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EXHIBIT 2.1
Execution Copy
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RECAPITALIZATION AGREEMENT
BY AND AMONG
TEAM HEALTH, INC.,
MEDPARTNERS, INC.,
PACIFIC PHYSICIAN SERVICES, INC.,
AND
TEAM HEALTH HOLDINGS, L.L.C.
DATED AS OF JANUARY 25, 1999
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TABLE OF CONTENTS
PAGE
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ARTICLE I -- DEFINITIONS..........................................................................................1
Section 1.1 Definitions...................................................................1
Section 1.2 Cross Reference. ............................................................8
ARTICLE II -- THE RECAPITALIZATION...............................................................................10
Section 2.1 Pre-Closing Estimates of Certain Amounts. ..................................10
Section 2.2 Exchange of Common Stock.....................................................10
Section 2.3 Purchase of Preferred Stock and Common Stock.................................11
Section 2.4 Redemption of Certain Common Stock...........................................11
Section 2.5 Closing......................................................................12
Section 2.6 Post-Closing Adjustments. ...................................................12
ARTICLE III -- CONDITIONS TO CLOSING.............................................................................15
Section 3.1 Conditions to the Purchaser's Obligations. .................................15
Section 3.2 Conditions to the Company's, the Parent's
and the Existing Stockholder's Obligations............................................19
ARTICLE IV -- COVENANTS BEFORE CLOSING...........................................................................21
Section 4.1 Affirmative Covenants of the Company.........................................21
Section 4.2 Negative Covenants of the Company............................................23
Section 4.3 Covenants of Purchaser. ....................................................23
Section 4.4 Intercompany Accounts. .....................................................24
Section 4.5 Distributions................................................................24
Section 4.6 Financial Information........................................................25
Section 4.7 Parent Board Approval........................................................25
Section 4.8 Cash Management from Measurement Date to Closing Date........................25
ARTICLE V -- REPRESENTATIONS AND WARRANTIES
OF THE EXISTING STOCKHOLDER.............................................................................26
Section 5.1 Organization and Corporate Power.............................................26
Section 5.2 Authorization of Transactions................................................27
Section 5.3 Absence of Conflicts. ......................................................27
Section 5.4 Capitalization...............................................................28
Section 5.5 Financial Statements and Related Matters. ..................................28
Section 5.6 Absence of Undisclosed Liabilities. ........................................28
Section 5.7 Absence of Certain Developments. ...........................................29
Section 5.8 Real Property................................................................30
Section 5.9 Assets. ....................................................................31
Section 5.10 Taxes. .....................................................................32
Section 5.11 Contracts and Commitments....................................................33
Section 5.12 Proprietary Rights...........................................................35
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Section 5.13 Litigation; Proceedings......................................................35
Section 5.14 Brokerage. .................................................................36
Section 5.15 Governmental Licenses and Permits............................................36
Section 5.16 Employees....................................................................36
Section 5.17 Employee Benefit Plans. ....................................................36
Section 5.18 Insurance. .................................................................37
Section 5.19 Officers and Directors; Bank Accounts........................................38
Section 5.20 Affiliate Transactions. ....................................................38
Section 5.21 Compliance with Laws. ......................................................38
Section 5.22 Health Care Matters. ........................................................38
Section 5.23 Environmental Matters. .....................................................39
Section 5.24 Disclosure...................................................................40
Section 5.25 Closing Date. ..............................................................40
ARTICLE VI -- REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER........................................................................................41
Section 6.1 Organization. ...............................................................41
Section 6.2 Authorization of Transactions. .............................................41
Section 6.3 Absence of Conflicts.........................................................41
Section 6.4 Litigation. ................................................................42
Section 6.5 Investigation by the Purchaser. ............................................42
Section 6.6 Financing. .................................................................42
Section 6.7 Xxxx-Xxxxx-Xxxxxx............................................................43
Section 6.8 Brokerage. ..................................................................43
Section 6.9 Investment...................................................................43
Section 6.10 Closing Date.................................................................43
ARTICLE VII -- TERMINATION.......................................................................................43
Section 7.1 Termination..................................................................43
Section 7.2 Effect of Termination. .....................................................44
ARTICLE VIII -- INDEMNIFICATION AND RELATED MATTERS..............................................................44
Section 8.1 Survival. ..................................................................44
Section 8.2 Indemnification..............................................................45
Section 8.3 Certain Tax Matters..........................................................52
Section 8.4 Employees; Employee Benefits.................................................56
ARTICLE IX -- ADDITIONAL AGREEMENTS..............................................................................60
Section 9.1 Legend for the Restricted Securities.........................................60
Section 9.2 Press Releases and Announcements. ..........................................60
Section 9.3 Further Transfers. .........................................................61
Section 9.4 Specific Performance.........................................................61
Section 9.5 Expenses. ..................................................................61
Section 9.6 Exclusivity..................................................................61
Section 9.7 Books and Records. .........................................................62
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Section 9.8 Noncompetition, Nonsolicitation, and Confidentiality. ......................62
Section 9.9 Nonsolicitation by the Purchaser. .........................................64
Section 9.10 Use of Parent's Names and Logos..............................................64
Section 9.11 Medical Malpractice Matters..................................................65
Section 9.12 Transition Services..........................................................65
Section 9.13 EMSA Limited Partnership.....................................................67
Section 9.14 Certain Vendors..............................................................67
Section 9.15 IDX..........................................................................67
ARTICLE X -- MISCELLANEOUS.......................................................................................67
Section 10.1 Amendment and Waiver. ......................................................67
Section 10.2 Notices......................................................................68
Section 10.3 Binding Agreement; Assignment. .............................................68
Section 10.4 Severability. ..............................................................69
Section 10.5 No Strict Construction. ....................................................69
Section 10.6 Captions.....................................................................69
Section 10.7 Entire Agreement. ..........................................................69
Section 10.8 Counterparts. ..............................................................70
Section 10.9 Governing Law................................................................70
Section 10.10 Jurisdiction and Consent to Service..........................................70
Section 10.11 Parties in Interest..........................................................70
Section 10.12 Schedules. .................................................................70
INDEX OF EXHIBITS
Exhibit A - List of TH Entities
Exhibit B - Earn-Out Obligations
Exhibit C - "Knowledge" Individuals
Exhibit D - Net Working Capital Determination
Exhibit E - Preferred Stock Rights and Preferences
Exhibit F - Required Consents
Exhibit G - Form of Opinion of King & Spalding
Exhibit H - Debt and Equity Commitment Letters
Exhibit I - Form of Opinion of Xxxxxxxx & Xxxxx
Exhibit J - Farmers Insurance Proposal
Exhibit K - Special Bonus Payments
Exhibit L - Medical Malpractice Liability Insurance
Exhibit M - Certain Vendors
Exhibit N - IDX Allocation
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RECAPITALIZATION AGREEMENT
THIS RECAPITALIZATION AGREEMENT, dated as of January 25, 1999,
is made by and among Team Health, Inc., a Tennessee corporation (the "Company"),
Pacific Physician Services, Inc., a Delaware corporation (the "Existing
Stockholder"), MedPartners, Inc., a Delaware corporation (the "Parent"), and
Team Health Holdings, L.L.C., a Delaware limited liability company (the
"Purchaser"). The Company, the Existing Stockholder, the Parent, and the
Purchaser are referred to herein collectively as the "Parties" and individually
as a "Party." Certain capitalized terms used herein are defined in Article I
below.
WHEREAS, the Parent is the ultimate parent to the Existing
Stockholder, the Company, and the other entities that collectively constitute
what is commonly known as the "Team Health business," a list of which is
attached hereto as Exhibit A (the "TH Entities");
WHEREAS, as of the date hereof, certain of the TH Entities are
not Subsidiaries of the Company;
WHEREAS, prior to the Closing, the Parent will take such
actions as are necessary to cause all of the TH Entities to become Subsidiaries
of the Company (the "Internal Reorganization");
WHEREAS, the Existing Stockholder is the sole stockholder of
the Company, holding 100 shares of the Company's Common Stock, no par value (the
"Existing Common Stock"); and
WHEREAS, the Parties desire to consummate a recapitalization
of the Company on the terms and subject to the conditions set forth in this
Agreement, and desire that the transactions contemplated by this Agreement be
treated as a "recapitalization" for accounting purposes.
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties, and covenants which are to be made and
performed by the respective Parties, the Parties hereby agree as follows:
ARTICLE I -- DEFINITIONS
SECTION 1.1 DEFINITIONS. When used in this Agreement, the following
terms have the meanings set forth below:
"Acquired Companies" means the Company, each of the TH
Entities, and each of the Related Professional Corporations.
"Affiliate" of any particular Person means any other Person
controlling, controlled by, or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract, or otherwise.
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"Affiliated Group" means any affiliated group as defined in
Code Section 1504 that has filed a consolidated return for federal income tax
purposes (or any similar group under state, local, or foreign law).
"Agreement" means this Recapitalization Agreement, including
the Disclosure Letter and all Exhibits and Schedules hereto, as it may be
amended from time to time in accordance with its terms.
"Baseline Capital Expenditures Amount" means $10,000,000.
"Baseline Net Working Capital Amount" means $102,900,000
"Bottom Collar" means $100,900,000.
"Capital Expenditures Amount" means all expenditures made
during the period from January 1, 1998 through the close of business on the
Measurement Date for assets which, in accordance with GAAP, are required to be
capitalized and shown on the Company's consolidated balance sheet (after taking
the Internal Reorganization into account), as long as such asset is purchased
for Cash or financed by the incurrence of Indebtedness (i.e., assets which are
financed by accounts payable will not count towards the Capital Expenditures
Amount unless and then only to the extent that such accounts payable are paid
off with Cash prior to the close of business on the Measurement Date).
"Capital Stock" means (i) in the case of a corporation, any
and all shares of capital stock, (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of capital stock, (iii) in the case of a
partnership or limited liability company, any and all partnership or membership
interests (whether general or limited), (iv) in any case, any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person, and
(v) in any case, any right to acquire any of the foregoing.
"Cash" means all cash, cash equivalents, and marketable
securities.
"Cash Amount" means the book value of the Company's Cash as of
the close of business on the Measurement Date, determined on a consolidated
basis (after taking the Internal Reorganization into account) in accordance with
GAAP.
"Code" means the Internal Revenue Code of 1986, as amended,
and any reference to any particular Code section shall be interpreted to include
any revision of or successor to that section regardless of how numbered or
classified.
"Common Stock" means the Company's Common Stock, no par value.
"Earn-Out Obligations" means those payment obligations of the
Acquired Companies set forth on Exhibit B to former owners of businesses which
were acquired by the Acquired
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Companies prior to the Closing which are in the nature of deferred purchase
prices for such businesses and are expressly contingent on the financial or
operating performance of such businesses for periods after the Closing.
"Environmental and Safety Requirements" means all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations and all common law concerning public health and
safety, worker health and safety and pollution or protection of the environment,
including all such standards of conduct and bases of obligations relating to the
presence, use, production, generation, handling, transport, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or by-products, asbestos,
polychlorinated biphenyls (or PCBs), noise or radiation.
"Excluded Liabilities" means all liabilities and obligations
reflected on the books and records of the Acquired Companies relating to (i)
self-funded medical claims and the related tail liability incurred prior to the
Closing Date by current or former employees of InPhyNet Medical Management Inc.
and its Subsidiaries which relate to the government services or managed
healthcare divisions (or their covered dependents) and (ii) self-funded workers'
compensation claims and the related tail liability with respect to injuries
incurred prior to July 1, 1997 by current or former employees of InPhyNet
Medical Management Inc. and its Subsidiaries which relate to the government
services or managed healthcare divisions.
"GAAP" means generally accepted accounting principles of the
United States, consistently applied.
"Indebtedness" of any Person means, without duplication: (i)
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor or otherwise (other than trade payables and other current
liabilities incurred in the Ordinary Course of Business), including without
limitation all Earn-Out Obligations, and any commitment by which such Person
assures a creditor against loss, including contingent reimbursement obligations
with respect to letters of credit; (ii) indebtedness guaranteed in any manner by
such Person, including a guarantee in the form of an agreement to repurchase or
reimburse; and (iii) obligations under capitalized leases in respect of which
such Person is liable, contingently or otherwise, as obligor, guarantor or
otherwise, or in respect of which obligations such Person assures a creditor
against loss. Without limiting the generality of the foregoing, (i) the
promissory note payable to Edison Emergency Associates, P.A. dated August 1,
1997 will be treated as Indebtedness for purposes of this Agreement but will not
be treated as an Earn-Out Obligation for purposes of this Agreement and (ii) the
deferred compensation payable with respect to the EPA Deferred Compensation Plan
reflected on the Company's balance sheet and the deferred compensation
arrangements referred to in Section 8.4(i) will not be treated as Indebtedness
for purposes of this Agreement.
"Indebtedness Amount" means the book value of the Company's
Indebtedness as of the close of business on the Measurement Date, determined on
a consolidated basis (after taking the
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Internal Reorganization into account) in accordance with GAAP; provided that for
purposes of such calculation (i) all interest, prepayment penalties, premiums,
fees and expenses (if any) which would be payable if such Indebtedness was paid
in full on the Measurement Date shall be treated as Indebtedness and (ii) the
aggregate amount of Earn-Out Obligations included as Indebtedness shall be
deemed to be $13,487,000, regardless of the actual book value or expected value
of the Earn-Out Obligations at such time.
"Insider" means, any officer, director, executive employee,
stockholder, partner or Affiliate, as applicable, of any Acquired Company or any
spouse or dependent (whether natural or adopted) of any such individual or any
entity in which any of the foregoing Persons owns a 5% or greater direct or
indirect beneficial interest.
"knowledge" and "aware" and terms of similar import mean, with
respect to a Person, the actual knowledge of such Person (and if such Person is
an entity, this means the actual knowledge of the officers and directors of such
Person; provided that if the Person is the Parent, actual knowledge also shall
mean the actual knowledge of the officers and directors of the Existing
Stockholder and the Company, and for purposes of Section 5.13 only, it shall
also mean the actual knowledge of those individuals listed on Exhibit C attached
hereto), after making reasonable inquiry and exercising reasonable diligence
with respect to the particular matter in question.
"Leased Real Property" means all land, building, fixtures or
other real property in which any Acquired Company has a leasehold, subleasehold,
license, concession or other real property right or interest under the Real
Property Leases.
"Leasehold Improvements" means all buildings, fixtures and
other improvements located on each Leased Real Property which are owned by any
Acquired Company, regardless of whether such improvements are subject to
reversion to the landlord or other third party upon the expiration or
termination of the Real Property Lease for such Leased Real Property.
"Licenses" means all permits, licenses, franchises,
certificates, approvals, and other authorizations of third parties or foreign,
federal, state, or local governments or other similar rights.
"Liens" means any mortgage, pledge, security interest,
encumbrance, lien, or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof), any sale of receivables with recourse against the Acquired Companies,
any filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to any Acquired Company under a lease which
is not in the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person (other than any
subordination arising in the Ordinary Course of Business).
"Loss" means, with respect to any Person, any damage,
liability, diminution in value, demand, claim, action, cause of action, cost,
damage, deficiency, imposed Tax, penalty, fine or other loss or expense, whether
or not arising out of a third party claim, including all interest, penalties,
reasonable attorneys' fees and expenses and all amounts paid or incurred in
connection with any
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action, demand, proceeding, investigation or claim by any third party (including
any governmental entity or any department, agency or political subdivision
thereof) against or affecting such Person or which, if determined adversely to
such Person, would give rise to, evidence the existence of, or relate to, any
other Loss and the investigation, defense or settlement of any of the foregoing.
"Material Adverse Effect" means any material adverse effect on
the business, financial condition, operations, results of operations, or
prospects of the Acquired Companies, taken as a whole.
"Medical Malpractice Claim" means any claim for medical
malpractice arising at any time, in connection with the operation of the
business of the Acquired Companies on or prior to the Closing, for which any of
the Acquired Companies is liable, whether pursuant to law, the terms of any
contract between any of the Acquired Companies and any third party, or
otherwise.
"Measurement Date" means February 28, 1999.
"Net Working Capital Amount" means the book value of the
Company's consolidated current assets (excluding Cash, assets with respect to
Taxes, intercompany receivables and the deferred restructuring charge asset
referred to in item 4 on the Assets Schedule) minus the book value of the
Company's consolidated current liabilities (excluding Indebtedness, intercompany
payables, liabilities with respect to Taxes, and Excluded Liabilities), in each
case as of the close of business on the Measurement Date (after taking the
Internal Reorganization into account), in accordance with the procedures set
forth in Exhibit D.
"Ordinary Course of Business" means the ordinary course of
business consistent with past practice (including, without limitation, with
respect to collection of accounts receivable, purchases of supplies, repairs and
maintenance, payment of accounts payable and accrued expenses, terms of sale,
levels of capital expenditures, and operation of cash management practices
generally).
"Owned Real Property" means all land, together with all
buildings, fixtures and other improvements located thereon, and all easements
and other rights appurtenant thereto, owned by any of the Acquired Companies.
"Permitted Liens" means (i) real estate taxes, assessments and
other governmental fees or other charges levied with respect to the Real
Property not yet due and payable as of the Closing Date; (ii) mechanics and
similar statutory liens arising or incurred in the Ordinary Course of Business
for amounts which are not delinquent and which would not, individually or in the
aggregate, have a Material Adverse Effect; (iii) zoning, entitlement, building
and other land use and similar laws or regulations imposed by any governmental
authority having jurisdiction over such parcel which are not violated by the
current use and operation thereof; (iv) easements, covenants, conditions,
restrictions and other similar matters of record affecting title to such Real
Property Leases which would not materially impair the use or occupancy of such
parcel in the operation of the Acquired Companies' businesses; and (v) liens or
encumbrances placed by a landlord or other third party with respect to any
Leased Real Property.
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"Person" means and includes an individual, a partnership, a
joint venture, a limited liability company, a corporation or trust, an
unincorporated organization, a group, or a government or other department or
agency thereof, or any other entity.
"Proprietary Rights" means any and all (i) patents, patent
applications, patent disclosures, as well as any reissues, continuations,
continuations-in-part, divisions, extensions or reexaminations thereof, (ii)
trademarks, service marks, trade dress, trade names, logos, and corporate names
and registrations and applications for registration thereof, together with all
of the goodwill associated therewith, (iii) copyrights (registered or
unregistered) and copyrightable works and registrations and applications for
registration thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data, data bases, and documentation
thereof, (vi) trade secrets and other confidential information (including,
without limitation, ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, if any, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, financial and marketing plans, and customer and supplier lists
and information), (vii) other intellectual property rights, (viii) copies and
tangible embodiments thereof (in whatever protectable form or medium), and (ix)
license agreements related thereto.
"Real Property Leases" means all leases, subleases, licenses,
concessions and other agreements (written or oral), including, without
limitation, all amendments, extensions, renewals, guaranties and other
agreements with respect thereto, together with all security deposits thereunder,
held by the Acquired Companies for the use and occupancy of any real property or
interests therein.
"Related Professional Corporation" means each professional
corporation which has entered into a management or services agreement with the
Company, any TH Entity or any other Related Professional Corporation, other than
a professional corporation with respect to which (i) neither the Parent nor the
Company has the right to designate or replace the sole shareholder (or a
majority of the shareholders, if applicable) pursuant to an agreement between
such professional corporation and/or its shareholders, and the Parent or the
Acquired Company and (ii) neither the Parent nor the Company has the right to
participate, directly or indirectly, in the profits or losses of such
professional corporation in accordance with the management or services
agreement, provided, that in any event, it includes the entities listed as a
"Related Professional Corporation" on the Organizational Schedule included in
the Disclosure Letter.
"Restricted Securities" means the Preferred Stock and Common
Stock issued to the Existing Stockholder pursuant to Section 2.2(a) below
(including, without limitation, the Purchased Securities) and any securities
issued with respect to such securities by way of a conversion, stock dividend,
or stock split or in connection with a combination of shares, refinancing,
merger, consolidation, or other reorganization. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have (i) been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (ii) been distributed
to the public through a broker, dealer, or market maker pursuant to Rule 144 (or
any similar provision then in force) under the Securities Act or become eligible
for sale pursuant to Rule
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144(k) (or any similar provision then in force) under the Securities Act, or
(iii) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in Section 9.1 have been delivered by the
Company. Whenever any particular securities of the Company cease to be
Restricted Securities, the holder thereof shall be entitled to receive from the
Company, without expense, new securities of like tenor not bearing a Securities
Act legend of the character set forth in Section 9.1.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association, or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of such Person or a combination thereof,
or (ii) if a limited liability company, partnership, association, or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more Subsidiaries of such Person or a combination thereof.
For purposes hereof, a Person shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association, or other
business entity if such Person shall be allocated a majority of limited
liability company, partnership, association, or other business entity gains or
losses or shall be or control any managing director or general partner of such
limited liability company, partnership, association, or other business entity.
"Tail Malpractice Liability" means all liabilities and
obligations for Medical Malpractice Claims which arise out of or relate to, or
have arisen out of or relate to, events that occur in connection with the
operations of the Acquired Companies on or prior to Closing.
"Tax" or "Taxes" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated, and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto, and also including, without limitation, any Tax or Taxes of another
Person for which any Acquired Company is liable as a successor or as a
transferee or by contract).
"Tax Return" means returns, declarations, reports, claims for
refund, information returns or other documents (including any related or
supporting schedules, statements, or information) filed or required to be filed
in connection with the determination, assessment, or collection of Taxes of any
party or the administration of any laws, regulations, or administrative
requirements relating to any Taxes.
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"TH JV's" means those TH Entities designated as "TH JV's" on
the Organization Schedule included in the Disclosure Letter in which neither
Parent, the Existing Stockholder nor any Acquired Company owns an interest
greater than fifty percent (50%).
"Top Collar" means $104,900,000.
"Transaction Documents" means this Agreement, and all other
agreements, instruments, certificates, and other documents to be entered into or
delivered by any Party in connection with the consummation of the transactions
contemplated by this Agreement, including, without limitation, the Stockholders
Agreement and the Registration Agreement.
"Treasury Regulations" means the United States Treasury
Regulations promulgated pursuant to the Code.
SECTION 1.2 CROSS REFERENCE. The following terms are defined in the
following Sections of this Agreement:
Term Section
Accounts Receivable 5.5(b)
Acquisition Proposal 9.6
Actual Capital Expenditures Amount 2.6(a)
Actual Cash Amount 2.6(a)
Actual Indebtedness Amount 2.6(a)
Actual Net Working Capital Amount 2.6(a)
Akron Premises 9.12(c)
Akron Subtenant 9.12(c)
Akron Tenant 9.12(c)
Allocation 8.3(b)
Applicable Limitation Date 8.1
Bank Accounts 4.8(b)
Basket 8.2(b)(iii)
Bonds 4.6(b)
Bonus Participants 8.4(i)
Cap 8.2(b)(ii)
Cash Management Period 4.8(a)
CERCLA 5.23(e)
Closing 2.5
Closing Date 2.5
Closing Review 2.6(a)
Company Preface
Company 401(k) Plan 8.4(f)
Computer Systems 5.12(c)
Confidential Information 9.8(c)
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Confidentiality Agreement 4.1
Consolidated Subsidiaries 8.3(b)
Debt and Equity Commitment Letters 6.6
Debt Commitment Letters 6.6
Disclosure Letter Article V
Employee 8.4(a)
Draft Computations 2.6(a)
ERISA 5.17(a)
Estimated Capital Expenditures Amount 2.1
Estimated Cash Amount 2.1
Estimated Closing Common Value 2.1
Estimated Indebtedness Amount 2.1
Estimated Redemption Consideration 2.4(b)
Existing Common Stock Recitals
Existing Stockholder Preface
Expense Letter 10.7
E&Y 1998 Audit Fees 4.6(a)
Farmers Policy 4.1(l)
Financial Statements 5.5(a)
Firm 2.6(a)
Fundamental Representations and Warranties 8.1
HSR Act 3.1(d)
Indemnification Statement 8.3(c)
Indemnified Party 8.2(f)
Indemnifying Party 8.2(f)
Internal Reorganization Recitals
Joint Defense Proceeding 8.2(f)
Latest Balance Sheet 5.5(a)
1998 Financials 4.6(a)
Noncompete Period 9.8(a)
Objection Notice 2.6(a)
Parent Preface
Parent Board Approval 4.7
Parent Health Plan 8.4(d)
Parent's 401(k) 8.4(f)
Parties Preface
Party Preface
Plans 5.17(a)
Plantation Premises 9.12(a)
Plantation Subtenant 9.12(a)
Plantation Tenant 9.12(a)
Pre-Closing Period 8.3(a)
Pre-Closing Period Returns 8.3(c)
Preferred Stock 2.2(a)
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Prime Rate 2.6(b)
Purchased Securities 2.3(a)
Purchased Securities Purchase Price 2.3(a)
Purchaser Preface
Purchaser Parties 8.2(a)
Purchaser Tax Group 8.3(a)
Real Property 5.8(d)
Redeemed Securities 2.4(a)
Redemption Consideration 2.6
Registration Agreement 3.1(n)
Retirement Benefit Transition Period 8.4(f)
Schedule Update 5.25, 6.10
Section 338(h)(10) Election 8.3(b)
Seller Group 8.3(a)
Seller Parties 8.2(c)
Seller Trademarks and Logos 9.10
Senior Managers 7.1(b)
Senior Management Agreements 7.1(b)
Solvency Opinion 3.1(o)
Xxxxx Act 5.22(b)
Stockholders Agreement 3.1(m)
Straddle Period 8.3(a)
Straddle Period Returns 8.3(c)
Tampa Premises 9.12(b)
Tampa Subtenant 9.12(b)
Tampa Tenant 9.12(b)
Tax Benefit 8.3(c)
TH Entities Recitals
Transaction Expenses 9.5
Transition Cash Inflows 4.8(b)
Transition Cash Outflows 4.8(b)
Unregistered Proprietary Rights 5.12(a)
WARN Act 8.4(c)
Welfare Benefit Transition Period 8.4(d)
Year 2000 Compliant 5.12(c)
ARTICLE II -- THE RECAPITALIZATION
SECTION 2.1 PRE-CLOSING ESTIMATES OF CERTAIN AMOUNTS. Not later than
three days before the Closing, the Existing Stockholder, subject to the
Purchaser's reasonable approval, shall provide the Purchaser with a good faith
estimate of the Cash Amount (such estimate is referred to as the "Estimated Cash
Amount"), the Indebtedness Amount (such estimate is referred to as the
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"Estimated Indebtedness Amount"), and the Capital Expenditures Amount
(such estimate is referred to as the "Estimated Capital Expenditures Amount").
For purposes of Section 2.2 below, the "Estimated Closing Common Value" means an
amount equal to (A) $349,419,750, (B) plus the Estimated Cash Amount (whether
negative or positive), (C) less the Estimated Indebtedness Amount, (D) plus the
excess of the Estimated Capital Expenditures Amount over the Baseline Capital
Expenditures Amount or minus the excess of the Baseline Capital Expenditures
Amount over the Estimated Capital Expenditures Amount, (E) plus an amount equal
to $76,800.00 multiplied by the number of calendar days after the Measurement
Date through but not including the Closing Date, and (F) minus an amount equal
to all Cash swept by or otherwise transferred to the Parent or any of its
Affiliates or lenders (other than the Acquired Companies) during the Cash
Management Period referred to in Section 4.8 below.
SECTION 2.2 EXCHANGE OF COMMON STOCK.
(a) Exchange. On the basis of the representations, warranties,
covenants, and agreements herein, and subject to the satisfaction or waiver of
the conditions set forth herein and the terms hereof, at the Closing the
Existing Stockholder will contribute all of the Existing Common Stock to the
Company in exchange for the Company's issuance to the Existing Stockholder of
100,000 shares of the Company's Class A Preferred Stock, par value $.01 per
share, having the rights and preferences set forth on Exhibit E attached hereto
(the "Preferred Stock") and a number of shares of Common Stock equal to (i)(A)
the Estimated Closing Common Value minus (B) $100,000,000, divided by (ii)
$1.50.
(b) Delivery of Certificates by Existing Stockholder. At the
Closing, the Existing Stockholder will deliver to the Company, free and clear of
any Liens, one or more certificates representing the Existing Common Stock, duly
endorsed in blank or accompanied by stock powers or other instruments of
transfer duly executed in blank.
(c) Delivery of Certificates by Company. At the Closing, upon
delivery by the Existing Stockholder of the certificates representing the
Existing Common Stock, the Company will deliver to the Existing Stockholder,
free and clear of any Liens, one or more certificates representing the number of
shares of Preferred Stock and Common Stock referenced in Section 2.2(a) above.
SECTION 2.3 PURCHASE OF PREFERRED STOCK AND COMMON STOCK.
(a) Purchase. On the basis of the representations, warranties,
covenants, and agreements herein, and subject to the satisfaction or waiver of
the conditions set forth herein and the terms hereof, at the Closing the
Existing Stockholder will sell to the Purchaser, and the Purchaser will purchase
from the Existing Stockholder, 94,299.091 shares of Preferred Stock for a
purchase price of $1,000.00 per share and 9,267,273 shares of Common Stock for a
purchase price of $1.50 per share (collectively, the "Purchased Securities").
The aggregate purchase price for the Purchased Securities is hereinafter
referred to collectively as the "Purchased Securities Purchase Price."
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(b) Payment by the Purchaser. At the Closing, the Purchaser
shall pay to the account or accounts designated by the Existing Stockholder, by
wire transfer of immediately available funds, an amount in cash equal to the
Purchased Securities Purchase Price.
(c) Delivery of Certificates by Existing Stockholder. At the
Closing, upon delivery by the Purchaser of the Purchased Securities Purchase
Price, the Existing Stockholder will deliver to the Purchaser, free and clear of
any Liens, two or more certificates representing the Purchased Securities, duly
endorsed in blank or accompanied by stock powers or other instruments of
transfer duly executed in blank.
SECTION 2.4 REDEMPTION OF CERTAIN COMMON STOCK.
(a) Redemption. On the basis of the representations,
warranties, covenants, and agreements herein, and subject to the satisfaction or
waiver of the conditions set forth herein and the terms hereof, at the Closing
the Company will redeem and purchase from the Existing Stockholder, and the
Existing Stockholder will sell to the Company, all shares of Common Stock held
by the Existing Stockholder after taking into account the transactions in
Sections 2.2 and 2.3 above, minus 732,727 shares of Common Stock, for a purchase
price of $1.50 per share (the "Redeemed Securities"). As a result of the
transactions in Sections 2.2 and 2.3 above and this Section 2.4, the Existing
Stockholder will hold 5,700.909 shares of Preferred Stock and 732,727 shares of
Common Stock as of immediately following the Closing.
(b) Payment to Existing Stockholder. At the Closing, the
Company shall pay to the account or accounts designated by the Existing
Stockholder, by wire transfer of immediately available funds, an amount in cash
equal to the aggregate purchase price for the Redeemed Securities as set forth
in Section 2.4(a) above. The aggregate amount paid by the Company to the
Existing Stockholder under this Section 2.4(b) is referred to herein as the
"Estimated Redemption Consideration."
(c) Delivery of Certificates by Existing Stockholder. At the
Closing, upon payment by the Company of the Estimated Redemption Consideration,
the Existing Stockholder will deliver to the Company, free and clear of any
Liens, one or more certificates representing the Redeemed Securities, duly
endorsed in blank or accompanied by stock powers or other instruments of
transfer duly executed in blank.
SECTION 2.5 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Xxxxxxxx &
Xxxxx, 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, commencing at 10:00
a.m. on the third business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself), or at such other place or
on such other date as may be mutually agreeable to the Purchaser and the
Existing Stockholder; provided that in any event, if the Purchaser's senior
lenders require that the Closing take place at the offices of their attorneys,
the Parties agree that the Closing
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shall take place at such offices. The date and time of the Closing are herein
referred to as the "Closing Date."
SECTION 2.6 POST-CLOSING ADJUSTMENTS.
(a) Post-Closing Determination. Within 90 days after the
Closing Date, the Company and its auditors will conduct a review (the "Closing
Review") of the Cash Amount, the Indebtedness Amount, the Net Working Capital
Amount and the Capital Expenditures Amount and will prepare and deliver to the
Existing Stockholder a computation of such amounts (the "Draft Computations").
The Company and its auditors will make available to the Existing Stockholder and
its auditors all records and work papers used in preparing the Draft
Computations. If the Existing Stockholder disagrees with the computation of the
Cash Amount, the Indebtedness Amount, the Net Working Capital Amount or the
Capital Expenditures Amount reflected in the Draft Computations, the Existing
Stockholder may, within 30 days after receipt of the Draft Computations, deliver
a notice (an "Objection Notice") to the Company setting forth the Existing
Stockholder's calculation of the Cash Amount, the Indebtedness Amount, the Net
Working Capital Amount and the Capital Expenditures Amount. The Company and the
Existing Stockholder will use reasonable best efforts to resolve any
disagreements as to the computation of the Cash Amount, the Indebtedness Amount,
the Net Working Capital Amount and the Capital Expenditures Amount, but if they
do not obtain a final resolution within 30 days after the Company has received
the Objection Notice, the Company and the Existing Stockholder will jointly
retain an independent accounting firm of recognized national standing (the
"Firm") to resolve any remaining disagreements. If the Company and the Existing
Stockholder are unable to agree on the choice of the Firm, then the Firm will be
a "big-five" accounting firm (or a successor) selected by lot (after excluding
one firm designated by the Company and one firm designated by the Existing
Stockholder). The Company and the Existing Stockholder will direct the Firm to
render a determination within 30 days of its retention and the Company, the
Existing Stockholder, and their respective agents will cooperate with the Firm
during its engagement. The Firm will consider only those items and amounts in
the Draft Computations set forth in the Objection Notice which the Company and
the Existing Stockholder are unable to resolve. The Company and the Existing
Stockholder shall each submit a binder to the Firm promptly (and in any event
within 20 days after the Firm's engagement), which binder shall contain such
Party's computation of the Cash Amount, the Indebtedness Amount, the Net Working
Capital Amount and the Capital Expenditures Amount and information, arguments,
and support for such Party's position. The Firm shall review such binders and
base its determination solely on them. In resolving any disputed item, the Firm
may not assign a value to any item greater than the greatest value for such item
claimed by either party or less than the smallest value for such item claimed by
either party. The Firm's determination will be based on the definition of the
Cash Amount, the Indebtedness Amount, the Net Working Capital Amount and the
Capital Expenditures Amount included herein. The determination of the Firm will
be conclusive and binding upon the Parties. The Existing Stockholder shall bear
a percentage of the costs and expenses of the Firm equal to the difference
between the aggregate amount contested by the Existing Stockholder as set forth
on the Objection Notice and amounts actually paid to (or by) the Existing
Stockholder with respect to contested items, as a percentage of the aggregate
amount so contested. The Company shall bear the remainder of such costs and
expenses. The Cash Amount, the Indebtedness Amount, the Net Working Capital
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Amount and the Capital Expenditures Amount, as finally determined pursuant to
this Section 2.6(a), is referred to herein as the "Actual Cash Amount," the
"Actual Indebtedness Amount," the "Actual Net Working Capital Amount" and the
"Actual Capital Expenditures Amount," respectively.
(b) Post-Closing Adjustment.
(i) Payments by the Company.
(A) If the Actual Cash Amount is greater
than the Estimated Cash Amount, the Company will, within five
(5) business days after the determination thereof, pay to the
Existing Stockholder an amount equal to the sum of (A) the
Actual Cash Amount minus the Estimated Cash Amount plus (B)
interest on such difference from the Closing Date to the date
of payment at an interest rate equal to the "Prime Rate" as
listed in The Wall Street Journal (Midwest Edition) on the
Closing Date (the "Prime Rate"). Such payment will be made by
wire transfer or delivery of other immediately available
funds.
(B) If the Actual Indebtedness Amount is
less than the Estimated Indebtedness Amount, the Company will,
within five (5) business days after the determination thereof,
pay to the Existing Stockholder an amount equal to the sum of
(A) the Estimated Indebtedness Amount minus the Actual
Indebtedness Amount plus (B) interest on such difference from
the Closing Date to the date of payment at an interest rate
equal to the Prime Rate. Such payment will be made by wire
transfer or delivery of other immediately available funds.
(C) If the Actual Net Working Capital Amount
is greater than the Top Collar, the Company will, within five
(5) business days after the determination thereof, pay to the
Existing Stockholder an amount equal to the sum of (A) the
Actual Net Working Capital Amount minus the Top Collar plus
(B) interest on such difference from the Closing Date to the
date of payment at an interest rate equal to the Prime Rate.
Such payment will be made by wire transfer or delivery of
other immediately available funds.
(D) If the Actual Capital Expenditures
Amount is greater than the Estimated Capital Expenditures
Amount, the Company will, within five (5) business days after
the determination thereof, pay to the Existing Stockholder an
amount equal to the sum of (A) the Actual Capital Expenditures
Amount minus the Estimated Capital Expenditures Amount plus
(B) interest on such difference from the Closing Date to the
date of payment at an interest rate equal to the Prime Rate.
Such payment will be made by wire transfer or delivery of
other immediately available funds.
(ii) Payments by the Existing Stockholder.
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(A) If the Actual Cash Amount is less than
the Estimated Cash Amount, the Existing Stockholder will,
within five (5) business days after the determination thereof,
pay to the Company an amount equal to the sum of (A) the
Estimated Cash Amount minus the Actual Cash Amount plus (B)
interest on such difference from the Closing Date to the date
of payment at an interest rate equal to the Prime Rate. Such
payment will be made by wire transfer or delivery of other
immediately available funds.
(B) If the Actual Indebtedness Amount is
greater than the Estimated Indebtedness Amount, the Existing
Stockholder will, within five (5) business days after the
determination thereof, pay to the Company an amount equal to
the sum of (A) the Actual Indebtedness Amount minus the
Estimated Indebtedness Amount plus (B) interest on such
difference from the Closing Date to the date of payment at an
interest rate equal to the Prime Rate. Such payment will be
made by wire transfer or delivery of other immediately
available funds.
(C) If the Actual Net Working Capital Amount
is less than the Bottom Collar, the Existing Stockholder will,
within five (5) business days after the determination thereof,
pay to the Company an amount equal to the sum of (A) the
Bottom Collar minus the Actual Net Working Capital Amount plus
(B) interest on such difference from the Closing Date to the
date of payment at an interest rate equal to the Prime Rate.
Such payment will be made by wire transfer or delivery of
other immediately available funds.
(D) If the Actual Capital Expenditures
Amount is less than the Estimated Capital Expenditures Amount,
the Existing Stockholder will, within five (5) business days
after the determination thereof, pay to the Company an amount
equal to the sum of (A) the Estimated Capital Expenditures
Amount minus the Actual Capital Expenditures Amount plus (B)
interest on such difference from the Closing Date to the date
of payment at an interest rate equal to the Prime Rate. Such
payment will be made by wire transfer or delivery of other
immediately available funds.
(iii) Dispute. If, pursuant to Section 2.6(a) above,
there is a dispute as to the final determination of the Actual Cash
Amount, the Actual Indebtedness Amount, the Actual Net Working Capital
Amount or the Actual Capital Expenditures Amount, the Company and the
Existing Stockholder shall promptly pay to the other, as appropriate,
such amounts as are not in dispute, pending final determination of such
dispute pursuant to Section 2.6(a).
The Estimated Redemption Consideration, as finally adjusted pursuant to this
Section 2.6, is referred to herein as the "Redemption Consideration."
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ARTICLE III -- CONDITIONS TO CLOSING
SECTION 3.1 CONDITIONS TO THE PURCHASER'S OBLIGATIONS. The obligation
of the Purchaser to consummate the transactions contemplated by this Agreement
is subject to the satisfaction of the following conditions as of the Closing
Date:
(a) The representations and warranties set forth in Article V
hereof taken in their entirety shall be true and correct in all material
respects at and as of the Closing Date as though then made and as though the
Closing Date were substituted for the date of this Agreement throughout such
representations and warranties, without giving effect to any Schedule Updates
thereto other than those approved by the Purchaser pursuant to Section 5.25;
provided that, for purposes of this Section 3.1(a), those representations and
warranties that are qualified by references to "material" or "Material Adverse
Effect" shall be deemed not to include such qualifications;
(b) The Company, the Existing Stockholder and the Parent shall
have performed and complied in all material respects with all of the covenants
and agreements required to be performed by each of them under this Agreement on
or before the Closing;
(c) All third party consents listed on Exhibit F attached
hereto shall have been obtained on terms reasonably satisfactory to the
Purchaser (which consents will include, to the extent required by the Company's
lenders with respect to material Real Property Leases, consents to leasehold
mortgages, collateral assignments of leases, and/or waivers of landlord liens
from the landlords thereof or any other parties whose consent is required under
such Real Property Leases);
(d) All governmental filings, authorizations, and approvals
that are required for the consummation of the transactions contemplated hereby
shall have been duly made and obtained on terms reasonably satisfactory to the
Purchaser;
(e) Pursuant to a general assignment and assumption agreement
in form and substance reasonably satisfactory to the Purchaser and the Parent,
(i) the Parent and its Affiliates which are not Acquired Companies shall have
assigned to the Acquired Companies all right, title and interest of the Parent
and such Affiliates in and to any contracts, agreements, arrangements or
understandings which (A) exclusively relate to the business of the Acquired
Companies or (B) are listed on the Assigned Contracts Schedule included in the
Disclosure Letter and (ii) the Acquired Companies shall have assumed and agreed
to discharge and pay in full all liabilities and obligations arising under all
such contracts, agreements, arrangements and understandings; provided that any
assignment contemplated pursuant to this Section 3.1(e) which would have the
effect of rendering invalid any provisions of the contract, agreement,
arrangement or understanding to be assigned shall be void and of no effect with
respect to such provisions; and with respect to the Real Property Lease for the
Leased Real Property located at 000 Xxxx 00xx Xxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx,
the tenant under such Real Property Lease shall have entered into an Assignment
and Assumption of Lease in form and substance reasonably satisfactory to the
Purchaser;
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(f) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable judgment, decree, injunction, order, or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded, or materially and adversely affect the right of
the Purchaser to own, operate, or control any Acquired Company, and no judgment,
decree, injunction, order, or ruling shall have been entered which has any of
the foregoing effects;
(g) Since the date hereof, there shall have been no Material
Adverse Effect (without limiting the generality of the foregoing, since the date
hereof, there shall have been no modification or change (or threat of
modification or change) of any Medicare or Medicaid law, rule, regulation or
payment policy, or any rule or policy of any third-party payor, or any other
applicable law or regulation, which has had or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect; provided that
the implementation or effectiveness of the final rule entitled "Medicare
Program: Revisions to Payment Policies and Adjustments to the Relative Value
Units under the Physician Fee Schedule for Calendar Year 1999" published at 63
Fed. Reg. 58814 et seq. (November 2, 1998) shall not be deemed to have a
Material Adverse Effect);
(h) Except as otherwise specified in writing by the Purchaser
to the Existing Stockholder prior to the Closing Date, all of the directors of
each TH Entity that is not a TH JV shall have resigned and such resignations
shall be effective as of the Closing Date;
(i) The Internal Reorganization shall have occurred on terms
and pursuant to documents reasonably satisfactory to the Purchaser;
(j) The Company's charter shall have been amended to include
the provisions set forth in Exhibit E attached hereto, shall be in full force
and effect under the laws of the State of Tennessee as of the Closing as so
amended and shall not have been further amended or modified;
(k) The Purchaser shall have received an opinion, dated the
Closing Date, of King & Spalding, counsel to the Company, the Existing
Stockholder and the Parent, with respect to the matters set forth on Exhibit G
attached hereto, and the lenders providing debt financing in connection with the
transactions contemplated by this Agreement shall be entitled to rely thereon;
(l) On or before the Closing Date, the Existing Stockholder
shall have delivered to Purchaser all of the following:
(i) a certificate from the Company in a form
reasonably satisfactory to the Purchaser, dated the Closing Date,
stating that the preconditions specified in Sections 3.1(a) through (j)
have been satisfied;
(ii) a copy of the resolutions of the board of
directors of the Company, the Existing Stockholder and the Parent,
respectively, approving the transactions contemplated
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by this Agreement, certified by the Company, the Existing Stockholder
and the Parent, respectively;
(iii) a copy of the certificate of incorporation or
equivalent document for each Acquired Company, certified by the
appropriate authority in the jurisdiction in which such entity was
incorporated or organized;
(iv) a copy of the bylaws or equivalent document for
each Acquired Company, certified by such Acquired Company;
(v) certificates from appropriate authorities, dated
as of or about the Closing Date, as to the good standing and
qualification to do business of each Acquired Company in each
jurisdiction where they are so qualified;
(vi) all stock certificates and other instruments
evidencing ownership of each of the Company's Subsidiaries;
(vii) all minute books, stock books, ledgers and
registers, corporate seals and other corporate records relating to the
organization, ownership and maintenance of each Acquired Company;
(viii) copies of the consents, filings,
authorizations and approvals described in Sections 3.1(c) and (d) to
the extent applicable to the Company, the Existing Stockholder or the
Parent;
(ix) copies of the resignations described in Section
3.1(h); and
(x) such other documents or instruments as the
Purchaser may reasonably request to effect the transactions
contemplated hereby;
(m) The Company, the Parent, the Purchaser and the Existing
Stockholder shall have entered into a stockholders agreement in form and
substance reasonably acceptable to all parties thereto (the "Stockholders
Agreement"), and the Stockholders Agreement shall be in full force and effect as
of the Closing;
(n) The Company, the Parent, the Purchaser and the Existing
Stockholder shall have entered into a registration agreement in form and
substance reasonably acceptable to all parties thereto (the "Registration
Agreement"), and the Registration Agreement shall be in full force and effect as
of the Closing;
(o) The Purchaser shall have received an opinion from
Valuation Research, Inc. or another reputable investment banking or valuation
firm mutually acceptable to the Parties, regarding the solvency and liquidity of
the Company immediately upon consummation of the transactions contemplated
herein (the "Solvency Opinion");
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(p) The Company shall have received (i) at least $250.0
million of cash proceeds from senior and subordinated debt financings and (ii)
at least $40.0 million of unused availability under revolving loan commitments,
each on the terms and conditions set forth in the Debt Commitment Letters
attached hereto as Exhibit H;
(q) The Parent shall have obtained for the Company insurance
covering the Tail Malpractice Liability in accordance with Section 9.11 hereof;
(r) All proceedings to be taken by the Company, the Existing
Stockholder and the Parent in connection with the consummation of the
transactions contemplated by this Agreement and all certificates, opinions,
instruments, and other documents required to be delivered by the Company, the
Existing Stockholder and the Parent to effect the transactions contemplated
hereby reasonably requested by the Purchaser shall be reasonably satisfactory in
form and substance to the Purchaser;
(s) The Company shall have extended the term of the existing
contract with La Habre Clinic for at least 12 months beyond the expiration date
of the existing contract (it being understood that the expiration date of the
existing contract is March 2000);
(t) The Parent shall have received the consent of applicable
insurance providers for the provision of the transitional benefits required to
be provided by it pursuant to Section 8.4 hereof for the periods set forth
therein; and
(u) The Company shall have paid the full year's 1998 bonus to
the Company's management team prior to the Measurement Date, and the Parent
shall have fully vested and made immediately exercisable all stock options under
the Parent's 1998 Employee Stock Option Plan held by any officer or employee of
the Acquired Companies, the exercisability of which, and the sale of the
underlying stock of which, will not be restricted except to the extent required
by applicable law or the Parent's written trading policy, and in the case of any
person who is subject to such policy on the date hereof, such options will
remain exercisable until at least the fifth business day after the date on which
such exercisability and sale of the underlying stock is permitted, and such
exercisability and sale of the underlying stock will be permitted (unless
otherwise prohibited by law) commencing 72 hours after the public release of the
Parent's quarterly financial results for the quarter ended March 31, 1999 and
expiring 27 days after such commencement, and the Parent will use commercially
reasonable efforts to expeditiously facilitate such exercise and sale upon
request consistent with the level and speed of facilitation provided by other
publicly traded companies under similar circumstances.
Any condition specified in this Section 3.1 may be waived by the Purchaser in
its sole discretion; provided that no such waiver shall be effective unless it
is set forth in a writing executed by the Purchaser.
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SECTION 3.2 CONDITIONS TO THE COMPANY'S, THE PARENT'S AND THE EXISTING
STOCKHOLDER'S OBLIGATIONS. The obligation of the Company, the Existing
Stockholder and the Parent to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following conditions as of the
Closing Date:
(a) The representations and warranties set forth in Article VI
hereof taken in their entirety shall be true and correct in all material
respects at and as of the Closing Date as though then made and as though the
Closing Date were substituted for the date of this Agreement throughout such
representations and warranties, without giving effect to any Schedule Updates
thereto other than those approved by the Existing Shareholder or the Parent
pursuant to Section 6.9; provided that, for purposes of this Section 3.2(a),
those representations and warranties that are qualified by references to
"material" shall be deemed not to include such qualifications;
(b) The Purchaser shall have performed and complied in all
material respects with all of the covenants and agreements required to be
performed by it under this Agreement on or before the Closing;
(c) All governmental filings, authorizations, and approvals
that are required for the consummation of the transactions contemplated hereby
shall have been duly made and obtained on terms reasonably satisfactory to the
Existing Stockholder;
(d) Pursuant to a general assignment and assumption agreement
in form and substance reasonably satisfactory to the Purchaser and the Parent,
(i) the Parent and its Affiliates which are not Acquired Companies shall have
assigned to the Acquired Companies all right, title and interest of the Parent
and such Affiliates in and to any contracts, agreements, arrangements or
understandings which (A) exclusively relate to the business of the Acquired
Companies or (B) are listed on the Assigned Contracts Schedule included in the
Disclosure Letter and (ii) the Acquired Companies shall have assumed and agreed
to discharge and pay in full all liabilities and obligations arising under all
such contracts, agreements, arrangements and understandings; provided that any
assignment contemplated pursuant to this Section 3.2(d) which would have the
effect of rendering invalid any provisions of the contract, agreement,
arrangement or understanding to be assigned shall be void and of no effect with
respect to such provisions; and with respect to the Real Property Lease for the
Leased Real Property located at 000 Xxxx 00xx Xxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx,
the tenant under such Real Property Lease shall have entered into an Assignment
and Assumption of Lease in form and substance reasonably satisfactory to the
Purchaser;
(e) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable judgment, decree, injunction, order, or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded, or materially and adversely affect the right of
the Parent or the Existing Stockholder to receive benefits to be enjoyed by it
under this Agreement, and no judgment, decree, injunction, order, or ruling
shall have been entered which has any of the foregoing effects;
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(f) The Existing Stockholder shall have received an opinion,
dated the Closing Date, of Xxxxxxxx & Xxxxx, counsel to the Purchaser, with
respect to the matters set forth on Exhibit I attached hereto, and the lenders
providing debt financing in connection with the transactions contemplated by
this Agreement shall be entitled to rely thereon;
(g) On or before the Closing Date, the Purchaser shall have
delivered to the Existing Stockholder all of the following:
(i) a certificate from the Purchaser in a form
reasonably satisfactory to the Existing Stockholder, dated the Closing
Date, stating that the preconditions specified in Sections 3.2(a)
through (e) have been satisfied;
(ii) a copy of the resolutions of the board of
directors of the Purchaser approving the transactions contemplated by
this Agreement, certified by the Purchaser;
(iii) a copy of the certificate of formation for the
Purchaser, certified by the Secretary of State of the State of
Delaware;
(iv) a copy of the limited liability company
agreement for the Purchaser, certified by the Purchaser;
(v) a certificate from the Secretary of State of the
State of Delaware, dated as of or about the Closing Date, as to the
good standing of the Purchaser;
(vi) copies of the consents, filings, authorizations
and approvals described in Section 3.2(c) to the extent applicable to
the Purchaser; and
(vii) such other documents or instruments as the
Existing Stockholder may reasonably request to effect the transactions
contemplated hereby;
(h) The Company, the Parent, the Purchaser and the Existing
Stockholder shall have entered into the Stockholders Agreement, and the
Stockholders Agreement shall be in full force and effect as of the Closing;
(i) The Company, the Parent, the Purchaser and the Existing
Stockholder shall have entered into the Registration Agreement, and the
Registration Agreement shall be in full force and effect as of the Closing;
(j) The Parent and the Existing Stockholder shall have
received the Solvency Opinion which shall either be addressed to the Parent and
the Existing Stockholder or permit them to rely on it;
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(k) All proceedings to be taken by the Purchaser in connection
with the consummation of the transactions contemplated by this Agreement and all
certificates, opinions, instruments, and other documents required to be
delivered by the Purchaser to effect the transactions contemplated hereby
reasonably requested by the Existing Stockholder shall be reasonably
satisfactory in form and substance to the Existing Stockholder; and
(l) The Parent shall have received the consent of applicable
insurance providers for the provision of the transitional benefits required to
be provided by it pursuant to Section 8.4 hereof for the periods set forth
therein.
Any condition specified in this Section 3.2 may be waived by the Existing
Stockholder in its sole discretion; provided that no such waiver shall be
effective unless it is set forth in a writing executed by the Existing
Stockholder.
ARTICLE IV -- COVENANTS BEFORE CLOSING
SECTION 4.1 AFFIRMATIVE COVENANTS OF THE COMPANY. Except as otherwise
contemplated by this Agreement or by the Internal Reorganization, between the
date hereof and the Closing, unless the Purchaser otherwise agrees in writing,
the Existing Stockholder shall cause each TH Entity which is not a TH JV and
shall use its reasonable best efforts as permitted under applicable management
agreements and stock transfer restriction agreements to cause each Related
Professional Corporation and TH JV to:
(a) conduct each Acquired Company's businesses and operations
only in the Ordinary Course of Business, including, without limitation, paying
accounts payable in the Ordinary Course of Business including, without
limitation, running weekly check runs;
(b) keep in full force and effect each Acquired Company's
corporate existence and use its reasonable best efforts to cause its current
insurance (or reinsurance) policies (including, without limitation, those
relating to malpractice claims) not to be canceled or terminated or any of the
coverage thereunder to lapse;
(c) manage each Acquired Company's malpractice claims in the
Ordinary Course of Business and not materially alter the Acquired Companies'
malpractice claims program;
(d) use their reasonable best efforts to carry on the business
of each Acquired Company in the same manner as presently conducted and to keep
each Acquired Company's business organization and properties intact, including
its present business operations, physical facilities, working conditions, and
employees and including each Acquired Company's present relationships with
lessors, licensors, suppliers, customers, and others having business relations
with each such Acquired Company, respectively;
(e) maintain the Real Property and other material assets of
each Acquired Company in good repair, order, and condition (normal wear and tear
excepted) consistent with
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current needs and replace in accordance with prudent practices each Acquired
Company's inoperable, worn out, or obsolete material assets with assets of
comparable quality consistent with the Ordinary Course of Business;
(f) maintain the books, accounts, and records of each Acquired
Company in accordance with GAAP, consistent with the custom and practice as used
in the preparation of the Financial Statements;
(g) promptly (once the Parent obtains knowledge thereof)
inform the Purchaser in writing of any material breaches from the
representations and warranties contained in Article V or any material breach of
any covenant hereunder by the Company, the Existing Stockholder or the Parent;
(h) cooperate with the Purchaser and use reasonable best
efforts to cause the conditions to the Purchaser's obligation to close to be
satisfied (including, without limitation, the execution and delivery of all
agreements contemplated hereunder to be so executed and delivered and the making
and obtaining of all third party and governmental notices, filings,
authorizations, approvals, consents, releases, and terminations);
(i) permit the Purchaser to conduct a reasonable due diligence
investigation concerning the financial capability, resources and condition and
creditworthiness of the Parent;
(j) cooperate with the Purchaser in the Purchaser's
investigation of the business and properties of the Acquired Companies, to
permit the Purchaser and its employees, agents, accounting, legal, and other
authorized representatives to (i) have full access to the premises, books, and
records of each Acquired Company at reasonable hours, (ii) visit and inspect any
of the properties of each Acquired Company, and (iii) discuss the affairs,
finances, and accounts of each Acquired Company with the directors, officers,
partners, key employees, key customers, key sales representatives, key
suppliers, and independent accountants of such Acquired Company, respectively;
(k) with respect to any officer or employee of any of the
Acquired Companies, if such individual is also an officer, director or
shareholder of any professional corporation (other than a Related Professional
Corporation) which is party to a management agreement with the Parent or any of
its Affiliates, accommodate such officers' or directors' resignations from such
position(s) with, and facilitate the transfer of such shareholders' shares of,
such professional corporation; and
(l) at the direction of the Purchaser, pay the non-refundable
advance deposit of $500,000 contemplated by the medical malpractice Proposal of
Insurance (the "Farmers Policy") attached hereto as Exhibit J.
All information concerning the Parent, the Existing Stockholder or any Acquired
Company furnished or provided by the Parent, the Existing Stockholder or any
Acquired Company or any of their representatives to the Purchaser or its
representatives (whether furnished before or after the date of
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this Agreement) shall be held subject to the confidentiality agreement
previously executed by and between the Parent and the Purchaser (the
"Confidentiality Agreement").
SECTION 4.2 NEGATIVE COVENANTS OF THE COMPANY. Except as expressly
contemplated by this Agreement, by the Internal Reorganization or as set forth
in the Disclosure Letter, between the date hereof and the Closing, unless the
Purchaser otherwise agrees in writing, the Existing Stockholder shall cause each
TH Entity which is not a TH JV and shall use its reasonable best efforts as
permitted under applicable management agreements and stock transfer restriction
agreements to cause each Related Professional Corporation and TH JV not to:
(a) take any action that would require disclosure under
Section 5.7;
(b) make any loans or enter into any transaction with any
Insider other than transactions entered into in the Ordinary Course of Business;
(c) establish, amend or contribute to any pension, retirement,
profit sharing, or stock bonus plan or multiemployer plan covering any of the
employees of any Acquired Company, except as required by law or in accordance
with past practice;
(d) take any action designed or intended to encourage
employees of the Acquired Companies to leave their employment or otherwise not
to continue employment with such Acquired Companies;
(e) declare, pay, make, or otherwise effectuate any dividends
or distributions (other than in Cash), redemptions, equity repurchases, or other
transactions involving the Company's Capital Stock or equity securities; or
(f) commit, or enter into any agreement to do, any of the
foregoing.
SECTION 4.3 COVENANTS OF PURCHASER. Between the date hereof and the
Closing, the Purchaser shall:
(a) promptly (once it obtains knowledge thereof) inform the
Existing Stockholder in writing of any material breaches from the
representations and warranties contained in Article VI or any material breach of
any covenant hereunder by Purchaser;
(b) provide the Parent with such documentation as the Parent
may reasonably request to confirm, to the Parent's reasonable satisfaction, the
accuracy of the representations made by the Purchaser in Section 6.6, and the
Purchaser shall permit the Parent to conduct a reasonable due diligence
investigation concerning the financial capability, resources and condition and
creditworthiness of the Purchaser;
(c) cooperate with the Existing Stockholder and use its
reasonable best efforts to cause the conditions to the Existing Stockholder's
obligation to close to be satisfied (including,
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without limitation, the execution and delivery of all agreements contemplated
hereunder to be so executed and delivered and the making and obtaining of all
third party and governmental filings, authorizations, approvals, consents,
releases, and terminations);
(d) use good faith commercially reasonable efforts to assist
the Company to obtain the debt financing contemplated by Section 6.6 below. In
this regard, and without limiting the generality of the foregoing, the Purchaser
shall take all action within its control which is necessary or appropriate and
consistent with good faith commercially reasonable efforts to secure the debt
financing contemplated by the Debt Commitment Letters referred in Section 6.6
below so as to allow the Closing to occur on or prior to March 16, 1999. The
Purchaser will not amend or otherwise modify the Debt Commitment Letters (or any
term or condition thereof) in any respect that would materially and adversely
affect the ability of the Company to obtain such financing without the prior
written consent of the Parent. If the senior subordinated note offering
contemplated by the Debt Commitment Letter from DLJ Bridge Finance, Inc.,
NationsBridge, L.L.C. and Fleet Corporate Finance, Inc. is not available but the
bridge financing contemplated by such Debt Commitment Letter is available, the
Purchaser agrees to cause the Company to utilize such bridge financing so as to
allow the Closing to occur on or prior to March 16, 1999;
(e) pay or reimburse the Parent for the $500,000
non-refundable advance deposit for the Farmers Policy, which obligation to pay
or reimburse the Parent shall arise upon the Parent's payment of such
non-refundable deposit and shall be satisfied by the Purchaser within two
business days of the Purchaser's receipt of written notice from the Parent of
the payment by the Parent of such non-refundable advance deposit (unless this
Agreement is terminated pursuant to Section 7.1(g), in which case the Parent
will bear such cost and promptly reimburse the Purchaser to the extent the
Purchaser has made such payment or reimbursement); and
(f) use its reasonable best efforts to assist the Parent in
obtaining releases of those guarantees and of those other commitments,
obligations and liabilities arising under those contracts, agreements,
arrangements and understandings listed on the Assigned Contracts Schedule
included on the Disclosure Letter.
SECTION 4.4 INTERCOMPANY ACCOUNTS. The Parent will cause all
intercompany liabilities owing from any Acquired Company to the Parent or its
Affiliates (except other Acquired Companies) as of the close of business on the
Measurement Date to be reclassified to capital of the Company (i.e., after the
Measurement Date the Acquired Companies shall not have any obligation to repay
such intercompany liabilities). The Acquired Companies will cause all
intercompany liabilities owing from the Parent or any of its Affiliates (other
than the Acquired Companies) to any Acquired Company as of the close of business
on the Measurement Date to be cancelled with such cancellation being reflected
as an adjustment to the equity or capital of the Acquired Companies (i.e., after
the Closing neither the Parent nor any of its Affiliates (other than the
Acquired Companies) shall have any obligation to repay such intercompany
liabilities).
SECTION 4.5 DISTRIBUTIONS. The Parties agree that Parent and the
Existing Stockholder shall have the right, at or prior to the close of business
on the Measurement Date, to cause the
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Acquired Companies (but not the TH JV's, except to the extent in the Ordinary
Course of Business and so long as such distributions do not create any
obligations to the TH JV's or their other owners) to distribute Cash held by the
Acquired Companies (but not the TH JV's, except to the extent in the Ordinary
Course of Business and so long as such distributions do not create any
obligations to the TH JV's or their other owners) to the Parent or the Existing
Stockholder or their respective Affiliates, by one or more cash dividends,
repurchase of existing stock and/or distributions.
SECTION 4.6 FINANCIAL INFORMATION.
(a) The Existing Stockholder and the Parent agree to use
reasonable best efforts to cause to be issued, on or before February 19, 1999,
the audited consolidated balance sheets of the Company as of December 31, 1998
and the related statements of income and cash flow (or the equivalent) for the
twelve-month period then-ended (the "1998 Financials"). The Existing Stockholder
and the Parent will assist Ernst & Young in completing the audit (but the
Existing Stockholder and the Parent are not guaranteeing the completion date of
the audit) and will assist the Purchaser by providing available data to support
any reclassifications, addbacks and/or pro forma adjustments related thereto. If
the Closing does occur, the Purchaser will cause the Company to pay the fees and
expenses of Ernst & Young for their audit of the 1998 Financials (the "E&Y 1998
Audit Fees"). If the Closing does not occur, the Purchaser and the Parent will
each pay 50% of the E&Y 1998 Audit Fees.
(b) The Existing Stockholder and the Parent agree to use
reasonable best efforts to provide all necessary financial data for the offering
materials to be prepared for the proposed $150,000,000 Senior Subordinated Notes
due 2009 to be issued by the Company in connection with the transactions
contemplated by this Agreement (the "Bonds") and the syndication materials to be
prepared for the Company's new senior credit facility, and agree to permit the
Purchaser's use of the information contained in the such financial data in
connection with the issuance of the Bonds and the syndication of such senior
credit facility. The Purchaser will provide the Parent with an opportunity to
review and approve such information as reflected in such offering and
syndication materials, which approval will not be unreasonably withheld.
SECTION 4.7 PARENT BOARD APPROVAL. On or before January 27, 1999, the
Parent will convene and hold a meeting of its Board of Directors for the purpose
of approving this Agreement and the transactions contemplated hereby (the
"Parent Board Approval"). The Parent's chief executive officer and its chief
financial officer shall recommend to its Board of Directors the approval of this
Agreement and the transactions contemplated hereby.
SECTION 4.8 CASH MANAGEMENT FROM MEASUREMENT DATE TO CLOSING DATE.
(a) Loan. On March 1, 1999, the Parent will make a cash loan
to the Company in the amount of $5.0 million. The Company will use the proceeds
of such loan solely to fund its working capital requirements for the period
beginning on the day after the Measurement Date and ending on the Closing Date
(the "Cash Management Period"). At the Closing, the Company will repay such $5.0
million loan in full without interest.
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(b) Cash Inflows. During the Cash Management Period, the
Acquired Companies will maintain one or more bank accounts and/or lock boxes
(collectively, the "Bank Accounts") for the collective receipt of all
collections on accounts receivable and all other Cash inflows of the Acquired
Companies (the "Transition Cash Inflows") and all Transition Cash Inflows will
be immediately deposited in the Bank Accounts.
(c) Cash Outflows. During the Cash Management Period, the
Acquired Companies will fund all accounts payable and other Cash outflows
(including, without limitation, making payments for the clearing of all checks
which were issued on or before the Measurement Date and taken into account as
either reductions in determining the Cash Amount or reductions in determining
the Net Working Capital Amount) of the Acquired Companies (the "Transition Cash
Outflows") through the Bank Accounts. During the Cash Management Period, except
pursuant to the loan described in Section 4.8(a) above, all Transition Cash
Outflows will be the responsibility of the Acquired Companies and will not be
funded by the Parent or its lenders.
ARTICLE V -- REPRESENTATIONS AND WARRANTIES
OF THE EXISTING STOCKHOLDER
As a material inducement to Purchaser to enter into this
Agreement, with such exceptions as are set forth in a letter (the "Disclosure
Letter") delivered by the Existing Stockholder to the Purchaser prior to
execution hereof, the Existing Stockholder hereby represents and warrants that:
SECTION 5.1 ORGANIZATION AND CORPORATE POWER.
(a) The Organization Schedule included in the Disclosure
Letter contains under the heading "Before Internal Reorganization" a complete
and accurate list for each Acquired Company of its name, its jurisdiction of
incorporation or organization, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each stockholder
or equity holder and the number of shares or other equity interests held by
each), determined as of the date hereof. The Organization Schedule included in
the Disclosure Letter also contains under the heading "After Internal
Reorganization" a complete and accurate list for each Acquired Company of its
name, its jurisdiction of incorporation or organization, other jurisdictions in
which it is authorized to do business, and its capitalization (including the
identity of each stockholder or equity holder and the number of shares or other
equity interests held by each), as such will exist after completion of the
Internal Reorganization and as of immediately before the Closing. No Acquired
Company owns or holds the right to acquire any Capital Stock in any other
Person.
(b) Each Acquired Company is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
organization, with full organizational power and authority to conduct its
business as it is now being conducted and to own or use the properties and
assets that it purports to own or use. Each Acquired Company is duly qualified
to do business
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as a foreign organization and is in good standing under the laws of each state
or other jurisdiction in which either the ownership or use of the properties
owned or used by it, or the nature of the activities conducted by it, requires
such qualification, except where the failure to be so duly qualified or licensed
and in good standing would not individually or in the aggregate have a Material
Adverse Effect.
(c) The Existing Stockholder and the Parent is each a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of incorporation.
(d) The Existing Stockholder has made available to the
Purchaser correct and complete copies of the certificate of incorporation and
by-laws (or equivalent governing documents) for each Acquired Company, which
documents reflect all amendments made thereto at any time before the date
hereof. Correct and complete copies of the minute books containing the records
of meetings of the stockholders and board of directors (or equivalent parties),
the stock certificate books, and the stock record books of the Acquired
Companies have been furnished to the Purchaser. No Acquired Company is in
default under or in violation of any provision of its certificate of
incorporation or by-laws (or equivalent governing documents).
SECTION 5.2 AUTHORIZATION OF TRANSACTIONS. The Company, the Existing
Stockholder and the Parent each has all requisite corporate power and authority
to execute and deliver the Transaction Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby. The board of
directors of each of the Company and the Existing Stockholder has duly approved
the Transaction Documents to which it is a party and has duly authorized the
execution and delivery of the Transaction Documents to which it is a party and
the consummation of the transactions contemplated thereby. Except for the Parent
Board Approval and the approval of the sole shareholder of the Company and the
Existing Stockholder, which shall be received prior to Closing, no other
corporate proceedings on the part of the Company, the Existing Stockholder or
the Parent are necessary to approve and authorize the execution and delivery of
the Transaction Documents to which it is a party and the consummation of the
transactions contemplated thereby. All Transaction Documents to which the
Company, the Existing Stockholder or the Parent is a party have been duly
executed and delivered by the Company, the Existing Stockholder or the Parent
and constitute the valid and binding agreements of the Company, the Existing
Stockholder or the Parent, enforceable against the Company, the Existing
Stockholder or the Parent in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights; and as limited
by general principles of equity that restrict the availability of equitable
remedies.
SECTION 5.3 ABSENCE OF CONFLICTS. The execution, delivery, and
performance of the Transaction Documents and the consummation of the
transactions contemplated thereby by the Company, the Existing Stockholder and
the Parent do not and shall not (a) conflict with or result in any breach of any
of the terms, conditions, or provisions of, (b) constitute a material default
under, (c) result in a material violation of, (d) give any third party the right
to modify, terminate, or accelerate any obligation under, (e) result in the
creation of any Lien upon the Capital Stock or assets of any of the Acquired
Companies, or (f) require any authorization, consent, approval, exemption,
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or other action by or notice or declaration to, or filing with, any court or
administrative or other governmental body or agency, under the provisions of the
articles of incorporation, by-laws or similar organizational document of the
Existing Stockholder, the Parent or any Acquired Company or any indenture,
mortgage, lease, loan agreement or other agreement listed on either the
Contracts Schedule or the Benefit Plans Schedule included in the Disclosure
Letter, or any material law, statute, rule, or regulation to which the Existing
Stockholder, the Parent or any Acquired Company is subject or any material
judgment, order, or decree to which the Existing Stockholder, the Parent or any
Acquired Company is subject.
SECTION 5.4 CAPITALIZATION. The authorized Capital Stock of the Company
consists of 1,000 shares of Common Stock, no par value, of which 100 shares are
issued and outstanding, all of which are owned by the Existing Stockholder. As
of immediately after the amendment to the Company's charter contemplated in
Section 3.1(j) above, the authorized Capital Stock of the Company will consist
of 12,000,000 shares of Common Stock, par value $.01 per share, of which 1,000
shares will be issued and outstanding, and 200,000 shares of Class A Preferred
Stock, par value $.01 per share, of which no shares will be issued or
outstanding. All of the issued and outstanding Capital Stock of the Acquired
Companies have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record and owned beneficially by the Persons and
in the manner described on the Organization Schedule included in the Disclosure
Letter, free and clear of all Liens, and are not subject to, nor were they
issued in violation of, any preemptive rights or rights of first refusal. There
are no outstanding or authorized options, warrants, rights, contracts, calls,
puts, rights to subscribe, conversion rights, or other agreements or commitments
to which any Acquired Company is a party or which are binding upon any Acquired
Company providing for the issuance, disposition, or acquisition of any Acquired
Company's Capital Stock (other than this Agreement). There are no outstanding or
authorized stock appreciation, phantom stock, or similar rights with respect to
any Acquired Company. There are no voting trusts, proxies, or any other
agreements or understandings with respect to the voting of the Capital Stock of
any Acquired Company. No Acquired Company is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of any Acquired Company's Capital Stock.
SECTION 5.5 FINANCIAL STATEMENTS AND RELATED MATTERS.
(a) Financial Statements. Included in the Disclosure Letter as
the Financial Statements Schedule are the following financial statements: (i)
the audited consolidated balance sheets of the Company as of December 31, 1996
and 1997, and the related statements of income and cash flows (or the
equivalent) for the respective twelve-month periods ended December 31, 1995,
1996 and 1997; and (ii) the unaudited consolidated balance sheet of the Company
as of November 30, 1998 (the "Latest Balance Sheet"), and the related statements
of income and cash flows (or the equivalent) for the eleven-month period then
ended. Each of the foregoing financial statements (the "Financial Statements")
presents fairly, in all material respects, the Company's consolidated financial
condition and results of operations as of the times and for the periods referred
to therein, and has been prepared in accordance with GAAP, subject in the case
of unaudited consolidated financial statements to the absence of footnote
disclosure and customary year-end adjustments, none of which will be material.
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(b) Receivables. All accounts receivable that are taken into
account in determining the Net Working Capital Amount (collectively, the
"Accounts Receivable") represent or will represent valid obligations arising
from services actually performed in the Ordinary Course of Business. The
Accounts Receivable and the reserves thereto will be established in accordance
with GAAP.
SECTION 5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Acquired Company has
any material obligations or liabilities (whether accrued, absolute, contingent,
unliquidated, or otherwise, whether or not known, whether due or to become due,
and regardless of when asserted) arising out of or relating to the operation of
the Acquired Companies at or before the Closing, except (i) obligations under
contracts or commitments described on the Contracts Schedule included in the
Disclosure Letter or under contracts and commitments which are not required to
be disclosed thereon (but not liabilities for breaches thereof), (ii)
liabilities reflected on the liabilities side of the Latest Balance Sheet, (iii)
liabilities which have arisen after the date of the Latest Balance Sheet in the
Ordinary Course of Business of such Acquired Company or otherwise in accordance
with the terms and conditions of this Agreement (none of which is a liability
for breach of contract, breach of warranty, tort, or infringement or a claim or
lawsuit or an environmental liability), and (iv) liabilities, contracts,
commitments or obligations disclosed elsewhere in this Agreement or the
Disclosure Letter hereto. Without limiting the generality of the foregoing, all
fees and expenses owing or potentially owing to Coopers & Xxxxxxx in connection
with its cost savings project for the Acquired Companies will be paid in full by
the Parent on or prior to Closing.
SECTION 5.7 ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly
contemplated by this Agreement or the Internal Reorganization, since December
31, 1997, no Acquired Company has:
(a) suffered any change that has had or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or
suffered any theft, damage, destruction, or casualty loss in excess of $100,000,
to its assets, whether or not covered by insurance, or suffered any substantial
destruction of books and records;
(b) subjected any portion of its properties or assets to any
Lien (other than Permitted Liens) other than Liens, which individually or in the
aggregate, would not have a Material Adverse Effect;
(c) sold, leased, assigned, or transferred (including, without
limitation, transfers to Existing Stockholder or any Insider) a portion of its
tangible assets, or canceled without fair consideration any material debts or
claims owing to or held by it, except in the Ordinary Course of Business of the
Acquired Company;
(d) sold, assigned, licensed, or transferred (including,
without limitation, transfers to Existing Stockholder or any Insider) any
material Proprietary Rights owned by, issued to, or licensed to any Acquired
Company or to the knowledge of the Parent disclosed any material
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confidential information to (other than pursuant to agreements requiring the
recipient to maintain the confidentiality of such confidential information) or
received any material confidential information of any third party in violation
of any obligation of confidentiality;
(e) suffered any losses or waived any rights, the suffering or
wavier of which would result in a Material Adverse Effect;
(f) other than in the Ordinary Course of Business of the
Acquired Company, entered into, amended, or terminated any Real Property Leases,
material personal property lease, contract, agreement, license or commitment, or
taken any other action or entered into any other material transaction;
(g) materially changed any business practice other than in the
Ordinary Course of Business of the Acquired Company;
(h) except in the Ordinary Course of Business of the Acquired
Company, paid or increased any bonuses, salaries, or other compensation to any
stockholder, director, officer, or employee or entered into any employment,
severance, or similar contract or agreement with any director, officer, or
employee;
(i) adopted, or materially increased the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of any Acquired Company;
(j) conducted its cash management customs and practices other
than in the Ordinary Course of Business of the Acquired Company (including,
without limitation, with respect to collection of accounts receivable, purchases
of supplies, repairs and maintenance, payment of accounts payable and accrued
expenses, levels of capital expenditures and operation of cash management
practices generally);
(k) made any capital expenditures or commitments for capital
expenditures in excess of $100,000 except in the Ordinary Course of Business of
the Acquired Company;
(l) made a material change in its accounting methods; or
(m) made or committed to make any payments or other transfers
in connection with, or in contemplation of, the transactions contemplated by
this Agreement or the other Transaction Documents.
SECTION 5.8 REAL PROPERTY.
(a) The Real Property Schedule included in the Disclosure
Letter sets forth the address and the record legal description of the land for
each Owned Real Property. With respect to each parcel of Owned Real Property:
(i) the owner Acquired Company has good and marketable fee
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simple title to such parcel, which shall be free and clear of all Liens as of
the Closing Date, except Permitted Liens; (ii) there are no leases, subleases,
licenses, concessions or other agreements (written or oral) granting to any
person other than the Acquired Company the right to use or occupy such parcel or
any portion thereof; and (iii) there are no outstanding options, rights of first
offer or rights of first refusal to purchase such parcel or any portion thereof
or interest therein.
(b) The Real Property Schedule included in the Disclosure
Letter sets forth the address of each Leased Real Property and a list of all
Real Property Leases (including, without limitation, all amendments, extensions,
renewals, guaranties and other agreements with respect thereto) for each Leased
Real Property. The Existing Stockholder has delivered to Purchaser a true and
complete copy of each written Real Property Lease, and in the case of any oral
Real Property Leases, a written summary of the basic terms thereof. With respect
to each of the Real Property Leases: (i) the Real Property Lease is legal,
valid, binding, enforceable and in full force and effect, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights and by general
principles of equity that restrict the availability of equitable remedies; (ii)
the acquisition of stock and change in control of the Acquired Companies (as the
case may be) as contemplated under this Agreement will not result in a breach of
or default under the Real Property Lease or otherwise cause the Real Property
Lease to cease to be legal, valid, binding, enforceable and in full force and
effect on identical terms following the Closing; (iii) no Acquired Company nor,
to the knowledge of the Parent, any other party to the Real Property Lease is in
material breach or default under the Real Property Lease beyond applicable cure
periods, and to the knowledge of the Parent, no event has occurred or
circumstance exists which, with the delivery of notice, passage of time or both,
would constitute such a material breach or default or permit the termination,
modification or acceleration of rent under the Real Property Lease; (iv) no
party to the Real Property Lease has repudiated any term thereof, and there are
no material disputes in effect with respect to the Real Property Lease; and (v)
no Acquired Company has assigned, subleased, mortgaged, deeded in trust or
otherwise transferred or encumbered the Real Property Lease or any interest
therein.
(c) Pursuant to and subject to the Real Property Leases, the
Acquired Companies have good title to the Leasehold Improvements, which shall be
free and clear of all Liens as of the Closing Date, except Permitted Liens.
(d) The Owned Real Property, the Leased Real Property and
Leasehold Improvements (collectively, the "Real Property") include all of the
real property used by the Acquired Companies in the operation of their
businesses.
SECTION 5.9 ASSETS.
(a) Each Acquired Company owns good and marketable title to,
or a valid leasehold interest in, free and clear of all Liens other than
Permitted Liens, all of the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) which are shown on the Latest Balance
Sheet, or which have been acquired by such Acquired Company thereafter, except
for personal property and assets sold since the date of the Latest Balance Sheet
in the Ordinary
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Course of Business. Neither the Parent nor any of its Subsidiaries (except
Acquired Companies) owns any properties or assets (whether real, personal, or
mixed and whether tangible or intangible) which are used in the business of any
of the Acquired Companies. The Assigned Contracts Schedule included in the
Disclosure Letter contains a true, complete and correct list of all contracts,
agreements, arrangements and understandings to which the Parent or Affiliates of
the Parent (other than the Acquired Companies) are a party which primarily
relate to the business of the Acquired Companies as conducted in the ordinary
course, except those such contracts, agreements, arrangements and understandings
which exclusively relate to the business of the Acquired Companies.
(b) The buildings, machinery, equipment, personal properties,
vehicles, and other tangible assets of the Acquired Companies (other than the TH
JV's), and to the knowledge of the Parent, the TH JV's, located upon or used in
connection with the Real Property are operated in conformity in all material
respects with all applicable laws and regulations and are usable in the Ordinary
Course of Business. The Acquired Companies (other than the TH JV's), and to the
knowledge of the Parent, the TH JV's, own, license under valid licenses or lease
under valid leases all buildings, machinery, equipment, and other tangible
assets, other than Cash (except for equity securities of the Acquired
Companies), necessary for the conduct of their business as currently conducted.
SECTION 5.10 TAXES.
(a) Each of the Acquired Companies has filed all material Tax
Returns required to be filed by it, and each such Tax Return has been prepared
in compliance with all applicable laws and regulations and is true and correct
in all material respects.
(b) All Taxes that are due and payable by the Acquired
Companies (whether or not shown on any Tax Return) have been paid, and each of
the Acquired Companies has properly withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
shareholder, employee, creditor, independent contractor, or other third party.
(c) No action, suit, proceeding or audit is pending against or
with respect to the Acquired Companies regarding Taxes and no Acquired Company
has received any written notice of any audit that has not commenced.
(d) None of the Acquired Companies is a party to or bound by
any Tax allocation or Tax sharing agreement with any Person other than the
Acquired Companies.
(e) None of the Acquired Companies (A) has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Parent or one of the Acquired
Companies) for any taxable year ended after December 31, 1994 or (B) has any
liability for the Taxes of any Person (other than any of the Acquired Companies)
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
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(f) No Acquired Company has received written notice from a
taxing authority in a jurisdiction where any of the Acquired Companies does not
file Tax Returns that such Person is or may be subject to taxation by such
jurisdiction.
(g) Each of the Acquired Companies has made available to the
Purchaser true, correct and complete copies of all Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by any of
the Acquired Companies for the past three (3) years.
(h) None of the Acquired Companies has consented to extend the
time in which any Tax may be assessed or collected by any taxing authority.
(i) None of the Acquired Companies will be required to include
any item of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date as a
result of any (i) change in method of accounting for a taxable period ending on
or prior to the Closing Date under Code Section 481(c) (or any corresponding or
similar provision of state, local or foreign income Tax law); (ii) "closing
agreement" as described in Code Section 7121 (or any corresponding or similar
provision of state, local or foreign income Tax law); or (iii) installment sale
made prior to the Closing Date.
(j) None of the Acquired Companies has filed a consent under
Code Section 341(f).
(k) None of the Acquired Companies is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute payment"
within the meaning of Code Section 280G (or any corresponding provision of
state, local or foreign income Tax law), in connection with the transactions
contemplated hereby.
SECTION 5.11 CONTRACTS AND COMMITMENTS.
(a) Except for contracts with clients, physicians and health
care service providers which involve individually less than $250,000 annually,
no Acquired Company is a party to or bound by any written or oral:
(i) contract for the employment of any officer,
individual employee or other Person on a full-time, part-time,
consulting or other basis providing annual compensation in excess of
$150,000 or contract relating to loans to officers, directors or
Affiliates of such Acquired Company;
(ii) contract under which the Acquired Companies have
advanced or loaned any other Person amounts in the aggregate exceeding
$25,000, other than trade credit and advances of independent contractor
payments extended in the Ordinary Course of Business;
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(iii) agreement or indenture relating to borrowed
money or other Indebtedness in excess of $1,000,000 or the mortgaging,
pledging or otherwise placing a Lien on any material asset or group of
assets of the Acquired Companies;
(iv) guaranty of any obligation in excess of
$1,000,000;
(v) lease or agreement under which any Acquired
Company is the lessee of or holds or operates any personal property
owned by any other party, except for any lease or agreement for
personal property under which the aggregate annual payments do not
exceed $100,000;
(vi) lease or agreement under which any Acquired
Company is the lessor of or permits any third party to hold or operate
any property, real or personal, owned or controlled by any Acquired
Company;
(vii) contract or group of related contracts
(excluding purchase orders issued or received in the Ordinary Course of
Business) with the same party or group of affiliated parties the
performance of which involves consideration in excess of $250,000;
(viii) assignment, license, indemnification or
agreement with respect to any intangible property (including, without
limitation, any Proprietary Rights);
(ix) distribution or franchise agreement;
(x) agreement with a term of more than six months,
which is not terminable by the Acquired Companies upon less than 90
days notice without penalty or which involves more than $250,000
annually;
(xi) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world; or
(xii) any other agreement, entered into other than in
the Ordinary Course of Business, which is material to its operations
and business prospects or involves a consideration in excess of
$250,000 annually.
(b) All of the contracts, agreements and instruments set forth
on the Contracts Schedule included in the Disclosure Letter, and all contracts
with clients, physicians and health care service providers of the Acquired
Companies, are valid, binding and enforceable in accordance with their
respective terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; and as limited by general principles of equity
that restrict the availability of equitable remedies. Each Acquired Company has
performed all material obligations required to be performed by it and is not in
default under or in breach of nor in receipt of any claim of default or breach
under any such
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contract, agreement or instrument other than defaults which would not result in
a Material Adverse Effect. No event has occurred which with the passage of time
or the giving of notice or both would result in a default, breach or event of
noncompliance by the Company or, to the Parent's knowledge, any other party
under any such contract, agreement or instrument other than such defaults,
breaches and events of noncompliance as would not result in a Material Adverse
Effect. No Acquired Company has received written notice of the intention of any
Party to cancel or terminate any contract, agreement or instrument required to
be set forth on the Contracts Schedule included in the Disclosure Letter and, to
the Parent's knowledge, there has not been any breach or anticipated breach by
the other parties to any such contract, agreement or instrument.
(c) The Existing Stockholder has provided the Purchaser with,
or provided the Purchaser with access to, a true and correct copy of all written
contracts which are required to be disclosed on the Contracts Schedule included
in the Disclosure Letter, in each case together with all amendments, waivers, or
other changes thereto (all of which are disclosed on the Contracts Schedule
included in the Disclosure Letter). The Contracts Schedule included in the
Disclosure Letter contains an accurate and complete description of all material
terms of all oral contracts referred to therein (unless the oral agreement is to
extend a terminated or expired written contract substantially on the same terms
of such contract).
SECTION 5.12 PROPRIETARY RIGHTS.
(a) The Proprietary Rights Schedule included in the Disclosure
Letter contains a complete and accurate list of all patented and registered
Proprietary Rights and all pending patent applications and applications for the
registration of other Proprietary Rights filed by the Acquired Companies. The
Proprietary Rights Schedule included in the Disclosure Letter also contains a
complete and accurate list of all material (i) trade names, unregistered
trademarks, service marks, copyrights, proprietary information systems and
proprietary databases owned by the Acquired Companies (collectively, the
"Unregistered Proprietary Rights"); (ii) computer software owned and/or used by
the Acquired Companies other than commercially available "off-the-shelf"
software; and (iii) licenses granted by the Acquired Companies to any third
party and all licenses granted by any third party to the Acquired Companies, in
each case identifying the subject Proprietary Rights. The Company has made
available to the Purchaser correct and complete copies of all documents
embodying the licenses applicable to the Proprietary Rights listed on the
Proprietary Rights Schedule included in the Disclosure Letter other than for
software described in clause (ii).
(b) Each Acquired Company owns and possesses free and clear of
all Liens (except Permitted Liens), all right, title, and interest in and to, or
has the right to use pursuant to a valid and enforceable license, the
Proprietary Rights necessary for the operation of such Acquired Company's
business as currently conducted; no Acquired Company has received any notice of
invalidity, infringement, or misappropriation from any third party with respect
to any such Proprietary Rights; no Acquired Company has received any notice that
any Proprietary Rights of any third parties have been interfered with, infringed
upon, or misappropriated by such Acquired Company and to the Parent's knowledge,
no grounds exist for any claim of such interference, infringement,
misappropriation or conflict; and to the knowledge of the Parent, no third party
has
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interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Proprietary Rights of any Acquired Company.
(c) The Existing Stockholder has made available to the
Purchaser a copy of the inventory conducted by the Acquired Companies of the
hardware, software and embedded microcontrollers in noncomputer equipment (the
"Computer Systems") used by all of the Acquired Companies in their respective
businesses, in order to determine which parts of the Computer Systems are not
Year 2000 Compliant (as defined below) and to estimate the cost and time of
rendering such Computer Systems Year 2000 Compliant prior to December 31, 1999
or such earlier date on which the Computer Systems may shut down or produce
incorrect calculations or otherwise malfunction without becoming totally
inoperable. The Existing Stockholder and the Acquired Companies have budgeted
$1,200,000 through December 31, 1999 to address Computer Systems which are not
Year 2000 Compliant. For purposes of this Agreement, "Year 2000 Compliant" means
that all of the hardware, software and embedded microcontrollers in non computer
equipment comprising Computer Systems will correctly differentiate between years
in different centuries that end in the same two digits, and will accurately
process date/time data (including, but not limited to, calculating, comparing
and sequencing) from, into and between the twentieth and twenty-first centuries,
including leap year calculations.
SECTION 5.13 LITIGATION; PROCEEDINGS. There are no actions, suits,
proceedings, orders, judgments, decrees, or investigations pending or, to the
Parent's knowledge, threatened against any Acquired Company (or against any of
their respective officers, directors, agents, or employees (in each case, in
their capacity as such)) at law or in equity, or before or by any federal,
state, municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality, domestic or foreign, and to the knowledge of the
Parent, there is no reasonable basis known for any of the foregoing. No Acquired
Company is subject to any outstanding order, judgment, or decree issued by any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or any arbitrator. There is no claim, action, suit,
proceeding or governmental investigation pending or, to the knowledge of the
Parent, threatened against the Parent or the Existing Stockholder, by or before
any court, governmental or regulatory authority or by any third party which
challenges the validity of this Agreement or which would be reasonably likely to
adversely affect or restrict the Parent's or the Existing Stockholder's ability
to consummate the transactions contemplated hereby.
SECTION 5.14 BROKERAGE. There are no claims for brokerage commissions,
finders' fees, or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of any Acquired Company, the Existing Stockholder or the Parent.
SECTION 5.15 GOVERNMENTAL LICENSES AND PERMITS. The License Schedule
included in the Disclosure Letter contains a complete listing and summary
description of all material Licenses owned or possessed by any Acquired Company
or used by any Acquired Company in the conduct of its business. Except as would
not result in a Material Adverse Effect, each Acquired Company owns or possesses
such right in and to all Licenses as is necessary to conduct such Acquired
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Company's business as presently conducted and as proposed to be conducted and
shall use its reasonable efforts to maintain all such Licenses. No loss or
expiration of any License is pending or, to the Parent's knowledge, threatened
or reasonably foreseeable (including, without limitation, as a result of the
transactions contemplated hereby) other than expiration in accordance with the
terms thereof or as would not result in a Material Adverse Effect.
SECTION 5.16 EMPLOYEES. To the knowledge of the Parent, no key
executive employee and no group of employees or independent contractors of any
Acquired Company has any plans to terminate his, her, or their employment or
relationship with any Acquired Company; each Acquired Company has complied in
all material respects during the last five years with all applicable laws
relating to the employment of personnel and labor; no Acquired Company is a
party to or bound by any collective bargaining agreement, nor has any Acquired
Company experienced any material strikes, grievances, unfair labor practices
claims, or other material employee or labor disputes in the last five years; no
Acquired Company has engaged in any unfair labor practice in the last five
years; and the Parent has no any knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of any Acquired Company.
SECTION 5.17 EMPLOYEE BENEFIT PLANS.
(a) The Benefit Plans Schedule included in the Disclosure
Letter identifies all bonus, deferred or incentive compensation, profit sharing,
retirement, vacation, sick leave, hospitalization or severance plans, "employee
benefit plans" (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and material fringe benefit plans
sponsored, maintained or contributed to by any Acquired Company or with respect
to which any Acquired Company has any material liability (the "Plans"). None of
the Plans are subject to Title IV of ERISA nor provide for medical or life
insurance benefits to retired or former employees of any Acquired Company (other
than as required under Code Section 4980B, or similar state law). Each Acquired
Company is not a participating or contributing employer in any "multiemployer
plan" (as defined in Section 3(37) of ERISA) with respect to employees of the
Acquired Companies nor has any Acquired Company incurred any withdrawal
liability with respect to any multiemployer plan or any liability in connection
with the termination or reorganization of any multiemployer plan.
(b) Each such Plan is in all material respects in compliance,
and has been administered in all material respects in accordance, with the
applicable provisions of ERISA and the Code and all other applicable laws, rules
and regulations, including, but not limited to, medical continuation under Code
Section 4980B. No Acquired Company has (i) engaged in any transaction prohibited
by ERISA or the Code; (ii) breached any fiduciary duty owed by it with respect
to the Plans described above; or (iii) failed in any material respect to file
and distribute timely and properly all reports and information required to be
filed or distributed in accordance with ERISA or the Code.
(c) All material contributions, premiums or payments under or
with respect to each Plan which are due on or before the Closing Date have been
paid.
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(d) Each Plan which is intended to be qualified under section
401(a) of the Code (i) has been amended to reflect all requirements of the Tax
Reform Act of 1986 and all subsequent legislation which is required to be
adopted prior to the Closing Date and (ii) has received from the Internal
Revenue Service a favorable determination letter which considers the terms of
the Plan as amended for such changes in law.
(e) Each Acquired Company has not incurred and has no reason
to expect that it will incur, any liability to the Pension Benefit Guaranty
Corporation (other than premium payments) or otherwise under Title IV of ERISA
(including any withdrawal liability) or under the Code with respect to any
employee pension benefit plan that any Acquired Company or any other entity,
that together with any Acquired Company is treated as a single employer under
section 414 of the Code, maintains or ever has maintained or to which any of
them contributes, ever has contributed, or ever has been required to contribute.
(f) Each individual who has received compensation for the
performance of services on behalf of any Acquired Company has been properly
classified as an employee or independent contractor in accordance with
applicable laws.
SECTION 5.18 INSURANCE. The Parent has made available to Purchaser a
list and brief description of each insurance policy maintained by each Acquired
Company with respect to such Acquired Company's properties, assets, and
business, together with a claims history for the past three years. All of such
insurance policies are in full force and effect, and no Acquired Company is in
default with respect to its obligations under any such insurance policies. No
Acquired Company has any self-insurance or co-insurance programs, and the
reserves set forth on the Latest Balance Sheet have been established in the
Ordinary Course of Business of the Acquired Companies.
SECTION 5.19 OFFICERS AND DIRECTORS; BANK ACCOUNTS. The Officers,
Directors, and Bank Accounts Schedule included in the Disclosure Schedule lists
all officers and directors of each Acquired Company, and all bank accounts,
safety deposit boxes, and lock boxes (designating each authorized signatory with
respect thereto) for each Acquired Company.
SECTION 5.20 AFFILIATE TRANSACTIONS. No Insider is a party to any
material agreement, contract, commitment, or transaction with any Acquired
Company or which is pertaining to the business of any Acquired Company or has
any interest in any property, real or personal or mixed, tangible or intangible,
used in or pertaining to the business of any Acquired Company.
SECTION 5.21 COMPLIANCE WITH LAWS. Each Acquired Company and their
respective officers, directors, agents (in their capacity as such), and
employees have complied in all material respects with and are in material
compliance with all applicable laws, regulations, and ordinances of foreign,
federal, state, and local governments and all agencies thereof which are
applicable to the business, business practices, or any owned or leased
properties of any Acquired Company and to which any Acquired Company may be
subject, and no material claims have been filed against any Acquired Company
alleging a violation of any such laws or regulations, and neither any Acquired
Company nor the Existing Stockholder has received notice of any such violations.
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SECTION 5.22 HEALTH CARE MATTERS.
(a) To the knowledge of the Parent, all physicians employed by
or otherwise contracting with the Acquired Companies have and are maintaining in
good standing their license to practice medicine in the state(s) in which they
practice medicine, except where the failure to have or maintain such license in
good standing would not have a Material Adverse Effect.
(b) To the knowledge of the Parent, no Acquired Company has
submitted any claim which violates any applicable self-referral law, including
the Federal Ethics in Patient Referrals Act, 42 U.S.C. Section 1395nn (known as
the "Xxxxx Act"), or any applicable state self-referral law, other than claims
the submission or payment of which individually or in the aggregate would not
have a Material Adverse Effect. To the knowledge of the Parent, no Acquired
Company has submitted any claim for payment to any payor source, either
governmental or nongovernmental, in violation of any false claim or fraud law,
including the "False Claim Act," 31 U.S.C. Section 3729, or any other applicable
federal or state false claim or fraud law, other than claims the submission or
payment of which individually or in the aggregate would not have a Material
Adverse Effect.
(c) To the knowledge of the Parent, no Acquired Company
(including without limitation any manager, officer, member, partner or employee
of any Acquired Company), nor any agent acting on behalf of or for the benefit
thereof, has directly or indirectly, other than as would not result in a
Material Adverse Effect, (i) knowingly and willfully offered or paid any
remuneration, in cash or in kind, to, or made any financial arrangements with,
any past or present customers, past or present suppliers, contractors or third
party payors in order to obtain business or payments from such persons, other
than entertainment activities in the ordinary and lawful course of business,
(ii) knowingly and willfully given or agreed to give, or is aware that there has
been made or that there is any agreement to make, any gift or gratuitous payment
of any kind, nature or description (whether in money, property or services) to
any customer or potential customer, supplier or potential supplier, contractor,
third party payor or any other person other than in connection with promotional
or entertainment expenses in the ordinary and lawful course of business, (iii)
knowingly and willfully made or agreed to make, or is aware that there has been
made or that there is any agreement to make, any contribution, payment or gift
of funds or property to, or for the private use of, any governmental official,
employee or agent where either the contribution, payment or gift is or was
illegal under the laws of the United States or under the laws of any state
thereof or any other jurisdiction (foreign or domestic) under which such
payment, contribution or gift was made, (iv) knowingly and willfully established
or maintained any unrecorded fund or asset for any purpose or made any false or
artificial entries on any of its books or records for any reason, (v) knowingly
and willfully made, or agreed to make, or is aware that there has been made or
that there is any agreement to make, any payment to any person with the
intention or understanding that any part of such payment would be used for any
purpose other than that described in the documents supporting such payment, or
(vi) knowingly and willfully paid or offered to pay any illegal remuneration for
any referral to any Acquired Company in violation of any applicable
anti-kickback law, including the Federal Anti-Kickback Statute, 42 U.S.C.
Section 1320a-7b(b), or any applicable state anti-kickback law.
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(d) To the knowledge of the Parent, no Acquired Company
(including without limitation any of their managers, officers, or employees) has
been convicted of, charged with, or investigated for a Medicare, Medicaid or
state health program related offense, or convicted of, charged with, or
investigated for a violation of federal or state law related to fraud, theft,
embezzlement, breach of fiduciary responsibility, financial misconduct,
obstruction of an investigation or controlled substances, or has been excluded
or suspended from participation in Medicare, Medicaid or any federal or state
health program or been subject to any order or consent decree of, or criminal
or civil fine or penalty imposed by, any court or governmental agency. To the
knowledge of the Parent, no Acquired Company has arranged or contracted with (by
employment or otherwise) any individual or entity that the Acquired Companies
know or should know is excluded from participation in a Federal Health Care
Program, as defined in 42 U.S.C. Section 1320a-7b(f), for the provision of items
or services for which payment may be made under such Federal Health Care
Program.
SECTION 5.23 ENVIRONMENTAL MATTERS.
(a) Each Acquired Company has complied in all material
respects with and is currently in compliance in all material respects with all
Environmental and Safety Requirements, and neither any Acquired Company nor the
Existing Stockholder has received any oral or written notice, report, or
information regarding any liabilities (whether accrued, absolute, contingent,
unliquidated, or otherwise) or any corrective, investigatory, or remedial
obligations arising under Environmental and Safety Requirements which relate to
any Acquired Company or any of their respective properties or facilities.
(b) Without limiting the generality of the foregoing, each
Acquired Company has obtained and complied with, and is currently in compliance
with, all permits, licenses, and other authorizations that may be required
pursuant to any Environmental and Safety Requirements for the occupancy of such
Acquired Company's respective properties or facilities or the operation of such
Acquired Company's respective businesses, except where the failure to so obtain
or comply with all such permits, licenses and other authorizations would not
have a Material Adverse Effect. A list of all such permits, licenses, and other
authorizations which are material to any Acquired Company is set forth on the
Environmental Schedule included in the Disclosure Letter.
(c) To the knowledge of the Parent, neither this Agreement,
nor the other Transaction Documents, nor the consummation of the transactions
contemplated hereby and thereby shall impose any obligations on any Acquired
Company or otherwise for site investigation or cleanup, or notification to or
consent of any government agencies or third parties under any Environmental and
Safety Requirements (including, without limitation, any so called
"transaction-triggered" or "responsible property transfer" laws and
regulations).
(d) To the knowledge of the Parent, none of the following
exists at any property or facility owned or leased by any Acquired Company: (i)
underground storage tanks or surface impoundments; (ii) asbestos-containing
material in any friable or potentially friable form or condition; (iii)
materials or equipment containing polychlorinated biphenyls; or (iv) landfills.
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(e) To the knowledge of the Parent, no Acquired Company has
ever treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or Released (as defined in CERCLA) any substance
(including, without limitation, any hazardous substance), except to the extent
in compliance with Environmental and Safety Requirements, or owned, occupied, or
operated any facility or property in a manner known to the Parent to give rise
to liabilities of any Acquired Company for response costs, natural resource
damages, or attorneys' fees pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA") or any
other Environmental and Safety Requirements.
(f) To the knowledge of the Parent, without limiting the
generality of the foregoing, no facts, events, or conditions relating to the
past or present properties, facilities, or operations of any Acquired Company
shall give rise to any material corrective, investigatory, or remedial
obligations pursuant to Environmental and Safety Requirements, or give rise to
any other material liabilities (whether accrued, absolute, contingent,
unliquidated, or otherwise) pursuant to Environmental and Safety Requirements,
including, without limitation, those liabilities relating to onsite or offsite
Releases or threatened Releases of hazardous materials, substances or wastes,
personal injury, property damage, or natural resources damage.
(g) To the knowledge of the Parent, no Acquired Company has,
either expressly or by operation of law, assumed or undertaken any liability or
corrective investigatory or remedial obligation of any other Person relating to
any Environmental and Safety Requirements.
SECTION 5.24 DISCLOSURE. Neither this Agreement, the other Transaction
Documents, nor any of the schedules, attachments or exhibits hereto, contain any
untrue statement of a material fact or omit a material fact necessary to make
each statement contained herein or therein, not misleading.
SECTION 5.25 CLOSING DATE. All of the representations and warranties
contained in this Article V and elsewhere in this Agreement and all information
delivered in any schedule, attachment, or Exhibit hereto or in any certificate
delivered pursuant to this Agreement to the Purchaser are true and correct on
the date of this Agreement and shall be true and correct on the Closing Date,
except to the extent that the Existing Stockholder has advised the Purchaser
otherwise in writing before the Closing (each, a "Schedule Update"). Each
Schedule Update delivered to the Purchaser shall be taken into account in
determining whether or not a representation or warranty has been breached for
purposes of any claims for indemnification pursuant to Section 8.2(a)(i) below,
as long as such Schedule Update discloses facts, events or circumstances which
occurred after the date hereof or such Schedule Update discloses facts, events
or circumstances which occurred prior to the date hereof as to which the
Company's chief executive officer, chief operating officer and executive vice
president of finance and administration had no knowledge as of the date hereof.
No Schedule Update shall be taken into account in determining whether or not the
conditions to Closing set forth in Article III above have been satisfied unless
the Purchaser has approved such Schedule Update.
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ARTICLE VI -- REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
As a material inducement to the Company and the Existing
Stockholder to enter into this Agreement, the Purchaser hereby represents and
warrants to the Existing Stockholder that:
SECTION 6.1 ORGANIZATION. The Purchaser is a limited liability company
duly organized, validly existing, and in good standing under the laws of the
State of Delaware.
SECTION 6.2 AUTHORIZATION OF TRANSACTIONS. The Purchaser has all
requisite organizational power and authority to execute and deliver the
Transaction Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. The board of directors of the Purchaser has
duly approved the Transaction Documents to which it is a party and has duly
authorized the execution and delivery of the Transaction Documents to which it
is a party and the consummation of the transactions contemplated thereby. No
other limited liability company proceedings on the part of the Purchaser are
necessary to approve and authorize the execution and delivery of the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated thereby. All Transaction Documents to which the Purchaser is a
party have been duly executed and delivered by the Purchaser and constitute the
valid and binding agreements of the Purchaser, enforceable against the Purchaser
in accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and as limited by general principles
of equity that restrict the availability of equitable remedies.
SECTION 6.3 ABSENCE OF CONFLICTS. The execution, delivery, and
performance of the Transaction Documents and the consummation of the
transactions contemplated thereby by the Purchaser do not and shall not (a)
conflict with or result in any breach of any of the terms, conditions, or
provisions of, (b) constitute a material default under, (c) result in a material
violation of, (d) give any third party the right to modify, terminate, or
accelerate any obligation under, or (e) require any authorization, consent,
approval, exemption, or other action by or notice or declaration to, or filing
with, any court or administrative or other governmental body or agency, under
the provisions of the certificate of formation or limited liability company
agreement of the Purchaser or any material indenture, mortgage, lease, loan
agreement, or other material agreement or instrument to which the Purchaser is
bound or affected, or any material law, statute, rule, or regulation to which
the Purchaser is subject or any material judgment, order, or decree to which the
Purchaser is subject.
SECTION 6.4 LITIGATION. There is no claim, action, suit, proceeding or
governmental investigation pending or, to the knowledge of the Purchaser,
threatened against the Purchaser, by or before any court, governmental or
regulatory authority or by any third party which challenges the validity of this
Agreement or which would be reasonably likely to adversely affect, delay or
restrict the Purchaser's ability to consummate the transactions contemplated
hereby.
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SECTION 6.5 INVESTIGATION BY THE PURCHASER. The Purchaser has conducted
its own independent review and analysis of the business, operations, technology,
assets, liabilities, results of operations, financial condition and prospects of
the Acquired Companies and acknowledges that Parent and the Existing Stockholder
have provided the Purchaser with access to the personnel, properties, premises
and records of each of the Acquired Companies for this purpose. In entering into
this Agreement, the Purchaser has relied solely upon the representations,
warranties and other provisions of the Transaction Documents and its own
investigation and analysis, and the Purchaser (a) acknowledges that none of the
Parent, the Existing Stockholder or the Acquired Companies nor any of their
respective directors, officers, employees, Affiliates, controlling Persons,
agents or representatives makes or has made any representation or warranty,
either express or implied, as to the accuracy or completeness of any of the
information provided or made available to the Purchaser or its directors,
officers, employees, Affiliates, controlling Persons, agents or representatives,
and (b) agrees, to the fullest extent permitted by law, that none of the Parent,
the Existing Stockholder or the Acquired Companies nor any of their respective
directors, officers, employees, Affiliates, controlling Persons, agents or
representatives shall have any liability or responsibility whatsoever to the
Purchaser or its directors, officers, employees, Affiliates, controlling
Persons, agents or representatives on any basis (including, without limitation,
in contract or tort, under federal or state securities laws or otherwise) based
upon any information provided or made available, or statements made, to the
Purchaser or its directors, officers, employees, Affiliates, controlling
Persons, agents or representatives (or any omissions therefrom), including,
without limitation, in respect of the specific representations and warranties of
Parent and the Existing Stockholder set forth in this Agreement, except as and
only to the extent expressly set forth in this Agreement.
SECTION 6.6 FINANCING. Attached hereto as Exhibit H are true and
correct copies of the senior and subordinated debt financing commitment letters
(the "Debt Commitment Letters") issued to the Purchaser by (i) Fleet National
Bank, NationsBank, N.A. and DLJ Capital Funding, Inc., and (ii) DLJ Bridge
Finance, Inc., NationsBridge, L.L.C. and Fleet Corporate Finance, Inc. and the
equity financing commitment letters issued to the Purchaser by (i) Madison
Dearborn Capital Partners II, L.P., (ii) Cornerstone Equity Investors IV, L.P.
and (iii) Healthcare Equity Partners, L.P. (together with the Debt Commitment
Letters, the "Debt and Equity Commitment Letters"), respectively, on or about
January 22, 1999 in order to consummate the transactions contemplated hereby,
and to fund the working capital requirements of the Company after the Closing.
The Purchaser acknowledges that the Debt and Equity Commitment Letters have been
delivered by the Purchaser to the Parent and the Existing Stockholder to
materially induce the Parent and the Existing Stockholder to enter into this
Agreement.
SECTION 6.7 XXXX-XXXXX-XXXXXX. Within the meaning of the
Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of 1976, as amended, and the rules
promulgated thereunder (16 C.F.R. Sections 801- 803), the Purchaser is its
own ultimate parent entity, the total assets of the Purchaser are less than
$10,000,000 and the annual net sales of the Purchaser are less than $10,000,000.
SECTION 6.8 BROKERAGE. There are no claims for brokerage commissions,
finders' fees, or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Purchaser.
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SECTION 6.9 INVESTMENT. The Purchaser (a) understands that the
Purchased Securities have not been registered under the Securities Act, or under
any state securities laws, and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public offering,
(b) is acquiring the Purchased Securities solely for its own account for
investment purposes, and not with a view to the distribution thereof, and (c) is
an accredited investor within the meaning of Regulation D promulgated under the
Securities Act; provided that, nothing contained herein shall prevent the
Purchaser or subsequent holder of Restricted Securities from transferring such
securities in compliance with the provisions of Section 9.1.
SECTION 6.10 CLOSING DATE. All of the representations and warranties
contained in this Article VI and elsewhere in this Agreement and all information
delivered in any schedule, attachment, or Exhibit hereto or in any certificate
delivered pursuant this Agreement to the Parent or Existing Stockholder are true
and correct on the date of this Agreement and shall be true and correct on the
Closing Date, except to the extent that the Existing Stockholder has advised the
Purchaser otherwise in writing before the Closing (each, a "Schedule Update").
Each Schedule Update delivered to the Existing Stockholder or the Parent shall
be taken into account in determining whether or not a representation or warranty
has been breached for purposes of any claims for indemnification pursuant to
Section 8.2(c)(i) below, as long as such Schedule Update discloses facts, events
or circumstances which occurred after the date hereof or such Schedule Update
discloses facts, events or circumstances which occurred prior to the date hereof
as to which the Purchaser had no knowledge as of the date hereof. No Schedule
Update shall be taken into account in determining whether or not the conditions
to Closing set forth in Article III above have been satisfied unless the
Existing Stockholder or the Parent has approved such Schedule Update.
ARTICLE VII -- TERMINATION
SECTION 7.1 TERMINATION. This Agreement may be terminated at any time
before the Closing:
(a) by mutual written consent of the Parent and the Purchaser;
(b) by the Purchaser if the representations and warranties set
forth in Article V hereof taken in their entirety are not true and correct in
all material respects on the date made or deemed made; provided that, for
purposes of this Section 7.1(b), those representations and warranties that are
qualified by references to "material" or "Material Adverse Effect" shall be
deemed not to include such qualifications;
(c) by the Parent if the representations and warranties set
forth in Article VI hereof taken in their entirety are not true and correct in
all material respects on the date made or deemed made; provided that, for
purposes of this Section 7.1(c), those representations and warranties that are
qualified by references to "material" shall be deemed not to include such
qualifications;
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(d) by the Purchaser if the Company, the Existing Stockholder
or the Parent shall have failed to perform and comply in all material respects
with all of the covenants and agreements required to be performed by each of
them under this Agreement on or before the Closing;
(e) by the Parent if the Purchaser shall have failed to
perform and comply in all material respects with all of the covenants and
agreements required to be performed by it under this Agreement on or before the
Closing;
(f) by the Parent or the Purchaser if events have occurred
which have made it impossible to satisfy a condition precedent to the
terminating Party's obligations to consummate the transactions contemplated
hereby unless such terminating Party's willful or knowing breach of this
Agreement has caused the condition to be unsatisfied;
(g) by the Parent or the Purchaser if the Parent Board
Approval is not obtained on or before January 27, 1999 unless such terminating
Party's willful or knowing breach of this Agreement has caused such approval to
not be obtained; or
(h) by the Parent or the Purchaser if the Closing has not
occurred on or before March 16, 1999; provided, however, that neither the
Purchaser nor the Existing Stockholder shall be entitled to terminate this
Agreement pursuant to this Section 7.1(h) if such Party's willful or knowing
breach of this Agreement has prevented the consummation of the transactions
contemplated hereby at or before such time.
SECTION 7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Existing Stockholder or the Purchaser as provided in
Section 7.1, this Agreement shall forthwith become void and there shall be no
liability on the part of any Party to any other Party under this Agreement,
except that the provisions of this Section 7.2, Sections 9.2, 9.5 and 9.9 and
Article X (other than Section 10.3) shall continue in full force and effect and
except that nothing herein shall relieve any Party from liability for any breach
of this Agreement before such termination.
ARTICLE VIII -- INDEMNIFICATION AND RELATED MATTERS
SECTION 8.1 SURVIVAL. All representations, warranties, covenants, and
agreements set forth in this Agreement or in any writing or certificate
delivered in connection with this Agreement shall survive the Closing Date and
the consummation of the transactions contemplated hereby and shall not be
affected by any examination made for or on behalf of any Party, the knowledge of
any of such Party's officers, directors, stockholders, employees, or agents, or
the acceptance of any certificate or opinion. Notwithstanding the foregoing, no
Party shall be entitled to recover for any Loss pursuant to Section 8.2(a)(i) or
(iv) or Section 8.2(c)(i) unless written notice of a claim thereof is delivered
to the other Party before the Applicable Limitation Date. For purposes of this
Agreement, the term "Applicable Limitation Date" shall mean the date which is 18
months after the Closing Date; provided that the Applicable Limitation Date with
respect to the following Losses shall be as follows: (i) with respect to any
Loss arising from or related to (A) a breach of the representations and
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warranties of the Existing Stockholder set forth in Section 5.22 (Health Care
Matters), or (B) matters described in Section 8.2(a)(iv), the Applicable
Limitation Date shall be the date which is three years after the Closing Date;
(ii) with respect to any Loss arising from or related to a breach of the
representations and warranties of the Existing Stockholder set forth in Section
5.10 (Taxes) and Section 5.17 (Employee Benefits Matters), the Applicable
Limitation Date shall be the date of expiration of the statute of limitations
applicable to the statute, regulation or other authority which gave rise to such
Loss, and (iii) with respect to any Loss arising from or related to a breach of
the representations and warranties of the Existing Stockholder set forth in
Section 5.1 (Organization and Corporate Power), Section 5.2 (Authorization of
Transactions), Section 5.3 (Absence of Conflicts), Section 5.4 (Capitalization)
or Section 5.14 (Brokerage) and with respect to any Loss arising from or related
to a breach of the representations and warranties of the Purchaser set forth in
Section 6.1 (Organization), Section 6.2 (Authorization of Transactions), Section
6.3 (Absence of Conflicts) or Section 6.7 (Brokerage), there shall be no
Applicable Limitation Date (i.e., such representations and warranties shall
survive forever). The representations and warranties described in clause (iii)
of the preceding sentence are referred to as the "Fundamental Representations
and Warranties."
SECTION 8.2 INDEMNIFICATION.
(a) Indemnification by the Existing Stockholder and the
Parent. The Existing Stockholder and the Parent shall jointly and severally
indemnify the Purchaser and the Acquired Companies, and each of the Purchaser's
and the Acquired Companies' respective officers, directors, stockholders,
employees, agents, representatives, affiliates, successors, and assigns
(collectively, the "Purchaser Parties") and hold each of them harmless from and
against and pay on behalf of or reimburse such Purchaser Parties in respect of
any Loss which any such Purchaser Party may suffer, sustain, or become subject
to, as a result of or relating to:
(i) the breach of any representation or warranty made
by the Company, the Existing Stockholder or the Parent contained in
this Agreement or in any certificate delivered by the Company, the
Existing Stockholder or the Parent with respect thereto in connection
with the Closing (in each case, determined without regard to any
qualifications therein referencing the terms "materiality," "Material
Adverse Effect," or other terms of similar import or effect and, in the
case of Sections 5.22(a), (b) and (c), also, determined without regard
to any qualifications therein referencing the term "knowledge", but
determined with regard to any qualifications therein referencing the
terms "knowingly and willfully");
(ii) the breach of any covenant or agreement made by
Company contained in this Agreement to be performed by the Company
prior to or at the Closing;
(iii) the breach of any covenant or agreement made by
the Existing Stockholder or the Parent contained in this Agreement;
(iv) any claim or audit by any governmental authority
or agent thereof (including, without limitation, any fiscal
intermediary or carrier) or qui tam relator pertaining
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to any healthcare program (including, without limitation, with respect
to xxxxxxxx under Medicare, Medicaid and CHAMPUS), arising out of the
operation of the Acquired Companies on or before the Closing Date;
(v) any matter listed under the heading "General
Litigation" on the Litigation Schedule included in the Disclosure
Letter to the extent not covered by third party insurance;
(vi) any matter listed under the heading "Dollar One
Litigation" on the Litigation Schedule included in the Disclosure
Letter to the extent not covered by third party insurance;
(vii) Medical Malpractice Claims which arise out of
or relate to, or have arisen out of or relate to, events that occur in
connection with the operations of the Acquired Companies on or prior to
the Closing, to the extent not covered by the insurance policies
referenced in Section 9.11 hereof or any other applicable professional
liability insurance policy maintained for the benefit of the Acquired
Companies (collectively, the "Applicable Insurance Policies"); provided
that the indemnity provided in this clause (vii) will not apply to
Medical Malpractice Claims that would have been covered by the
Applicable Insurance Policies, but for (A) the insolvency, bankruptcy
or liquidation of the applicable insurer or any other similar event
which renders the applicable insurer unable or incapable of paying all
or any part of a Loss associated with a Medical Malpractice Claim; (B)
the post-Closing breach of the Applicable Insurance Policy by an
Acquired Company, an Affiliate thereof or an insured (other than the
Parent, the Existing Stockholder or their Affiliates) under such
insurance policy or the failure following the Closing of an Acquired
Company, an Affiliate thereof or an insured (other than the Parent, the
Existing Stockholder or their Affiliates) under such insurance policy
to comply with the applicable covenants and agreements of such
insurance policy; or (C) an express exclusion from coverage or express
limitation on coverage, other than a per occurrence, per doctor or
aggregate limitation set forth in the Applicable Insurance Policy which
places a cap or limit on the liability of the applicable insurance
company for such Medical Malpractice Claim; provided however, that for
purposes of the exclusions from coverage and limitations on coverage
contemplated by this clause (C), the Parties agree that the express
exclusions and limitations (other than per occurrence, per doctor or
aggregate limitations or the endorsement(s) excluding InPhyNet
entities) set forth in the St. Xxxx policy referenced on Exhibit L
hereto shall control and be deemed applicable to all of the Applicable
Insurance Policies for purposes of this clause (C), notwithstanding the
actual limitations and exclusions set forth in such other Applicable
Insurance Policies; or
(viii) any Excluded Liabilities.
The Existing Stockholder and the Parent hereby acknowledge that they and their
Affiliates will have no claims or rights to contribution or indemnity from the
Acquired Companies or their officers and directors with respect to any amounts
paid by any of them pursuant to this Section 8.2(a).
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(b) Limitations on Indemnification by the Existing Stockholder
and the Parent. The indemnification provided for in Section 8.2(a) above is
subject to the following limitations:
(i) The Existing Stockholder and the Parent will be
liable to the Purchaser Parties with respect to claims referred to in
Sections 8.2(a)(i) and (iv) only if a Purchaser Party gives the
Existing Stockholder written notice thereof within the Applicable
Limitation Date.
(ii) The aggregate amount of all payments made by the
Existing Stockholder and the Parent in satisfaction of claims for
indemnification pursuant to Sections 8.2(a)(i), (iv) and (v) shall not
exceed $50,000,000 (the "Cap"); provided, however, that the Cap shall
not apply with respect to any Losses resulting from or relating to
breaches of any Fundamental Representations and Warranties and such
Losses shall not count towards satisfaction of the Cap.
(iii) The Existing Stockholder and the Parent shall
not be liable to indemnify any Purchaser Parties pursuant to Sections
8.2(a)(i), (iv) and (v) unless and until the Purchaser Parties have
collectively suffered Losses by such breaches or pursuant to such
Sections in excess of a $3,700,000 aggregate basket ("Basket") (at
which point, subject to the other limitations herein, the Existing
Stockholder and the Parent will be liable to the Purchaser Parties for
all Losses in excess of such Basket); provided, however, that the
Basket shall not apply with respect to any Losses resulting from or
relating to breaches of any Fundamental Representations and Warranties
and such Losses shall not count towards satisfaction of the Basket.
(iv) The Purchaser Parties shall take all reasonable
steps to mitigate all indemnifiable liabilities and damages upon and
after becoming aware of any event which could reasonably be expected to
give rise to any liabilities or damages that are indemnifiable
hereunder.
(v) If the Existing Stockholder's or the Parent's
indemnification obligation under this Section 8.2 arises in respect of
any indemnifiable event (A) for which a Purchaser Party receives
indemnification from the Existing Stockholder or the Parent and (B)
which results in any Tax benefit to such Purchaser Party for any
taxable period (or portion thereof) beginning and ending after the
Closing Date which would not, but for such indemnifiable event, be
available, such Purchaser Party shall pay, or shall cause to be paid,
to the Existing Stockholder or the Parent an amount equal to the actual
Tax saving produced by such Tax benefit reduced by the amount of any
Tax detriment to such Purchaser Party as a result of the receipt of
such indemnification. Tax benefits and detriments shall be taken into
account as and when actually realized. The amount of any such Tax
saving for any taxable period shall be the amount of the reduction in
Taxes payable to a Tax authority by such Purchaser Party with respect
to such Tax period (net of any Tax detriment resulting from the receipt
of the indemnity payment) as compared to the Taxes that would have been
payable to a Tax
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authority by such Purchaser Party with respect to such Tax period in
the absence of such Tax benefit.
(vi) Any payment made by the Existing Stockholder or
the Parent to a Purchaser Party pursuant to this Section 8.2 in respect
of any indemnifiable event shall be net of any insurance proceeds or
proceeds from indemnification by third parties realized by and paid to
such Purchaser Party or an Acquired Company in respect of such claim.
Such Purchaser Party shall use its reasonable efforts to make insurance
claims relating to any indemnifiable event for which it is seeking
indemnification pursuant to this Section 8.2; provided that such
Purchaser Party shall not be obligated to make such an insurance claim
if the cost of pursuing such an insurance claim together with any
corresponding increase in insurance premiums or other chargebacks to
such Purchaser Party, as the case may be, would exceed the value of the
claim for which such Purchaser Party is seeking indemnification. To the
extent the Acquired Companies are party to agreements (through
assignment in accordance with the provisions of this Agreement, or
otherwise) pursuant to which the Acquired Companies have the right to
indemnification with respect to an indemnifiable event for which a
Purchaser Party is seeking indemnification pursuant to this Section
8.2, the Purchaser Parties shall use their reasonable efforts to make
claims (or cause the Acquired Companies to make claims) against such
third parties for indemnification against such Losses.
(vii) From and after the Closing, the indemnification
rights provided in Section 8.2(a) of this Agreement shall be the sole
and exclusive remedy of the Purchaser Parties with respect to any
dispute arising out of or related to this Agreement or any Loss which
any Purchaser Party may suffer, sustain or become subject to, as a
result of or relating to this Agreement and the transactions
contemplated hereby, except for (A) the right to seek specific
performance of any of the agreements contained herein, and (B) except
in the case where the Company, the Existing Stockholder or the Parent
has defrauded the Purchaser Parties.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Purchaser delivers written notice of a claim to the Existing
Stockholder no later than the Applicable Limitation Date, the Existing
Stockholder shall be required to indemnify the Purchaser Parties for all Losses
(subject to the Basket and Cap limitations) which the Purchaser Parties may
incur in respect of the matters which are the subject of such claim, regardless
of when incurred. Notwithstanding any implication to the contrary contained in
this Agreement, the limits on indemnification set forth in this Agreement shall
not apply to claims for damages arising from fraud.
(c) Indemnification by the Purchaser. The Purchaser shall
indemnify the Parent, the Existing Stockholder and the Company, and hold the
Parent, the Existing Stockholder, the Company, and the Parent's, the Existing
Stockholder's and the Company's respective officers, directors, stockholders,
employees, agents, representatives, affiliates, successors, and assigns
(collectively, the "Seller Parties") harmless from and against and pay on behalf
of or reimburse such
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Seller Parties in respect of any Loss which such Seller Party may suffer,
sustain, or become subject to, as a result of or relating to:
(i) the breach of any representation or warranty made
by the Purchaser contained in this Agreement or in any certificate
delivered by the Purchaser with respect thereto in connection with the
Closing (in each case, determined without regard to any qualifications
therein referencing the terms "materiality," or other terms of similar
import or effect); or
(ii) the breach of any covenant or agreement made by
the Purchaser contained in this Agreement.
(d) Limitations on Indemnification by the Purchaser. The
indemnification provided for in Section 8.2(c) above is subject to the following
limitations:
(i) The Purchaser will be liable to the Seller
Parties with respect to claims referred to in Section 8.2(c)(i) only if
a Existing Stockholder gives the Purchaser written notice thereof
within the Applicable Limitation Date;
(ii) The Seller Parties shall take all reasonable
steps to mitigate all indemnifiable liabilities and damages upon and
after becoming aware of any event which could reasonably be expected to
give rise to any liabilities or damages that are indemnifiable
hereunder.
(iii) Any payment made by the Purchaser to a Seller
Party pursuant to this Section 8.2 in respect of any indemnifiable
event shall be net of any insurance proceeds realized by and paid to
such Seller Party in respect of such claim. Such Seller Party shall use
its reasonable efforts to make insurance claims relating to any
indemnifiable event for which it is seeking indemnification pursuant to
this Section 8.2; provided that such Seller Party shall not be
obligated to make such an insurance claim if such Seller Party in its
reasonable judgment believes the cost of pursuing such an insurance
claim together with any corresponding increase in insurance premiums or
other chargebacks to such Seller Party, as the case may be, would
exceed the value of the claim for which such Seller Party is seeking
indemnification.
(iv) From and after the Closing, the indemnification
rights provided in Section 8.2(c) of this Agreement shall be the sole
and exclusive remedy of the Seller Parties with respect to any dispute
arising out of or related to this Agreement or any Loss which any
Seller Party may suffer, sustain or become subject to, as a result of
or relating to this Agreement and the transactions contemplated hereby,
except for (A) the right to seek specific performance of any of the
agreements contained herein, and (B) except in the case where the
Purchaser has defrauded the Seller Parties.
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Notwithstanding any implication to the contrary contained in this Agreement, so
long as the Existing Stockholder delivers written notice of a claim to the
Purchaser no later than the Applicable Limitation Date, the Purchaser shall be
required to indemnify the Seller Parties for all Losses which the Seller Parties
may incur in respect of the matters which are the subject of such claim,
regardless of when incurred. Notwithstanding any implication to the contrary
contained in this Agreement, the limits on indemnification set forth in this
Agreement shall not apply to claims for damages arising from fraud.
In the event a Purchaser Party has a claim for indemnification pursuant to
Section 8.2(a) for which (A)(i) the Parent agrees in writing that the Purchaser
Party is entitled to indemnification or (ii) a final non-appealable order of a
court of competent jurisdiction is rendered in favor of the Purchaser Party and
(B) the Parent has failed to satisfy such claim in full within ten business days
of notice of the issuance of such final, non-appealable court order or the date
of the written agreement with respect thereto, then the Company may, at its
option, cause the Parent and Existing Stockholder to satisfy such
indemnification obligation by canceling a number of shares of Preferred Stock
held by the Existing Stockholder having a liquidation value (plus accrued and
unpaid dividends thereon) equal to the indemnification obligation. In the event
of a cancellation of shares of Preferred Stock in accordance with this
paragraph, then from and after such time, the Existing Stockholder shall no
longer have any rights as a holder of such shares, and such shares shall be
deemed cancelled in accordance with the applicable provisions hereof, whether or
not the certificates therefor have been delivered to the Company. The
certificates representing the Existing Stockholder's Preferred Stock will bear
the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN CANCELLATION OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH
IN A RECAPITALIZATION AGREEMENT, DATED AS OF JANUARY 25, 1999, AS AMENDED AND
MODIFIED FROM TIME TO TIME, BY AND AMONG THE ISSUER AND CERTAIN INVESTORS. A
COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE ISSUER'S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." This paragraph is not intended to
create a security interest within the meaning of the Uniform Commercial Code or
other preference or encumbrance but rather is intended to cancel all or a
portion of the Preferred Stock retained by the Existing Stockholder under the
specific circumstances described in this paragraph.
(e) Indemnification by the Company. The Company shall
indemnify the Purchaser Parties and the Seller Parties and hold each of them
harmless from and against and pay on behalf of or reimburse such Purchaser
Parties and Seller Parties in respect of any Loss which any such Purchaser Party
or Seller Party may suffer, sustain, or become subject to, as a result of or
relating to the breach of any covenant or agreement made by the Company
contained in this Agreement to be performed by the Company after the Closing.
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(f) Procedures.
(i) If a party hereto seeks indemnification under
this Article VIII (including any indemnification for Taxes pursuant to
Section 8.3), such party (the "Indemnified Party") shall promptly give
written notice to the other party (the "Indemnifying Party") after
receiving written notice of any action, lawsuit, proceeding,
investigation, or other claim against it (if by a third party) or
discovering the liability, obligation, or facts giving rise to such
claim for indemnification, describing the claim, the amount thereof (if
known and quantifiable), and the basis thereof; provided that the
failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent
such failure shall have prejudiced the Indemnifying Party. In that
regard, if any action, lawsuit, proceeding, investigation, or other
claim shall be brought or asserted by any third party which, if
adversely determined, would entitle the Indemnified Party to indemnity
pursuant to this Article VIII, the Indemnified Party shall promptly
notify the Indemnifying Party of the same in writing, specifying in
detail the basis of such claim and the facts pertaining thereto and the
Indemnifying Party shall be entitled to participate in the defense of
such action, lawsuit, proceeding, investigation, or other claim giving
rise to the Indemnified Party's claim for indemnification at its
expense, and at its option (subject to the exceptions in paragraphs
(ii) and (iii) below) shall be entitled to control and appoint lead
counsel of such defense with reputable counsel reasonably acceptable to
the Indemnified Party; provided that, as a condition precedent to the
Indemnifying Party's right to assume control of such defense, it must
first agree in writing to be fully responsible for all Losses relating
to such claims and to provide full indemnification to the Indemnified
Party for all Losses relating to such claims subject to the terms
hereof.
(ii) Except as provided in paragraph (iii) below, if
the claim which the Indemnifying Party seeks to assume control (A)
involves claims for non-monetary relief (except where non-monetary
relief is merely incidental to a primary claim or claims for monetary
damages), (B) involves criminal allegations, (C) is one in which the
Indemnifying Party is also a party and joint representation would be
inappropriate or there may be legal defenses available to the
Indemnified Party which are different from or additional to those
available to the Indemnifying Party; or (D) involves a claim which,
upon petition by the Indemnified Party, the appropriate court rules
that the Indemnifying Party failed or is failing to vigorously
prosecute or defend, then the Indemnifying Party shall not have the
right to assume control of such defense and shall pay the fees and
expenses of counsel retained by the Indemnified Party.
(iii) If the claim which the Indemnifying Party seeks
to assume control (i) involves claims for both monetary and
non-monetary relief (except where non-monetary relief is merely
incidental to a primary claim or claims for monetary damages), or (ii)
involves both monetary claims and criminal allegations (each, a "Joint
Defense Proceeding"), the Indemnifying Party and the Indemnified Party
will jointly participate in and control the defense of such Joint
Defense Proceeding, and the Indemnifying Party will pay the
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reasonable fees and expenses of legal counsel jointly retained by the
Indemnifying Party and the Indemnified Party in connection with such
Joint Defense Proceeding.
If the Indemnifying Party is permitted to assume and control
the defense and elects to do so, the Indemnified Party shall have the right to
employ counsel separate from counsel employed by the Indemnifying Party in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel employed by the Indemnified Party shall be at the expense of the
Indemnified Party unless the employment thereof has been specifically authorized
by the Indemnifying Party in writing.
If the Indemnifying Party shall control the defense of any
such claim, the Indemnifying Party shall obtain the prior written consent of the
Indemnified Party (which shall not be unreasonably withheld) before entering
into any settlement of a claim or ceasing to defend such claim, if pursuant to
or as a result of such settlement or cessation, injunction, or other equitable
relief will be imposed against the Indemnified Party or any of the Indemnified
Party's respective affiliates or if such settlement does not expressly
unconditionally release the Indemnified Party from all liabilities and
obligations with respect to such claim.
If the Indemnified Party shall control the defense of any such
claim, the Indemnifying Party shall not be bound by any settlement or compromise
of such claim or any consent to the entry of any judgment with respect to such
claim without the prior written consent of the Indemnifying Party (which shall
not be unreasonably withheld).
With reference to the indemnification by the Parent and the
Existing Stockholder pursuant to Section 8.2(a)(vii) hereof, the parties agree
as follows:
(i) The Acquired Companies shall have the
responsibility for timely reporting of all Medical Malpractice Claims
to the appropriate insurance carrier, and/or state fund, based on a
schedule of insurance and state funds to be provided by the Parent. Any
Medical Malpractice Claim received by the Parent or any of its
Affiliates (other than an Acquired Company) will be promptly
transmitted to the Company's designated claims manager.
(ii) The Company will provide the Parent with copies
of any notification received by any insurance carrier, and/or state
fund, stating any of the following: (i) that a particular case has the
potential to exceed the applicable policy limit; or (ii) that there is
a reservation of rights or declination of coverage. In the event of
such notification, and at the request of the Parent, the Company will
provide the Parent with copies of the claim files of the Acquired
Companies and any other relevant information reasonably available. Upon
request, the Company will assist the Parent in taking reasonable steps
to protect the interests of the Parent and, with respect to excess
policy limit losses, to exercise reasonable efforts to cause the
carrier to settle such claim, if appropriate, within the policy limit.
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(g) Tax Treatment. Amounts paid to or on behalf of the
Existing Stockholder or the Company as indemnification shall be treated as
adjustments to the Redemption Consideration for Tax purposes.
SECTION 8.3 CERTAIN TAX MATTERS.
(a) Certain Definitions. As used in this Agreement:
"Purchaser Tax Group" means the Affiliated Group of which the Purchaser is the
common parent.
"Pre-Closing Period" means any taxable period, including that portion of any
Straddle Period, which ends on or before the Closing Date.
"Seller Group" means the Affiliated Group of which the Parent is the common
parent.
"Straddle Period" means any taxable period that includes (but does not end on)
the Closing Date.
(b) Section 338(h)(10) Elections. The Existing Stockholder
will join with Purchaser in making a timely election under Section 338(h)(10) of
the Code, and any applicable corresponding or similar provisions of state or
local law (the "Section 338(h)(10) Election") to treat the transaction hereunder
as the deemed sale of the assets of the Acquired Companies which are members of
the Seller Group (the "Consolidated Subsidiaries"), for federal and state income
tax purposes. The Existing Stockholder and the Purchaser shall jointly prepare
Internal Revenue Service Form 8023 with respect to the Consolidated
Subsidiaries, and such other forms and schedules as are necessary or required to
make the Section 338(h)(10) Election, and the Existing Stockholder and the
Purchaser shall execute such Form 8023, and shall take all such other acts as
are necessary to make or perfect such Section 338(h)(10) Election. The Existing
Stockholder and the Purchaser will use their reasonable best efforts to agree on
the allocation of the "MADSP" among the assets of the Consolidated Subsidiaries
pursuant to the applicable Treasury Regulations under Section 338 of the Code
(the "Allocation") and will use the Allocation in reporting the deemed purchase
and sale of the assets of the Consolidated Subsidiaries for federal and state
income tax purposes. If the parties are unable to agree upon the Allocation
within 90 days before the due date of filing any Tax Return for which the
Allocation is relevant, the Allocation shall be made by the Firm.
(c) Return Filing, Refunds, Credits and Transfer Taxes.
(i) Except with regard to Tax Returns for Straddle
Periods, the Parent shall prepare, or cause to be prepared, and file,
or cause to be filed, on a timely basis all Tax Returns of or including
each Consolidated Subsidiary for all Pre-Closing Periods (the
"Pre-Closing Period Returns"). The Parent shall pay, or cause to be
paid, all Taxes shown to be due on the Pre-Closing Period Returns.
(ii) The Company shall prepare, or cause to be
prepared, and shall file, or cause to be filed, on a timely basis all
Tax Returns other than the Pre-Closing Period Returns
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with respect to each Consolidated Subsidiary, including Tax Returns, if
any, for the Straddle Period (the "Straddle Period Returns"). The
Company shall pay, or cause to be paid, all Taxes shown to be due on
such Tax Returns.
(iii) The Company shall provide the Parent with
copies of any Straddle Period Returns at least 30 days prior to the due
date thereof (giving effect to any extensions thereto), accompanied by
a statement calculating in reasonable detail the Parent's
indemnification obligation pursuant to Section 8.3(e) hereof (the
"Indemnification Statement"). The Parent shall have the right to review
such Straddle Period Returns and Indemnification Statement prior to the
filing of such Straddle Period Returns. If the Parent disputes any
amounts shown due on such Tax Returns or the amount calculated in the
Indemnification Statement, the Parent and the Company shall consult and
resolve in good faith any issues arising as a result of the review of
such Straddle Period Return and Indemnification Statement. If the
Parent agrees to the Indemnification Statement amount, the Parent shall
pay to the Company an amount equal to the Taxes shown on the
Indemnification Statement less any amounts paid by the Parent or any
Consolidated Subsidiary on or before the Closing Date with respect to
estimated taxes thereto not later than three days before the due date
(including any extensions thereof) for payment of Taxes with respect to
such Straddle Period Return. If the Parties are unable to resolve any
dispute within 15 days after the Parent's receipt of such Straddle
Period Return and Indemnification Statement, such dispute shall be
resolved by the Firm, which shall resolve any issue in dispute as
promptly as practicable. If the Firm is unable to make a determination
with respect to any disputed issue prior to the due date (including any
extensions) for the filing of the Straddle Period Return in question,
(A) the Company shall file, or shall cause to be filed, such Straddle
Period Return without such determination having been made and (B) the
Parent shall pay to the Company, not later than three days before the
due date (including any extensions thereof) for the payment of Taxes
with respect to such Straddle Period Return, an amount determined by
the Parent as the proper amount chargeable to the Parent pursuant to
this Section 8.3. Upon delivery to the Parent and the Company by the
Firm of its determination, appropriate adjustments shall be made to the
amount paid by the Parent in accordance with the immediately preceding
sentence in order to reflect the decision of the Firm. The
determination by the Firm shall be final, conclusive and binding on the
parties.
(iv) The Parent and the Company shall reasonably
cooperate, and shall cause their respective Affiliates, officers,
employees, agents, auditors and representatives reasonably to
cooperate, in preparing and filing all Tax Returns (including amended
returns and claims for refund), including maintaining and making
available to each other all records necessary in connection with Taxes
and in resolving all disputes and audits with respect to all taxable
periods relating to Taxes. The Company and the Parent recognize that
the Parent will need access, from time to time, after the Closing Date,
to certain accounting and tax records and information held by each
Consolidated Subsidiary to the extent such records and information
pertain to events occurring prior to the Closing Date; therefore, the
Company agrees that from and after the Closing Date the Company shall,
and shall cause each other Consolidated Subsidiary to, (A) retain and
maintain such records until such time as the
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Parent determines that such retention and maintenance is no longer
necessary and (B) allow the Parent and its agents and representatives
(and agents and representatives of its Affiliates) to inspect, review
and make copies of such records as the Parent may deem necessary or
appropriate from time to time. The Company shall indemnify Parent from
and against any penalties, additions to tax or interest imposed on
Parent as a result of any failure of the Company to provide records or
other information regarding Taxes with respect to the Company or any
Consolidated Subsidiary in a timely manner.
(v) The Company shall not, and shall cause each other
Consolidated Subsidiary not to, dispose of or destroy any of the
business records and files of such Consolidated Subsidiary relating to
Taxes in existence on the Closing Date without first offering to turn
over possession thereof to the Parent by written notice to the Parent
at least 30 days prior to the proposed date of such disposition or
destruction.
(vi) Any refunds and credits of Taxes of any
Consolidated Subsidiary or similar benefit (including any interest or
similar benefit) received from or credited thereon by the applicable
tax authority (a "Tax Benefit") with respect to (A) any taxable period
ending on or before the Closing Date or (B) Taxes for which the Parent
has indemnified the Company under this Agreement, shall be for the
account of the Parent, and if received or utilized by the Company or
another Consolidated Subsidiary, shall be paid to the Parent within
five business days after the Company or such other Consolidated
Subsidiary receives such refund or utilizes such credit. Except as
provided in the next sentence, any refunds or credits of any
Consolidated Subsidiary with respect to any Straddle Period shall be
apportioned between the Parent, on the one hand, and the Company, on
the other hand, on the basis of an interim closing of the books. In the
case of a refund or credit attributable to any Taxes that are imposed
on a periodic basis and are attributable to the Straddle Period, other
than Taxes based upon or related to gross or net income or receipts,
the refund or credit of such Taxes of a Consolidated Subsidiary for the
Pre-Closing Period shall be deemed to be the amount of such refund or
credit for the Straddle Period multiplied by a fraction the numerator
of which is the number of days in the Straddle Period ending on the
Closing Date and the denominator of which is the number of days in the
Straddle Period. Any Tax Benefit not described in clauses (A) or (B) of
the first sentence of this Section 8.3(c)(vi) shall be for the account
of the Company only.
(vii) Notwithstanding any other provisions of this
Agreement to the contrary, all sales, use, transfer, gains, stamp,
duties, recording and similar Taxes incurred in connection with the
transactions contemplated by this Agreement shall be split equally
between the Company and the Existing Stockholder, and the Company
shall, at its own expense, accurately file or cause to be filed all
necessary Tax Returns and other documentation with respect to such
Taxes. If required by applicable law, the Existing Stockholder will
join in the execution of any such Tax Returns or such other
documentation.
(d) Elections. The Company shall not, and shall cause each
other Consolidated Subsidiary not to, make, amend or revoke any Tax election if
such action would adversely affect the
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Parent or any Person (other than a Consolidated Subsidiary) as to whom or with
whom the Parent has filed a consolidated return with respect to any taxable
period ending on or before the Closing Date or for the Pre-Closing Period or any
Tax refund with respect thereto.
(e) Tax Indemnification.
(i) The Company shall indemnify, defend and hold
harmless the Parent and its Affiliates, at any time after the Closing,
from and against any liability for Taxes of the Company or any other
Consolidated Subsidiary for any taxable period ending after the Closing
Date except for Straddle Periods, in which case the Company's indemnity
will cover only that portion of any such Taxes that is not attributable
to the Pre-Closing Period.
(ii) The Parent shall indemnify, defend and hold
harmless the Acquired Companies and their Affiliates, at any time after
the Closing, from and against any liability for (i) Taxes of any
Acquired Company, except as provided in Section 8.3(c)(vii) hereof, for
the Pre-Closing Period (including the portion of any Straddle Period
ending on the Closing Date) and (ii) Taxes imposed pursuant to Treasury
Regulation Section 1.1502-6 with respect to the taxable income of any
member of the Seller Group (other than the Consolidated Subsidiaries)
for any taxable period.
(iii) In determining the responsibility of the Parent
and the Company for Taxes attributable to any Straddle Period, Taxes
based upon or related to gross or net income or receipts shall be
apportioned on the basis of an interim closing of the books as of the
Closing Date, and all other Taxes shall be prorated on a daily basis.
SECTION 8.4 EMPLOYEES; EMPLOYEE BENEFITS.
(a) For the six month period following the Closing, the
Company shall cause each Acquired Company to provide each individual who is
actively employed by such Acquired Company on the Closing Date (each, an
"Employee") with salary, bonuses and benefits that are substantially comparable
in the aggregate to the salary, bonuses and benefits provided to each such
Employee immediately prior to the Closing (excluding special retention and other
similar bonuses paid or payable with respect to the year 1998 or in connection
with the transactions contemplated hereby), provided that no Person, in
providing such substantially comparable salary, bonuses and benefits, shall be
required to continue to employ any such Employee during such six-month period or
to provide or maintain any particular plan or benefit which was provided to or
maintained for Employees prior to the Closing. The Acquired Companies shall
treat all pre-Closing service completed by an Employee with any Acquired Company
or any Affiliate thereof, and any predecessor thereto, the same as post-Closing
service completed with such Acquired Company for vesting and eligibility
purposes, including waiting periods relating to preexisting conditions under
medical plans, vacations, severance pay, early retirement or any subsidized
benefit provided for under any employee benefit plan (including, but not limited
to, any "employee benefit plan" as defined in Section 3(3) of ERISA) maintained
by the Company on or after the Closing Date. Prior to the Closing, the Existing
Stockholder shall furnish the Purchaser with a list of the length of
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service with each Acquired Company or its Affiliates for each of the Employees.
For purposes of computing deductible amounts (or like adjustments or limitations
on coverage) under any employee welfare benefit plan (including, without
limitation, any "employee welfare benefit plan" as defined in Section 3(1) of
ERISA), expenses and claims previously recognized for similar purposes under the
applicable welfare benefit plan of any Acquired Company or any Affiliate shall
be credited or recognized under the comparable plan maintained after the Closing
Date by the Acquired Companies.
(b) After the Closing Date, the Company shall be responsible
for, and shall indemnify and hold harmless Parent, the Existing Stockholder and
their Affiliates and their officers, directors, employees, Affiliates and agents
and the fiduciaries (including plan administrators) of the Plans, from and
against, any and all claims, losses, damages, costs and expenses (including,
without limitation, attorneys' fees and expenses) and other liabilities and
obligations relating to or arising out of (i) all salaries, bonuses,
commissions, vacation entitlements and other benefits accrued but unpaid as of
the Closing and taken into account in determining the Net Working Capital
Amount, (ii) the employee benefit liabilities assumed by the Company under this
Agreement, and (iii) any claims of, or damages or penalties sought by, any
Employee, or any governmental entity on behalf of or concerning any Employee,
with respect to any act or failure to act by the Company or any Acquired Company
after the Closing Date to the extent arising from the employment, discharge,
layoff or termination of any Employee. The foregoing notwithstanding, nothing in
this Section 8.4(b) shall be deemed to limit the responsibility of the Existing
Stockholder or the Parent for the representations and warranties of the Existing
Stockholder set forth in Article V hereof or the indemnification of the
Purchaser Parties with respect thereto in accordance with Section 8.2 hereof.
(c) The Company shall, for a period of six months following
the Closing Date, operate the Acquired Companies in compliance with the Worker
Adjustment Retraining and Notification Act, 29 U.S.C. Section 2101 et. seq. (the
"WARN Act") and any other applicable similar state or local law concerning plant
closings. In the event the Company's actions should trigger any notice
requirement under the WARN Act or any other applicable similar state or local
law concerning plant closings during the 90 days following the Closing Date, the
Company shall be solely responsible for providing appropriate notice under such
plant closing law. The Company shall indemnify the Parent and the Existing
Stockholder for any claims, losses, damages, costs or expenses arising out of
the Company's failure to provide proper notice pursuant to the WARN Act or other
law regarding plant closings or otherwise comply with the WARN Act or such other
laws regarding plant closings.
(d) During the period commencing on the Closing Date and
ending on the date the Acquired Companies reasonably can arrange for health,
dental, short-term disability, long-term disability, life, accidental death and
dismemberment and business travel accident insurance independent of the
insurance provided to the employees of the Acquired Companies under the
MedPartners, Inc. Health and Welfare Benefits Plan (the "Parent Health Plan")
immediately prior to the Closing Date (but in no event later than September 30,
1999) (the "Welfare Benefit Transition Period"), the Parent shall permit the
employees of the Acquired Companies (and their covered dependents), including
those employees (and their covered dependents) who become eligible for such
insurance during the Welfare Benefit Transition Period, to participate in the
health, dental,
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short-term disability, long-term disability, life, accidental death and
dismemberment and business travel accident insurance in which employees of the
Acquired Companies participated immediately prior to the Closing Date; provided
(i) the Acquired Companies shall pay all costs associated with the provision of
such insurance (to the extent not paid for by employees of the Acquired
Companies), including any incidental administrative costs incurred by the Parent
and its Subsidiaries and any reasonable costs incurred as a result of any
changes in the form of payroll data which is provided by the Acquired Companies
to the plan administrators; (ii) the Acquired Companies shall promptly provide
all data the Parent requests with respect to the participation of such persons
in such insurance and (iii) the Acquired Companies shall comply with all notice
requirements associated with the provision of such insurance, including any
notice requirements imposed by third party administrators in connection with
payroll data. The Parent agrees to use reasonable best efforts to cooperate with
the Company to provide it with comprehensive health claims data with respect to
the Acquired Companies, and the Company agrees to reimburse the Parent for all
reasonable out-of-pocket expenses incurred by the Parent in providing such data.
Parent shall exercise reasonable efforts prior to the Closing Date to obtain the
consents of the Parent's applicable insurance providers to such Welfare Benefit
Transition Period insurance. The sole role of the Parent in permitting the
employees of the Acquired Companies (and their covered dependents) to
participate in such insurance subsequent to the Closing Date shall be to
facilitate the transition of health, dental, short-term disability, long-term
disability, life, accidental death and dismemberment and business travel
accident insurance coverage for such individuals and the Parent shall not be
deemed a plan fiduciary in such role, except as required under applicable law.
As provided under the Parent Health Plan, health and dental insurance coverage
will be provided based on covered expenses incurred prior to the end of the
Welfare Benefit Transition Period, and short-term disability, long-term
disability, life, accidental death and dismemberment and business travel
accident insurance coverage will be provided based on covered claims incurred
prior to the end of the Welfare Benefit Transition Period. The Acquired
Companies shall jointly and severally indemnify and hold harmless Parent and its
Subsidiaries from all liabilities, other than liabilities arising due to
Parent's or its Subsidiaries' gross negligence or willful misconduct, arising in
connection with the provision of, or the failure to provide, such insurance and
the benefits covered under such insurance by the Parent's applicable insurance
providers. Nothing in this paragraph (d) shall preclude amendment of the Parent
Health Plan in any manner after the Closing Date, to the extent permitted by the
Parent Health Plan, except where such amendment would cut-back the coverages of
employees of the Acquired Companies on a basis which is inconsistent with that
applicable to Parent's employees.
(e) COBRA. Any individual who is receiving or is otherwise
entitled to elect to receive medical continuation coverage under Parent's Health
Plan pursuant to Section 4980B of the Code as of Closing Date shall continue to
be eligible to participate under such plan, in accordance with Section 4980B of
the Code, and the Acquired Companies shall have no obligation or liability to
provide continuation coverage with respect to such individuals.
(f) 401(k) Retirement Plans. During the period from the
Closing Date until the date that the Acquired Companies reasonably arrange for
participation in a Company-sponsored 401(k) plan (the "Company 401(k) Plan") by
employees of the Acquired Companies, but in no event later than September 30,
1999 (the "Retirement Benefit Transition Period"), the Parent shall permit
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and shall cause its Subsidiaries to permit the employees of Acquired Companies
who participated in the Pacific Physician Services Profit Sharing and Retirement
Plan or the InPhyNet Administrative Services, Inc. 401(k) Retirement Plan (the
"Parent's 401(k) Plans") immediately prior to the Closing Date, as well as other
employees of the Acquired Companies who become eligible during the Retirement
Benefit Transition Period, to participate under the Parent's 401(k) Plans during
the Retirement Benefit Transition Period. The Acquired Companies shall reimburse
Parent and its Subsidiaries for the reasonable cost (internal and external) of
the provision and administration of benefits under the Parent's 401(k) Plans for
the current and former employees of the Acquired Companies during the Retirement
Benefit Transition Period. For purposes of participation in the Parent's 401(k)
Plans, the Acquired Companies shall adopt the Parent's 401(k) Plans. The Company
401(k) Plan shall recognize service credited under Parent's 401(k) Plans for all
purposes, including vesting. As soon as practicable after the last day of the
Retirement Benefit Transition Period, the Acquired Companies' current and former
employees' vested and nonvested account balances (including earnings through the
date of transfer) under the Parent's 401(k) Plans shall be transferred to one or
more tax-qualified defined contribution plans specified by the Company, in
accordance with the requirements of Code Section 414(l) and Title I of ERISA.
(g) Workers' Compensation. Except as set forth as in Section
8.4(j), Parent shall retain all liability and obligation with respect to
workers' compensation claims (filed before, on or after the Closing Date)
relating to injuries incurred prior to the Closing Date, except for those claims
relating to occupational illnesses and diseases that occur over a period of time
which have accident dates that transcend the Closing Date, in which case
proportional liability shall be determined by the Parent's and the Company's
respective insurance carriers and third party administrators.
(h) Flexible Spending Account Plans. On or prior to the
Closing Date, the Company shall adopt, or cause its Subsidiaries to adopt, a
health-care and dependent-care reimbursement account plan for the benefit of
current employees of the Acquired Companies who participate in the health-care
and dependent-care reimbursement accounts under the Parent Health Plan. On or
prior to the Closing Date, the Parent shall spinoff, or shall cause its
Subsidiaries to spinoff, the health-care and dependent-care reimbursement
account balances held under the Parent Health Plan for employees of the Acquired
Companies for 1999 and shall transfer, in cash, the related assets (and
liabilities) and recordkeeping information to the Company. The Company
thereafter shall have all liability and obligation with respect to reimbursement
of such employees under such accounts with respect to eligible health-care and
dependent-care expenses incurred in 1999; provided, that, the Parent shall, at
its option, act as a third party administrator with respect to such accounts
during the Welfare Benefit Transition Period.
(i) Special Bonus Plan. Subject to any deferred compensation
arrangements agreed to in writing between the Company and any of the senior
managers of the Company identified on Exhibit K attached hereto (the "Bonus
Participants"), at the Closing the Company shall make the special bonus payments
to the Bonus Participants in the amounts identified on Exhibit K attached
hereto, and such special bonuses shall not be taken into account as deductions
in determining the Net Working Capital Amount and shall not constitute
Indebtedness for purposes of this Agreement. The Company shall at the Closing
assume and shall thereafter discharge and pay in full any and all
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liabilities of the Parent and its Affiliates (other than the Acquired Companies)
with respect to such deferred compensation arrangements for the Bonus
Participants.
(j) Self-funded InPhyNet Coverages. The Acquired Companies
shall be responsible for all liabilities and obligations relating to (i)
self-funded medical claims incurred prior to the Closing Date by current or
former employees of InPhyNet Medical Management Inc. and its Subsidiaries which
relate to the Team Health division (or their covered dependents) and (ii)
self-funded workers' compensation claims with respect to injuries incurred prior
to July 1, 1997 by current or former employees of InPhyNet Medical Management
Inc. and its Subsidiaries which relate to the Team Health division. The Parent
shall be responsible for all liabilities and obligations relating to (i)
self-funded medical claims incurred prior to the Closing Date by current or
former employees of InPhyNet Medical Management Inc. and its Subsidiaries which
relate to the government services or managed healthcare divisions (or their
covered dependents) and (ii) self-funded workers' compensation claims with
respect to injuries incurred prior to July 1, 1997 by current or former
employees of InPhyNet Medical Management Inc. and its Subsidiaries which relate
to the government services or managed healthcare divisions.
(k) MedStock Plan. The Parent shall, on a timely basis,
reimburse any amounts due to employees of the Acquired Companies in accordance
with the terms of the MedStock Plan.
(l) The Parent and the Company shall act in good faith and
cooperate, and shall cause their Subsidiaries to act in good faith and
cooperate, to timely and efficiently effect the actions and transaction
contemplated by this Section 8.4, including any government filings necessary to
effect the transfer of assets and liabilities contemplated by this Section 8.4,
and the Parent and its Subsidiaries shall provide such information as is
reasonably requested by the Company, including, without limitation, participant
claim histories, for the purposes of putting replacement plans and coverages
into effect.
ARTICLE IX -- ADDITIONAL AGREEMENTS
SECTION 9.1 LEGEND FOR THE RESTRICTED SECURITIES.
(a) Restricted Securities are transferable only pursuant to
(i) public offerings registered under the Securities Act, (ii) Rule 144 or Rule
144A of the Securities and Exchange Commission (or any similar rule or rules
then in force) if such rule is available and (iii) subject to the conditions
specified in Section 9.1(b) below, any other legally available means of
transfer.
(b) In connection with the transfer of any Restricted
Securities (other than a transfer described in clauses (i) or (ii) of Section
9.1(a) above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of counsel which (to the reasonable satisfaction of the Company) is
knowledgeable in securities law matters to the effect that such transfer of
Restricted Securities may be effected without registration of such Restricted
Securities under the Securities Act. In addition, if the holder of the
Restricted Securities delivers to the Company an opinion of counsel that no
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subsequent transfer of such Restricted Securities shall require registration
under the Securities Act, the Company shall promptly upon such contemplated
transfer deliver new certificates for such Restricted Securities which do not
bear the Securities Act legend set forth in Section 9.1(d). If the Company is
not required to deliver new certificates for such Restricted Securities not
bearing such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing its agreement to
be bound by the conditions contained in this Section 9.1(b) and Section 9.1(d)
below.
(c) If any Restricted Securities become eligible for sale
pursuant to Rule 144(k), the Company shall, upon the request of the holder of
such Restricted Securities, remove the legend set forth in Section 9.1(d) below
from the certificates for such Restricted Securities.
(d) Each certificate or instrument representing Restricted
Securities shall be imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE
SECURITIES LAWS. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE
RECAPITALIZATION AGREEMENT, DATED AS OF JANUARY 25, 1999, AS AMENDED
AND MODIFIED FROM TIME TO TIME, BY AND AMONG THE ISSUER AND CERTAIN
INVESTORS, AND THE ISSUER RESERVES THE RIGHT TO REFUSE THE TRANSFER OF
SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT
TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE
ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE."
SECTION 9.2 PRESS RELEASES AND ANNOUNCEMENTS. Before the Closing Date,
no press releases related to this Agreement and the transactions contemplated
herein, or other announcements to the employees, customers, or suppliers of any
Acquired Company shall be issued by any Party without the mutual approval of all
Parties, except for any public disclosure which any Party in good faith believes
is required by law or regulation (in which case the disclosure shall be prepared
jointly by the Existing Stockholder and the Purchaser). After the Closing Date,
no press releases related to this Agreement and the transactions contemplated
herein, or other announcements to the employees, customers, or suppliers of any
Acquired Company shall be issued by the Parent or the Existing Stockholder
without the prior approval of the Purchaser, except for any public disclosure
which the Parent or the Existing Stockholder in good faith believes is required
by law or regulation (in which case the disclosure shall be prepared jointly by
the Existing Stockholder and the Purchaser); provided that after the Closing
Date, the Parent shall be permitted to make customary disclosures pursuant to
documents filed with the Securities and Exchange Commission.
SECTION 9.3 FURTHER TRANSFERS. Each Party shall execute and deliver
such further instruments of conveyance and transfer and take such additional
action as any other Party may
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reasonably request to effect, consummate, confirm, or evidence the consummation
of the transactions contemplated hereby.
SECTION 9.4 SPECIFIC PERFORMANCE. The Parties hereto acknowledge and
agree that in the event of a breach of this Agreement, money damages may be
inadequate and the non-breaching party may have no adequate remedy at law.
Accordingly, the Parties agree that each Party shall have the right, in addition
to any other rights and remedies existing in its favor, to enforce its rights
and the other Party's obligations hereunder not only by an action or actions for
damages but also by an action or actions for specific performance, injunctive,
and/or other equitable relief.
SECTION 9.5 EXPENSES. The Parties shall pay all of their own fees,
costs, and expenses (including, without limitation, fees, costs and expenses of
legal counsel, investment bankers, brokers, or other representatives and
consultants and appraisal fees, costs, and expenses) incurred in connection with
the negotiation of this Agreement and the other agreements contemplated hereby,
the performance of its obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby and thereby (collectively,
the "Transaction Expenses"); it being understood that if the transactions
contemplated hereby are consummated, the Company shall reimburse the Purchaser
and its investors for all of their Transaction Expenses. At the request of the
Existing Stockholder, the Transaction Expenses for which the Existing
Stockholder and the Parent are liable pursuant to this Section 9.5 may be
deducted from the Redemption Consideration and paid directly to the Existing
Stockholder's and Parent's legal counsel, investment bankers and other agents
and representatives. To the extent that any Acquired Company pays or becomes
liable with respect to any Transaction Expenses of the Parent, the Existing
Stockholder or any Acquired Company and such Transaction Expenses are not
otherwise taken into account as deductions in determining the Net Working
Capital Amount, the Redemption Consideration shall be reduced dollar-for-dollar;
provided that there shall be no such reduction to the Redemption Consideration
for legal fees and expenses to counsel for the Senior Managers in connection
with the negotiation and execution of the Senior Management Agreements.
SECTION 9.6 EXCLUSIVITY. Until this Agreement is terminated by its
terms, no Seller Party shall (and no Seller Party shall cause or permit any
Insider or agent or any other Person acting on its behalf to), discuss or
negotiate with any other Person a possible sale of all or part of any Acquired
Company's securities or assets (except for dispositions of assets in the
Ordinary Course of Business), whether such transaction takes the form of a sale
of stock, merger, liquidation, dissolution, reorganization, recapitalization,
consolidation, sale of assets or otherwise (an "Acquisition Proposal"), or
provide any information to any other Person concerning any Acquired Company
(other than information which the Acquired Companies provide to other Persons in
the Ordinary Course of Business). The Seller Parties and their agents and other
Persons acting on their behalf (a) do not have any agreement, arrangement or
understanding with respect to any Acquisition Proposal (except this Agreement),
(b) shall cease and cause to be terminated any and all discussions with third
parties regarding any Acquisition Proposal, and (c) shall promptly notify the
Purchaser if any Acquisition Proposal, or any inquiry or contact with any person
or entity with respect thereto, is made.
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SECTION 9.7 BOOKS AND RECORDS. Unless otherwise consented to in writing
by the Parent or the Purchaser (as the case may be), the Purchaser and the
Parent will not, for a period of ten years following the date hereof, destroy,
alter, or otherwise dispose of any of the books and records of any Acquired
Company acquired by the Purchaser hereunder or retained by the Parent or any of
its Affiliates without first offering to surrender to the Parent or the
Purchaser such books and records or any portion thereof of which the Parent or
the Purchaser may intend to destroy, alter, or dispose. The Purchaser and the
Parent will allow the other party's representatives, attorneys, and accountants
access to such books and records, upon reasonable request for during such
party's normal business hours, for the purpose of examining and copying the same
in connection with any matter whether or not related to or arising out of this
Agreement or the transactions contemplated hereby.
SECTION 9.8 NONCOMPETITION, NONSOLICITATION, AND CONFIDENTIALITY. From
and after the Closing:
(a) Noncompetition. In consideration of the mutual covenants
provided for herein to the Parent and the Existing Stockholder at the Closing,
during the period beginning on the Closing Date and ending on the fifth
anniversary of the Closing Date (the "Noncompete Period"), none of the Parent,
the Existing Stockholder or any of their then Affiliates shall engage (whether
as an owner, operator, manager, employee, officer, director, consultant,
advisor, representative, or otherwise) directly or indirectly in any business
that provides outsourced staffing or those related billing services being
provided by the Acquired Companies as conducted on the date hereof to hospitals
and clinics anywhere within the United States; provided that ownership of less
than 5% of the outstanding stock of any publicly traded corporation shall not be
deemed to be engaging solely by reason thereof in any of its businesses;
provided further that the Parent and the Existing Stockholder shall not be
deemed to be in breach of this Section 9.8(a) solely as a result of owning a
direct or indirect interest in a business whose other owner engages in the
activities prohibited hereunder. The Parties hereto agree that the covenant set
forth in this Section 9.8 is reasonable with respect to its duration,
geographical area, and scope. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 9.8 is invalid
or unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(b) Nonsolicitation. Except as otherwise agreed by the Company
and the Parent, the Parent and the Existing Stockholder agree that, during the
Noncompete Period, they will not (and they will cause their Affiliates to not)
directly or indirectly contact, approach, or solicit for the purpose of offering
employment to or hiring (whether as an employee, consultant, agent, independent
contractor, or otherwise) or hire any employee or independent contractor of any
Acquired Company at any time during the six month period before the Closing Date
or during the Noncompete Period, without the prior written consent of the
Company; provided that nothing in this Section 9.8(b) shall prohibit the Parent,
the Existing Stockholder or their Affiliates from taking any
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action otherwise prohibited by this Section 9.8(b) with respect to any employee
whose employment is first terminated or independent contractor whose engagement
is first terminated by an Acquired Company.
(c) Confidentiality. Each of the Existing Stockholder and the
Parent shall treat and hold as confidential any information concerning the
business and affairs of the Acquired Companies (including, without limitation,
all Proprietary Rights and all information learned in connection with activities
under Section 9.12 hereof, but excluding tax returns and related records) that
is not already generally available to the public (the "Confidential
Information"), refrain from using any of the Confidential Information except in
connection with this Agreement, and at any time upon the request of the
Purchaser deliver promptly to the Purchaser or destroy, at the request and
option of the Purchaser, all tangible embodiments (and all copies) of the
Confidential Information which are in its possession or under its control. In
the event that the Existing Stockholder or the Parent is requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, it shall notify the Purchaser
promptly of the request or requirement so that the Purchaser may seek an
appropriate protective order or waive compliance with the provisions of this
Section 9.8(c). If, in the absence of a protective order or the receipt of a
waiver hereunder, the Parent or the Existing Stockholder is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal or
else stand liable for contempt, it may disclose the Confidential Information to
the tribunal; provided that it shall use its best efforts to obtain, at the
request and expense of the Purchaser, an order or other assurance that
confidential treatment shall be accorded to such portion of the Confidential
Information required to be disclosed as the Purchaser shall designate.
(d) Trade Names. The Parent and the Existing Stockholder shall
not use or permit any of its Affiliates to use the "Team Health" name, the names
"Team Health Radiology", "Team Health Radiology Services", "Team Health West",
Team Health Southeast", "Park Med Occupational Services", "Doctor's Essential
Services, Inc.", "DESI" or "InPhyNet", any names of the Acquired Companies other
than names containing the term "EMSA", or any names or symbols confusingly
similar thereto in any manner anywhere in the world after Closing.
(e) Remedy for Breach. The Parent and Existing Stockholder
acknowledge and agree that in the event of a breach of any of the provisions of
this Section 9.8, monetary damages shall not constitute a sufficient remedy.
Consequently, in the event of any such breach, the Company, the Purchaser,
and/or their respective successors or assigns may, in addition to other rights
and remedies existing in their favor, apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions hereof,
in each case without the requirement of posting a bond or proving actual
damages.
SECTION 9.9 NONSOLICITATION BY THE PURCHASER. Except as otherwise
agreed by the Purchaser and the Parent, for a period of two years following the
date hereof, (a) if this Agreement is terminated for any reason pursuant to
Article VII, the Purchaser shall not, directly or indirectly,
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actively solicit or induce any employee, agent or contractor of any Acquired
Company, the Existing Stockholder or the Parent to leave such employment and
become an employee, agent or contractor of the Purchaser or any of its
Affiliates if the Purchaser had contact with such employee, agent or contractor
in connection with the transactions contemplated herein and (b) neither the
Purchaser, nor any Acquired Company shall, directly or indirectly, actively
solicit or induce any employee, agent or contractor of the Parent or any
Affiliate thereof (other than an Acquired Company) to leave such employment and
become an employee, agent or contractor of the Purchaser, any Acquired Company
or any of their respective Affiliates; provided that nothing in this Section 9.9
shall prohibit the Purchaser, any Acquired Company or any of their Affiliates
from taking any action otherwise prohibited by this Section 9.9 with respect to
any Person whose employment is first terminated by the Parent, an Acquired
Company or an Affiliate thereof, as the case may be. This Section 9.9 supersedes
Paragraph 5 of the Confidentiality Agreement.
SECTION 9.10 USE OF PARENT'S NAMES AND LOGOS. Except as expressly set
forth in this Section 9.10, it is expressly agreed that the Purchaser is not
purchasing, acquiring or otherwise obtaining any right, title or interest in the
names "MedPartners, Inc.", "EMSA" or any tradenames, trademarks, identifying
logos or service marks related thereto or employing the word "MedPartners" or
"EMSA" or any part or variation of any of the foregoing or any confusingly
similar tradename, trademark or logo (collectively, the "Seller Trademarks and
Logos"). Except as expressly set forth in this Section 9.10, the Purchaser
agrees that, neither it nor any of its Affiliates shall make any use of the
Seller Trademarks and Logos from and after the Closing Date. At or prior to the
Closing, the Existing Stockholder shall cause the name of each Acquired Company
that contains the word "MedPartners" or "EMSA" to be changed to a name that does
not contain such words. In recognition of the fact that certain of the Acquired
Companies' assets have imprinted thereon the Seller Trademark and Logos, the
Company shall remove, within one year after the Closing, such name or logotype
from, or render the same illegible on, all assets of the Acquired Companies on
which they are imprinted or legible or, in the alternative, shall discontinue
use of such assets. Subject to the foregoing, during the one year period
following Closing, the Acquired Companies are granted a non-exclusive,
nonassignable royalty-free license to use all assets utilizing the Seller
Trademark and Logos. The Acquired Companies shall not assert any claim of
ownership of, or any claim to, any goodwill or reputation associated with the
Seller Trademarks and Logos by reason of the Acquired Companies' use of the
Seller Trademarks and Logos pursuant to this Section 9.10 or otherwise. The
Company shall not take action in derogation of any of the rights of the Parent
to the Seller Trademarks and Logos. The Acquired Companies shall maintain
quality standards for all assets utilizing the Seller Trademarks and Logos that
are substantially equivalent to the standards currently used by the Parent in
connection with such assets.
SECTION 9.11 MEDICAL MALPRACTICE MATTERS. The Parent and the Purchaser
agree that on or prior to the Closing Date, the Parent shall acquire (at its
sole cost and expense) for the benefit of the Purchaser, insurance policies
covering the Tail Malpractice Liability in the amounts and reflecting the terms
and conditions set forth on Exhibit L attached hereto and such other terms and
conditions as are reasonable and customary for the industry and mutually
acceptable to the Parent and the Purchaser.
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SECTION 9.12 TRANSITION SERVICES.
(a) Plantation Premises. With respect to the Leased Real
Property located at 0000 Xxxxx Xxxx Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxx (the
"Plantation Premises"), the Parent shall cause its Affiliate, MedPartners
Acquisition Corporation, as the current tenant under such Real Property Lease
(the "Plantation Tenant"), to sublease to the Plantation Subtenant (as defined
below) that portion of the Plantation Premises which is used and occupied by one
or more of the Acquired Companies as of the date of this Agreement (such
Acquired Companies are referred to collectively herein as the "Plantation
Subtenant"), from the Closing Date until March 1, 2000, which term shall be
renewed automatically thereafter for successive periods of one (1) month each
until the Plantation Tenant or the Plantation Subtenant provide written notice
of non-renewal to the other party at least six months prior to the expiration of
the initial term or any renewal term, at a monthly rent equal to (i) $41,947,
payable on or prior to the first day of each calendar month (except for the
initial partial month, which shall be payable at Closing), plus (ii) 27.15% of
all excess expenses for the Plantation Premises which are charged to Plantation
Tenant under such Real Property Lease, payable upon delivery to the Plantation
Subtenant of documentation evidencing such charges (which amounts in clauses (i)
and (ii) shall be prorated on a per diem basis for the initial month if less
than a full calendar month), and which otherwise shall be on the same terms and
conditions as currently used or occupied by the Plantation Subtenant.
(b) Tampa Premises. With respect to the Leased Real Property
located at 0000 Xxxxxxxx Xxxxxxxx Xxxxxxxx, Xxxxx, Xxxxxxx (the "Tampa
Premises"), the Parent shall cause its Affiliate, MedPartners of Florida, Inc.
(the "Tampa Tenant"), as the current tenant under such Real Property Lease, to
sublease to the Tampa Subtenant (as defined below) that portion of the Tampa
Premises which is used and occupied by one or more of the Acquired Companies as
of the date of this Agreement (such Acquired Companies are referred to
collectively herein as the "Tampa Subtenant"), from the Closing until the last
day of the sixth (6th) calendar month after the Closing Date, which term shall
be renewed automatically thereafter for successive periods of one (1) month each
until the Tampa Tenant or the Tampa Subtenant provide written notice of
non-renewal to the other party at least thirty (30) days prior to the expiration
of the initial term or any renewal term, at a monthly rent equal to (i) $ 6,652,
payable on or prior to the first day of each calendar month (except for the
initial partial month, which shall be payable at Closing), plus (ii) 100% of all
excess expenses for the Tampa Premises which are charged to Tampa Tenant under
such Real Property Lease, payable upon delivery to Tampa Subtenant of
documentation evidencing such charges (which amounts in clauses (i) and (ii)
shall be prorated on a per diem basis for the initial month if less than a full
calendar month), and which otherwise shall be on the same terms and conditions
as currently used or occupied by the Tampa Subtenant.
(c) Akron Premises. With respect to the Leased Real Property
located at 0000 Xxxxxxxxx Xxxx, Xxxxx, Xxxx (the "Akron Premises"), the Acquired
Company which is the tenant under such Real Property Lease (the "Akron Tenant"),
shall sublease to the Akron Subtenant (as defined below) that portion of the
Akron Premises consisting of approximately 3,738 square feet which is used and
occupied by the Parent or one or more of the Affiliates as of the date of this
Agreement (the "Akron Subtenant"), from the Closing Date until the last day of
the sixth (6th) full
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calendar month after the Closing, which term shall be renewed automatically
thereafter for successive periods of one (1) month each until Akron Tenant or
the Akron Subtenant provide written notice of non-renewal to the other party at
least thirty (30) days prior to the expiration of the initial term or any
renewal term, at a monthly rent equal to (i) $4,707 payable on or prior to the
first day of each calendar month (except for the initial partial month, which
shall be payable at Closing), plus (ii) 11.69% of excess expenses for the Akron
Premises which are charged to Akron Tenant under such Real Property Lease plus
(iii) 11.69% of electricity expenses which are charged to the Akron Tenant under
such Real Property Lease, payable upon delivery to Akron Subtenant of
documentation evidencing such charges (which amounts in clauses (i) and (ii)
shall be prorated on a per diem basis for the initial month if less than a full
calendar month), and which otherwise shall be on the same terms and conditions
as currently used or occupied by the Akron Subtenant.
(d) Plantation Phone System. The Parent agrees to provide to
the Acquired Companies, for as long as one of the Acquired Companies is the
Plantation Subtenant, access to the existing telephone system at the Plantation
Premises, in the manner, cost and at a relative level of service consistent with
that provided by the Parent to the Acquired Companies immediately prior to the
date hereof.
(e) Wide Area Network. The Parent agrees to provide to the
Acquired Companies, for the longer of six (6) months following the Closing or
until the Acquired Companies are no longer accessing the Parent's SAP R/3
software pursuant to paragraph (f) below, access to the Parent's wide area
network via MCI frame-relay circuits, in the manner, cost and at a relative
level of service consistent with that provided by the Parent to the Acquired
Companies immediately prior to the date hereof.
(f) SAP R/3 Software. The Parent agrees to provide to the
Acquired Companies, accounting, finance and related support services, including
but not limited to full access to and use of the Parent's SAP R/3 software and
related systems, through the date which is six (6) months following the Closing,
in the manner, cost (with the access and use cost in no event exceeding $10,000
per month) and at a relative level of service consistent with that provided by
the Parent to the Acquired Companies immediately prior to the date hereof;
provided that to the extent any support services cannot be provided by the
Parent itself and Parent is required to obtain the services of a third party to
provide such support, the Acquired Companies shall reimburse the Parent for all
amounts paid to such third parties for such support. If the Company desires to
use the SAP R/3 software and related systems beyond the date which is six (6)
months following the Closing, the Parent will (at the Company's sole cost and
expense) reasonably cooperate in good faith with the Company in negotiating
satisfactory arrangements with SAP America, Inc.
(g) DEC 8420 Services. The Acquired Companies agree to provide
to the Parent, for three (3) months following the Closing, systems hardware
support related to its COMPAQ (DEC) Alpha model 8420, including but not limited
to digital equipment maintenance and operations support, in the manner and at a
relative level of service consistent with that provided by the Acquired
Companies to the Parent as of the end of the third quarter of 1998, for the
amount of $48,115 per month, payable monthly.
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(h) PC & Network Support. The Acquired Companies agree to
provide to the Parent, for three (3) months following the Closing, PC and Local
Area Network support, in the manner and at a relative level of service
consistent with that provided by the Acquired Companies to the Parent as of the
end of the third quarter of 1998, for the amount of $7,600 per month, payable
monthly.
(i) DEC 4100 Services. The Acquired Companies agree to provide
to the Parent, for three (3) months following the Closing, information
technology support related to its COMPAQ (DEC) Alpha model 4100, including but
not limited to server hardware and systems maintenance, computer operations
support and software applications support, in the manner and at a relative level
of service consistent with that provided by the Acquired Companies to the Parent
as of the end of the third quarter of 1998, for the amount of $9,708 per month,
payable monthly.
SECTION 9.13 EMSA LIMITED PARTNERSHIP. The Parties agree that from and
after the Closing Date, the Parent shall cause EMSA Limited Partnership to enter
into an agreement to provide that any and all payments received by EMSA Limited
Partnership related to third-party payor contracts be forwarded immediately to
EMSA Contracting Services, Inc.
SECTION 9.14 CERTAIN VENDORS. Prior to the Closing Date, those vendors
specified on Exhibit M hereto that have supplied goods or services to the
Acquired Companies through the Parent's centralized purchasing programs shall be
notified that, from and after the Closing Date, all goods and services ordered
by the Acquired Companies are for the account of the Acquired Companies and that
the Parent has no obligation with respect thereto. To the extent deemed
appropriate by the Acquired Companies, on or prior to the Closing Date, the
Acquired Companies shall enter into purchase contracts with such vendors, under
which the Parent shall have no liability.
SECTION 9.15 IDX. Prior to the Closing Date, the Parent and the
Acquired Companies shall enter into an agreement with IDX Systems Corporation
which shall provide for IDX licenses to be allocated in accordance with Exhibit
N attached hereto.
ARTICLE X -- MISCELLANEOUS
SECTION 10.1 AMENDMENT AND WAIVER. This Agreement may be amended and
any provision of this Agreement may be waived, provided that any such amendment
or waiver shall be binding upon a Party only if such amendment or waiver is set
forth in a writing executed by the Purchaser and the Existing Stockholder. No
course of dealing between or among any Persons having any interest in this
Agreement shall be deemed effective to modify, amend, or discharge any part of
this Agreement or any rights or obligations of any Party under or by reason of
this Agreement.
SECTION 10.2 NOTICES. All notices, demands, and other communications
given or delivered under this Agreement shall be in writing and shall be deemed
to have been given, (i) when received if given in person, (ii) on the date of
electronic confirmation of receipt if sent by telex, facsimile or other wire
transmission, (iii) three days after being deposited in the U.S. mail, certified
or registered
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mail, postage prepaid, or (iv) one day after being deposited with a reputable
overnight courier. Notices, demands, and communications to the Parties shall,
unless another address is specified in writing, be sent to the address or
telecopy number indicated below:
Notices to the Parent or the Existing Stockholder
or, before the Closing, notices to the Company: with a copy to
c/o MedPartners, Inc. King & Spalding
3000 Galleria Tower 000 Xxxxxxxxx Xxxxxx
Xxxxx 0000 Xxxxxxx, Xxxxxxx 00000-0000
Xxxxxxxxxx, Xxxxxxx 00000 Fax No. (000) 000-0000
Fax No. (000) 000-0000 Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Attention: Legal Services
Notices to the Purchaser
or, after the Closing, notices to the Company: with a copy to:
Team Health Holdings, L.L.C. Xxxxxxxx & Xxxxx
c/o Madison Dearborn Partners 000 Xxxx Xxxxxxxx
Three First Xxxxxxxx Xxxxx, Xxxxx 0000 Xxxxxxx, Xxxxxxxx 00000
Xxxxxxx, Xxxxxxxx 00000 Attention: Xxxxxxx X. Perl, Esq.
Attention: Xxxxxxx Xxxxxxxx Fax No. (000) 000-0000
Fax No. (000) 000-0000
and
Cornerstone Equity Investors, LLC
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxx X. X'Xxxxx
Fax No. (000) 000-0000
and
Healthcare Equity Partners
000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxxx X'Xxxxx
Fax No. (000) 000-0000
SECTION 10.3 BINDING AGREEMENT; ASSIGNMENT. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns; provided that
neither this Agreement nor any of the rights, interests, or
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obligations hereunder may be assigned by any Party without the prior written
consent of the other Parties; provided that
(a) the Purchaser may at any time before the Closing, assign,
in whole or in part, its rights and obligations pursuant to this Agreement to
one or more of its Affiliates; provided that the Purchaser will nonetheless
remain liable for all of its obligations hereunder;
(b) the Purchaser and the Company may each assign its rights
under this Agreement for collateral security purposes to any lender providing
financing to the Purchaser, the Company, or any of their Affiliates and any such
lender may exercise all of the rights and remedies of the Purchaser and the
Company hereunder; and
(c) the Purchaser and the Company may assign its rights under
this Agreement, in whole or in part, to any subsequent purchaser of the
Purchaser or any Acquired Company or any material portion of its assets (whether
such sale is structured as a sale of stock, a sales of assets, a merger, or
otherwise); provided that the Purchaser and the Company will nonetheless remain
liable for all of its obligations hereunder.
SECTION 10.4 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
SECTION 10.5 NO STRICT CONSTRUCTION. The language used in this
Agreement shall be deemed to be the language chosen by the Parties to express
their mutual intent, and no rule of strict construction shall be applied against
any Person. The Parties hereto have participated jointly in the negotiation and
drafting of this Agreement. In the event of an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties hereto, and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement.
SECTION 10.6 CAPTIONS. The captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize, or in any way affect any provision
of this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.
SECTION 10.7 ENTIRE AGREEMENT. This Agreement and the documents
referred to herein contain the entire agreement between the Parties and
supersede any prior understandings, agreements, or representations by or between
the Parties, written or oral, which may have related to the subject matter
hereof in any way; provided that if the Agreement is terminated pursuant to
Section 7.1(g), the expense reimbursement letter dated November 20, 1998 between
the Parent and certain of the Purchaser's stockholders shall remain in full
force and effect.
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SECTION 10.8 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
SECTION 10.9 GOVERNING LAW. All questions concerning the construction,
validity, and interpretation of this Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York, without
giving effect to any choice of law or conflict of law provision (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
SECTION 10.10 JURISDICTION AND CONSENT TO SERVICE. Without limiting the
jurisdiction or venue of any other court, each of Parties (a) agrees that any
suit, action or proceeding arising out of or relating to this Agreement may be
brought solely in the state or federal courts of New York; (b) consents to the
exclusive jurisdiction of each such court in any suit, action or proceeding
relating to or arising out of this Agreement; (c) waives any objection which it
may have to the laying of venue in any such suit, action or proceeding in any
such court; and (d) agrees that service of any court paper may be made in such
manner as may be provided under applicable laws or court rules governing service
of process.
SECTION 10.11 PARTIES IN INTEREST. Nothing in this Agreement, express
or implied, is intended to confer on any Person, other than the Parties and
their respective successors and assigns, any rights or remedies under or by
virtue of this Agreement.
SECTION 10.12 SCHEDULES. Information disclosed in the Disclosure Letter
shall be deemed to be disclosed for purposes of qualifying any representation
and warranty in Article V to the extent that such information is reasonably
apparent on its face as being applicable to such representation and warranty.
* * * * *
73
78
IN WITNESS WHEREOF, the Parties have executed this
Recapitalization Agreement as of the date first written above.
TEAM HEALTH, INC.
By: ______________________________
Its: ______________________________
MEDPARTNERS, INC.
By: ______________________________
Its: ______________________________
PACIFIC PHYSICIAN SERVICES, INC.
By: ______________________________
Its: ______________________________
TEAM HEALTH HOLDINGS, L.L.C.
By: ______________________________
Its: ______________________________
