warrant, upon surrender hereof at the office
of the Company with written instructions as to the denominations of the Warrants
to be issued in exchange.
8. (a) In case the Company shall at any time after the date of this
Agreement (i) declare a dividend on the Common Stock of the Company payable in
shares of the Company's
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Common Stock, (ii) subdivide the outstanding, Common Stock, or (iii) reverse
split the outstanding Common Stock into a smaller number of shares, the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, reverse split or reclassification, and/or
the number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Warrant exercised after such
time shall be entitled to receive the aggregate number and kind of securities
which, if such Warrant had been exercised immediately prior to such date, such
holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, reverse split or reclassification. Such
adjustments shall be made successively whenever any event listed above shall
occur.
(b) If at any time the Company shall declare a dividend or otherwise
make a distribution to the holders of its Common Stock in the form of: (i) cash;
(ii) any evidences of its indebtedness, any shares of its capital stock or any
other securities or property of any nature whatsoever (including securities of a
subsidiary, but excluding common stock or securities convertible into common
stock); or (iii) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its capital stock, or any other
securities or property of any nature whatsoever (including securities of a
subsidiary, but excluding securities convertible into common stock or additional
shares of Common Stock), (to the extent that an appropriate adjustment for such
distribution is not covered by another paragraph Section 8) the adjustments set
forth in subparagraphs (i) and (ii) below shall be made to the number of shares
of Common Stock for which this Warrant is exercisable and the Purchase Price,
respectively:
(i) The number of shares of Common Stock for which this
Warrant is exercisable shall be adjusted to equal: (i) the number of
shares of common Stock for which this Warrant is exercisable
immediately prior to such event, (ii) multiplied by a fraction, (A) the
numerator of which shall be the current market price per share of
Common Stock on the record date for the dividend or distribution, and
(B) the denominator of which shall be the current market price per
share of Common Stock on the record date for the dividend or
distribution minus the amount allocable to one share of Common Stock of
any such cash so distributed and the fair value (as determined in good
faith by the Board of Directors of the Company and supported by an
opinion from an investment banking firm of recognized national standing
acceptable to the holders of the Warrant) of any and all such evidences
of indebtedness, shares of capital stock, other securities or property,
or warrants or other subscription or purchase rights so distributed.
(ii) The Purchase Price shall be adjusted to equal: (i) the
Purchase Price in effect immediately before the occurrence of any such
event, (ii) multiplied by a fraction, (A) the numerator of which is the
number of shares of Common Stock for which this Warrant is exercisable
immediately before the adjustment, and (B) the denominator of which is
the number of shares for which this Warrant is exercisable immediately
after the adjustment.
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Such adjustment shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) For the purpose of any computation under Section 8(b) hereof, the
current market price per share of Common Stock on any date shall be (i) the
average of the last reported sale prices for the past thirty trading days as
reported on a national securities exchange or (ii) the average of the last
reported bid and asked prices for the past thirty trading days if the Company's
common stock is reported on the NASDAQ or (iii) if the Company's common stock is
not reported on the NASDAQ, the average of the last reported sale price for the
past thirty trading days as reported in the "pink sheets" (or an equivalent
quotation system) for over-the-counter stocks.
(d) No adjustment in the Purchase Price shall be required unless such
adjustment would require a decrease of at lest one cent ($0.01) in such price;
provided, however, that any adjustment which (by reason of this Section 8(d)) is
not require to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 8 shall be made to
the nearest cent or to the nearest hundredth of a Share, as the case may be, but
in no event shall the Company be obligated to issue fractional Shares or
fractional portions of any securities upon the exercise of any Warrant.
(e) In the event that at any time, as a result of an adjustment made
pursuant to Section 8(a) hereof, the holder of any Warrant thereafter exercised
shall become entitled to receive any shares of capital stock or warrants or
other securities of the Company other than the Shares, thereafter the number of
such other shares of capital stock or warrants or other securities so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Shares contained in this Section 8, and the provisions of this
Warrant with respect to the Shares shall apply, to the extent applicable, on
like terms to any such other shares of capital stock or warrants or other
securities.
(f) In any case in which this Section 8 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Warrants exercised after such record date
Shares and such other shares of capital stock or warrants or other securities of
the Company, if any, issuable upon such exercise over and above the Shares, on
the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to the holder a due xxxx or other
appropriate instrument evidencing such holder's right to receive such shares of
capital stock; or warrants or other securities upon the occurrence of the event
requiring such adjustment.
(g) In case of any capital reorganization of the Company, or any
reclassification of the Common Stock (other than a change in par value, or from
par to no par value, or from no par value to par value, or as a result of
subdivision or combination), or in case of the consolidation
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of the Company with or the merger of the Company into any other corporation
(other than a consolidation or merger in which the Company is the continuing
corporation) or of the sale of the properties and assets of the Company as, or
substantially as, an entirety to any other corporation, each Warrant shall after
such reorganization, reclassification, consolidation, merger or sale be
exercisable, upon the terms and conditions, specified herein, for the number of
shares of Common Stock or other capital stock or warrants or other securities or
property to which a holder of the number of Shares purchasable (at the time of
such reorganization, reclassification, consolidation, merger or sale) upon
exercise of such Warrant would have been entitled upon such reorganization,
reclassification, consolidation, merger or sale; and in any such case, if
necessary, the provisions set forth in this Section 8(g) with respect to the
rights and interests thereafter of the registered holders of all Warrants
purchasable upon the exercise of any portion of this Warrant shall be
approximately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of Common Stock or other capital stock or warrants or other
securities or property thereafter deliverable on the exercise of the Warrants.
The subdivision, reverse split or combination of shares of Common Stock at any
time outstanding into a greater or lesser number of shares shall not be deemed
to be a reclassification of the Common Stock for the purposes of this Section
8(g).
(h) Except as provided in subparagraph (iv) hereunder, if the Company
shall, prior to the Expiration Date, issue or sell (whether in a single
transaction or a series of transactions, whether or not related) any additional
shares of Common Stock in exchange for consideration in an amount per additional
share of Common Stock which are in each instance, less than the Purchase Price
at the time the additional shares of Common Stock are issued, then (to the
extent that an appropriate adjustment is not covered by another paragraph of
Section 8), the Purchase Price and the number of shares for which the Warrant is
exercisable shall be adjusted as follows:
(i) The Purchase Price shall be adjusted to equal (i) the
Purchase Price for which this Warrant is exercisable prior to the
adjustment; (ii) multiplied by a fraction, (A) the numerator of which
is the sum of the number of shares of Common Stock outstanding
immediately prior to the issue or sale multiplied by the Purchase Price
then in effect, plus the number of shares of Common Stock that could
have been acquired at the current market price immediately prior to
such issue or sale using the aggregate consideration payable in the
issue or sale and (B) the denominator of which is the number of shares
of Common Stock outstanding immediately prior to the issue or sale plus
the number of additional shares of Common Stock issued or sold.
(ii) The number of shares of Common Stock for which this
Warrant is exercisable shall be adjusted to equal the number of shares
of Common Stock for which this Warrant is exercisable immediately prior
to such issue or sale, multiplied by a fraction, (A) the numerator of
which is the Purchase Price after giving effect to the adjustment, and
(B) the denominator of which is the Purchase Price in effect
immediately prior to the issue or sale.
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(iii) No adjustment of the number of shares of Common Stock
for which this Warrant shall be exercisable or the Purchase Price shall
be made under paragraph (i) or (ii) of this Section 8(h) upon the
issuance of any additional shares of Common Stock which are issued
pursuant to the exercise of any warrants or other subscription or
purchase rights or pursuant to the exercise of any conversion or
exchange rights in any securities convertible into common stock, if any
such adjustment shall previously have been made upon the issuance of
such warrants or other rights or upon the issuance of such securities
convertible into common stock (or upon the issuance of any warrant or
other rights therefor) pursuant to this Section 8.
(iv) Notwithstanding any other provision of this Section 8(h),
no adjustment to the exercise price of the Warrants or the number of
shares issuable upon exercise of the Warrants shall be made with
respect to the issuance (to persons or entities other than persons or
entities who or which, acting alone or together, own of record or
beneficially, at least (x) 10% of the outstanding shares of Common
Stock, including securities convertible into, or otherwise representing
the right to acquire, shares of Common Stock, or (y) securities
representing at least 10% of the voting power or equity interest in the
Company, including securities convertible into or otherwise
representing the right to acquire such securities) of up to an
aggregate of 4,500,000 additional shares of Common Stock (including but
not limited to the issuance of shares of Common Stock upon the exercise
of conversion of the options, warrants, convertible securities or other
securities evidencing the right to purchase shares of Common Stock).
9. Upon exercise the Company shall not be required to issue fractions
of Shares. In lieu of such fractional Shares, the holders of Warrants shall
receive an amount in cash equal to the same fraction of the current market value
of one whole Share. For purposes of this Section 9, the current market value of
one whole Share shall be determined pursuant to Section 8(c) hereof. All
calculations under this section 9 shall be made to the nearest cent.
10. The holder of a Warrant shall not be entitled to any rights of a
shareholder of the Company with respect to any Shares purchasable upon the
exercise thereof, including voting, dividend or dissolution rights, until such
Shares have been paid for in full and issued to such holder. As soon as
practicable after such exercise, the Company shall deliver a certificate or
certificates for the securities issuable upon such exercise, all of which shall
be fully paid and nonassessable, to the person or persons entitled to receive
the same; provided, however, that such certificate or certificates delivered to
the holder of the surrendered warrant shall bear a legend reading substantially
as follows:
No sale, offer to sell or transfer of such securities or this
certificate or of any shares or other securities issued in exchange for
or in respect of such securities shall be made unless a registration
statement under the Securities Act of 1933, (the "Act"), as amended,
with respect to such securities, is in effect or, to the Company's
reasonable satisfaction, an exemption from the registration
requirements of the Act is then applicable to such securities.
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11. (a) Upon any adjustment of the Purchase Price pursuant to
Section 8 hereof, the Company within ninety (90) calendar days thereafter
shall have on file for inspection by the holder hereof a certificate of the
Board of Directors of the Company setting forth the Purchase Price after
such adjustment and setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based and setting
forth the number of Shares purchasable upon exercise of a Warrant after such
adjustment in the Purchase Price, which certificate shall, absent manifest
error, be conclusive evidence of the correctness of the matters set forth
therein.
(b) In case:
(1) the Company shall authorize the issuance to all holders of
Common Stock of rights, options or warrants to subscribe for or
purchase capital stock of the Company or of any other subscription
rights, options or warrants; or
(2) the Company shall authorize the distribution to all
holders of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
earnings (or consolidated earnings if the Company shall have one or
more subsidiaries) or earned surplus or dividends payable in Common
Stock or distributions of scrip); or
(3) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the conveyance or transfer of the properties and assets
of the Company substantially as an entirety, or of any capital
reorganization of any reclassification of the Common Stock (other than
a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or
combination); or
(4) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(5) the Company proposes to take any other action which would
require an adjustment of the Purchase Price pursuant to Section 8
hereof;
then the Company shall give to the holder of a Warrant at his or its address
appearing below at least ten (10) calendar days prior to the applicable record
date hereinafter specified in (i) or (ii) below, by first-class mail, postage
prepaid, a written notice stating (i) the date as of which the holders of record
of shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined or (ii) the date on which any such
consolidation, merger, conveyance, transfer, reorganization, reclassification,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange such shares for securities or other property, if
any, deliverable upon such consolidation, merger, conveyance, transfer,
reorganization, reclassification, dissolution, liquidation or winding up. The
failure to give the
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notice required by this Section 11 (b) or any defect herein shall not affect the
legality or validity of any distribution right, option, warrant, consolidation,
merger, conveyance, transfer, reorganization, reclassification, dissolution,
liquidation or winding up or the vote upon any action.
(c) Nothing contained herein shall be construed as conferring upon the
holder of a Warrant with respect to the Shares the right to vote or to consent
or to receive notice as a stockholder in respect of the meetings of stockholders
or the election of directors of the Company or any other matter, or any rights
whatsoever as a stockholder of the Company.
12. Any notice, request, demand or other communication pursuant to the
terms of this Warrant shall be in writing and shall be sufficiently given or
made when delivered or mailed by first class or registered mail, postage
prepaid, if to the Company addressed to:
United Payors or United Providers, Inc.
0000 Xxxxxxxx Xxxxxxxxx
0xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Secretary
or to such other address as the Company may designate by written notice to the
holder of a Warrant, and if to the holder of a Warrant at his or its registered
address on the records of the Company.
13. All the covenants and provisions herein by or for the benefit of
the Company hereof shall bind and inure to the benefit of its respective
successors and assigns to the extent permitted hereunder and all of the
covenants and provisions herein by or for the benefit of the holder hereof shall
inure to the benefit of such holder's successors, legal representatives, heirs
or assigns as permitted herein.
14. This Warrant shall be deemed to be a contract made under the laws
of the State of Delaware for all purposes and shall be construed in accordance
with the internal laws of such State.
15. Nothing in the Warrant shall be construed to give to any person or
corporation other than the Company and the holder of this Warrant any legal or
equitable right, remedy or claim under this Warrant; but this Warrant shall be
for the sole and exclusive benefit of the Company and the holder of this
Warrant.
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IN WITNESS WHEREOF, an authorized officer of the Company has signed this
Warrant.
UNITED PAYORS & UNITED PROVIDERS, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------
President
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ELECTION TO PURCHASE
--------------------
(To be executed by the holder only if it desires to exercise Warrants
evidenced by the within Warrant)
TO: UNITED PAYORS & UNITED PROVIDERS, INC.
0000 Xxxxxxxx Xxxxxxxxx
0xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Secretary
The undersigned hereby (1) irrevocably elects to exercise _____________
Warrants, evidenced by the within Warrant for, and to purchase thereunder
________________ Shares issuable upon exercise of said Warrants, (2) makes
payment in full of the Purchase Price of such Shares, (3) requests that
certificates for the Shares be issued in the name of:
Please print Social Security or Tax Identification Number ______________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
and (4) if said number of Warrants shall not be all the Warrants evidenced by
the within Warrant, requests that a new Warrant evidencing Warrants not so
exercised be issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
In lieu of receipt of a fractional Share the undersigned hereby elects (check
the appropriate line): -----
--------------------
_______ (i) to receive a cash payment, and the check representing payment
thereof should be made payable to ___________________________
_____________________________________________________________
(Please print name and address)
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and should be delivered to
_____________________________________________________________
________________________________________________________; or
_______ (ii) to credit the amount of such payment against the Purchase
Price payable for the Shares issuable upon the exercise of
said Warrants.
DATED: __________________________, 199__
Signature: ____________________________
NOTICE: The above signature must
correspond with the name as
written upon the face of the
within Warrant in every
particular, without alteration
or enlargement or any change
whatsoever, or if signed by
any other person the Form of
Assignment herein must be
duly executed.
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EXHIBIT A-2
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR
LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. IN
PARTICULAR, NO SALE, OFFER TO SELL OR TRANSFER OF SUCH WARRANTS OR THE
SECURITIES UNDERLYING SUCH WARRANTS SHALL BE MADE UNLESS A REGISTRATION
STATEMENT UNDER THE ACT WITH RESPECT TO SUCH SECURITIES IS IN EFFECT OR, TO THE
COMPANY'S REASONABLE SATISFACTION, AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT IS THEN APPLICABLE TO SUCH SECURITIES.
WARRANT TO PURCHASE 168,000 SHARES
OF COMMON STOCK OF
UNITED PAYORS & UNITED PROVIDERS, INC.
ISSUED TO
PREFERRED HEALTH CHOICE, INC.
DATED: October 29, 1996
NO. 2
(INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE)
THIS IS TO CERTIFY THAT Preferred Health Choice, Inc., an Illinois
corporation ("PHC"), (or its registered assigns, herein referred to as the
"Warrantholder") is entitled, upon the due exercise hereof and subject to the
terms and conditions hereof, at any time commencing on the first anniversary of
this certificate ("Commencement Date"), and ending on the third anniversary of
the Commencement Date (the "Expiration Date"), to purchase from United Payors &
United Providers, Inc, a Delaware corporation (the "Company"), and the Company
shall issue and sell to the Warrantholder, the number of shares of common stock,
$.01 par value per share (the "Common Stock"), of the Company (said number of
shares as adjusted as provided herein being hereinafter referred to as the
"Shares") set forth above upon surrender hereof, with the form of election to
purchase included herein completed and duly executed, at the office of the
Company, and upon simultaneous payment therefor at an exercise price per Share
equal to $16.00 (said amount as adjusted herein being hereinafter referred to as
the "Purchase Price") in cash and/or check payable to the order of the Company.
The number and Purchase Price of the Shares are subject to adjustment as
provided herein.
1. The Warrantholder hereby represents to the Company that the
Warrantholder is taking the Warrants for investment and not with a view to a
distribution of the Warrants or the underlying Common Stock. Nevertheless, the
Company and the Warrantholder acknowledge and agree that Warrantholder may sell,
transfer, assign, hypothecate or otherwise dispose of this Warrant after the
Commencement Date, provided such sale, transfer, assignment, hypothecation
49
or other disposition is in accordance with applicable federal and state
securities laws. In connection therewith the Company may require an opinion of
counsel and/or other documentation as are reasonably necessary to evidence
compliance with such laws.
2. Subject to the restrictions set forth in Section 3 hereof, upon
surrender of this Warrant, and payment of the Purchase Price as aforesaid, the
Company shall issue and deliver with all reasonable dispatch the certificate(s)
for the Shares to or upon the written order of the holder of this Warrant and in
such name or names as such holder may designate. Such certificate(s) shall
represent the number of Shares issuable upon the exercise of the Warrants
embodied herein, together with a cash amount (if the holder has so elected in
accordance with the provisions of Section 9 hereof) in respect of any fraction
of a Share otherwise issuable upon such surrender.
Certificate(s) representing the Shares shall be deemed to have been
issued and the person so designated to be named therein shall be deemed to have
become a holder of record of such Shares as of the date of the surrender of this
Warrant and payment of the Purchase Price as aforesaid; provided, however that
if, at the date of surrender of this Warrant and payment of such Purchase Price,
the transfer books for the Shares or other classes of stock purchasable upon the
exercise of this Warrant shall be closed, the certificate(s) for the Shares in
respect of which this Warrant is then exercised shall be issuable as of the date
on which such books shall next be opened, and until such date the Company shall
be under no duty to deliver any certificate(s) for such Shares. This Warrant
shall be exercisable, at the election of the registered holder hereof, either as
an entirety or from time to time for part of the number of Shares specified
herein, but in no event shall fractional Shares be issued with regard to the
exercise of this Warrant. In the event that this Warrant is exercised at any
time prior to the close of business on the Expiration Date, a new Warrant shall
be issued to such holder for the remaining number of Shares purchasable pursuant
hereto. The Company shall cancel this Warrant when it is surrendered upon
exercise.
Prior to due presentment for registration of transfer of this Warrant,
the Company shall deem and treat the Warrantholder in whose name this Warrant
shall be issued as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing on this Warrant made by anyone other than
the Company) for the purpose of any exercise hereof, of any distribution to the
holder hereof, and for all other purposes, and the Company shall not be affected
by any notice to the contrary.
3. The Company shall pay all documentary stamp taxes, if any,
attributable to the initial issuance of the Shares issuable upon the exercise of
this Warrant, provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue or delivery of any certificates for Shares in a name other than that of
the Warrantholder upon the exercise of this Warrant, and in such case the
Company shall not be required to issue or deliver any certificates for Shares
until or unless the person or persons requesting the issuance have paid to the
Company the amount of such tax or have established to the Company's satisfaction
that such tax has been paid.
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50
4. In case this Warrant shall be mutilated, lost, stolen or destroyed,
the Company shall issue and deliver, in exchange and substitution for and upon
cancellation of the mutilated Warrant, or in lieu of and substitution for the
Warrant lost, stolen or destroyed, a new Warrant of like tenor and representing
an equivalent number of Shares purchasable upon exercise, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction of such Warrant and reasonable indemnity or bond, if requested, also
reasonably satisfactory to the Company. Applicants for such substitute Warrant
shall also comply with such other reasonable conditions and pay such other
reasonable charges as the Company may prescribe.
5. (a) For the purpose of enabling it to satisfy any obligation to
issue Shares upon the exercise of this Warrant, the Company shall at all times
through the Expiration Date, reserve and keep available, free from preemptive
rights and out of its aggregate authorized but unissued shares of Common Stock,
the number of Shares deliverable upon the exercise of this Warrant.
(b) Before taking any action which would cause an adjustment pursuant
to the terms set forth herein reducing the portion of the Purchase Price
attributable to the Shares below the then par value (if any) of such Shares, the
Company shall take any corporate action which may, in the opinion of its counsel
(which may be counsel regularly engaged by the Company), be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Shares at the Purchase Price as so adjusted.
(c) The Company covenants that all Shares issued upon exercise of the
Warrants shall, upon issuance in accordance with the terms hereof, be fully paid
and nonassessable and free from all preemptive rights and taxes, liens, charges
and security interests created by the Company with respect to the issuance and
holding thereof.
(d) After the Expiration Date, no Shares shall be subject to
reservation in respect to this Warrant.
6. Unless this Warrant is surrendered and payment made as herein
provided before the Expiration Date, this Warrant will become wholly void and
all rights evidenced hereby will terminate.
7. Subject to the provisions of Section 2 above, this Warrant may be
exchanged for a number of Warrants of the same tenor as this Warrant for the
purchase in the aggregate of the same number of Shares of the Company as are
purchasable upon exercise of this Warrant, upon surrender hereof at the office
of the Company with written instructions as to the denominations of the Warrants
to be issued in exchange.
8. (a) In case the Company shall at any time after the date of this
Agreement (i) declare a dividend on the Common Stock of the Company payable in
shares of the Company's Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) reverse split the outstanding Common Stock into a smaller number
of shares, the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, reverse split
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51
or reclassification, and/or the number and kind of shares of capital stock
issuable on such date, shall be proportionately adjusted so that the holder of
any Warrant exercised after such time shall be entitled to receive the aggregate
number and kind of securities which, if such Warrant had been exercised
immediately prior to such date, such holder would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision, reverse
split or reclassification. Such adjustments shall be made successively whenever
any event listed above shall occur.
(b) If at any time the Company shall declare a dividend or otherwise
make a distribution to the holders of its Common Stock in the form of: (i) cash;
(ii) any evidences of its indebtedness, any shares of its capital stock or any
other securities or property of any nature whatsoever (including securities of a
subsidiary, but excluding common stock or securities convertible into common
stock); or (iii) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its capital stock, or any other
securities or property of any nature whatsoever (including securities of a
subsidiary, but excluding securities convertible into common stock or additional
shares of Common Stock), (to the extent that an appropriate adjustment for such
distribution is not covered by another paragraph Section 8) the adjustments set
forth in subparagraphs (i) and (ii) below shall be made to the number of shares
of Common Stock for which this Warrant is exercisable and the Purchase Price,
respectively:
(i) The number of shares of Common Stock for which this
Warrant is exercisable shall be adjusted to equal: (i) the number of
shares of common Stock for which this Warrant is exercisable
immediately prior to such event, (ii) multiplied by a fraction, (A) the
numerator of which shall be the current market price per share of
Common Stock on the record date for the dividend or distribution, and
(B) the denominator of which shall be the current market price per
share of Common Stock on the record date for the dividend or
distribution minus the amount allocable to one share of Common Stock of
any such cash so distributed and the fair value (as determined in good
faith by the Board of Directors of the Company and supported by an
opinion from an investment banking firm of recognized national standing
acceptable to the holders of the Warrant) of any and all such evidences
of indebtedness, shares of capital stock, other securities or property,
or warrants or other subscription or purchase rights so distributed.
(ii) The Purchase Price shall be adjusted to equal: (i) the
Purchase Price in effect immediately before the occurrence of any such
event, (ii) multiplied by a fraction, (A) the numerator of which is the
number of shares of Common Stock for which this Warrant is exercisable
immediately before the adjustment, and (B) the denominator of which is
the number of shares for which this Warrant is exercisable immediately
after the adjustment.
Such adjustment shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
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52
(c) For the purpose of any computation under Section 8(b) hereof, the
current market price per share of Common Stock on any date shall be (i) the
average of the last reported sale prices for the past thirty trading days as
reported on a national securities exchange or (ii) the average of the last
reported bid and asked prices for the past thirty trading days if the Company's
common stock is reported on the NASDAQ or (iii) if the Company's common stock is
not reported on the NASDAQ, the average of the last reported sale price for the
past thirty trading days as reported in the "pink sheets" (or an equivalent
quotation system) for over-the-counter stocks.
(d) No adjustment in the Purchase Price shall be required unless such
adjustment would require a decrease of at lest one cent ($0.01) in such price;
provided, however, that any adjustment which (by reason of this Section 8(d)) is
not require to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 8 shall be made to
the nearest cent or to the nearest hundredth of a Share, as the case may be, but
in no event shall the Company be obligated to issue fractional Shares or
fractional portions of any securities upon the exercise of any Warrant.
(e) In the event that at any time, as a result of an adjustment made
pursuant to Section 8(a) hereof, the holder of any Warrant thereafter exercised
shall become entitled to receive any shares of capital stock or warrants or
other securities of the Company other than the Shares, thereafter the number of
such other shares of capital stock or warrants or other securities so receivable
upon exercise of any Warrant shall be subject to adjustment from time to time in
a manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Shares contained in this Section 8, and the provisions of this
Warrant with respect to the Shares shall apply, to the extent applicable, on
like terms to any such other shares of capital stock or warrants or other
securities.
(f) In any case in which this Section 8 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Warrants exercised after such record date
Shares and such other shares of capital stock or warrants or other securities of
the Company, if any, issuable upon such exercise over and above the Shares, on
the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to the holder a due xxxx or other
appropriate instrument evidencing such holder's right to receive such shares of
capital stock or warrants or other securities upon the occurrence of the event
requiring such adjustment.
(g) In case of any capital reorganization of the Company, or any
reclassification of the Common Stock (other than a change in par value, or from
par to no par value, or from no par value to par value, or as a result of
subdivision or combination), or in case of the consolidation of the Company with
or the merger of the Company into any other corporation (other than a
consolidation or merger in which the Company is the continuing corporation) or
of the sale of the properties and assets of the Company as, or substantially as,
an entirety to any other corporation, each Warrant shall after such
reorganization, reclassification, consolidation, merger
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53
or sale be exercisable, upon the terms and conditions, specified herein, for the
number of shares of Common Stock or other capital stock or warrants or other
securities or property to which a holder of the number of Shares purchasable (at
the time of such reorganization, reclassification, consolidation, merger or
sale) upon exercise of such Warrant would have been entitled upon such
reorganization, reclassification, consolidation, merger or sale; and in any such
case, if necessary, the provisions set forth in this Section 8(g) with respect
to the rights and interests thereafter of the registered holders of all Warrants
purchasable upon the exercise of any portion of this Warrant shall be
approximately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of Common Stock or other capital stock or warrants or other
securities or property thereafter deliverable on the exercise of the Warrants.
The subdivision, reverse split or combination of shares of Common Stock at any
time outstanding into a greater or lesser number of shares shall not be deemed
to be a reclassification of the Common Stock for the purposes of this Section
8(g).
(h) Except as provided in subparagraph (iv) hereunder, if the Company
shall, prior to the Expiration Date, issue or sell (whether in a single
transaction or a series of transactions, whether or not related) any additional
shares of Common Stock in exchange for consideration in an amount per additional
share of Common Stock which are in each instance, less than the Purchase Price
at the time the additional shares of Common Stock are issued, then (to the
extent that an appropriate adjustment is not covered by another paragraph of
Section 8), the Purchase Price and the number of shares for which the Warrant is
exercisable shall be adjusted as follows:
(i) The Purchase Price shall be adjusted to equal (i) the
Purchase Price for which this Warrant is exercisable prior to the
adjustment; (ii) multiplied by a fraction, (A) the numerator of which
is the sum of the number of shares of Common Stock outstanding
immediately prior to the issue or sale multiplied by the Purchase Price
then in effect, plus the number of shares of Common Stock that could
have been acquired at the current market price immediately prior to
such issue or sale using the aggregate consideration payable in the
issue or sale and (B) the denominator of which is the number of shares
of Common Stock outstanding immediately prior to the issue or sale plus
the number of additional shares of Common Stock issued or sold.
(ii) The number of shares of Common Stock for which this
Warrant is exercisable shall be adjusted to equal the number of shares
of Common Stock for which this Warrant is exercisable immediately prior
to such issue or sale, multiplied by a fraction, (A) the numerator of
which is the Purchase Price are giving effect to the adjustment, and
(B) the denominator of which is the Purchase Price in effect
immediately prior to the issue or sale.
(iii) No adjustment of the number of shares of Common Stock
for which this Warrant shall be exercisable or the Purchase Price shall
be made under paragraph (i) or (ii) of this Section 8(h) upon the
issuance of any additional shares of Common Stock which are issued
pursuant to the exercise of any warrants or other subscription or
purchase rights or pursuant to the exercise of any conversion or
exchange rights in any
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54
securities convertible into common stock, if any such adjustment shall
previously have been made upon the issuance of such warrants or other
rights or upon the issuance of such securities convertible into common
stock (or upon the issuance of any warrant or other rights therefor)
pursuant to this Section 8.
(iv) Notwithstanding any other provision of this Section 8(h),
no adjustment to the exercise price of the Warrants or the number of
shares issuable upon exercise of the Warrants shall be made with
respect to the issuance (to persons or entities other than persons or
entities who or which, acting alone or together, own of record or
beneficially, at least (x) 10% of the outstanding shares of Common
Stock, including securities convertible into, or otherwise representing
the right to acquire, shares of Common Stock, or (y) securities
representing at least 10% of the voting power or equity interest in the
Company, including securities convertible into or otherwise
representing the right to acquire such securities) of up to an
aggregate of 4,500,000 additional shares of Common Stock (including but
not limited to the issuance of shares of Common Stock upon the exercise
of conversion of the options, warrants, convertible securities or other
securities evidencing the right to purchase shares of Common Stock).
9. Upon exercise the Company shall not be required to issue fractions
of Shares. In lieu of such fractional Shares, the holders of Warrants shall
receive an amount in cash equal to the same fraction of the current market value
of one whole Share. For purposes of this Section 9, the current market value of
one whole Share shall be determined pursuant to Section 8(c) hereof. All
calculations under this section 9 shall be made to the nearest cent.
10. The holder of a Warrant shall not be entitled to any rights of a
shareholder of the Company with respect to any Shares purchasable upon the
exercise thereof, including voting, dividend or dissolution rights, until such
Shares have been paid for in full and issued to such holder. As soon as
practicable after such exercise, the Company shall deliver a certificate or
certificates for the securities issuable upon such exercise, all of which shall
be fully paid and nonassessable, to the person or persons entitled to receive
the same; provided, however, that such certificate or certificates delivered to
the holder of the surrendered Warrant shall bear a legend reading substantially
as follows:
No sale, offer to sell or transfer of such securities or this
certificate or of any shares or other securities issued in exchange for
or in respect of such securities shall be made unless a registration
statement under the Securities Act of 1933 (the "Act"), as amended,
with respect to such securities, is in effect or, to the Company's
reasonable satisfaction, an exemption from the registration
requirements of the Act is then applicable to such securities.
11. (a) Upon any adjustment of the Purchase Price pursuant to Section 8
hereof, the Company within ninety (90) calendar days thereafter shall have on
file for inspection by the holder hereof a certificate of the Board of Directors
of the Company setting forth the Purchase Price after such adjustment and
setting forth in reasonable detail the method of calculation and
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55
the facts upon which such calculations are based and setting forth the number of
Shares purchasable upon exercise of a Warrant after such adjustment in the
Purchase Price, which certificate shall, absent manifest error, be conclusive
evidence of the correctness of the matters set forth therein.
(b) In case:
(1) the Company shall authorize the issuance to all holders of
Common Stock of rights, options or warrants to subscribe for or
purchase capital stock of the Company or of any other subscription
rights, options or warrants; or
(2) the Company shall authorize the distribution to all
holders of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
earnings (or consolidated earnings if the Company shall have one or
more subsidiaries) or earned surplus or dividends payable in Common
Stock or distributions of scrip); or
(3) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the conveyance or transfer of the properties and assets
of the Company substantially as an entirety, or of any capital
reorganization of any reclassification of the Common Stock (other than
a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or
combination); or
(4) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(5) the Company proposes to take any other action which would
require an adjustment of the Purchase Price pursuant to Section 8
hereof;
then the Company shall give to the holder of a Warrant at his or its address
appearing below at least ten (10) calendar days prior to the applicable record
date hereinafter specified in (i) or (ii) below, by first-class mail, postage
prepaid, a written notice stating (i) the date as of which the holders of record
of shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined or (ii) the date on which any such
consolidation, merger, conveyance, transfer, reorganization, reclassification,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange such shares for securities or other property, if
any, deliverable upon such consolidation, merger, conveyance, transfer,
reorganization, reclassification, dissolution, liquidation or winding up. The
failure to give the notice required by this Section 11 (b) or any defect herein
shall not affect the legality or validity of any distribution right, option,
warrant, consolidation, merger, conveyance, transfer, reorganization,
reclassification, dissolution, liquidation or winding up or the vote upon any
action.
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(c) Nothing contained herein shall be construed as conferring upon the
holder of a Warrant with respect to the Shares the right to vote or to consent
or to receive notice as a stockholder in respect of the meetings of stockholders
or the election of directors of the Company or any other matter, or any rights
whatsoever as a stockholder of the Company.
12. Any notice, request, demand or other communication pursuant to the
terms of this Warrant shall be in writing and shall be sufficiently given or
made when delivered or mailed by first class or registered mail, postage
prepaid, if to the Company addressed to:
United Payors or United Providers, Inc.
0000 Xxxxxxxx Xxxxxxxxx
0xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Secretary
or to such other address as the Company may designate by written notice to the
holder of a Warrant, and if to the holder of a Warrant at his or its registered
address on the records of the Company.
13. All the covenants and provisions herein by or for the benefit of
the Company hereof shall bind and inure to the benefit of its respective
successors and assigns to the extent permitted hereunder and all of the
covenants and provisions herein by or for the benefit of the holder hereof shall
inure to the benefit of such holder's successors, legal representatives, heirs
or assigns as permitted herein.
14. This Warrant shall be deemed to be a contract made under the laws
of the State of Delaware for all purposes and shall be construed in accordance
with the internal laws of such State.
15. Nothing in the Warrant shall be construed to give to any person or
corporation other than the Company and the holder of this Warrant any legal or
equitable right, remedy or claim under this Warrant; but this Warrant shall be
for the sole and exclusive benefit of the Company and the holder of this
Warrant.
IN WITNESS WHEREOF, an authorized officer of the Company has signed this
Warrant.
UNITED PAYORS & UNITED PROVIDERS, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------
President
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ELECTION TO PURCHASE
--------------------
(To be executed by the holder only if it desires to exercise Warrants
evidenced by the within Warrant)
TO: UNITED PAYORS & UNITED PROVIDERS, INC.
0000 Xxxxxxxx Xxxxxxxxx
0xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Secretary
The undersigned hereby (1) irrevocably elects to exercise _____________
Warrants, evidenced by the within Warrant for, and to purchase thereunder
________________ Shares issuable upon exercise of said Warrants, (2) makes
payment in full of the Purchase Price of such Shares, (3) requests that
certificates for the Shares be issued in the name of:
Please print Social Security or Tax Identification Number ______________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
and (4) if said number of Warrants shall not be all the Warrants evidenced by
the within Warrant, requests that a new Warrant evidencing Warrants not so
exercised be issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
In lieu of receipt of a fractional Share the undersigned hereby elects (check
the appropriate line): -----
--------------------
_______ (i) to receive a cash payment, and the check representing payment
thereof should be made payable to ___________________________
_____________________________________________________________
(Please print name and address)
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and should be delivered to
_____________________________________________________________
________________________________________________________; or
_______ (ii) to credit the amount of such payment against the Purchase
Price payable for the Shares issuable upon the exercise of
said Warrants.
DATED: __________________________, 199__
Signature: ____________________________
NOTICE: The above signature must
correspond with the name as
written upon the face of the
within Warrant in every
particular, without alteration
or enlargement or any change
whatsoever, or if signed by
any other person the Form of
Assignment herein must be
duly executed.
11
