CONFORMED COPY
STOCK PURCHASE AGREEMENT
among
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.
HEALTH CARE SERVICE CORPORATION
INDEPENDENCE BLUE CROSS
MEDICAL SERVICE ASSOCIATION OF PENNSYLVANIA
XXXXXX COUNTY MEDICAL BUREAU, INC.
VERITUS, INC.
GREEN SPRING HEALTH SERVICES, INC.
and
CHARTER MEDICAL CORPORATION
dated
November 14, 1995
STOCK PURCHASE AGREEMENT
Table of Contents
Page
ARTICLE 1.
DEFINITIONS........................................................... 1
Section 1.1. Affiliate............................................................. 1
Section 1.2. Associate............................................................. 1
Section 1.3. Audited Financial Statements.......................................... 1
Section 1.4. Balance Sheet......................................................... 1
Section 1.5. Balance Sheet Date.................................................... 1
Section 1.6. Basket Amount......................................................... 1
Section 1.7. Benefit Plans......................................................... 2
Section 1.8. Business.............................................................. 2
Section 1.9. Business Day.......................................................... 2
Section 1.10. Buyer Disclosure Schedule............................................. 2
Section 1.11. Buyer SEC Reports..................................................... 2
Section 1.12. Buyer Subsidiary...................................................... 2
Section 1.13. Buyer Subsidiary Shares............................................... 2
Section 1.14. Cash Portion of Purchase Price........................................ 2
Section 1.15. Charter Common Stock.................................................. 2
Section 1.16. Closing............................................................... 2
Section 1.17. Closing Date.......................................................... 2
Section 1.18. Code.................................................................. 2
Section 1.19. Company Affiliate..................................................... 2
Section 1.20. Confidentiality Agreement............................................. 2
Section 1.21. Contract.............................................................. 2
Section 1.22. Credit Agreement...................................................... 2
Section 1.23. Director and Officer Policies......................................... 3
Section 1.24. Employment Contracts.................................................. 3
Section 1.25. Encumbrances.......................................................... 3
Section 1.26. Environmental Laws.................................................... 3
Section 1.27. ERISA................................................................. 3
Section 1.28. ERISA Affiliate....................................................... 3
Section 1.29. ERISA Pension Plan.................................................... 3
Section 1.30. ERISA Welfare Plan.................................................... 3
Section 1.31. Exchange Agreement.................................................... 3
Section 1.32. Family Member......................................................... 3
Section 1.33. Financial Statements.................................................. 3
Section 1.34. GAAP.................................................................. 3
Section 1.35. Governmental Antitrust Authority...................................... 3
Section 1.36. Governmental Authority................................................ 3
Section 1.37. GPA................................................................... 4
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Section 1.38. GPA Balance Sheet..................................................... 4
Section 1.39. GPA Balance Sheet Date................................................ 4
Section 1.40. GPA Common Stock...................................................... 4
Section 1.41. GPA Company Affiliate................................................. 4
Section 1.42. GPA Disclosure Letter................................................. 4
Section 1.43. GPA Financial Statements.............................................. 4
Section 1.44. GPA Stock Exchange Agreement.......................................... 4
Section 1.45. GPA Subsidiary........................................................ 4
Section 1.46. GPA Subsidiary Shares................................................. 4
Section 1.47. GSHS Disclosure Schedule.............................................. 4
Section 1.48. GSHS Long Term Compensation Plan...................................... 4
Section 1.49. GSHS Shares........................................................... 4
Section 1.50. HSR Act............................................................... 4
Section 1.51. Indemnifiable Damages................................................. 4
Section 1.52. Interim Financial Statements.......................................... 4
Section 1.53. Intellectual Property................................................. 4
Section 1.54. IRS................................................................... 5
Section 1.55. Knowledge............................................................. 5
Section 1.56. Leased Real Property.................................................. 5
Section 1.57. Leases................................................................ 5
Section 1.58. Market Value.......................................................... 5
Section 1.59. New GSHS Shares....................................................... 5
Section 1.60. New Stockholders' Agreement........................................... 5
Section 1.61. Old Shareholders' Agreement........................................... 5
Section 1.62. Operating Agreement................................................... 5
Section 1.63. Parachute Plan........................................................ 5
Section 1.64. Permits............................................................... 5
Section 1.65. Permitted Encumbrances................................................ 5
Section 1.66. Purchase Price........................................................ 5
Section 1.67. Registration Statement................................................ 5
Section 1.68. Seller Disclosure Schedule............................................ 6
Section 1.69. Stock Portion of Purchase Price....................................... 6
Section 1.70. Subsidiary............................................................ 6
Section 1.71. Subsidiary Shares..................................................... 6
Section 1.72. Takeover Proposal .................................................... 6
Section 1.73. Tax or Taxes ......................................................... 6
Section 1.74. Tax Return............................................................ 6
Section 1.75. Tax Sharing Agreement................................................. 6
Section 1.76. Third-Party Claim..................................................... 6
Section 1.77. Undisclosed Liability................................................. 6
Section 1.78. 1933 Act.............................................................. 6
Section 1.79. 1934 Act.............................................................. 6
Section 1.80. Other Defined Terms................................................... 6
ARTICLE 2.
SALE OF STOCK; CLOSING................................................ 6
Section 2.1. Purchase and Sale..................................................... 6
Section 2.2. Purchase Price........................................................ 7
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Section 2.3. Transfer and Delivery of GSHS Shares and
New GSHS Shares; Payment of Purchase Price............................ 7
Section 2.4. Time and Place of Closing............................................. 8
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF GSHS................................ 8
Section 3.1. Organization, etc..................................................... 8
Section 3.2. Authorization; Execution; Binding Effect.............................. 8
Section 3.3. Capitalization; Share Ownership....................................... 9
Section 3.4. Subsidiaries.......................................................... 9
Section 3.5. No Conflicting Agreements or Charter
Provisions............................................................ 10
Section 3.6. Consents, Approvals, Licenses, Etc.................................... 10
Section 3.7. Litigation............................................................ 10
Section 3.8. Financial Statements.................................................. 11
Section 3.9. No Undisclosed Liabilities............................................ 11
Section 3.10. Compliance with Laws; Permits......................................... 11
Section 3.11. No Adverse Changes.................................................... 11
Section 3.12. Intellectual Property................................................. 12
Section 3.13. Certain Transactions.................................................. 13
Section 3.14. Benefit Plans......................................................... 13
Section 3.15. Tax Matters........................................................... 15
Section 3.16. Contracts............................................................. 16
Section 3.17. Insurance............................................................. 17
Section 3.18. Personnel Matters..................................................... 17
Section 3.19. Properties............................................................ 17
Section 3.20. Absence of Certain Commercial Practices............................... 18
Section 3.21. Obligations Under Certain Agreements.................................. 18
Section 3.22. Brokers, Finders and Investment Bankers............................... 18
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . 19
Section 4.1. Organization, etc..................................................... 19
Section 4.2. Authorization; Execution; Binding Effect.............................. 19
Section 4.3. Capitalization; Share Ownership....................................... 19
Section 4.4. No Conflicting Agreements or
Charter Provisions.................................................... 19
Section 4.5. Consents, Approvals, Licenses, Etc.................................... 20
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF BUYER............................... 20
Section 5.1. Organization, etc..................................................... 20
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Section 5.2. Authorization; Execution; Binding Effect.............................. 20
Section 5.3. No Conflicting Agreements or
Charter Provisions.................................................... 21
Section 5.4. Securities Filings.................................................... 21
Section 5.5. Capitalization........................................................ 21
Section 5.6. Absence of Certain Changes or Events.................................. 22
Section 5.7. Litigation............................................................ 22
Section 5.8. Compliance with Laws.................................................. 22
Section 5.9. Credit Agreement Amendment............................................ 23
Section 5.10. No Undisclosed Liabilities............................................ 23
Section 5.11. Brokers, Finders and Investment Bankers............................... 23
Section 5.12. Subsidiaries.......................................................... 23
Section 5.13. Takeover Provisions Inapplicable...................................... 23
Section 5.14. GPA................................................................... 23
ARTICLE 6.
COVENANTS OF SELLER AND BUYER AND GSHS................................ 32
Section 6.1. Investigation of Business; Access to
Properties and Records................................................ 32
Section 6.2. Regulatory and Other Authorizations................................... 32
Section 6.3. Best Efforts; Obtaining Consents and
Making Notifications; Disclosure of Changes........................... 34
Section 6.4. Further Assurances.................................................... 34
Section 6.5. Conduct of Business of GSHS and Subsidiaries.......................... 34
Section 6.6. Preservation of Business.............................................. 36
Section 6.7. Public Announcements.................................................. 36
Section 6.8. No Solicitation....................................................... 36
Section 6.9. Right to Update, Cure................................................. 37
Section 6.10. Conduct of Buyer Business Prior to Closing............................ 37
Section 6.11. GSHS Long-Term Compensation Plan...................................... 37
Section 6.12. Post-Closing Operations and Events.................................... 37
Section 6.13. Registration Statement................................................ 38
Section 6.14. New GSHS Shares....................................................... 42
ARTICLE 7.
CONDITIONS TO BUYER'S OBLIGATION TO CLOSE............................. 42
Section 7.1. Representations, Warranties and
Covenants of Seller................................................... 42
Section 7.2. Filings; Consents; Waiting Periods.................................... 42
Section 7.3. No Injunction......................................................... 43
Section 7.4. Closing Documents..................................................... 43
Section 7.5. Absence of Litigation................................................. 44
Section 7.6. Customer Contracts.................................................... 44
Section 7.7. Old Shareholders' Agreement........................................... 44
Section 7.8. Exchange Agreement.................................................... 44
Section 7.9. GPA Stock Exchange Agreement.......................................... 44
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Section 7.10. New Stockholders' Agreement........................................... 44
Section 7.11. Operating Agreements.................................................. 44
Section 7.12. Purchase of New GSHS Shares........................................... 45
Section 7.13. GSHS Certificate of Incorporation
and Bylaws............................................................ 45
Section 7.14. Agreement Among Sellers............................................... 45
Section 7.15. Fairness Opinion...................................................... 45
Section 7.16. Credit Agreement...................................................... 45
Section 7.17. Certain Capital Contributions......................................... 45
Section 7.18. Board Approvals....................................................... 45
Section 7.19. GSHS Long-Term Compensation Plan...................................... 45
Section 7.20. Section 6.13.......................................................... 45
ARTICLE 8.
CONDITIONS TO SELLER'S OBLIGATIONS TO CLOSE........................... 46
Section 8.1. Representations, Warranties and
Covenants of Buyer.................................................... 46
Section 8.2. Filings; Consents; Waiting Periods.................................... 46
Section 8.3. No Injunction......................................................... 46
Section 8.4. No Material Adverse Change............................................ 46
Section 8.5. Closing Documents..................................................... 46
Section 8.6. Absence of Litigation................................................. 47
Section 8.7. Execution of Other Agreements......................................... 47
Section 8.8. GPA Stock Exchange; New GSHS Shares;
GSHS Certificate of Incorporation
and Bylaws............................................................ 47
Section 8.9. Credit Agreement...................................................... 47
Section 8.10. Board Approvals....................................................... 47
Section 8.11. Fairness Opinion...................................................... 47
Section 8.12. Section 6.13.......................................................... 47
ARTICLE 9.
SURVIVAL; INDEMNIFICATION ............................................ 47
Section 9.1. Survival.............................................................. 47
Section 9.2. Indemnification....................................................... 48
Section 9.3. Exclusive Remedy...................................................... 50
ARTICLE 10.
TERMINATION........................................................... 51
Section 10.1. Termination........................................................... 51
Section 10.2. Procedure and Effect of Termination................................... 51
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ARTICLE 11.
MISCELLANEOUS......................................................... 52
Section 11.1. Counterparts.......................................................... 52
Section 11.2. Governing Law......................................................... 52
Section 11.3. No Third Party Beneficiaries.......................................... 52
Section 11.4. Entire Agreement...................................................... 52
Section 11.5. Expenses.............................................................. 52
Section 11.6. Notices............................................................... 52
Section 11.7. Successors and Assigns................................................ 56
Section 11.8. Headings; Definitions................................................. 56
Section 11.9. Amendments and Waivers................................................ 56
Section 11.10. Specific Performance.................................................. 56
Section 11.11. Severability of Provisions............................................ 56
Section 11.12. Seller Liability...................................................... 57
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") dated as of the 14th day
of November, 1995, is made and entered into by and among Blue Cross and Blue
Shield of New Jersey, Inc. ("BCBS"), a New Jersey health service corporation,
Health Care Service Corporation ("HCSC"), an Illinois legal mutual reserve
company, Independence Blue Cross ("IBC"), a Pennsylvania non-profit hospital
plan corporation, Medical Service Association of Pennsylvania ("MSAP"), a
Pennsylvania corporation, Xxxxxx County Medical Bureau, Inc. ("PCMB"), a
Washington non-profit corporation, Veritus, Inc. ("VI"), a Pennsylvania
non-profit corporation, Green Spring Health Services, Inc. ("GSHS"), a Delaware
corporation, and Charter Medical Corporation, a Delaware corporation ("Buyer").
(Each of BCBS, HCSC, IBC, MSAP, PCMB and VI is referred to in this Agreement as
a "Seller" and together as the "Sellers").
WHEREAS, Sellers own all of the issued and outstanding common stock
of GSHS in the amounts set forth in Section 3.3 of the GSHS Disclosure Schedule
and Section 4.3 of the Seller Disclosure Schedule;
WHEREAS, Buyer desires to purchase from Sellers, and Sellers desire
to sell to Buyer, 5,391.92 of the issued and outstanding shares of common stock
of GSHS as of the date of this Agreement and 516.82 shares of the common stock
of GSHS that are to be purchased by Sellers pursuant to Section 6.15 prior to
the Closing of the transactions contemplated by this Agreement, both upon the
terms and subject to the conditions set forth in this Agreement (the sale and
purchase of such shares are referred to in this Agreement as the "Stock
Purchase");
NOW, THEREFORE, the parties to this Agreement agree as follows:
ARTICLE 1.
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
Section 1.1. "Affiliate" shall mean, with respect to any person, a
person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such person.
Section 1.2. "Associate" shall mean, with respect to any person, any
corporation or other business organization of which such person is an executive
officer (as such term is defined in Rule 3b-7 under the 0000 Xxx) or partner or
is the beneficial owner, directly or indirectly, of ten percent or more of any
class of equity securities, any trust or estate in which such person has a
substantial beneficial interest or as to which such person serves as a trustee
or in a similar capacity and any relative or spouse of such person, or any
relative of such spouse, who has the same home as such person.
Section 1.3. "Audited Financial Statements" shall mean the audited
consolidated balance sheets of GSHS at December 31, 1994, 1993 and 1992 and the
related audited consolidated statements of operations, changes in stockholders'
equity and cash flows for the years then ended, including related footnotes, in
each case as examined by and accompanied by the report of Xxxxxx Xxxxxxxx LLP,
independent certified public accountants, which Audited Financial Statements are
included in the GSHS Disclosure Schedule.
Section 1.4. "Balance Sheet" shall mean the unaudited consolidated
balance sheet of GSHS as of August 31, 1995 included in the Interim Financial
Statements.
Section 1.5. "Balance Sheet Date" shall mean August 31, 1995.
Section 1.6. "Basket Amount" shall mean an amount equal to Five
Million Dollars ($5,000,000).
1
Section 1.7. "Benefit Plans" shall mean all plans, programs, ERISA
Welfare Plans, ERISA Pension Plans and other arrangements under which or through
which GSHS or an ERISA Affiliate provides, or has an obligation to provide, or
makes, or has an obligation to make, contributions to provide, compensation or
benefits of any kind or description whatsoever (whether current or deferred and
whether paid in cash or in kind) to, or on behalf of, one, or more than one,
employee or director or former employee or former director, other than any
plans, programs or other arrangements which only provide for the payment of cash
compensation currently from the general assets of GSHS or an ERISA Affiliate on
a payday by payday basis as base salary or hourly wages for current services.
Section 1.8. "Business" shall mean the business of providing managed
behavioral health care services, including managed alcohol and other substance
abuse services and employee assistance plan services; and the components of such
services may include for a particular client or customer one or more of the
following concerning behavioral healthcare: case or care management,
administrative services for self-insured or partly self-insured customers,
utilization review, certification or pre-admission or pre-treatment
certification, assessment and referral, triage, services priced on a capitated,
non-capitated or partly-capitated basis, staff clinical services, provider
network services and preferred provider organization services.
Section 1.9. "Business Day" shall mean any day that is not a
Saturday, a Sunday or other day on which banks are required or authorized by law
to be closed in the City of New York.
Section 1.10. "Buyer Disclosure Schedule" shall mean the disclosure
schedule, dated as of the date of this Agreement, delivered to Sellers by Buyer,
as amended and updated pursuant to Section 6.9.
Section 1.11. "Buyer SEC Reports" shall have the meaning set forth in
Section 5.4.
Section 1.12."Buyer Subsidiary" shall mean a corporation,
partnership or other entity of which the Buyer satisfies the provisions of
either clause (i) or clause (ii) of the definition of Subsidiary.
Section 1.13. "Buyer Subsidiary Shares" shall have the meaning set
forth in Section 5.13.
Section 1.14. "Cash Portion of Purchase Price" shall have the meaning
set forth in Section 2.2.
Section 1.15. "Charter Common Stock" shall mean the common stock, par
value $0.25 per share, of Buyer.
Section 1.16. "Closing" shall have the meaning set forth in Section
2.4.
Section 1.17. "Closing Date" shall mean the date and effective time
at which the Closing occurs.
Section 1.18. "Code" shall mean the Internal Revenue Code of 1986,
as amended, together with the regulations promulgated thereunder.
Section 1.19. "Company Affiliate" shall have the meaning set forth in
Section 3.13.
Section 1.20. "Confidentiality Agreement" shall mean the
Confidentiality Agreement between GSHS and Buyer dated as of April 25, 1995.
Section 1.21."Contract" shall mean any contract, agreement,
indenture, lease of personal property (whether or not capitalized), note, bond,
loan agreement, letter of credit agreement, line of credit agreement,
instrument, lien, conditional sales contract, mortgage, franchise, commitment,
obligation or other arrangement or agreement, but shall exclude leases of real
property and insurance policies.
Section 1.22. "Credit Agreement" shall have the meaning set forth in
Section 6.12(a).
2
Section 1.23. "Director and Officer Policies" shall mean any
insurance policies providing coverage or benefits with respect to liabilities
incurred by or imposed on the directors or officers of GSHS or any Subsidiary.
Section 1.24. "Employment Contracts" shall mean all Contracts or
other arrangements under which GSHS or a Subsidiary has agreed to employ any
person for any period, including severance contracts.
Section 1.25. "Encumbrances" shall mean any security interest,
pledge, mortgage, lien, charge, adverse claim of ownership or use, or other
encumbrance of any kind.
Section 1.26. "Environmental Laws" shall mean all federal, state and
local laws, statutes, regulations, rules, ordinances, and orders with respect to
pollution or protection of the environments including laws relating to Hazardous
Substances or other toxic materials or wastes into ambient air, surface water,
ground space water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or Hazardous Substances or other toxic
materials or wastes.
Section 1.27. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the rulings and regulations under the
Employee Retirement Income Security Act of 1974, as amended.
Section 1.28. "ERISA Affiliate" shall mean a corporation that is or
was a member of a controlled group of corporations with GSHS within the meaning
of Section 414(b) of the Code, a trade or business (including a sole
proprietorship, partnership, limited liability company, trust, estate or
corporation) that is under common control with GSHS within the meaning of
Section 414(m) of the Code, or a trade or business which together with GSHS is
treated as a single employer under Section 414(o) of the Code.
Section 1.29. "ERISA Pension Plan" shall mean any employee pension
benefit plan as defined in Section 3(2) of ERISA which is established,
maintained or contributed to by GSHS or any ERISA Affiliate.
Section 1.30. "ERISA Welfare Plan" shall mean any employee welfare
benefit plan as defined in Section 3(1) of ERISA which is established,
maintained or contributed to by GSHS or any ERISA Affiliate.
Section 1.31. "Exchange Agreement" shall mean the Exchange Agreement
among certain of the Sellers and Buyer, dated as of the Closing Date and
attached to this Agreement as Exhibit A.
Section 1.32. "Family Member" shall have the meaning set forth in
Section 3.13.
Section 1.33. "Financial Statements" shall mean the Audited
Financial Statements and the Interim Financial Statements.
Section 1.34. "GAAP" shall mean generally accepted accounting
principles (as such term is used in the American Institute of Certified Public
Accountants' Professional Standards) from time to time in effect.
Section 1.35. "Governmental Antitrust Authority" shall mean any
governmental authority (federal or state) with jurisdiction over the enforcement
of any applicable antitrust laws.
Section 1.36. "Governmental Authority" shall mean any foreign,
federal, state or local governmental entity or municipality or subdivision
thereof or any authority, department, commission, board, bureau, agency, court
or instrumentality thereof.
3
Section 1.37. "GPA" shall mean Group Practice Affiliates, Inc., a
Delaware corporation and a wholly-owned subsidiary of Buyer.
Section 1.38. "GPA Balance Sheet" shall have the meaning set forth
in Section 5.14(l).
Section 1.39. "GPA Balance Sheet Date" shall have the meaning set
forth in Section 5.14(l).
Section 1.40. "GPA Common Stock" shall have the meaning set forth in
Section 5.14(a).
Section 1.41. "GPA Company Affiliate" shall have the meaning set
forth in Section 5.14(p).
Section 1.42. "GPA Disclosure Letter" shall have the meaning set
forth in Section 5.14(g).
Section 1.43. "GPA Financial Statements" shall have the meaning set
forth in Section 5.14(e).
Section 1.44. "GPA Stock Exchange Agreement" shall mean the GPA Stock
Exchange Agreement, dated the date of this Agreement, between Buyer and GSHS
providing for the acquisition by GSHS on the Closing Date, in a tax-free
reorganization pursuant to Section 368(a)(1)(B) of the Code, of all the issued
and outstanding common stock of GPA from Buyer for 969.04 shares of the common
stock of GSHS, a copy of which is attached as Exhibit B.
Section 1.45. "GPA Subsidiary" shall have the meaning set forth in
Section 5.14(f).
Section 1.46. "GPA Subsidiary Shares" shall have the meaning set
forth in Section 5.14(h).
Section 1.47. "GSHS Disclosure Schedule" shall mean the disclosure
schedule, dated as of the date of this Agreement, delivered to Buyer by GSHS, as
amended and updated pursuant to Section 6.9.
Section 1.48. "GSHS Long Term Compensation Plan" shall have the
meaning set forth in Section 6.11.
Section 1.49. "GSHS Shares" shall have the meaning set forth in
Section 2.1.
Section 1.50. "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the regulations promulgated
thereunder.
Section 1.51. "Indemnifiable Damages" shall mean any and all
liabilities, losses, interest, penalties, obligations, judgments, damages,
fines, amounts paid or payable in settlement, expenses and costs (including,
without limitation, reasonable counsel fees, accounting fees, investigation
costs and costs and expenses incurred in connection with the foregoing).
Section 1.52. "Interim Financial Statements" shall mean the unaudited
consolidated balance sheet of GSHS at August 31, 1995 and the related unaudited
consolidated statement of operations for the eight-month period then ended,
which Interim Financial Statements are included in the GSHS Disclosure Schedule.
Section 1.53. "Intellectual Property" means all patents and patent
rights, trademarks and trademark rights, trade names and trade name rights,
service marks and service xxxx rights, service names and service name rights,
brand names, inventions, procedures, formulae, copyrights and copyright rights,
trade dress, business and product names, logos, slogans, trade secrets,
processes, designs, methodologies, computer programs (including all source
codes) and related documentation, technical information, know-how and all
pending applications for and registrations of patents, trademarks, service marks
and copyrights.
4
Section 1.54. "IRS" shall mean the Internal Revenue Service.
Section 1.55. "Knowledge" shall mean actual knowledge of an executive
officer of any Seller, Buyer or Buyer Subsidiary and, in the case of GSHS or any
Subsidiary, actual knowledge of any executive officer or director.
Section 1.56. "Leased Real Property" shall mean the real property
leased by GSHS or any Subsidiary, as tenant, together with, to the extent leased
by GSHS or a Subsidiary, all buildings and other structures, facilities or
improvements currently or subsequently located on or at such property, all
fixtures, systems, equipment and items of personal property of GSHS attached or
appurtenant to such real property, and all easements, licenses, rights and
appurtenances relating to the foregoing.
Section 1.57. "Leases" shall mean the leases for the Leased Real
Property.
Section 1.58. "Market Value" shall mean the arithmetic average of the
closing sale prices for a share of Charter Common Stock as reported by the
American Stock Exchange for the ten trading days immediately preceding the third
business day prior to the Closing Date; provided, however, that if such
arithmetic average is less than $20.00, the Market Value shall be deemed to be
$20.00 and provided, further, that if such arithmetic average is greater than
$22.00, the Market Value shall be deemed to be $22.00.
Section 1.59. "New GSHS Shares" shall mean the shares of common stock
of GSHS to be purchased by Sellers pursuant to Section 6.14 prior to the Closing
and sold to Buyer at the Closing pursuant to Section 6.14.
Section 1.60. "New Stockholders' Agreement" shall mean the
Stockholders' Agreement among Sellers (other than MSAP and VI), Buyer and GSHS,
dated as of the Closing Date and attached to this Agreement as Exhibit C.
Section 1.61. "Old Shareholders' Agreement" shall mean the
Subscription and Stockholders' Agreement among Sellers and GSHS, initially dated
as of April 29, 1993, as amended from time to time after such date.
Section 1.62. "Operating Agreement" shall mean an agreement between
GSHS (or a Subsidiary) and a customer for the provision by GSHS (or a
Subsidiary) to the customer of services related to one or more aspects of the
Business.
Section 1.63. "Parachute Plan" shall mean any plan, program or policy
of any kind or description whatsoever or provision in an Employment Contract
that promises any special or enhanced benefits as a result of a change of
control in GSHS or any Subsidiary.
Section 1.64. "Permits" shall mean all permits, licenses and other
governmental approvals, accreditations, participation agreements, consents,
authorizations, certificates of authority and orders.
Section 1.65. "Permitted Encumbrances" shall mean (i) Encumbrances
for Taxes not yet payable and for Taxes being contested in good faith, (ii)
Encumbrances arising out of, under or in connection with this Agreement and
(iii) Encumbrances and imperfections of title that do not secure payment of
borrowed money and the existence of which do not materially affect the use of
the property subject to such Encumbrances.
Section 1.66. "Purchase Price" shall have the meaning set forth in
Section 2.2.
Section 1.67. "Registration Statement" shall have the meaning set
forth in Section 6.13.
5
Section 1.68. "Seller Disclosure Schedule" shall mean the disclosure
schedule, dated as of the date of this Agreement, delivered to Buyer by Sellers,
as amended and updated pursuant to Section 6.9.
Section 1.69. "Stock Portion of Purchase Price" shall have the
meaning set forth in Section 2.2.
Section 1.70. "Subsidiary" shall mean a corporation, partnership or
other entity of which GSHS (i) has the power to elect more than 50% of the board
of directors or other governing authority either directly or indirectly or (ii)
owns or controls more than 50% of the outstanding equity securities or equity
interests either directly or through an unbroken chain of entities as to each of
which 50% or more of the outstanding equity securities or equity interests is
owned directly or indirectly by its parent.
Section 1.71. "Subsidiary Shares" shall have the meaning set forth in
Section 3.4(b).
Section 1.72. "Takeover Proposal" shall mean any proposal for a
merger, consolidation, acquisition of all of the stock or assets of GSHS or the
acquisition of a substantial equity interest in GSHS or a substantial portion of
the consolidated assets of GSHS or any solicitation of proxies in connection
with any meeting for the purpose of effecting a business combination or change
in control.
Section 1.73. "Tax" or "Taxes" shall mean all federal, state, local
or foreign taxes, levies, imposts, duties, licenses and registration fees, and
charges of any nature whatsoever including, without limitation, income tax
withholding, unemployment and social security taxes, interest, penalties and
additions to tax with respect to such taxes.
Section 1.74. "Tax Return" shall mean any return, declaration,
report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment to such documents and any amendment of such
documents.
Section 1.75. "Tax Sharing Agreement" shall have the meaning set
forth in Section 6.12(b).
Section 1.76. "Third-Party Claim" shall have the meaning set forth
in Section 9.2(c).
Section 1.77. "Undisclosed Liability" shall mean an obligation,
indebtedness or liability of any nature (each of which, for purposes of this
definition, is assumed to be material), which is required by GAAP to be
reflected on the Balance Sheet or in the notes to the Balance Sheet or to the
Financial Statements of which the Balance Sheet is a part and which is not
reflected, reserved against or disclosed on the Balance Sheet or the notes to
the Financial Statements or disclosed in this Agreement or the GSHS Disclosure
Schedule.
Section 1.78. "1933 Act" shall mean the Securities Act of 1933, as
amended.
Section 1.79. "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
Section 1.80. Other Defined Terms. The terms defined in first
paragraph and in the whereas clauses shall have the meanings given to such
terms in such paragraph and whereas clauses.
ARTICLE 2.
SALE OF STOCK; CLOSING
Section 2.1. Purchase and Sale. On the basis of the representations,
warranties, covenants and agreements and subject to the satisfaction or waiver
of the conditions to Closing set forth in this Agreement, at the Closing Sellers
will sell and Buyer will purchase (a) an aggregate of 5,391.92 shares of common
stock of GSHS, par value $0.01 per share (collectively, the "GSHS Shares"),
which constitute, and will constitute as of the Closing,
6
approximately 40% of the issued and outstanding capital stock of GSHS; and Buyer
will purchase the GSHS Shares from each Seller, and each Seller will sell the
GSHS Shares to Buyer, in the following amounts: BCBS - 347.98 shares, HCSC -
347.98 shares, IBC - 347.98 shares, MSAP - 2,000 shares, PCMB - 347.98 shares,
and VI - 2,000 shares; and (b) the New GSHS Shares, which will consist of an
aggregate of 516.82 shares of common stock of GSHS, par value $0.01 per share,
which shares shall be the shares purchased by Sellers from GSHS prior to Closing
pursuant to Section 6.14; and Buyer will purchase the New GSHS Shares from each
Seller, and each Seller will sell the New GSHS Shares to Buyer in the following
amounts: BCBS - 86.14 shares, HCSC - 86.14 shares, IBC - 86.14 shares, MSAP -
86.14 shares, PCMB - 86.14 shares, and VI - 86.14 shares.
Section 2.2. Purchase Price. In full payment for the GSHS Shares and
the New GSHS Shares, Buyer will pay and deliver to Sellers an aggregate purchase
price of Seventy-three Million, One Hundred Sixty-nine Thousand Nine Hundred
Ninety-five and 46/100 Dollars ($73,169,995.46) (the "Purchase Price") payable
to each Seller in the following amounts:
Purchase Price Purchase Price Total
Seller For GSHS Shares For New GSHS Shares Purchase Price
------ --------------- ------------------- --------------
1. BCBS $ 4,309,158.13 $ 1,066,660.49 $ 5,375,818.62
2. HCSC $ 4,309,158.13 $ 1,066,660.49 $ 5,375,818.62
3. IBC $ 4,309,158.13 $ 1,066,660.49 $ 5,375,818.62
4. MSAP $24,766,700.00 $ 1,066,660.49 $25,833,360.49
5. PCMB $ 4,309,158.13 $ 1,066,660.49 $ 5,375,818.62
6. VI $24,766,700.00 $ 1,066,660.49 $25,833,360.49
Each Seller (other than MSAP and VI) may elect, by written notice
delivered to Buyer not later than November 15, 1995, or such later date as Buyer
may agree upon in writing, to receive all or any portion of the Purchase Price
payable to such Seller in the form of Charter Common Stock valued at Market
Value; provided, however, that if the aggregate preliminary elections made by
all such Sellers exceed $18,290,000 of Charter Common Stock valued at Market
Value, each such Seller's election shall be reduced by such Seller's pro rata
share of the amount in excess of $18,290,000 (the "Stock Portion of the Purchase
Price"). Any such election shall be irrevocable. The portion of the Purchase
Price payable to MSAP and VI shall be paid in cash. The difference between the
aggregate Purchase Price and the Stock Portion of the Purchase Price shall be
payable in cash (the "Cash Portion of the Purchase Price").
Section 2.3. Transfer and Delivery of GSHS Shares and New GSHS
Shares; Payment of Purchase Price.
(a) GSHS Shares. At the Closing, each Seller, severally and not
jointly, shall sell, assign, transfer and deliver to Buyer (i) the number of
GSHS Shares set forth by its name in Section 2.1 by delivery to Buyer of a
certificate or certificates representing such GSHS Shares, duly endorsed for
transfer or accompanied by duly executed stock powers, and (ii) the number of
New GSHS Shares set forth by its name in Section 2.1 by delivery to Buyer of a
certificate or certificates representing such New GSHS Shares, duly endorsed for
transfer or accompanied by duly executed stock powers. Sellers severally
covenant and agree with Buyer to cause GSHS to, and GSHS agrees to,
7
immediately upon the Closing, accept for transfer such certificates for the GSHS
Shares and the New GSHS Shares and to issue to Buyer a certificate or
certificates, in the name of Buyer, representing the GSHS Shares and the New
GSHS Shares.
(b) Payment of Cash Portion of the Purchase Price. At the Closing,
Buyer will pay to each Seller its portion of the Cash Portion of the Purchase
Price by wire transfer of immediately available funds to an account of each
Seller designated by each Seller in writing to Buyer not less than three
Business Days prior to the Closing.
(c) Payment of Stock Portion of the Purchase Price. At the Closing,
Buyer will deliver to each Seller its portion of the Stock Portion of the
Purchase Price by delivery to such Seller of a certificate registered in the
name of such Seller for a number of shares of Charter Common Stock equal to such
Seller's Stock Portion of the Purchase Price divided by the Market Value of
Charter Common Stock and rounded up to the nearest whole number.
Section 2.4. Time and Place of Closing. The closing (the "Closing")
of the Stock Purchase will be held at 10:00 a.m. on the fifth Business Day after
the latest to occur of (i) the termination of the waiting periods under the HSR
Act, (ii) the fulfillment or waiver of the conditions set forth in Articles 7
and 8, and (iii) November 30, 1995, at the offices of King & Spalding, 191
Peachtree Street, Atlanta, Georgia or, if Buyer so requests, at offices in New
York, New York of counsel to Buyer's commercial lenders, or at such other time
and place as the parties may agree. It is understood that the Stock Purchase
shall be deemed to take place effective as of the close of business on the
Closing Date, regardless of the time at which the Closing actually occurs on the
Closing Date.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF GSHS
GSHS represents and warrants to Buyer as follows and acknowledges
that Buyer is relying upon such representations and warranties in connection
with the transactions provided for in this Agreement. The parties acknowledge
that certain of the representations and warranties set forth in this Article 3
lack qualifications as to materiality in light of the agreements set forth in
Sections 7.1 and 9.2(f).
Section 3.1. Organization, etc. GSHS and each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of their respective states of incorporation and has all requisite corporate
power and authority (i) to conduct its business as it is now conducted and to
own or lease all of the properties owned or leased by it; and (ii) in the case
of GSHS, to enter into and perform its obligations under this Agreement. True,
correct and complete copies of the Certificate or Articles of Incorporation and
bylaws of GSHS and each Subsidiary as of the date of this Agreement have been
previously delivered or made available to Buyer. The corporate records and
minute books of GSHS and each Subsidiary contain complete and accurate minutes
of all meetings and other corporate actions of the directors and stockholders of
GSHS and each Subsidiary held, in the case of GSHS, since its date of
incorporation, and in the case of each Subsidiary, since the date of its
acquisition by GSHS, and the share certificate books and register of
stockholders of GSHS and each Subsidiary are complete and accurate. GSHS and
each Subsidiary is duly qualified to do business as a foreign corporation, and
is in good standing, in all jurisdictions in which the ownership or lease of
property by it or the conduct of its business makes such qualification
necessary.
Section 3.2. Authorization; Execution; Binding Effect. The execution,
delivery and performance of this Agreement, the GPA Stock Exchange Agreement and
the New Stockholders' Agreement, and the consummation of the transactions
provided for in such agreements have been duly authorized by all necessary
corporate action on the part of GSHS. Assuming due execution and delivery by the
other parties, this Agreement, the GPA Stock Exchange Agreement and the New
Stockholders' Agreement constitute the legal, valid and binding obligation of
GSHS,
8
enforceable against GSHS in accordance with its respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other laws affecting creditors' rights and remedies generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
Section 3.3. Capitalization; Share Ownership. The authorized capital
stock of GSHS consists of 12,000 shares of $0.01 par value common stock, of
which 12,000 shares are issued and outstanding. Upon completion of the amendment
to the Certificate of Incorporation of GSHS and the issuance and sale of the New
GSHS Shares, as provided by Section 6.14, the authorized capital stock of GSHS
will consist of 15,000 shares of $0.01 common stock, of which 12,516.82 shares
will be issued and outstanding. All outstanding shares of the capital stock of
GSHS are, and upon the sale and issuance pursuant to Section 6.14 and the GPA
Stock Exchange Agreement, respectively, the New GSHS Shares and the shares of
common stock of GSHS to be issued pursuant to the GPA Stock Exchange Agreement
will be, duly authorized, validly issued and fully paid, nonassessable and in no
case issued in violation of any pre-emptive rights granted by GSHS. GSHS has no
shares of its capital stock in its treasury. Except for this Agreement, the
transactions contemplated by the GPA Stock Exchange Agreement and Section 6.14,
and as set forth in Section 3.3 of the GSHS Disclosure Schedule, (i) there is no
existing subscription, option, warrant, call, right, commitment or other
agreement (whether pre-emptive or contractual) to which GSHS is a party
requiring, and there are no convertible securities of GSHS outstanding which
upon conversion would require, directly or indirectly, the issuance of any
additional common stock of GSHS or other securities convertible into or
exercisable or exchangeable for common stock of GSHS or any other equity
security of GSHS, and (ii) there are no outstanding contractual obligations of
GSHS to repurchase, redeem or otherwise acquire any outstanding capital stock of
GSHS. There are no bonds, debentures, notes or other indebtedness issued and
outstanding having the right to vote on any matters on which GSHS's stockholders
may vote. There are no obligations, contingent or otherwise, of GSHS or any
Subsidiary to (x) repurchase, redeem or otherwise acquire any outstanding
capital stock of GSHS or the capital stock of, or other equity interests in, any
Subsidiary or (y) except for guarantees of obligations of, or loans and advances
to, GSHS or any Subsidiary, provide funds to, or make investments in, or provide
any guarantee with respect to the obligations of any other person. The GSHS
Shares sold pursuant to this Agreement have been duly authorized and validly
issued, fully paid and nonassessable, will be delivered free and clear of all
liens, charges and encumbrances of any kind or nature and will not be in
violation of any pre-emptive rights. Except for the Old Shareholders' Agreement,
GSHS has granted no person or entity any registration rights in respect of
common stock of GSHS or securities convertible into or exercisable or
exchangeable for common stock of GSHS. Each Seller is the sole record owner of
the shares of GSHS listed beside such Seller's name in Section 3.3 of the GSHS
Disclosure Schedule and, upon consummation of the transactions contemplated by
Section 6.14, will be the sole record owner of the number of New GSHS Shares
listed beside such Seller's name in Section 6.14. The Old Shareholders'
Agreement is the only stockholder agreement, voting agreement, voting trust,
proxy or other agreement to which GSHS is a party with respect to the voting or
transfer of the common stock of GSHS.
Section 3.4. Subsidiaries. (a) Other than the Subsidiaries set forth
in Section 3.4(b) of the GSHS Disclosure Schedule, there are no other
corporations, partnerships, limited liability companies, joint ventures or other
entities in which GSHS or any Subsidiary owns, of record or beneficially, any
direct or indirect equity interest or any right (contingent or otherwise) to
acquire the same.
(b) Section 3.4(b) of the GSHS Disclosure Schedule sets forth the
jurisdiction of incorporation of each Subsidiary, its authorized capital stock,
the number and class or series of its issued and outstanding shares of capital
stock, and the current ownership by GSHS and its Subsidiaries of such shares
(collectively, the "Subsidiary Shares"). The Subsidiary Shares constitute all
the issued and outstanding shares of capital stock of the Subsidiaries. The
Subsidiary Shares have been duly authorized and validly issued and are fully
paid and nonassessable and were not issued in violation of any pre-emptive
rights. There are no existing subscriptions, options, warrants, calls, rights of
conversion or other rights, agreements, arrangements or commitments relating to
the capital stock of any Subsidiary
9
obligating any Subsidiary to issue or sell any shares of its capital stock.
Either GSHS or another Subsidiary owns the Subsidiary Shares issued by the
respective Subsidiaries free and clear of all Encumbrances, except (i) as set
forth in Section 3.4(b) of the GSHS Disclosure Schedule and (ii) Encumbrances
arising out of or in connection with this Agreement. There are no voting trusts,
stockholder agreements, proxies or other agreements in effect with respect to
the voting or transfer of the Subsidiary Shares.
Section 3.5. No Conflicting Agreements or Charter Provisions. Except
as set forth in Section 3.5 of the GSHS Disclosure Schedule, the execution,
delivery and compliance with and performance by GSHS of the terms and provisions
of this Agreement, the GPA Stock Exchange Agreement and the New Stockholders'
Agreement, and the consummation of the transactions contemplated by such
agreements, will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default (or an event which, with
notice, lapse of time, or both, would constitute a default) under, (iii) result
in any violation of, (iv) require the obtaining of any consent, approval or
action of, make any filing with or give notice to any person (except for a
Governmental Authority) as a result of or under the terms of, (v) result in or
give to any person any right of termination, cancellation, acceleration,
modification, or increased or accelerated rights, entitlements or payments
under, or (vi) result in the creation or imposition of any Encumbrance upon GSHS
or any Subsidiary or any of their respective assets under: (A) the Certificate
or Articles of Incorporation or bylaws of GSHS or any Subsidiary or any
resolutions adopted by the stockholders or the Board of Directors of GSHS or any
Subsidiary (assuming the Certificate of Incorporation of GSHS has been amended
as provided in Section 6.14), or (B) any order, judgment or decree (in a
proceeding to which a Governmental Authority is not a party) to which GSHS or
any Subsidiary is subject.
Section 3.6. Consents, Approvals, Licenses, Etc. No consent,
approval, authorization, license, statute, law, rule, regulation, order or
Permit of, or declaration, filing or registration with, or notification to, any
Governmental Authority is required to be made or obtained by GSHS or any
Subsidiary in connection with the execution, delivery and performance of this
Agreement, the GPA Stock Exchange Agreement and the New Stockholders' Agreement,
or the consummation of the transactions contemplated by such agreements, except:
(i) as set forth in Section 3.6 of the GSHS Disclosure Schedule; (ii) applicable
requirements, if any, of the Delaware General Corporation Law, the 1934 Act,
state securities or blue sky laws and the HSR Act; or (iii) where the failure to
obtain such Permits, or to make such declarations, filing or registration or
notifications, would not, either individually or in the aggregate, have an
adverse effect on GSHS or any Subsidiary or Buyer involving more than $20,000.
Section 3.7. Litigation. Except as set forth in Section 3.7 of the
GSHS Disclosure Schedule, there is (whether insured or uninsured) no action,
suit, proceeding or investigation pending or, to the Knowledge of GSHS or any
Subsidiary, threatened in writing, at law or in equity, in any court or before
or by any Governmental Authority: (i) against GSHS or any Subsidiary, except for
uninsured private civil litigation not involving a claim for equitable relief
and involving a claim for less than $100,000; (ii) to the Knowledge of GSHS or
any Subsidiary, affecting GSHS or any Subsidiary or any of their properties,
except for uninsured private civil litigation not involving a claim for
equitable relief and involving a claim for less than $100,000; or (iii) to the
Knowledge of GSHS or any Subsidiary, affecting this Agreement, the GPA Stock
Exchange Agreement or the New Stockholders' Agreement or any action taken or to
be taken or documents executed or to be executed pursuant to or in connection
with the provisions of any such agreement. Prior to the execution of this
Agreement, GSHS has delivered to Buyer all responses of counsel for GSHS and the
Subsidiaries to auditors' requests for information delivered in connection with
the 1994 Audited Financial Statements (together with any updates provided by
such counsel) regarding actions or proceedings pending or threatened against,
relating to or affecting GSHS or any Subsidiary.
10
Section 3.8. Financial Statements. The GSHS Disclosure Schedule
includes true, correct and complete copies of the Financial Statements. Each of
the Financial Statements (i) has been prepared from the books and records of
GSHS and the Subsidiaries, which in all material respects account for
transactions, assets and liabilities consistent with good business and
accounting practice and Section 13(b)(2) of the 1934 Act and (ii) fairly
presents the financial position, results of operations, changes in stockholder's
equity and cash flows of GSHS on a consolidated basis as of the dates and for
the periods set forth in such Financial Statements, in accordance with GAAP
applied consistently throughout the periods involved, except as set forth in
Section 3.8 of the GSHS Disclosure Schedule. Each of the financial statements
delivered by GSHS pursuant to Section 6.1(c) shall comply with the preceding
sentence.
Section 3.9. No Undisclosed Liabilities. To the Knowledge of GSHS or
any Subsidiary, neither GSHS nor any Subsidiary had any Undisclosed Liability as
of the Balance Sheet Date, and except (i) as set forth in Section 3.9 of the
GSHS Disclosure Schedule, (ii) as set forth in the Balance Sheet or (iii) for
normal and recurring current liabilities accruing in the ordinary course of
business since the date of the Balance Sheet, neither GSHS nor any Subsidiary,
on the date of this Agreement, has outstanding any Undisclosed Liability. Except
as set forth in the Financial Statements or in Section 3.9 of the GSHS
Disclosure Schedule, neither GSHS nor any Subsidiary has any long-term
indebtedness, any lease obligation required to be recorded under GAAP as a
capitalized lease and on the Closing Date will have no long-term debt due to or
from any Seller (except as reflected in the most recent Audited Financial
Statements).
Section 3.10. Compliance with Laws; Permits. GSHS and each Subsidiary
has, since July 1, 1994, complied with all laws, regulations and orders relating
or applicable to the operation of its respective business. GSHS and each
Subsidiary holds all Permits required to be held by it in order to own, occupy
and lease its assets and to conduct and operate its business (as presently
conducted and as conducted on the Closing Date) in compliance with all
applicable laws and regulations. A true and correct copy of each such Permit has
previously been delivered or made available to Buyer. Except as set forth in
Section 3.6 or Section 3.10 of the GSHS Disclosure Schedule, neither GSHS nor
any Subsidiary is in default or, to GSHS's Knowledge, alleged to be in default
with respect to any judgment, order, writ, injunction or decree of any
Governmental Authority which would have an adverse effect on the business,
assets or financial condition of GSHS or any Subsidiary in excess of $50,000, no
notice from any Governmental Authority or agency in respect to (including an
investigation) the revocation, termination, suspension or limitation of any
Permit or the failure to have any Permit has been issued or given to GSHS or any
Subsidiary, nor does GSHS or any Subsidiary have any Knowledge of the proposed
or threatened issuance of any such notice or of any pending or threatened
investigation with respect to any such matter.
Section 3.11. No Adverse Changes. Since the Balance Sheet Date and
except as set forth in Section 3.11 of the GSHS Disclosure Schedule or as
contemplated by this Agreement or the GPA Stock Exchange Agreement, there has
not been, occurred or arisen:
(i) any adverse change in the financial condition, results
of operations, prospects, business or properties of GSHS and the
Subsidiaries;
(ii) any termination (or, to the Knowledge of GSHS or any
Subsidiary, threat of termination) of any Contract to which either
GSHS or any Subsidiary is a party representing $500,000 or more of
revenue to GSHS or a Subsidiary for the 12-month period ended June
30, 1995;
(iii) any increase in the compensation payable or to become
payable by GSHS or any Subsidiary to any of its directors, officers,
management, employees, consultants or agents whose base
11
annual salary or, in the case of a non-employee, base annual
compensation (for any individual) exceeds $75,000 or any increase in
benefits under any bonus, insurance, pension or other benefit plan
made for or with any of such persons (including, but not limited to,
any change in targets, goals, bonus pools and the like under any
Benefit Plan, Employment Contract or other employee compensation
arrangement) except for such increases made in the ordinary course of
business and consistent with the past practices of GSHS or such
Subsidiary;
(iv) any direct or indirect redemption, purchase or other
acquisition by GSHS or any Subsidiary of any shares of capital stock
of GSHS or any Subsidiary, any declaration, setting aside or payment
of any dividend or other distribution by GSHS or any Subsidiary in
respect of shares of capital stock of GSHS or any Subsidiary whether
in cash, shares or property, or any loan to any stockholder;
(v) any unusual or extraordinary item resulting in a loss
suffered by GSHS or any Subsidiary, which, individually or in the
aggregate, is equal to or in excess of $500,000;
(vi) any mortgage on, pledge of or grant of a security
interest in any of the assets of GSHS or any Subsidiary other than
Permitted Encumbrances;
(vii) any payment default or event of default by GSHS or any
Subsidiary under any debt with a principal amount equal to or greater
than $100,000 or under any Lease or lease agreement with annual
rental payments equal to or greater than $50,000;
(viii) any guaranty of any obligation or debt of any person or
entity by GSHS or any Subsidiary (other than GSHS or a Subsidiary),
except in the ordinary course of business;
(ix) any material change in (i) any investment, accounting or
Tax practice or policy of GSHS or any Subsidiary or (ii) any method
of calculating any bad debt, contingency, IBNR (incurred but not
reported claims) or other reserve of GSHS or any Subsidiary for
accounting or Tax purposes;
(x) any business combination involving GSHS or any
Subsidiary and any other person (other than with respect to this
Agreement);
(xi) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any
consent with respect to any Contract which is required (or had it
been in effect on the date of this Agreement would have been
required) to be disclosed in Section 3.16 of the GSHS Disclosure
Schedule (other than any of the foregoing contemplated by this
Agreement);
(xii) any capital expenditures or commitments for additions to
property, plant or equipment of GSHS or any Subsidiary in an
aggregate amount exceeding $200,000; or
(xiii) any other transaction involving GSHS or any Subsidiary
outside the ordinary course of business.
Section 3.12. Intellectual Property. GSHS or a Subsidiary
either has all right, title and interest in or a valid and binding
license to use all of the Intellectual Property used by GSHS or any
Subsidiary in the conduct of their respective businesses. No other
Intellectual Property is used or necessary in the conduct of the
business of GSHS or any Subsidiary. Except as disclosed in Section
3.12 of the GSHS Disclosure Schedule, (i) all registrations with and
12
applications to Governmental Authorities in respect of such
Intellectual Property are valid and in full force and effect, (ii)
GSHS and the Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of their trade
secrets, and (iii) neither GSHS nor any Subsidiary is, or has
received any notice that it is, in default (or with the giving of
notice or lapse of time or both, would be in default) under any
license to use such Intellectual Property. Neither GSHS nor any
Subsidiary has received notice that GSHS or any Subsidiary is
infringing any Intellectual Property of any other person, no claim is
pending or, to the Knowledge of GSHS or any Subsidiary, has been made
to such effect that has not been resolved and, to the Knowledge of
GSHS and each Subsidiary, neither GSHS nor any Subsidiary is
infringing any Intellectual Property rights of any other person.
Section 3.13. Certain Transactions. Except as set forth in Section
3.13 of the GSHS Disclosure Schedule, to the Knowledge of GSHS or any
Subsidiary:
(a) No Seller, no Affiliate or Associate of any Seller
(other than GSHS and its Subsidiaries), no officer, director or other
Affiliate of GSHS or any Subsidiary ("Company Affiliate") and no
Associate or Family Member of any Company Affiliate has directly or
indirectly (i) any interest in any corporation, partnership, limited
liability company, proprietorship or other entity which sells to or
purchases from GSHS or any Subsidiary any products or services, (ii)
sells to or purchases from GSHS or any Subsidiary any products or
services, (iii) any cause of action or claim against GSHS or any
Subsidiary; or (iv) a beneficial interest in any Contract to which
GSHS or any Subsidiary is a party or by which it is bound;
(b) Neither GSHS nor any Subsidiary is indebted, either
directly or indirectly, to any Company Affiliate, or any Associate or
Family Member of any Company Affiliate in any amount other than
current obligations for payments of salaries, bonuses and other
fringe benefits for past services rendered and recorded on the books
of GSHS or a Subsidiary; and
(c) No Company Affiliate or any Associate or Family
Member of a Company Affiliate is indebted to GSHS or any Subsidiary.
For purposes of this Section 3.13, there shall be
disregarded any interest which arises solely from the ownership of
less than a five percent equity interest in a corporation whose stock
is regularly traded on any national securities exchange or on the
NASD National Market System; and the term "Family Member" shall mean
a member of an immediate family as the term "immediate family" is
defined in the instructions to Item 404 of Regulation S-K under the
1933 Act and the 1934 Act.
Section 3.14. Benefit Plans.
(a) There are no Benefit Plans or Employment Contracts other than
those set forth in Section 3.14(a) of the GSHS Disclosure Schedule; and no such
Benefit Plans or Employment Contracts obligate GSHS or any Subsidiary to provide
post-retirement health or life insurance benefits to employees or former
employees of GSHS or any Subsidiary other than continuation coverage provisions
under Federal and state law, including with respect to the Consolidated Omnibus
Budget Reconciliation Act of 1985.
(b) GSHS has furnished or made available to Buyer a true, complete
and correct copy of each Benefit Plan and Employment Contract which is set forth
in writing and a complete description of each other Benefit Plan and Employment
Contract.
13
(c) Except as set forth in Section 3.14(c) of the GSHS Disclosure
Schedule, no assets have been set aside in a trust or other separate account
(other than in a tax-exempt trust or tax-exempt separate account) by GSHS or any
ERISA Affiliate to pay directly or indirectly any benefits under any Benefit
Plan or Employment Contract, and all of the assets of any such tax-exempt trust
or separate account are shown on the books and records of such trust or separate
account at their current fair market value.
(d) GSHS, each Subsidiary and each ERISA Affiliate have established,
maintained, administered, reported and disclosed, made contributions to and
otherwise performed all their duties and responsibilities under each Benefit
Plan and each Employment Contract in compliance with all applicable laws.
Neither GSHS, any Subsidiary nor any ERISA Affiliate has any duty or obligation
to indemnify or hold any other person harmless for any liability attributable to
any acts or omissions by such person with respect to any Benefit Plan,
Employment Contract or employee or former employee.
(e) Neither GSHS, any Subsidiary nor any ERISA Affiliate has any
liability for any unpaid Tax or penalty with respect to any Benefit Plan or
Employment Contract, including without limitation, any unpaid Tax or penalty
under ERISA or under the Code.
(f) There are no claims which have been made or, to the Knowledge of
any ERISA Affiliate, threatened under any of the Benefit Plans or Employment
Contracts or against GSHS or any ERISA Affiliate with respect to any of the
Benefit Plans or Employment Contracts (other than routine claims made in the
ordinary course of plan or contract operations) or with respect to the
employment or termination of employment or treatment of any employee or former
employee, and no ERISA Affiliate has any Knowledge of any proposed or actual
audit or investigation by any governmental or other law enforcement agency with
respect to any Benefit Plan, Employment Contract or the employment or
termination of employment or treatment of any employee or former employee.
(g) Except as set forth in Section 3.14(g) of the GSHS Disclosure
Schedule, neither GSHS, any Subsidiary nor any ERISA Affiliate is subject to any
liabilities (including withdrawal liabilities) with respect to any Benefit Plan
or employee benefit plan subject to Title IV of ERISA, including without
limitation, any liabilities arising from Title I or Title IV of ERISA, other
than the liability to make current contributions when due and to pay current
expenses and premiums when due. All such contributions, expenses and premiums
have been paid in full when due.
(h) Except as set forth in Section 3.14(h) of the GSHS Disclosure
Schedule, GSHS or a Subsidiary has the right under the terms of each Benefit
Plan and under applicable law to terminate such plan at any time exclusively by
action of GSHS or such Subsidiary, and no additional contributions would be
required in order to properly effect the termination of such plan in accordance
with the terms of such plan and applicable law.
(i) Neither GSHS nor any Subsidiary employs, or has ever employed, or
leases, or has ever leased, from another employer, any person who is a member of
a collective bargaining unit, and neither GSHS nor any Subsidiary makes or has
made, or has an obligation to make, or has had an obligation to make, or
reimburses or has an obligation to reimburse, or has reimbursed or has had an
obligation to reimburse, another employer directly or indirectly for making,
contributions to an employee benefit plan for the benefit of such a person.
(j) Section 280G of the Code shall not apply to any payments to be
made by GSHS or any Subsidiary as a result of the transactions contemplated by
this Agreement. There are no Parachute Plans to which GSHS or any Subsidiary is
a party or other payment obligations of GSHS or any Subsidiary to an employee or
former employee of GSHS or a Subsidiary which will be triggered as a result of
the change in the control of GSHS contemplated by this Agreement and the GPA
Stock Exchange Agreement, and which constitute an "excess parachute payment"
within the meaning of Section 280G of the Code.
(k) No employer securities, employer real property or other employer
property is included in the assets of any Benefit Plan.
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Section 3.15. Tax Matters.
(a) Except as set forth in Section 3.15(a) of the GSHS Disclosure
Schedule, GSHS and each Subsidiary have (i) filed when due (after taking into
account applicable extensions) with the appropriate federal, state, local,
foreign and other governmental agencies all Tax Returns required to be filed by
them, and (ii) paid when due and payable all Taxes owed by them or, to the
extent of Taxes not yet due and payable, have accrued or otherwise adequately
reserved on the Financial Statements in accordance with GAAP for the payment of
such Taxes not yet due and payable. All such Tax Returns are correct and
complete in all material respects. Complete and accurate copies of all such Tax
Returns due or filed since January 1, 1993, have been furnished or made
available to Buyer. GSHS and each Subsidiary set forth in Section 3.15(a) of the
GSHS Disclosure Schedule is a member of the affiliated group (as defined in
Section 1504 of the Code) of corporations filing a consolidated federal income
tax return of which GSHS is the common parent. GSHS has included the
Subsidiaries in its consolidated federal income Tax Returns, and in its
consolidated, combined or unitary state or local Tax Returns, to the extent set
forth in Section 3.15(a) of the GSHS Disclosure Schedule. Except as set forth in
Section 3.15(a) of the GSHS Disclosure Schedule, neither GSHS nor any Subsidiary
has obtained an extension of the time within which to file any Tax Return that
has not yet been filed. Neither GSHS nor any Subsidiary has received notice from
any Governmental Authority in a jurisdiction in which such entity does not file
a Tax Return stating that such entity is or may be subject to taxation by that
jurisdiction.
(b) There are no Taxes assessed or, to the Knowledge of GSHS or any
Subsidiary, asserted in respect of any Tax Returns filed by GSHS or any
Subsidiary or claimed to be due by any taxing authority or otherwise that are
not accrued or adequately reserved for on the Financial Statements in accordance
with GAAP. Except as set forth in Section 3.15(b) of the GSHS Disclosure
Schedule, to the Knowledge of GSHS or any Subsidiary, no Tax Return of GSHS or
any Subsidiary is currently being audited or, to GSHS or any such Subsidiary's
Knowledge, is scheduled for future audit by the IRS or any other taxing
authority (whether foreign or domestic). Except as set forth in Section 3.15(b)
of the GSHS Disclosure Schedule, neither GSHS nor any Subsidiary has executed or
filed with the IRS or any other taxing authority (whether foreign or domestic)
any agreement, waiver, or other document extending, or having the effect of
extending, the period for assessment or collection of any Taxes, which extension
or waiver is still in effect. GSHS has delivered to Buyer correct and complete
copies of all examination reports, statements of deficiencies and similar
documents prepared by the IRS or any other taxing authority in the possession of
GSHS or any Subsidiary that relate to the income, operations or business of GSHS
or any Subsidiary. All final adjustments made by the IRS with respect to any
federal Tax Return of GSHS or any Subsidiary have been reported to the relevant
state, local, or foreign taxing authorities to the extent required by law. No
requests for ruling or determination letters filed by GSHS or any Subsidiary are
pending with any taxing authority. Except with respect to the consolidated group
of which GSHS is the parent, neither GSHS nor any Subsidiary is a party to any
Tax allocation or sharing agreement with any other entity or has any liability
or obligation to any other entity under any such agreement that previously was
in effect. Except as set forth in Section 3.15(b) of the GSHS Disclosure
Schedule, neither GSHS nor any Subsidiary has any liability to any person or
entity with respect to Taxes paid, owed or to be paid for periods of time during
which GSHS or any Subsidiary or any predecessor of any such entity were members
of a consolidated group other than the consolidated group of which GSHS is or
was the common parent.
(c) Neither GSHS nor any Subsidiary has filed a consent pursuant to
Section 341(f) of the Code, or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by it. No property of GSHS or any
Subsidiary is property that such a corporation is or will be required to treat
as being owned by another person pursuant to the provisions of Section 168(f)(8)
of the Code of 1954, as amended and in effect immediately prior to the enactment
of the Tax Reform Act of 1986, or is "tax exempt use property" within the
meaning of Section 168(h)(1) of the Code. Except as set forth in Section 3.18(c)
of the GSHS Disclosure Schedule, neither GSHS nor any Subsidiary has agreed to
or, to the Knowledge of GSHS or any Subsidiary, is required to make any
adjustment pursuant to Section 481(a) of the Code by reason of
15
a change in accounting method initiated by GSHS or any Subsidiary, and GSHS has
no Knowledge that the IRS has proposed any such adjustment or change in
accounting method. Except as set forth in Section 3.15(c) of the GSHS Disclosure
Schedule, neither GSHS nor any Subsidiary (i) has been a member of an affiliated
group filing a consolidated federal income Tax Return, other than the affiliated
group the common parent of which is GSHS, or (ii) has any liability for Taxes of
any person (other than GSHS and its Subsidiaries) under Treasury Regulation ss.
1.1502-6 or any similar provision of state, local or foreign law, or as a
transferee or successor, by contract, or otherwise.
(d) Proper and timely filings of all required forms and elections
have been made with the IRS to permit treatment under Section 338(h)(10) of the
Code for (i) the acquisition by GSHS (then called GS Holding Corp.) of 80
percent of the stock of the Delaware corporation then called Green Spring Health
Services, Inc. on April 30, 1993, pursuant to a Stock Purchase Agreement dated
as of March 19, 1993, and (ii) the acquisition by GSHS of all of the outstanding
stock of TAO, Inc. on June 30, 1994, pursuant to a Stock Purchase Agreement
dated June 16, 1994. All federal Tax Returns filed by GSHS and any Subsidiary
subsequent to such acquisitions have consistently reflected such treatment for
federal income tax purposes. With respect to the acquisition described in clause
(i) of the first sentence of this paragraph, the requirements of Section
1.197-1T(c) and (e) of the Treasury Regulations were properly and timely
fulfilled such that Section 197 of the Code was retroactively effective with
respect to such acquisition.
Section 3.16. Contracts.
(a) Except for Contracts which are terminable by GSHS or any
Subsidiary without penalty or payment of any amount on 120 days' or less prior
written notice, Section 3.16 of the GSHS Disclosure Schedule sets forth each of
the following Contracts to which GSHS or any Subsidiary is a party: (i) any
contract for borrowed money or deferred portion of purchase price equal to or in
excess of $100,000 that is secured by an Encumbrance on any property of the
Company or any Subsidiary; (ii) any loan agreement, credit agreement, promissory
note, guarantee, indenture, subordination agreement, letter of credit, interest
rate or foreign currency protection agreement or any other similar type of
Contract in each case involving a debt or similar obligation of $100,000 or
more; (iii) any consulting or other Contract with attorneys, accountants,
actuaries, appraisers, investment bankers, lobbyists, government relations
persons or other professional advisers equal to or in excess of $500,000 per
year; (iv) any brokerage agreement, marketing agreement, sales agent or
consulting agreement providing for the payment of commissions or other
compensation with respect to referring or directing business to GSHS or any
Subsidiary equal to or in excess of $150,000 per year; (v) any Contract (except
for Contracts with customers) which, in whole or in part, (A) presently
restricts or precludes GSHS or any present or future Subsidiary or Affiliate of
GSHS from conducting any business anywhere in the world, or (B) upon the
occurrence of any event, the giving of notice or the passage of time, by its
terms would have such an effect; (vi) any Contract (except for Contracts with
customers) that involves aggregate payments by or to GSHS or any Subsidiary in
excess of $500,000; (vii) any indemnification agreement (except those entered
into in the ordinary course of business), guaranty or power of attorney granted
to any person or entity (other than GSHS or a Subsidiary); (viii) any lease or
Lease with annual rental payments equal to or in excess of $50,000; and (ix)
Contracts with the 15 largest customers of GSHS and the Subsidiaries measured by
revenues from such customers during the twelve-month period ended June 30, 1995.
GSHS has delivered or otherwise made available to Buyer true, correct and
complete copies of the Contracts set forth in Section 3.16 of the GSHS
Disclosure Schedule, together with all amendments, waivers, modifications,
supplements or side letters materially affecting the obligations of any party
under such Contracts.
(b) Except as set forth opposite or otherwise as part of the
description of such Contract in Section 3.16 of the GSHS Disclosure Schedule:
(i) Each of the Contracts set forth in Section 3.16 of the
GSHS Disclosure Schedule with respect to clause (ix) of Section
3.16(a) is valid and enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, and reorganization and
similar laws affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law
or in equity);
16
(ii) Since January 1, 1995, no party to any such Contract has
given to GSHS or any Subsidiary notice of any breach or default under
any such Contract by GSHS or a Subsidiary which has not been cured or
waived;
(iii) Neither GSHS nor any Subsidiary is in violation, breach
of or default under any such Contract in any material respect or,
with notice of lapse of time or both, would be in violation, breach
of or default under any such Contract; and, to the Knowledge of GSHS
and its Subsidiaries no other party to any such Contract is in
violation, breach of or default under any such Contract or, with
notice or lapse of time or both, would be in violation, breach of or
default under any such Contract; and
(iv) No consent by or of any party to any such Contract is
required in order to consummate the transactions contemplated by this
Agreement or the GPA Stock Exchange Agreement without causing a
breach or violation of or a default under such Contract.
Section 3.17. Insurance. Section 3.17 of the GSHS Disclosure Schedule
sets forth (i) a true and correct list of all insurance policies and other
surety arrangements of any kind or nature whatsoever which are in force and to
which GSHS or any Subsidiary is a named insured or beneficiary, and a true and
correct copy of each such policy has been furnished to Buyer and (ii) a summary
description of each pending claim asserting liability of GSHS or a Subsidiary
equal to or greater than $200,000 under each such policy.
Section 3.18. Personnel Matters. Except as set forth in Section 3.18
of the GSHS Disclosure Schedule:
(a) Neither GSHS nor any Subsidiary is a party to any
collective bargaining or similar agreement nor are any of GSHS' or its
Subsidiaries' employees currently represented by a labor organization for
purposes of collective bargaining as provided under the National Labor Relations
Act;
(b) there is no unfair labor practice charge or complaint or
any other matter against or involving GSHS or any Subsidiary pending or, to the
Knowledge of any Seller, GSHS or any Subsidiary, threatened before the National
Labor Relations Board or any court of law;
(c) there is no labor strike, or other dispute, slowdown or
stoppage pending against GSHS or any Subsidiary; and
(d) there are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including discrimination
based upon sex, age, marital status, race, national origin, sexual preference,
disability or veteran status) pending before the Equal Employment Opportunity
Commission or any Governmental Authority against GSHS or any Subsidiary.
Section 3.19. Properties.
(a) Title to Properties. Except as set forth in Section
3.19(a) of the GSHS Disclosure Schedule, GSHS and the Subsidiaries collectively
have a valid leasehold interest in or have legal right to use without
restriction all of the real property and GSHS and the Subsidiaries collectively
own, have a valid leasehold interest in or have legal right to use without
restriction the tangible personal property used in the conduct of their
businesses, free and clear of
17
all Encumbrances, except Permitted Encumbrances and Encumbrances reflected on
the Financial Statements.
(b) Personalty, Equipment and Fixtures. Substantially all
fixtures, facilities, computers, computer hardware and peripheral equipment,
personal property and equipment owned or leased by GSHS or any Subsidiary (i)
are in good working order, ordinary wear and tear excepted, and GSHS and each
Subsidiary has maintained the same in accordance with sound industry practices
(except for equipment awaiting repair in the ordinary course of GSHS's or any
Subsidiary's business consistent with past practices), and (ii) meet and comply
in all material respects with all applicable laws, rules and regulations of any
Governmental Authority.
Section 3.20. Absence of Certain Commercial Practices. Since
January 1, 1991, none of GSHS or any Subsidiary, any of their directors,
officers or employees has:
(a) given, proposed to give, or agreed to give any material
gift or similar material benefit to any customer, supplier or any other person
(other than as described in subsection (b) of this Section 3.20), for the
purpose of furthering the business of GSHS or a Subsidiary;
(b) in connection with the business of GSHS or any
Subsidiary, used any corporate or other funds for contributions, payments,
gifts, or entertainment, or made any expenditures relating to political
activities to government employees, officials or others in violation of any
applicable law or established or maintained any unlawful or unrecorded funds; or
(c) offered or paid or solicited or received any
remuneration (as such term has been interpreted under 42 U.S.C. ss. 1320a-7b(b))
to induce or in return for any referral of healthcare business or ordering of
healthcare items or services in violation of any federal or state civil or
criminal law.
To the knowledge of GSHS or any Subsidiary, none of GSHS, any
Subsidiary, any of their respective directors, officers, or employees has
accepted or received any unlawful contributions, payments or gifts in connection
with the business of GSHS and the Subsidiaries.
Section 3.21. Obligations Under Certain Agreements. Except as set
forth in Section 3.21 of the GSHS Disclosure Schedule, with respect to (i) the
Stock Purchase Agreement, dated March 19, 1993, among VI, HCSC, GS Holding, Inc.
and Blue Cross and Blue Shield of Maryland, Inc., (ii) the Subscription
Agreement, dated January 11, 1994, among GSHS, Green Spring Mental Health
Services of New Jersey, Inc., BCBS, and Quality Health Management, (iii) the
Stock Purchase Agreement, dated June 16, 1994, among GSHS, VI, HCSC and IBC,
(iv) the Stock Purchase Agreement, dated June 16, 1994, among GSHS, VI and MSAP
(v) the Stock Purchase Agreement, dated June 16, 1994, between GSHS and IBC
relating to TAO, Inc., and (vi) the Stock Purchase Agreement, dated October 25,
1993, among GSHS, PCMB and Maschoff, Xxxx and Associates, Inc., there are no
pending, unresolved or unpaid indemnification or similar claims against or
further payments or consideration payable by GSHS or any Subsidiary under any of
such agreements or any related agreement.
Section 3.22. Brokers, Finders and Investment Bankers. Except for
Xxxx Xxxxxx Xxxxxxxx, Inc., no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Sellers. GSHS is solely responsible for the fees and expenses of
Xxxx Xxxxxx Xxxxxxxx, Inc.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller, severally and not jointly, represents and warrants to
Buyer as follows and acknowledges that Buyer is relying upon such
representations and warranties in connection with the transactions provided for
in this Agreement. The parties acknowledge that certain of the representations
and warranties set forth in this Article 4 lack qualifications as to materiality
in light of the agreements set forth in Sections 7.1 and 9.2(f).
Section 4.1. Organization. Such Seller is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to enter into
and perform its obligations under this Agreement and each Operating Agreement to
which it or a subsidiary is a party, and, in the case of each Seller other than
MSAP and VI, the Exchange Agreement and the New Stockholders' Agreement.
Section 4.2. Authorization; Execution; Binding Effect. Subject to the
conditions contained in Section 8.10, the execution, delivery and performance of
this Agreement, and, in the case of each Seller other than MSAP and VI, the
Exchange Agreement and the New Stockholders' Agreement, and the consummation of
the transactions provided for in such agreements have been duly authorized by
all necessary corporate action on the part of such Seller. Subject to the
conditions contained in Section 8.10, assuming due execution and delivery by the
other parties, this Agreement constitutes, and, in the case of each Seller other
than MSAP and VI, the Exchange Agreement and the New Stockholders' Agreement,
will constitute, the legal, valid and binding obligations of such Seller,
enforceable against such Seller in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other laws affecting creditors' rights and remedies generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
Section 4.3. Capitalization; Share Ownership. Except for this
Agreement (including but not limited to Section 6.14), the GPA Stock Exchange
Agreement and as set forth in Section 4.3 of the Seller Disclosure Schedule, (i)
there is no existing subscription, option, warrant, call, right, commitment or
other agreement (whether pre-emptive or contractual) to which such Seller is a
party requiring, directly or indirectly, the issuance of any additional shares
of common stock of GSHS or other securities convertible into or exercisable or
exchangeable for shares of common stock of GSHS or any other equity security of
GSHS, and (ii) there are no outstanding contractual obligations of such Seller
to repurchase, redeem or otherwise acquire any outstanding capital stock of
GSHS. The GSHS Shares and the New GSHS Shares to be sold pursuant to this
Agreement will be delivered free and clear of all liens, charges and
encumbrances of any kind or nature and will not be in violation of any
pre-emptive rights. Except pursuant to the Old Shareholders' Agreement, such
Seller does not have registration rights in respect of the GSHS Shares or the
New GSHS Shares or securities convertible into or exercisable or exchangeable
for GSHS Shares or the New GSHS Shares. Such Seller is the sole beneficial owner
of the shares of GSHS listed beside such Seller's name in Section 4.3 of the
Seller Disclosure Schedule and, upon consummation of the transactions provided
by Section 6.14, will be the sole beneficial owner of the New GSHS Shares listed
beside such Seller's name in Section 6.14. The Old Shareholders' Agreement is
the only stockholder agreement, voting agreement, voting trust, proxy or other
agreement to which such Seller is a party with respect to the voting or transfer
of GSHS Shares.
Section 4.4. No Conflicting Agreements or Charter Provisions. Except
as set forth in Section 4.4 of the Seller Disclosure Schedule, the execution,
delivery and compliance with and performance of the terms and provisions of this
Agreement, and, in the case of each Seller other than MSAP and VI, the Exchange
Agreement and the New Stockholders' Agreement by such Seller will not (i)
conflict with or result in a breach of the terms, conditions or
19
provisions of, (ii) constitute a default (or an event which, with notice, lapse
of time, or both, would constitute a default) under, (iii) result in any
violation of, (iv) require the obtaining of any consent, approval or action of,
make any filing with or give notice to any person (except for a Governmental
Authority) as a result of or under the terms of, (v) result in or give to any
persons any right of termination, cancellation, acceleration, modification, or
increased or accelerated rights, entitlements or payments under, or (vi) result
in the creation or imposition of any Encumbrance upon such Seller or any of its
assets under: (A) the Certificate or Articles of Incorporation or bylaws of such
Seller or any resolutions adopted by the stockholders or the Board of Directors
(or a duly authorized committee of the Board of Directors) of such Seller, (B)
any provision of any material Contract to which such Seller is a party or by
which it or any part of any of its assets may be bound, or (C) any order,
decree, license, permit, statute, law, rule or regulation to which such Seller
is subject.
Section 4.5. Consents, Approvals, Licenses, Etc. No consent,
approval, authorization, license, order or Permit of, or declaration, filing or
registration with, or notification to, any Governmental Authority is required to
be made or obtained by such Seller in connection with the execution, delivery
and performance of this Agreement, and, in the case of each Seller other than
MSAP and VI, the Exchange Agreement and the New Stockholders' Agreement and the
consummation of the transactions contemplated by such agreements, except (i) as
set forth in Section 4.5 of the Seller Disclosure Schedule; or (ii) applicable
requirements, if any, of the Delaware General Corporation Law, the 1934 Act,
state securities or blue sky laws and the HSR Act.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows and acknowledges
that Sellers are relying on such representations and warranties in connection
with the transactions provided for in this Agreement:
Section 5.1. Organization, etc. Buyer is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate or other power and authority (i) to
conduct its business as it is now conducted and to own or lease all of the
properties owned or leased by it; and (ii) to enter into and perform this
Agreement, the Exchange Agreement, the GPA Stock Exchange Agreement and the New
Stockholders' Agreement. True, correct and complete copies of the Certificate or
Articles of Incorporation and bylaws of Buyer and each Buyer Subsidiary as of
the date of this Agreement have been previously delivered or made available to
GSHS. The corporate records and minute books of Buyer contain complete and
accurate minutes of all meetings and other corporate actions of the directors
and stockholders of Buyer held, in the case of Buyer, since its date of
incorporation, and in the case of each Buyer Subsidiary, since the date of its
acquisition by Buyer, and the share certificate books and register of
stockholders of each Buyer Subsidiary are complete and accurate. Buyer and each
Buyer Subsidiary is duly qualified as a foreign corporation to do business, and
is in good standing, in all jurisdictions in which the ownership or lease of
property or the conduct of its business make such qualification necessary,
except where the failure to be so qualified would not have an aggregate adverse
effect of more than $50,000 on the financial condition of Buyer and the Buyer
Subsidiaries, taken together.
Section 5.2. Authorization; Execution; Binding Effect. The execution,
delivery and performance of this Agreement, the Exchange Agreement, the GPA
Stock Exchange Agreement and the New Stockholders' Agreement and the
consummation of the transactions provided for in such agreements have been duly
authorized by all necessary corporate action on the part of Buyer. Assuming due
execution and delivery by the other parties, this Agreement, the Exchange
Agreement, the GPA Stock Exchange Agreement and the New Stockholders' Agreement
constitute the legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights and
20
remedies generally and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
Section 5.3. No Conflicting Agreements or Charter Provisions. The
execution, delivery, compliance with and performance of the terms and provisions
of this Agreement, the Exchange Agreement, the GPA Stock Exchange Agreement and
the New Stockholders' Agreement will not (i) conflict with or result in a breach
of the terms, conditions or provisions of, (ii) constitute a default (or an
event which, with notice, lapse of time, or both, would constitute a default)
under, (iii) result in any violation of, (iv) require the obtaining of any
consent, approval or action of, or the making of any filing with or give notice
to any person (except for a Governmental Authority) as a result of or under the
terms of, or (v) result in or give to any person any right of termination,
cancellation, acceleration, modification, or increased or accelerated rights,
entitlements or payments under, (A) the Certificate of Incorporation or bylaws
of Buyer, (B) except as set forth in Section 5.3 of the Buyer Disclosure
Schedule, any provision of any material Contract to which Buyer is a party, or
(C) any order, judgment, decree, license, permit, statute, law, rule or
regulation to which Buyer is subject.
Section 5.4. Securities Filings. (a) True and complete copies of all
reports and registration statements filed with respect to Buyer pursuant to the
1933 Act or pursuant to the 1934 Act during the period from October 1, 1992 to
the date of this Agreement (the "Buyer SEC Reports") have been delivered to
GSHS. The Buyer SEC Reports conform in all material respects to the applicable
requirements of the 1933 Act and the 1934 Act and the rules and regulations
promulgated under such acts and did not include at the time of filing such
documents any untrue statement of a material fact or omit to state any material
fact required to be stated or necessary to make the statements made, in light of
the circumstances under which they were made, not misleading. During the period
from October 1, 1992 through the date of this Agreement, Buyer has not failed to
make any filing required by the 1933 Act or the 1934 Act on a timely basis.
(b) Each of the consolidated financial statements (including, in each
case, any related notes to the consolidated financial statements) contained in
the Buyer SEC Reports (i) was prepared in accordance with GAAP (except, in the
case of unaudited consolidated financial statements included in the Buyer SEC
Reports, to the extent preparation of such financial statements in accordance
with GAAP is not required by applicable rules of the Securities and Exchange
Commission) in a manner consistent (except for the required adoption by Buyer
effective on July 31, 1992 of Fresh-Start Accounting pursuant to GAAP) with
prior periods; (ii) presents fairly, in all material respects, the financial
position, results of operations, changes in stockholders' equity and cash flows
of the Buyer on a consolidated basis at the date and for the period indicated;
(iii) are in all material respects, in accordance with the books of account and
records of the Buyer; and (iv) comply as to form in all material respects with
applicable accounting requirements and with the rules and regulations of the
Commission with respect thereto.
Section 5.5. Capitalization. The authorized capital stock of Buyer
consists of (a) 80 million shares of Charter Common Stock and (b) 10 million
shares of preferred stock, no par value. As of September 30, 1995: (i)
28,398,166 shares of Charter Common Stock were issued and outstanding, all of
which are duly authorized, validly issued, fully paid and nonassessable and not
in violation of any pre-emptive rights; (ii) 2,863,515 shares of Charter Common
Stock were reserved for future issuance pursuant to stock options granted
certain directors, officers and employees; (iii) 177,567 shares of Charter
Common Stock were reserved for future issuance upon exercise of warrants; and
(iv) 39,205 shares of Charter Common Stock were reserved in connection with the
acquisition of Magellan Health Services, Inc. Since September 30, 1995, there
has been no material change in the number of issued and outstanding shares of
Charter Common Stock as set forth in subsection (i) above. No shares of
preferred stock are issued and outstanding. Except for this Agreement, as set
forth in clauses (ii) through (iv) of the second sentence of this Section
21
5.5, and as set forth in Section 5.5 of the Buyer Disclosure Schedule, (i) there
is no existing subscription, option, warrant, call, right, commitment or other
agreement (whether pre-emptive or contractual) to which Buyer is a party
requiring, and there are no convertible securities of Buyer outstanding which
upon conversion would require, directly or indirectly, the issuance of any
additional Common Stock of Buyer or other securities convertible into or
exercisable or exchangeable for Common Stock of Buyer or any other equity
security of Buyer, and (ii) there are no outstanding contractual obligations of
Buyer to repurchase, redeem or otherwise acquire any outstanding capital stock
of Buyer. There are no bonds, debentures, notes or other indebtedness issued and
outstanding having the right to vote on any matters on which Buyer's
stockholders may vote. There are no obligations, contingent or otherwise, of
Buyer or any Buyer Subsidiary to (x) repurchase, redeem or otherwise acquire any
outstanding capital stock of Buyer or (except to the extent of not more than
$10,000,000) the capital stock of, or other equity interests in, any Buyer
Subsidiary or (y) except to the extent permitted by the Credit Agreement, and
except for guarantees of obligations of, or loans and advances to, Buyer or any
Buyer Subsidiary, provide funds to, or make investments in, or provide any
guarantee with respect to the obligations of any other person. The shares of
Charter Common Stock to be issued pursuant to this Agreement and the Exchange
Agreement have been or will, upon issuance in accordance with the terms of such
agreements, be duly authorized and validly issued, fully paid and nonassessable,
will be delivered free and clear of all liens, charges and encumbrances of any
kind or nature and such issuance will not be in violation of any pre-emptive
rights. Buyer has granted no person or entity any registration rights in respect
of the capital stock of Buyer or securities convertible into or exercisable or
exchangeable for such capital stock, which registration rights are outstanding
as of the date of this Agreement. Buyer is not a party to any stockholder
agreement, voting agreement, voting trust, proxy or other agreement in effect
with respect to the capital stock of Buyer.
Section 5.6. Absence of Certain Changes or Events. Since June 30,
1995 and except as disclosed in the Buyer SEC Reports filed prior to the date of
this Agreement, Buyer has operated its business in the ordinary course and there
has not been (a) any event or circumstance that has had a material adverse
effect on Buyer's business, (b) any material change by Buyer in its application
of GAAP, (c) any damage, destruction or loss, whether or not covered by
insurance, which, insofar as reasonably can be foreseen, in the future would
have a material adverse effect on Buyer and the Buyer Subsidiaries, taken as a
whole, or (d) any entry into any commitment or transaction material to Buyer and
the Buyer Subsidiaries, taken as a whole (including, without limitation, any
borrowing or sale of assets) except in the ordinary course of business
consistent with past practice.
Section 5.7. Litigation. Except as set forth in Section 5.7 of the
Buyer Disclosure Schedule, (a) there is (whether insured or uninsured) no
action, suit, proceeding or investigation pending or, to the Knowledge of Buyer,
threatened in writing, at law or in equity, in any court or before any
Governmental Authority against Buyer or any Buyer Subsidiary or affecting Buyer
or any Buyer Subsidiary or any of the respective assets or properties of Buyer
or any Buyer Subsidiary that, individually or in the aggregate would have a
material adverse effect on Buyer or would prevent Buyer from consummating the
transactions contemplated by this Agreement, the Exchange Agreement, the GPA
Stock Exchange Agreement, and the New Stockholders' Agreement, and (b) Buyer and
the Buyer Subsidiaries and their respective assets and properties are not
subject to any order from any Governmental Authority that has or is likely to
have a material adverse effect on Buyer.
Section 5.8. Compliance with Laws. Except as set forth in Section
5.8 of the Buyer Disclosure Schedule, the conduct by Buyer and the Buyer
Subsidiaries of their respective businesses is in compliance in all material
respects with all applicable laws, regulations and orders. Neither Buyer nor
any Buyer Subsidiary has received any notice to the effect that Buyer or any
Buyer Subsidiary is not in compliance in all material respects with any
applicable law, regulation or order except (i) as set forth in Section 5.8 of
the Buyer Disclosure Schedule or (ii) for deficiencies noted in hospital
licensure, Medicare or Medicaid surveys and inspections where revocation of
licensure or Medicare or Medicaid participation is not proposed or pending if
deficiencies are corrected in a timely manner pursuant to a plan of correction,
and Buyer or the applicable Buyer Subsidiary is correcting such deficiencies in
a timely manner. Neither
22
Buyer nor any Buyer Subsidiary has any Knowledge of the proposed or threatened
issuance of any such notice or of any pending or threatened investigation with
respect to any such matter.
Section 5.9. Credit Agreement Amendment. Buyer has obtained from the
requisite lenders under the Credit Agreement and will deliver prior to the
Closing to GSHS and Sellers a true, correct and fully executed amendment that,
subject to the conditions contained therein, permits Buyer, without violating
any provision of the Credit Agreement or any of the documents relating to the
Credit Agreement, to enter into and consummate this Agreement, the Exchange
Agreement, the New Stockholders' Agreement and the GPA Stock Exchange Agreement
and to consummate the transactions contemplated thereby, except for a
requirement that the incurrence of indebtedness by Buyer and the Buyer
Subsidiaries, the making of capital contributions to the Buyer Subsidiaries and
the purchase of equity securities of Buyer Subsidiaries shall be subject to
certain limitations contained in the Credit Agreement.
Section 5.10. No Undisclosed Liabilities. Buyer and the Buyer
Subsidiaries did not have as of June 30, 1995, any material indebtedness,
liability or obligation of any kind or nature (fixed or contingent) that is
required to be reflected on the balance sheet as of such date in accordance with
GAAP which is not reflected, reserved against or disclosed in the Buyer SEC
Reports or disclosed in the Buyer Disclosure Schedule.
Section 5.11. Brokers, Finders and Investment Bankers. Except for
Xxxxx Xxxxxx Incorporated, no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer. Buyer is solely responsible for the fees and expenses of
Xxxxx Xxxxxx Incorporated.
Section 5.12. Subsidiaries.
(a) Buyer has no "Significant Subsidiaries" (as such term is defined
in Rule 1-02 of Regulation S-X of the Securities and Exchange Commission.
(b) The shares of capital stock of the Buyer Subsidiaries owned by
Buyer or a Buyer Subsidiary (the "Buyer Subsidiary Shares") have been duly
authorized and validly issued and are fully paid and nonassessable and were not
issued in violation of any preemptive rights. Except for the GPA Stock Exchange
Agreement and as set forth in Section 5.12(b) of the Buyer Disclosure Schedule,
there are no existing subscriptions, options, warrants, calls, rights of
conversion or other rights, agreements, arrangements or commitments relating to
the capital stock of any Buyer Subsidiary or obligation of any Buyer Subsidiary
to issue or sell any of its shares of capital stock. Either Buyer or another
Buyer Subsidiary owns the Buyer Subsidiary Shares free and clear of all
Encumbrances, except as set forth in Section 5.12(b) of the Buyer Disclosure
Schedule. Except for the GPA Stock Exchange Agreement as set forth in Section
5.12(b) of the Buyer Disclosure Schedule, there are no voting trusts,
stockholder agreements, proxies or other agreements in effect with respect to
the voting or transfer of the Buyer Subsidiary Shares.
Section 5.13. Takeover Provisions Inapplicable. As of the date hereof
and at all times on or prior to the Closing Date, Section 203 of the Delaware
General Corporation Law is, and shall be, inapplicable to the transactions
contemplated by this Agreement.
Section 5.14. GPA. (a) The 1,000,000 shares of the common stock of
GPA (such shares, the "GPA Common Stock") to be acquired by GSHS pursuant to the
GPA Stock Exchange Agreement (i) are validly issued
23
and outstanding, fully paid and nonassessable and not issued in violation of any
pre-emptive rights and (ii) have been issued in compliance with applicable
federal and state statutes and regulations.
(b) Buyer is the lawful record and beneficial owner of and has good
and valid title to the shares of GPA Common Stock, free and clear of all
Encumbrances, with full right, power and authority to transfer and contribute
the GPA Common Stock to GSHS.
(c) The certificate or certificates representing GPA Common Stock
delivered to GSHS at the Closing, together with any other instruments of
transfer deemed necessary by GSHS, will be sufficient to transfer and vest in
GSHS good and valid title to the GPA Common Stock, free and clear of all
Encumbrances and upon the closing of the transactions provided for by the GPA
Stock Exchange Agreement, GSHS will acquire the beneficial and legal, good and
valid title to the GPA Common Stock, free and clear of all Encumbrances.
(d) The shares of GPA Common Stock constitute all of the issued and
outstanding capital stock of GPA, and other than the GPA Stock Exchange
Agreement, (i) there is no existing subscription, option, warrant, call, right,
commitment or other agreement (whether pre-emptive or contractual) to which
Buyer is a party requiring, and there are no convertible securities of GPA
outstanding which upon conversion would require, directly or indirectly, the
issuance of any additional shares of common stock of GPA or other securities
convertible into or exercisable or exchangeable for common stock of GPA or any
other equity security of GPA, and (ii) there are no outstanding contractual
obligations of GPA to repurchase, redeem or otherwise acquire any outstanding
shares of common stock of GPA. There are no bonds, debentures, notes or other
indebtedness issued and outstanding having the right to vote on any matters on
which GPA's stockholders may vote. There are no obligations, contingent or
otherwise, of GPA or any subsidiary of GPA to (x) repurchase, redeem or
otherwise acquire any outstanding shares of common stock of GPA or the capital
stock of, or other equity interests in, any subsidiary of GPA or (y) except for
guarantees of obligations of, or loans and advances to, GPA or any subsidiary of
GPA, provide funds to, or make investments in, or provide any guarantee with
respect to the obligations of any other person. GPA has granted no person or
entity any registration rights in respect of any shares of its common stock or
securities convertible into or exercisable or exchangeable for any shares of the
common stock of GPA. Buyer is the sole record and beneficial owner of the GPA
Common Stock.
(e) Buyer has delivered to GSHS true and complete copies of the
unaudited consolidated balance sheet of GPA as of or at September 30, 1995 and
unaudited statements of income, changes in stockholder's equity and cash flows
for the 12-month period ended September 30, 1995 (the "GPA Financial
Statements"). The GPA Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied and fairly present
the financial position of GPA as at their dates and the results of operations
and changes in financial position of GPA for the periods ended, except for the
absence of notes to the GPA Financial Statements and normal, recurring audit
adjustments which will not be material in amount. Since September 30, 1995,
there has been no material adverse change in the assets, liabilities, business,
prospects, results of operations or financial condition of GPA.
(f) GPA and each corporation, partnership or other entity of which
GPA (i) has the power to elect more than 50% of the board of directors or other
governing authority either directly or indirectly or (ii) owns or controls more
than 50% of the outstanding equity securities or equity interests either
directly or through an unbroken chain of entities as to each of which 50% or
more of the outstanding equity securities or equity interests is owned directly
by its parent (a "GPA Subsidiary") is a corporation duly organized, validly
existing and in good standing under the laws of their respective states of
incorporation and has all requisite corporate power and authority to conduct its
business as it is now conducted and to own or lease all of the properties owned
or leased by it. True, correct and complete copies of the Certificate or
Articles of Incorporation and bylaws of GPA and each GPA Subsidiary as of the
date of this Agreement have been previously delivered or made available to GSHS.
The corporate records and minute books of GPA and each GPA Subsidiary contain
complete and accurate minutes of all meetings and other corporate actions of the
directors and stockholders of GPA and each GPA Subsidiary held, in the case of
GPA, since its date of incorporation, and in the case of each GPA Subsidiary,
since the date of its incorporation or acquisition by GPA, and the share
certificate books and register of stockholders of GPA and each GPA Subsidiary
are complete and accurate. GPA and each GPA Subsidiary
24
is duly qualified to do business as a foreign corporation, and is in good
standing, in all jurisdictions in which the ownership or lease of property by it
or the conduct of its business makes such qualification necessary.
(g) Other than the GPA Subsidiaries set forth in Section 5.14(g) of
the disclosure letter from CMC to the Company, dated the date of this Agreement
(the "GPA Disclosure Letter"), there are no other corporations, partnerships,
limited liability companies, joint ventures or other entities in which GPA or
any GPA Subsidiary owns, of record or beneficially, any direct or indirect
equity interest or any right (contingent or otherwise) to acquire the same.
(h) Section 5.14(h) of the GPA Disclosure Letter sets forth the
jurisdiction of incorporation of each GPA Subsidiary, its authorized capital
stock, the number and class or series of its issued and outstanding shares of
capital stock, and the current ownership by GPA and the GPA Subsidiaries of such
shares (collectively, the "GPA Subsidiary Shares"), as well as the current
ownership percentages held by third parties. Except as set forth in Section
5.14(h) of the GPA Disclosure Letter, the GPA Subsidiary Shares constitute all
the issued and outstanding shares of capital stock of the GPA Subsidiaries. The
GPA Subsidiary Shares have been duly authorized and validly issued and are fully
paid and nonassessable and were not issued in violation of any pre-emptive
rights. There are no existing subscriptions, options, warrants, calls, rights of
conversion or other rights, agreements, arrangements or commitments relating to
the capital stock of any GPA Subsidiary obligating any GPA Subsidiary to issue
or sell any shares of its capital stock. Either GPA or another GPA Subsidiary
owns the GPA Subsidiary Shares issued by the respective GPA Subsidiaries free
and clear of all Encumbrances, except (i) as set forth in Section 5.14(h)(i) of
the GPA Disclosure Letter and (ii) Encumbrances arising out of or in connection
with this Agreement. There are no voting trusts, proxies or other agreements in
effect with respect to the voting or transfer of the GPA Subsidiary Shares.
(i) The consummation of the transactions contemplated by this
Agreement and the GPA Stock Exchange Agreement, will not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default (or an event which, with notice, lapse of time, or both, would
constitute a default) under, (iii) result in any violation of, (iv) require the
obtaining of any consent, approval or action of, make any filing with or give
notice to any person (except for a Governmental Authority) as a result of or
under the terms of, (v) result in or give to any person any right of
termination, cancellation, acceleration, modification, or increased or
accelerated rights, entitlements or payments under, or (vi) result in the
creation or imposition of any Encumbrance upon GPA or any GPA Subsidiary or any
of their respective assets under: (A) the Certificate or Articles of
Incorporation or bylaws of GPA or any GPA Subsidiary or any resolutions adopted
by the stockholders or the Board of Directors of GPA or any GPA Subsidiary, or
(B) any order, judgment or decree (in a proceeding to which a Governmental
Authority is not a party) to which GPA or any GPA Subsidiary is subject.
(j) No consent, approval, authorization, license, statute, law, rule,
regulation, order or Permit of, or declaration, filing or registration with, or
notification to, any Governmental Authority is required to be made or obtained
by GPA or any GPA Subsidiary in connection with the execution, delivery and
performance of this Agreement, or the consummation of the transactions
contemplated by this Agreement or the GPA Stock Exchange Agreement, except: (i)
as set forth in Section 5.14(j)(i) of the GPA Disclosure Letter; (ii) applicable
requirements, if any, of the Delaware General Corporation Law, the 1934 Act,
state securities or blue sky laws and the HSR Act; or (iii) where the failure to
obtain such Permits, or to make such declarations, filing or registration or
notifications, would not, either individually or in the aggregate, have an
adverse effect on GPA or any GPA Subsidiary involving more than $20,000.
(k) Except as set forth in Section 5.14(k) of the GPA Disclosure
Letter, there is (whether insured or uninsured) no action, suit, proceeding or
investigation pending or, to the Knowledge of GPA or a GPA Subsidiary,
threatened in writing, at law or in equity, in any court or before or by any
Governmental Authority: (i) against GPA or any GPA Subsidiary, except for
uninsured private civil litigation not involving a claim for equitable relief
and involving a claim for less than $200,000; (ii) to the Knowledge of GPA or
any GPA Subsidiary, affecting GPA or any GPA Subsidiary or any of their
properties, except for uninsured private civil litigation not involving a claim
for equitable
25
relief and involving a claim for less than $200,000; or (iii) to the Knowledge
of GPA or any GPA Subsidiary, affecting this Agreement, the GPA Stock Exchange
Agreement or any action taken or to be taken or documents executed or to be
executed pursuant to or in connection with the provisions of this Agreement.
(l) As of September 30, 1995 (the "GPA Balance Sheet Date"), neither
GPA nor any GPA Subsidiary had any Undisclosed Liability. Except (i) as set
forth in Section 5.14(l) of the GPA Disclosure Letter, (ii) as set forth in the
unaudited consolidated balance sheet of GPA as of September 30, 1995 included in
the GPA Financial Statements (the "GPA Balance Sheet") or (iii) for normal and
recurring current liabilities accruing in the ordinary course of business since
the date of the Balance Sheet, neither GPA nor any GPA Subsidiary, on the date
of this Agreement, has outstanding any undisclosed liability that would be an
Undisclosed Liability if the definition of such term referred to the GPA Balance
Sheet, the GPA Financial Statements and the GPA Disclosure Letter. Except as set
forth in the GPA Financial Statements or in Section 5.14(l) of the GPA
Disclosure Letter, neither GPA nor any GPA Subsidiary has any long-term
indebtedness, any lease obligation required to be recorded under GAAP as a
capitalized lease and on the Closing Date will have no debt due to or from Buyer
(except as reflected in the most recent GPA Financial Statements).
(m) GPA and each GPA Subsidiary has, since their respective dates of
incorporation, complied in all material respects with all laws, regulations and
orders relating or applicable to the operation of its respective business. GPA
and each GPA Subsidiary holds all Permits required to be held by it in order to
own, occupy and lease its assets and to conduct and operate its business (as
presently conducted and as conducted on the Closing Date) in compliance with all
applicable laws and regulations. A true and correct copy of each such Permit has
previously been delivered or made available to GSHS. Except as set forth in
Section 5.14(j)(i) or Section 5.14(m) of the GPA Disclosure Letter, neither GPA
nor any GPA Subsidiary is in default or, to GPA's Knowledge, alleged to be in
default with respect to any judgment, order, writ, injunction or decree of any
Governmental Authority which would have an adverse effect on the business,
assets or financial condition of GPA or any GPA Subsidiary in excess of $50,000,
no notice from any Governmental Authority or agency in respect to (including an
investigation) the revocation, termination, suspension or limitation of any
Permit or the failure to have any Permit has been issued or given to GPA or any
GPA Subsidiary, nor does GPA or any GPA Subsidiary have any Knowledge of the
proposed or threatened issuance of any such notice or of any pending or
threatened investigation with respect to any such matter.
(n) Since the Balance Sheet Date and except as set forth in Section
5.14(n) of the GPA Disclosure Letter or as contemplated by this Agreement, there
has not been, occurred or arisen:
(i) any material adverse change in the financial condition,
results of operations, prospects, business, properties, assets or
liabilities of GPA and the GPA Subsidiaries;
(ii) any termination (or, to the Knowledge of GPA or any GPA
Subsidiary, threat of termination) of any Contract to which either
GPA or any GPA Subsidiary is a party representing $500,000 or more of
revenue to GPA or a GPA Subsidiary for the 12-month period ended
September 30, 1995;
(iii) any increase in the compensation payable or to become
payable by GPA or any GPA Subsidiary to any of its directors,
officers, management, employees, consultants or agents whose base
annual salary or, in the case of a non-employee, base annual
compensation (for any individual) exceeds $75,000 or any increase in
benefits under any bonus, insurance, pension or other benefit plan
made for or with any of such persons (including, but not limited to,
any change in targets, goals, bonus pools and the like under any
Benefit Plan, Employment Contract or other employee compensation
arrangement) except for such increases made in the ordinary course of
business and consistent with the past practices of GPA or such GPA
Subsidiary;
(iv) any direct or indirect redemption, purchase or other
acquisition by GPA or any GPA Subsidiary of any shares of capital
stock of GPA or any GPA Subsidiary, any declaration,
26
setting aside or payment of any dividend or other distribution by GPA
or any GPA Subsidiary in respect of shares of capital stock of GPA or
any GPA Subsidiary whether in cash, shares or property, or any loan
to any stockholder;
(v) any unusual or extraordinary item resulting in a loss
suffered by GPA or any GPA Subsidiary, which, individually or in the
aggregate, is equal to or in excess of $500,000;
(vi) any mortgage on, pledge of or grant of a security
interest in any of the assets of GPA or any GPA Subsidiary other than
Permitted Encumbrances;
(vii) any payment default or event of default by GPA or any
GPA Subsidiary under any debt with a principal amount equal to or
greater than $500,000 or under any lease agreement with annual rental
payments equal to or greater than $200,000;
(viii) any guaranty of any obligation or debt of any person or
entity by GPA or any GPA Subsidiary (other than GPA or a GPA
Subsidiary), except in the ordinary course of business;
(ix) any material change in (A) any investment, accounting or
Tax practice or policy of GPA or any GPA Subsidiary or (B) any method
of calculating any bad debt, contingency, IBNR (incurred but not
reported claims) or other reserve of GPA or any GPA Subsidiary for
accounting or Tax purposes;
(x) any business combination involving GPA or any GPA
Subsidiary and any other person (other than with respect to this
Agreement or the GPA Stock Exchange Agreement);
(xi) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any
consent with respect to any Contract which is required (or had it
been in effect on the date of this Agreement would have been
required) to be disclosed in Section 5.14(ac) of the GPA Disclosure
Letter (other than any of the foregoing contemplated by this
Agreement);
(xii) any capital expenditures or commitments for additions to
property, plant or equipment of GPA or any GPA Subsidiary in an
aggregate amount exceeding $200,000; or
(xiii) any other transaction involving or development affecting
GPA or any GPA Subsidiary outside the ordinary course of business.
(o) GPA or a GPA Subsidiary either has all right, title and interest
in or a valid and binding license to use all of the Intellectual Property used
by GPA or any GPA Subsidiary in the conduct of their respective businesses. No
other Intellectual Property is used or necessary in the conduct of the business
of GPA or any GPA Subsidiary. Except as disclosed in Section 5.14(o) of the GPA
Disclosure Letter, (i) all registrations with and applications to Governmental
Authorities in respect of such Intellectual Property are valid and in full force
and effect, (ii) GPA and the GPA Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of their trade
secrets, and (iii) neither GPA nor any GPA Subsidiary is, or has received any
notice that it is, in default (or with the giving of notice or lapse of time or
both, would be in default) under any license to use such Intellectual Property.
Neither GPA nor any GPA Subsidiary has received notice that GPA or any GPA
Subsidiary is infringing any Intellectual Property of any other person, no claim
is pending or, to the Knowledge of GPA or any GPA Subsidiary, has been made to
such effect that has not been resolved and, to the Knowledge of GPA and each GPA
Subsidiary, neither GPA nor any GPA Subsidiary is infringing any Intellectual
Property rights of any other person.
27
(p) Except as set forth in Section 5.14(p) of the GPA Disclosure
Letter, and except intercompany agreements and charges between GPA and Buyer, to
the Knowledge of GPA or any GPA Subsidiary:
(i) No officer, director or other Affiliate of GPA or any
GPA Subsidiary ("GPA Company Affiliate") and no Associate or Family
Member of any Company Affiliate has directly or indirectly (i) any
interest in any corporation, partnership, limited liability company,
proprietorship or other entity which sells to or purchases from GPA
or any GPA Subsidiary any products or services, (ii) sells to or
purchases from GPA or any GPA Subsidiary any products or services,
(iii) any cause of action or claim against GPA or any GPA Subsidiary;
or (iv) a beneficial interest in any Contract to which GPA or any GPA
Subsidiary is a party or by which it is bound;
(ii) Except as referenced in subparagraph 5.14(ac)(ii),
neither GPA nor any GPA Subsidiary is indebted, either directly or
indirectly, to any Company Affiliate, or any Associate or Family
Member of any Company Affiliate in any amount other than current
obligations for payments of salaries, bonuses and other fringe
benefits for past services rendered and recorded on the books of GPA
or a GPA Subsidiary; and
(iii) No Company Affiliate or any Associate or Family Member
of a Company Affiliate is indebted to GPA or any GPA Subsidiary.
For purposes of this Section 5.14(p), there shall be disregarded any
interest which arises solely from the ownership of less than a five percent
equity interest in a corporation whose stock is regularly traded on any national
securities exchange or on the NASD National Market System; and the term "Family
Member" shall mean a member of an immediate family as the term "immediate
family" is defined in the instructions to Item 404 of Regulation S-K under the
1933 Act and the 1934 Act (as defined in the Stock Purchase Agreement).
(q) There are no Benefit Plans or Employment Contracts other than
those set forth in Section 5.14(q) of the GPA Disclosure Letter; and no such
Benefit Plans or Employment Contracts obligate GPA or any GPA Subsidiary to
provide post-retirement health or life insurance benefits to employees or former
employees of GPA or any GPA Subsidiary other than continuation coverage
provisions under Federal and state law, including with respect to the
Consolidated Omnibus Budget Reconciliation Act of 1985.
(r) GPA has furnished or made available to GSHS a true, complete and
correct copy of each Benefit Plan and Employment Contract which is set forth in
writing and a complete description of each other Benefit Plan and Employment
Contract.
(s) Except as set forth in Section 5.14(s) of the GPA Disclosure
Letter, no assets have been set aside in a trust or other separate account
(other than in a tax-exempt trust or tax-exempt separate account) by GPA or any
ERISA Affiliate to pay directly or indirectly any benefits under any Benefit
Plan or Employment Contract, and all of the assets of any such tax-exempt trust
or separate account are shown on the books and records of such trust or separate
account at their current fair market value.
(t) GPA, each GPA Subsidiary and each ERISA Affiliate have
established, maintained, administered, reported and disclosed, made
contributions to and otherwise performed all their duties and responsibilities
under each Benefit Plan and each Employment Contract in compliance with all
applicable laws. Neither GPA, any GPA Subsidiary nor any ERISA Affiliate has any
duty or obligation to indemnify or hold any other person harmless for any
liability attributable to any acts or omissions by such person with respect to
any Benefit Plan, Employment Contract or employee or former employee.
28
(u) Neither GPA, any GPA Subsidiary nor any ERISA Affiliate has any
liability for any unpaid Tax or penalty with respect to any Benefit Plan or
Employment Contract, including without limitation, any unpaid Tax or penalty
under ERISA or under the Code.
(v) There are no claims which have been made or, to the Knowledge of
any ERISA Affiliate, threatened under any of the Benefit Plans or Employment
Contracts or against GPA or any ERISA Affiliate with respect to any of the
Benefit Plans or Employment Contracts (other than routine claims made in the
ordinary course of plan or contract operations) or with respect to the
employment or termination of employment or treatment of any employee or former
employee, and no ERISA Affiliate has any Knowledge of any proposed or actual
audit or investigation by any governmental or other law enforcement agency with
respect to any Benefit Plan, Employment Contract or the employment or
termination of employment or treatment of any employee or former employee.
(w) Except as set forth in Section 5.14(w) of the GPA Disclosure
Letter, neither GPA, any GPA Subsidiary nor any ERISA Affiliate is subject to
any liabilities (including withdrawal liabilities) with respect to any Benefit
Plan or employee benefit plan subject to Title IV of ERISA, including without
limitation, any liabilities arising from Title I or Title IV of ERISA, other
than the liability to make current contributions when due and to pay current
expenses and premiums when due. All such contributions, expenses and premiums
have been paid in full when due.
(x) Except as set forth in Section 5.14(x) of the GPA Disclosure
Letter, GPA or a GPA Subsidiary has the right under the terms of each Benefit
Plan and under applicable law to terminate such plan at any time exclusively by
action of GPA or such GPA Subsidiary, and no additional contributions would be
required in order to properly effect the termination of such plan in accordance
with the terms of such plan and applicable law.
(y) Neither GPA nor any GPA Subsidiary employs, or has ever employed,
or leases, or has ever leased, from another employer, any person who is a member
of a collective bargaining unit, and neither GPA nor any GPA Subsidiary makes or
has made, or has an obligation to make, or has had an obligation to make, or
reimburses or has an obligation to reimburse, or has reimbursed or has had an
obligation to reimburse, another employer directly or indirectly for making,
contributions to an employee benefit plan for the benefit of such a person.
(z) Section 280G of the Code shall not apply to any payments to be
made by GPA or any GPA Subsidiary as a result of the transactions contemplated
by this Agreement. There are no Parachute Plans to which GPA or any GPA
Subsidiary is a party or other payment obligations of GPA or any GPA Subsidiary
to an employee or former employee of GPA or a GPA Subsidiary which will be
triggered as a result of the change in the control of GPA contemplated by this
Agreement and the GPA Stock Exchange Agreement, and which constitute an "excess
parachute payment" within the meaning of Section 280G of the Code.
(aa) No employer securities, employer real property or other employer
property is included in the assets of any Benefit Plan.
(bb) The tax filings for GPA and each GPA Subsidiary are all made on
a consolidated basis with those of Buyer. Neither GPA nor any GPA Subsidiary has
received notice from any Governmental Authority in a jurisdiction in which such
entity does not file a Tax Return stating that such entity is or may be subject
to taxation by that jurisdiction.
(cc) Except for Contracts which are terminable by GPA or any GPA
Subsidiary without penalty on 120 days' or less prior written notice, and except
for the management and/or service agreements the GPA Subsidiaries have entered
into with the professional corporations they manage, Section 5.14(ac) of the GPA
Disclosure Letter sets forth each of the following Contracts to which GPA or any
GPA Subsidiary is a party: (i) any contract for borrowed money or deferred
portion of purchase price equal to or in excess of $500,000 that is secured by
an Encumbrance on any
29
property of the Company or any GPA Subsidiary; (ii) any loan agreement, credit
agreement, promissory note, guarantee, indenture, subordination agreement,
letter of credit, interest rate or foreign currency protection agreement or any
other similar type of Contract in each case involving a debt or similar
obligation of $500,000 or more; (iii) any consulting or other Contract with
attorneys, accountants, actuaries, appraisers, investment bankers, lobbyists,
government relations persons or other professional advisers equal to or in
excess of $500,000 per year; (iv) any brokerage agreement, marketing agreement,
sales agent or consulting agreement providing for the payment of commissions or
other compensation with respect to referring or directing business to GPA or any
GPA Subsidiary equal to or in excess of $150,000 per year; (v) any Contract
which, in whole or in part, (A) presently restricts or precludes GPA or any
present or future GPA Subsidiary or Affiliate of GPA from conducting any
business anywhere in the world, or (B) upon the occurrence of any event, the
giving of notice or the passage of time, by its terms would have such an effect;
(vi) any Contract that involves aggregate payments by or to GPA or any GPA
Subsidiary in excess of $500,000; (vii) any indemnification agreement (except
those entered into in the ordinary course of business), guaranty or power of
attorney granted to any person or entity (other than GPA or a GPA Subsidiary);
and (viii) any lease with annual rental payments equal to or in excess of
$100,000. GPA has delivered or otherwise made available to GSHS true, correct
and complete copies of the Contracts set forth in Section 5.14(ac) of the GPA
Disclosure Letter, together with all amendments, waivers, modifications,
supplements or side letters materially affecting the obligations of any party
under such Contracts.
(dd) Except as set forth opposite or otherwise as part of the
description of such Contract in Section 5.14(ad) of the GPA Disclosure Letter:
(i) Since January 1, 1995, no party to any such Contract has
given to GPA or any GPA Subsidiary notice of any breach or default
under any such Contract by GPA or a GPA Subsidiary which has not been
cured or waived.
(ii) Neither GPA nor any GPA Subsidiary is in violation,
breach of or default under any such Contract in any material respect
or, with notice of lapse of time or both, would be in violation,
breach of or default under any such Contract; and, to the Knowledge
of GPA and the GPA Subsidiaries no other party to any such Contract
is in violation, breach of or default under any such Contract or,
with notice or lapse of time or both, would be in violation, breach
of or default under any such Contract; and
(iii) No consent by or of any party to any such Contract is
required in order to consummate the transactions contemplated by this
Agreement without causing a breach or violation of or a default under
such Contract.
(ee) Except for a Directors and Officers' liability policy issued to
Orange County Behavioral Management Company, all insurance policies and other
surety arrangements of any kind or nature whatsoever which are in force and to
which GPA or any GPA Subsidiary is a named insured or beneficiary are issued
through Buyer. There are no claims asserting liability of GPA or a GPA
Subsidiary equal to or greater than $500,000 under any such policy.
(ff) Except as set forth in Section 5.14(af) of the GPA
Disclosure Letter:
(i) Neither GPA nor any GPA Subsidiary is a party to any
collective bargaining or similar agreement nor are any of GPA's or
the GPA Subsidiaries' employees currently represented by a labor
organization for purposes of collective bargaining as provided under
the National Labor Relations Act;
30
(ii) there is no unfair labor practice charge or complaint or
any other matter against or involving GPA or any GPA Subsidiary
pending or, to the Knowledge of GPA or any GPA Subsidiary, threatened
before the National Labor Relations Board or any court of law;
(iii) there is no labor strike, or other dispute, slowdown or
stoppage pending against GPA or any GPA Subsidiary; and
(iv) there are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including
discrimination based upon sex, age, marital status, race, national
origin, sexual preference, disability or veteran status) pending
before the Equal Employment Opportunity Commission or any
Governmental Authority against GPA or any GPA Subsidiary.
(gg) Except as set forth in Section 5.14(ag) of the GPA Disclosure
Letter, GPA and the GPA Subsidiaries collectively own, have a valid leasehold
interest in or have legal right to use without restriction all of the real
property and tangible personal property used in the conduct of their businesses,
free and clear of all Encumbrances, except Permitted Encumbrances and
Encumbrances reflected on the Financial Statements.
(hh) Substantially all fixtures, facilities, computers, computer
hardware and peripheral equipment, personal property and equipment owned or
leased by GPA or any GPA Subsidiary (i) are in good working order, ordinary wear
and tear excepted, and GPA and each GPA Subsidiary has maintained the same in
accordance with sound industry practices (except for equipment awaiting repair
in the ordinary course of GPA's or any GPA Subsidiary's business consistent with
past practices), and (ii) meet and comply in all material respects with all
applicable laws, rules and regulations of any Governmental Authority.
(ii) Since their respective dates of incorporation or acquisition,
none of GPA or any GPA Subsidiary, any of their directors, officers or employees
has:
(i) given, proposed to give, or agreed to give any material
gift or similar material benefit to any customer, supplier or any
other person (other than as described in subsection (ii) of this
subparagraph 5.14(ai)), for the purpose of furthering the business of
GPA or a GPA Subsidiary;
(ii) in connection with the business of GPA or any GPA
Subsidiary, used any corporate or other funds for contributions,
payments, gifts, or entertainment, or made any expenditures relating
to political activities to government employees, officials or others
in violation of any applicable law or established or maintained any
unlawful or unrecorded funds; or
(iii) offered or paid or solicited or received any remuneration
(as such term has been interpreted under 42 U.S.C. ss. 1320a-7b(b))
to induce or in return for any referral of healthcare business or
ordering of healthcare items or services in violation of any federal
or state civil or criminal law.
To the knowledge of GPA or any GPA Subsidiary, none of GPA, any GPA
Subsidiary, any of their respective directors, officers, or employees has
accepted or received any unlawful contributions, payments or gifts in connection
with the business of GPA and the GPA Subsidiaries.
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ARTICLE 6.
COVENANTS OF SELLERS, BUYER AND GSHS
Section 6.1. Investigation of Business; Access to Properties and
Records. (a) Subject to restrictions contained in confidentiality agreements to
which such party is subject with respect to any information relating to any
third party, prior to the Closing or termination of this Agreement, Sellers
shall give and shall cause GSHS to give to Buyer and its legal counsel,
accountants, lenders and other representatives reasonable access during normal
business hours to all of GSHS's and the Subsidiaries' properties for inspection
(including environmental), books, contracts, commitments and records, and shall
permit them to consult with management employees of each Seller, GSHS and the
Subsidiaries to allow Buyer full opportunity to make such investigations as are
necessary to review the affairs of GSHS and the Subsidiaries. If, prior to
Closing, Buyer discovers any breach of any representation or warranty contained
in this Agreement or any circumstances or condition that, to the Knowledge of
Buyer would constitute such a breach, Buyer will use reasonable efforts to
notify Sellers promptly of such facts known to Buyer and the nature of the
breach. Notwithstanding any other provision of this Agreement, no investigation
by one party to this Agreement shall affect the representations and warranties
of another party, and each such representation and warranty shall survive any
such in vestigation.
(b) Subject to restrictions contained in confidentiality agreements
to which such party is subject with respect to any information relating to any
third party, prior to the Closing or termination of this Agreement, Buyer shall
give GSHS, Sellers and their respective legal counsel, accountants, lenders and
other representatives reasonable access during normal business hours to all of
Buyer's and GPA's properties for inspection (including environmental), books,
contracts, commitments and records, and shall permit them to consult with
management employees of Buyer to allow GSHS or any Seller full opportunity to
make such investigations as are necessary to review the affairs of Buyer. If,
prior to Closing, GSHS or any Seller discovers any breach of any representation
or warranty contained in this Agreement or any circumstances or condition that,
to the Knowledge of GSHS or such Seller, would constitute such a breach, GSHS or
such Seller, as the case may be, will use reasonable efforts to notify Buyer
promptly of such facts known to GSHS or such Seller, as the case may be, and the
nature of the breach. Notwithstanding any other provision of this Agreement, no
investigation by one party to this Agreement shall affect the representations
and warranties of another party, and each such representation and warranty shall
survive any such investigation.
(c) Prior to the Closing Date, Sellers shall cause GSHS to deliver to
Buyer, as soon as available but not later than 30 days after the end of the
month with respect to monthly financial statements and not later than 45 days
after the end of the quarter with respect to quarterly financial statements,
unaudited condensed consolidated monthly and quarterly financial statements of
GSHS. Such financial statements shall include a balance sheet as of the end of
such period and statements of income and cash flows for the period then ended,
shall be prepared from and be, in all material respects, in accordance with the
books and records of GSHS and its Subsidiaries, shall apply GAAP in a manner
consistent with the Audited Financial Statements, and shall otherwise be
prepared on a basis consistent with GSHS's past practices with respect to
monthly and quarterly financial statements.
(d) Any information provided to or obtained by any party to this
Agreement, its legal counsel, accountants, lenders or other representatives
pursuant to this Agreement shall be held by such party, its representatives and
lenders in accordance with, and shall be subject to the terms of, the
Confidentiality Agreement.
Section 6.2. Regulatory and Other Authorizations.
(a) Subject to the limitations set forth in this Section 6.2,
Sellers, GSHS and Buyer will use their respective best efforts to obtain all
authorizations, consents, orders and approvals of all Governmental Authorities
that may be or become necessary for the execution, delivery and the performance
of their respective obligations pursuant to this Agreement and the GPA Stock
Exchange Agreement and will cooperate fully with one another in promptly seeking
to obtain all such authorizations, consents, orders and approvals. Each party to
this Agreement agrees to make (if required of such party by the HSR Act) a
timely [subject to Section 6.2(b)(i)] and appropriate filing of a Notification
32
and Report Form pursuant to the HSR Act with respect to the transactions
contemplated by this Agreement and, if required by the HSR Act, the Exchange
Agreement and the GPA Stock Exchange Agreement, to provide information requested
by any Governmental Antitrust Authority or the other party and agrees that it
will not take any action that will have the effect of delaying, impairing or
impeding the receipt of any required approvals.
(b) Notwithstanding anything in Section 6.2(a) to the contrary, Buyer
shall coordinate on behalf of all parties and, except as may be required by law,
shall determine in its sole judgment and discretion the timing and Buyer and
Sellers shall by mutual agreement determine the substance of all communications
and filings made by the parties with any Governmental Antitrust Authority
regarding the transactions contemplated by this Agreement, including without
limitation:
(i) the timing of all HSR filings by Buyer, GSHS and Sellers;
(ii) the extent to which it may be necessary to resolve or
settle any concerns on the part of any Governmental Antitrust
Authority regarding the legality under any antitrust law of the
transactions contemplated by this Agreement, the Exchange Agreement
or the GPA Stock Exchange Agreement by entering into negotiations,
providing information, making proposals, entering into and performing
agreements or submitting to judicial or administrative orders,
agreeing to any restrictions on conduct of business after Closing by
Buyer, GSHS or any Subsidiary, or selling or otherwise disposing of,
or holding separate (through the establishment of a trust or
otherwise), particular assets or categories of assets, or businesses,
of Buyer (or any Buyer Subsidiaries), including, after the Closing,
GSHS and its Subsidiaries;
(iii) contesting the entry in a judicial or administrative
proceeding brought under any antitrust law by any Governmental
Antitrust Authority or any other person of any permanent or
preliminary injunction or other order that would make consummation of
the transactions contemplated by this Agreement, the GPA Stock
Exchange Agreement or the Exchange Agreement unlawful or would
prevent or delay the transactions, including, without limitation,
taking the steps contemplated by Section 6.2(b)(ii);
(iv) if such an injunction or order has been issued in such a
proceeding, taking any and all steps, including, without limitation,
appeal thereof, the posting of bond or the steps contemplated by
Section 6.2(b)(ii), necessary to vacate, modify or suspend such
injunction or order so as to permit the consummation of the
transaction on the schedule contemplated by this Agreement;
(v) responding to and complying with any request or subpoena
for additional information by any Governmental Antitrust Authority;
and
(vi) determining any other appropriate response or initiative
to avoid or eliminate impediments under any antitrust law that may be
asserted by any Governmental Antitrust Authority or any other person
to the consummation of the transactions contemplated by this
Agreement, the Exchange Agreement or the GPA Stock Exchange
Agreement.
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Section 6.3. Best Efforts; Obtaining Consents and Making
Notifications; Disclosure of Changes. Subject to the terms and conditions
provided in this Agreement, each Seller, GSHS and Buyer each will use their
respective best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement and to cooperate with one another in connection with the foregoing,
including using best efforts:
(a) to obtain all necessary waivers, consents, releases and
approvals from other parties to loan agreements, leases, guarantees
and other contracts;
(b) to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to this
Agreement to consummate the transactions contemplated by this
Agreement; and
(c) to fulfill all conditions to this Agreement.
Nothing contained in this Agreement (including but not limited to the
term "best efforts" in Section 6.2(a), Section 6.3 and Section
10.1(c)) shall require any party to this Agreement to agree to hold
separate or to divest any of the assets, properties or businesses of
GSHS, any Subsidiary or Buyer or any Buyer Subsidiary or otherwise
agree to the imposition of any restriction on the operations of GSHS
or any Subsidiary after the Closing, Buyer or any Buyer Subsidiary or
a covenant or agreement that would cause any economic or financial
detriment to the ongoing operations of Buyer, Buyer Subsidiaries,
GSHS or any Subsidiary after the Closing.
Section 6.4. Further Assurances. Sellers, GSHS and Buyer
agree that, from time to time, at or after the Closing Date, each of
them will execute and deliver such further instruments of conveyance
and transfer and take such other action as may be necessary to carry
out the purposes and intents of this Agreement.
Section 6.5. Conduct of Business of GSHS and Subsidiaries. From the
date of this Agreement through the Closing, except as otherwise provided by this
Agreement or the GPA Stock Exchange Agreement and, except as consented to or
approved by Buyer in writing, Sellers and GSHS covenant and agree that:
(a) GSHS and the Subsidiaries shall operate their
businesses in the ordinary and usual course in all material respects
in accordance with past practices;
(b) GSHS or a Subsidiary (and the Sellers acting with
respect to the stock of GSHS) shall not issue, purchase or agree to
purchase, sell or agree to issue or sell:
(i) any shares of its capital stock; or
(ii) any securities convertible into or
evidencing the right to purchase, or options with respect
to, or rights to subscribe for, any shares of its capital
stock;
(c) neither GSHS nor a Subsidiary (and the Sellers acting
with respect to the stock of GSHS) shall amend its Certificate or
Articles of Incorporation or bylaws or declare or pay any dividend
(whether in cash or property) or declare or effect any stock split,
reclassification or other change in capital structure;
(d) GSHS and the Subsidiaries shall maintain their
books and records in the usual, regular and ordinary manner
consistent with past practice;
34
(e) GSHS and the Subsidiaries shall comply in all
material respects with all applicable laws; and
(f) neither GSHS nor any Subsidiary shall:
(i) enter into or consummate any joint venture,
partnership or other similar arrangement or form any other
new arrangement for the conduct of its business or acquire
or enter into any agreement or letter of intent to acquire,
by merger, consolidation, or purchase of stock or assets,
any business, entity or person;
(ii) purchase any material assets or securities
of any person, except for asset purchases in the ordinary
course of its business for individual amounts not in excess
of $50,000;
(iii)enter into any transactions, commitments or
obligations outside the ordinary course of business or incur
any indebtedness, including notes payable, current
maturities of long-term debt or capital lease obligations,
except for trade payables and other normal items accrued as
current liabilities;
(iv) take or agree to take any action prohibited
by this Section 6.5 or that would otherwise cause any
representation or warranty made by Sellers in this Agreement
to be untrue or inaccurate at the Closing Date or result in
the breach of any covenant or agreement in this Agreement
required to be performed by Sellers, any Seller or GSHS on
or prior to the Closing Date;
(v) take any action to amend or terminate any
Benefit Plan or to adopt any other plan, program,
arrangement or practice providing benefits for or
compensation to or on behalf of its employees or former
employees before the Closing Date, except as provided by
Section 6.11 with respect to the GSHS Long-Term Compensation
Plan or as required by applicable law;
(vi) terminate or cancel any insurance policy
that covers GSHS or a Subsidiary;
(vii)increase the base compensation or bonus,
incentive, severance or other benefit plan of any employee,
consultant or agent whose base annual salary or compensation
exceeds $75,000, except for increases in base annual
salaries in the ordinary course of business;
(viii) grant any Encumbrance on any asset,
except for Permitted Encumbrances;
(ix) enter into any lease for a term of more
than two years or an annual rent of more than $25,000;
(x) make any change in any investment,
accounting or Tax practice or policy of GSHS or any
Subsidiary or any method of calculating any bad debt,
contingency, IBNR or other charge or reserve of GSHS or any
Subsidiary.
35
Section 6.6. Preservation of Business. Subject to the terms and
conditions of this Agreement and except as otherwise provided by this
Agreement, GSHS shall, and Sellers shall cause GSHS and the Subsidiaries
to, use reasonable efforts to:
(a) preserve the business of GSHS and the Subsidiaries and
keep generally available to GSHS and the Subsidiaries the services of the
employees, officers, consultants, contractors and agents of GSHS and the
Subsidiaries;
(b) preserve generally the goodwill of customers, suppliers,
creditors and others having business relations with GSHS or a Subsidiary; and
(c) continue performance in the ordinary course of their
respective obligations under Contracts.
In connection with the operation of the business of GSHS and the
Subsidiaries between the date of this Agreement and the Closing, GSHS shall
confer in good faith on a regular and frequent basis with one or more designated
representatives of Buyer (which representatives shall have been designated by
Buyer to GSHS in writing) with respect to material matters affecting or
impacting the operations of GSHS and the Subsidiaries and to consult in general
with respect to the ongoing operations of GSHS and the Subsidiaries. Sellers
acknowledge that Buyer does not and will not waive any rights it may have under
this Agreement as a result of such consultations nor shall Buyer be responsible
for any decisions made by the officers and directors of GSHS with respect to
matters which are the subject of such consultation.
Section 6.7. Public Announcements. Neither Sellers, GSHS, the
Subsidiaries or Buyer, any agent nor any Affiliate of such entities shall make
any public statements, including, without limitation, any press releases or
other public disclosure, with respect to this Agreement and the transactions
contemplated by this Agreement without the prior consent of the other parties to
this Agreement (which consent may not be unreasonably withheld or delayed),
except as required by law and, in the case of Buyer, the American Stock
Exchange.
Section 6.8. No Solicitation. From the date of this Agreement to the
earlier of (i) the Closing Date or (ii) the termination of this Agreement in
accordance with its terms (but not including upon or due to a breach of this
Agreement by any Seller or GSHS), Sellers agree that (A) they will not, (B) they
will not permit GSHS or any Subsidiary to, and (C) they will not authorize or
permit any officer, director or employee of any Seller, GSHS, or any Subsidiary,
or any investment banker, attorney, financial advisor, accountant or other
person retained by any Seller, GSHS or any Subsidiary, directly or indirectly
(including by way of furnishing any information) to: (i) solicit, initiate,
assist, encourage or accept any Takeover Proposal or any inquiries relating to a
Takeover Proposal or to make any proposals which could reasonably be expected to
lead to any Takeover Proposal relating to GSHS or any Subsidiary; (ii) engage in
any negotiations with respect to, or otherwise attempt to consummate, a Takeover
Proposal; (iii) provide any public or nonpublic information concerning GSHS or
any Subsidiary to any person in connection with any Takeover Proposal or to any
person whom any Seller, GSHS or any Subsidiary knows or has reason to believe is
in the process of planning or considering a Takeover Proposal; or (iv) reach any
agreement or understanding for or with respect to any Takeover Proposal. Sellers
and GSHS will immediately advise Buyer orally and, within one Business Day, in
writing of any such inquiries, requests for information or Takeover Proposals of
which any of them has Knowledge. If any Seller, GSHS or any Subsidiary receives
from any person any offer, inquiry or informational request referred to above,
Sellers will promptly advise such person in writing of the terms of this Section
6.8 and will send Buyer a copy of such notice.
36
Section 6.9. Right to Update, Cure.
(a) From time to time prior to the Closing, Buyer, GSHS and Sellers
shall update or amend their respective disclosure of any matter set forth or
required to be set forth in their respective Disclosure Schedules to reflect any
changes in (or any inaccuracies in) such Disclosure Schedule. No such update
shall be deemed to cure (for purposes of Section 7.1, Section 8.1 or otherwise)
any breach of any representation and warranty by Sellers or by Buyer made in
this Agreement unless Buyer or Sellers, as the case may be, consent in writing
to the update made by the other. Notwithstanding anything in this Agreement to
the contrary, any party that receives a proposed amendment or update may defer
the Closing Date for up to five Business Days after receipt of such proposed
update or amendment.
(b) Each of the parties to this Agreement agrees to notify the other
parties promptly in writing of, and contemporaneously will provide the other
parties with true and complete copies of, any and all information or documents
relating to, and will use all commercially reasonable efforts to cure before
Closing, any event, transaction or circumstance occurring after the date of this
Agreement that causes or will cause any covenant or agreement under this
Agreement to be breached or that renders or will render untrue any
representation or warranty contained in this Agreement as if the same were made
on or as of the date of such event, transaction or circumstance. Each of the
parties to this Agreement also agrees to notify the other parties promptly in
writing of, and will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach of any representation, warranty, covenant or
agreement made in this Agreement, whether occurring or arising before, on or
after the date of this Agreement. No notice given pursuant to this Section
6.9(b) shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition to Closing or shall in any way limit any party's right to seek
indemnity under this Agreement.
Section 6.10. Conduct of Buyer Business Prior to Closing. Unless the
Sellers otherwise agree in writing and except as otherwise set forth in this
Agreement, in the Buyer Disclosure Schedule or the GPA Disclosure Letter,
between the date of this Agreement and the Closing Date Buyer and Buyer
Subsidiaries (including GPA and the GPA Subsidiaries) will conduct their
businesses only in the ordinary course. In addition, between the date of this
Agreement and the Closing Date, Buyer shall not take any action that would
interfere with the consummation of the transactions contemplated by this
Agreement or the GPA Stock Exchange Agreement, make such consummation more
difficult or delay the consummation of such transactions.
Section 6.11. GSHS Long-Term Compensation Plan. Sellers covenant and
agree with Buyer that, prior to Closing, they shall use their respective best
efforts to cause GSHS to terminate or amend (to the reasonable satisfaction of
Buyer) the GSHS Long-Term Compensation Plan, as amended (the "GSHS Long-Term
Compensation Plan"), for an aggregate cost of not more than the amount set forth
in Section 6.11 of the GSHS Disclosure Schedule. Sellers further covenant and
agree with Buyer that, prior to Closing, they shall cause GSHS to take all
actions that are necessary or appropriate in the reasonable judgment of Buyer to
permit all payments under the GSHS Long-Term Compensation Plan to qualify for
the exemption provided by Section 280G(b)(5)(A)(ii) and (B) of the Code.
Section 6.12. Post-Closing Operations and Events. Sellers,
severally and not jointly, covenant and agree with Buyer that from and after the
Closing:
(a) Sellers acknowledge that Buyer is obligated upon Closing to grant
a security interest in and to pledge Buyer's shares of the capital stock of GSHS
to Bankers Trust Company, as Collateral Agent (and its successors and assigns)
under the Second Amended and Restated Credit Agreement, dated as of May 2, 1994,
among Buyer, Bankers Trust Company, as Agent, First Union National Bank of North
Carolina, as Co-Agent, and the Lenders from time to time a party to such credit
agreement, as amended through the date of this Agreement and as from time to
time hereafter amended, supplemented or otherwise modified (the "Credit
Agreement").
37
(b) Sellers acknowledge that, if and when Buyer or Buyer Subsidiaries
together, directly or indirectly, own 80% or more of the voting power and value
of the outstanding stock of GSHS, Buyer will be obligated by law to include GSHS
and its 80% or more-owned subsidiaries in Buyer's consolidated federal income
tax return and, depending on applicable state law, in Buyer's consolidated or
unitary state income tax returns. Sellers covenant and agree with Buyer that in
such event and for so long as any such consolidated or unitary income tax
returns are required by federal or applicable state law, (i) Buyer's inclusion
of GSHS and its subsidiaries in any such consolidated or unitary income tax
return shall not constitute a breach or violation of or a default under any
provision of the New Stockholders' Agreement or any provision of any other
agreement among Sellers and Buyer; (ii) Sellers, together with Buyer, shall
cause their representatives on the Board of Directors of GSHS to cooperate in
the preparation and filing of such tax returns; and (iii) Sellers, together with
Buyer, shall cause their representatives on the Board of Directors of GSHS to
approve the execution and performance by GSHS of a tax sharing agreement (the
"Tax Sharing Agreement"), which Tax Sharing Agreement is required of Buyer by
Section 7.8 of the Credit Agreement. The Tax Sharing Agreement shall be
equitable to the parties and shall be in customary form for such agreements.
Section 6.13. Registration Statement. (a)(1) Promptly after the
Closing, Buyer will file a registration statement (a "Registration Statement")
under the 1933 Act, and cause such Registration Statement to become effective as
promptly as possible, with respect to the resale by Sellers (other than MSAP and
VI) of the shares of Charter Common Stock that may be issued under this
Agreement; and, prior to the first date on which shares of Charter Common Stock
may be issued under the Exchange Agreement, Buyer will file a registration
statement (a "Registration Statement") under the 1933 Act,and cause such
Registration Statement to become effective, with respect to the issuance to
Sellers (other than MSAP and VI) of the shares of Charter Common Stock that may
be issued under the Exchange Agreement.
(2) With respect to each Registration Statement, Buyer shall:
(i) cause the Registration Statement and the related
prospectus and any amendment or supplement, (A) to comply in all
material respects with the applicable requirements of the 1933 Act
and the rules and regulations promulgated under the 1933 Act and (B)
not to contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(ii) prepare and file with the Securities and Exchange
Commission such amendments and supplements to the Registration
Statement and the prospectus used in connection with the Registration
Statement as may be necessary to keep the Registration Statement
effective, in the case of the Registration Statement relating to the
Exchange Agreement, until 40 days after the later of (A) the Last
Exchange Closing (as defined in the Exchange Agreement) or (B) the
end of the Exchange Period (as defined in the Exchange Agreement)
and, in the case of the Registration Statement relating to resales of
shares of Common Stock issued pursuant to this Agreement, until the
later of (A) the resale of all such shares of Charter Common Stock by
Sellers (other than MSAP and VI) or (B) two years after the Closing;
and to comply with applicable provisions of the 1933 Act with respect
to all shares of Charter Common Stock that may be issuable under this
Agreement and under the Exchange Agreement (in each case, the
"Registrable Securities"); and will furnish, upon written request, to
each Seller (other than MSAP and VI) a copy of any amendment or
supplement to the Registration Statement or prospectus prior to
filing it after effectiveness and shall not file any such amendment
or supplement to which any such Seller shall have reasonably objected
on the grounds that such amendment or supplement does not comply in
all material respects with the requirements of the 1933 Act or of the
rules or regulations under the 1933 Act;
(iii) furnish to each Seller (other than MSAP and VI) a
conformed copy of the Registration Statement and of each amendment
and supplement to the Registration Statement
38
(excluding exhibits unless requested in writing), a reasonable number
of copies of the prospectus included in the Registration Statement
(including each preliminary prospectus and the final prospectus), the
documents, if any, incorporated by reference in the Registration
Statement or prospectus, and such other documents, as any such Seller
may reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities covered by the Registration Statement under
such other securities or blue sky laws of the states of the United
States as may be required for the issuance and sale of Registrable
Securities, to keep such registration or qualification in effect for
so long as the Registration Statement remains in effect, except that
Buyer shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction in which
it is not and would not, but for the requirements of this Section
6.13, be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent to general service
of process in any such jurisdiction;
(v) promptly notify Sellers (other than MSAP and VI), at any
time when a prospectus relating to the Registrable Securities may be
required to be delivered by any of them under the 1933 Act, upon
discovery that, or upon the happening of any event as a result of
which, the prospectus included in the Registration Statement, as then
in effect, includes or in the judgment of Buyer may include an untrue
statement of a material fact or omits or may omit to state any
material fact required to be stated in such prospectus or necessary
to make the statements in such prospectus not misleading in the light
of the circumstances in which they were made, which circumstance
requires amendment of the Registration Statement or supplementation
of the prospectus, and shall prepare and file as promptly as
reasonably possible a supplement to or an amendment of such
prospectus as may be necessary so that, as when delivered (if
required by the 0000 Xxx) to a purchaser of Registrable Securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated in such
prospectus or necessary to make the statements in such prospectus not
misleading in the light of the circumstances in which they were made;
(vi) otherwise use its best efforts to comply with all applicable
rules and regulations under the 1933 Act and, in its discretion, to
make available to its securities holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with the
first month of the first fiscal quarter after the effective date of
the Registration Statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the 1933 Act;
(vii) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by the Registration
Statement from and after a date not later than the effective date of
the Registration Statement; and
(viii) use its best efforts to list all Registrable Securities
covered by the Registration Statement on any national securities
exchange on which securities of the same class as the Registrable
Securities are then listed.
(3) Each Seller (other than MSAP and VI) shall furnish to
Buyer such information regarding such Seller as Buyer may from time
to time reasonably request in writing and as shall be required by the
1933 Act in connection with such registration.
(4) Buyer shall indemnify and hold harmless each Seller (other than
MSAP and VI), its directors, Affiliates and officers, and each other person, if
any, who controls such Seller within the meaning of the 1933 Act
39
against any losses, claims, damages, liabilities or expenses (including
reasonable fees and expenses of counsel), joint or several, to which such Seller
or any such director or officer or participating or controlling person may
become subject under the 1933 Act or otherwise in connection with or as a result
of a resale by such Seller of shares of Charter Common Stock issued pursuant to
this Agreement or the Exchange Agreement, insofar as such losses, claims,
damages, liabilities or expenses (or related actions or proceedings) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any preliminary
prospectus, final prospectus or summary prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or any
document incorporated by reference in the Registration Statement, or (ii) any
omission or alleged omission to state in any such document a material fact
required to be stated in any such document or necessary to make the statements
in any such document not misleading, and Buyer will reimburse such Seller and
each such director, Affiliate, officer, participating person and controlling
person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding, provided that Buyer shall not be liable in any such case
to the extent that any such loss, claim, damage, liability or expense (or action
or proceeding in respect of any such loss, claim, damage, liability or expense)
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to Buyer by such Seller or any such director, Affiliate, officer, participating
person or controlling person for use in the preparation of the Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Seller or any such director,
Affiliate, officer, participating person or controlling person and shall survive
the transfer of such securities by such Seller.
(5) Each Seller (other than MSAP and VI), severally and not jointly,
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in Section 6.13(a)(4)) Buyer, each director of Buyer, each officer of
Buyer who shall sign the Registration Statement and each other person, if any,
who controls Buyer within the meaning of the 1933 Act, with respect to any
untrue statement in or omission from the Registration Statement, any preliminary
prospectus, final prospectus or summary prospectus included in the Registration
Statement, or any amendment or supplement to the Registration Statement, but
only to the extent that such statement or omission was made in reliance upon and
in conformity with written information furnished to Buyer by such Seller for use
in the preparation of the Registration Statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of Buyer or any such director, officer or controlling person and shall
survive the transfer of such securities by such Seller.
(6) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in
Sections 6.13(a)(4) or (5), such indemnified party will, if a claim is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice shall not relieve the indemnifying party of its obligations under
Sections 6.13(a)(4) or (5), except to the extent that the indemnifying party is
actually materially prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment (i) a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim, or (ii) the
indemnified party has available to it reasonable defenses which are different
from or additional to those available to the indemnifying party, the
indemnifying party shall be entitled to participate in and to assume the defense
of such action, jointly with any other indemnifying party similarly notified, to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such action, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense of such action other than reasonable costs of investigation.
Notwithstanding the foregoing, in any such action, any indemnified party shall
have the right to retain its own counsel but the fees and disbursements of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party shall have failed to retain counsel for the indemnified
party, (ii) the indemnifying party and such indemnified party shall have
mutually agreed to the retention
40
of such counsel, or (iii) a conflict of interest arises between such indemnified
and indemnifying parties. The indemnifying party shall not, in connection with
any action or related actions in the same jurisdiction, be liable for the fees
and disbursements of more than one separate firm qualified in such jurisdiction
to act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there is a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(7) If the indemnification provided for in this Section 6.13(a)(4)
and (5) is unavailable or insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages, liabilities or expenses described as
indemnifiable pursuant to Sections 6.13(a)(4) or (5), then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party, as a result of such losses,
claims, damages, liabilities or expenses in such proportion as appropriate to
reflect the relative fault of Buyer, on the one hand, or such Seller, on the
other hand, and to the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any untrue statement or
omission giving rise to such indemnification obligation. Buyer and Sellers
(other than MSAP or VI) agree that it would not be just and equitable if
contributions pursuant to this Section 6.13(a)(7) were determined by pro rata
allocation or by any other method of allocation which did not take account of
the equitable considerations referred to above in this Section 6.13(a)(7). No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 0000 Xxx) shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.
(8) Periodic payments of amounts required to be paid pursuant to
Section 6.13(a)(4) and (5) shall be made during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred.
(9) Except as provided below, Buyer shall bear all registration
expenses incurred in connection with the performance of its obligations under
Section 6.13(a), including all expenses incurred by Buyer in complying with
Section 6.13(a), including, without limitation, all registration and filing
fees; printing expenses; fees and disbursements of counsel for Buyer; blue sky
fees and expenses; accountants' expenses, including, without limitation, any
special audits or reviews incident to any such registration; and fees of
transfer agents and registrars. Each Seller (other than MSAP and VI) shall pay
commissions upon any resale, transfer taxes and their own counsel fees, if any.
(b) Alternate Proceeding. In lieu of complying with Section 6.13(a),
if Buyer reasonably determines that the alternate proceeding described in this
Section 6.13(b) is available, Buyer shall cause the shares of Charter Common
Stock described in Section 6.13(a) to be issued pursuant to the exemption from
registration provided by Section 3(a)(10) of the 1933 Act; and, in such event,
Buyer shall (i) initiate an appropriate proceeding under applicable state law
and shall obtain all permits or other approvals necessary for the availability
of such exemption and (ii) cause the Exchange Agreement to be amended to provide
for the commencement of the Exchange Period as of the Closing Date, and the
termination of such Exchange Period on the third anniversary of the Closing
Date.
41
Section 6.14. New GSHS Shares. (a) Each Seller, severally and not
jointly, covenants and agrees with Buyer that it will take all necessary action
to cause GSHS, at or prior to Closing, to amend its Certificate of Incorporation
to increase the number of authorized shares of the common stock of GSHS to
15,000, in order that GSHS shall have authority under its Certificate of
Incorporation to issue the New GSHS Shares and the shares of the common stock of
GSHS to be issued to Buyer under the GPA Stock Exchange Agreement.
(b) Each Seller, severally and not jointly, covenants and agrees with
Buyer that it shall, by check payable to GSHS, purchase prior to the Closing,
and shall cause GSHS to sell to such Seller, such Seller's portion of the New
GSHS Shares in the amounts and for the cash purchase prices set forth below:
Seller No. of Shares Cash Purchase Price
------ ------------- -------------------
1. BCBS 86.14 $1,066,660.49
2. HCSC 86.14 $1,066,660.49
3. IBC 86.14 $1,066,660.49
4. MSAP 86.14 $1,066,660.49
5. PCMB 86.14 $1,066,660.49
6. VI 86.14 $1,066,660.49
ARTICLE 7.
CONDITIONS TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to consummate the Stock Purchase shall be subject
to the satisfaction on or prior to the Closing Date of all of the following
conditions (any of which may be waived in writing by Buyer in its sole
discretion):
Section 7.1. Representations, Warranties and Covenants of GSHS and
Sellers. Subject to the second sentence of this Section 7.1, the representations
and warranties of GSHS and Sellers in this Agreement shall be true and correct
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, except for
representations and warranties that speak as of a specific date or time other
than the Closing Date (which need only be true and correct as of such date or
time). The closing condition contained in this Section 7.1, as it relates to
representations and warranties, shall be satisfied unless the inaccuracies in
and breaches of such representations and warranties have an adverse effect on
GSHS and its Subsidiaries, taken as a whole, or on Buyer's ownership of the GSHS
shares, of $5,000,000 or more. The covenants and agreements of GSHS and Sellers
and GSHS to be performed on or before the Closing Date in accordance with this
Agreement shall have been performed in all material respects.
Section 7.2. Filings; Consents; Waiting Periods. All registrations,
filings, applications, notices, consents, approvals, waivers, authorizations,
qualifications and orders to be filed, made or obtained by Buyer, GSHS or any
Seller in order to consummate the transactions contemplated by this Agreement
and the GPA Stock Exchange Agreement and to operate the business of GSHS and the
Subsidiaries after Closing in compliance with all applicable laws and
regulations shall have been filed, made or obtained. All waiting periods
applicable under the HSR Act shall have expired or been terminated. Sellers,
GSHS and applicable Subsidiaries shall have obtained the consent of the
requisite parties to the agreements identified in Sections 3.6 and 3.16 of the
GSHS Disclosure Schedule, which consents shall be in form and substance
reasonably satisfactory to Buyer. GSHS shall have obtained written enforceable
waivers with respect to all existing breaches and any continuing breaches
(including any breaches anticipated to continue in the ordinary course of the
business of GSHS and its Subsidiaries after the Closing) of agreements with
those customers
42
identified in Section 3.16 of the GSHS Disclosure Schedule, which waivers shall
be in form and substance satisfactory to Buyer.
Section 7.3. No Injunction. There shall be no injunction, restraining
order or decree of any nature of any Governmental Authority that is in effect
that restrains, prohibits or makes illegal (i) the consummation of the Stock
Purchase, (ii) imposes conditions on the consummation of the Stock Purchase not
otherwise provided for in this Agreement, or (iii) the execution, delivery or
performance of the Exchange Agreement, the GPA Stock Exchange Agreement, or the
New Stockholders' Agreement.
Section 7.4. Closing Documents. Sellers shall have delivered or
caused to be delivered to Buyer the following documents:
(a) True and correct copies of the Certificate of
Incorporation of GSHS, certified by the Secretary of State of the State of
Delaware as of a date not more than five Business Days preceding the Closing
Date (except that Sellers shall only be required to deliver a true and correct
copy of the amendment required by Section 6.14(a)), and true and correct copies
of the bylaws of GSHS as in effect on the day prior to Closing, certified by the
Secretary of GSHS;
(b) Good standing certificates relating to GSHS and each
Subsidiary from their respective states of incorporation and each other
jurisdiction in which GSHS or any Subsidiary is qualified to do business as a
foreign corporation, and good standing certificates relating to Sellers from
their respective states of incorporation;
(c) Resolutions of the Board of Directors or a duly
authorized committee of the Board of Directors of each Seller authorizing (to
the extent such Seller is a party to the following agreements) the execution,
delivery and performance of this Agreement, the Exchange Agreement and the New
Stockholders' Agreement by such Seller, the execution, delivery and performance
of the GPA Stock Exchange Agreement by GSHS, and authorizing the termination of
the Old Shareholders' Agreement, certified by the Secretary of such Seller;
(d) A resolution of the Board of Directors of GSHS
authorizing the execution, delivery and performance of this Agreement and the
GPA Stock Exchange Agreement by GSHS, certified by the Secretary of GSHS;
(e) A certificate of the Secretary of each Seller attesting
to the incumbency of the officers of such Seller executing this Agreement and
the other certificates and agreements delivered or executed by such Seller at or
prior to the Closing;
(f) A certificate of the Secretary of GSHS attesting to the
incumbency of the officers of GSHS executing this Agreement and the GPA Stock
Exchange Agreement and the other certificates and agreements delivered by GSHS
at the Closing;
(g) A certificate of the Chairman of the Board, President or
any Vice President of each Seller attesting on behalf of such Seller to the
matters set forth in Section 7.1 with respect to such Seller;
(h) An opinion of counsel to Sellers and GSHS covering
customary matters for legal opinions in stock purchase transactions, in form and
substance reasonably satisfactory to Buyer and its counsel;
(i) A letter or letters addressed to the lenders under the
Credit Agreement attaching the certificates and opinions delivered pursuant to
subsections (a) through (h) of this Section 7.4 and authorizing such lenders to
rely thereon; and
43
(j) Each Seller shall have delivered to Buyer the
certificates representing the GSHS Shares and the certificates representing the
New GSHS Shares, in each case to be sold by such Seller pursuant to this
Agreement, free and clear of all liens, charges and encumbrances of any kind or
nature and which are not in violation of any pre-emptive rights, and such
delivery shall have been made in accordance with Section 2.3(a).
Section 7.5. Absence of Litigation. No claim, action, suit,
arbitration, investigation, inquiry or other proceeding by any Governmental
Authority with respect to this Agreement or the GPA Stock Exchange Agreement and
the transactions contemplated by such agreements shall be pending on the Closing
Date and, up to the Closing, no party to this Agreement shall have been advised
by any Governmental Authority (which advisory has not been officially withdrawn
by such Governmental Authority on or prior to the Closing Date) that such
Governmental Authority is reviewing this Agreement or the GPA Stock Exchange
Agreement or the transactions contemplated by this Agreement or the GPA Stock
Exchange Agreement to determine whether to file or commence any litigation with
respect to any aspect of this Agreement or the GPA Stock Exchange Agreement or
the transactions contemplated by such agreements.
Section 7.6. Customer Contracts. Except for the Operating Agreement
between GSHS and Gateway Health Plan, from the Balance Sheet date to the Closing
Date, neither GSHS nor the Subsidiaries shall have suffered the loss of one or
more Contracts with customers, whether by the termination or notice of
termination of Contracts or by the failure to renew Contracts upon the
expiration of such Contracts in accordance with their respective terms, which
(i) in the aggregate comprised more than one percent (1%) of the consolidated
revenue for GSHS and the Subsidiaries during the twelve-month period ended June
30, 1995; or (ii) in the case of Contracts the performance term of which began
or begins after July 1, 1994, are projected to produce in the aggregate revenue
in the twelve-month period ending June 30, 1996 of more than $1,000,000.
Section 7.7. Old Shareholders' Agreement. Sellers and GSHS shall
have terminated the Old Shareholders' Agreement, effective on or before the
Closing Date.
Section 7.8. Exchange Agreement. Sellers (except for MSAP and VI)
and Buyer shall have executed and delivered the Exchange Agreement.
Section 7.9. GPA Stock Exchange Agreement. Buyer and GSHS shall have
executed the GPA Stock Exchange Agreement on the date of this Agreement and the
transaction contemplated by such agreement shall have been closed, such closing
to include the delivery by Buyer to GSHS of certificates, duly endorsed for
transfer, representing the GPA Common Stock and the delivery by GSHS to Buyer of
a certificate representing 969.04 shares of the common stock of GSHS.
Section 7.10. New Stockholders' Agreement. Sellers (except for MSAP
and VI), Buyer and GSHS shall have executed and delivered the New Stockholders'
Agreement.
Section 7.11. Operating Agreements. Buyer shall have determined, in
its reasonable judgment, that Buyer does not anticipate that any customer
Contract in existence on the Closing Date between GSHS or a Subsidiary, on the
one hand, and a Seller or a subsidiary or Affiliate of a Seller, on the other
hand, will not be renewed, extended or replaced with a new Operating Agreement
upon the expiration or termination of the Operating Agreement in existence on
the Closing Date.
44
Section 7.12. Purchase of New GSHS Shares. Sellers shall have
purchased the New GSHS Shares in accordance with Section 6.14(b).
Section 7.13. GSHS Certificate of Incorporation and Bylaws. The
Certificate of Incorporation and bylaws of GSHS shall have been amended to
remove any provisions reflecting the Old Shareholders' Agreement and to carry
out the provisions of Section 6.14(a).
Section 7.14. Agreement Among Sellers. Any agreement among Sellers,
among Sellers and any other person or among some of Sellers proposed by such
parties to be entered into before, on or after the Closing Date, relating to the
governance or operations of GSHS after the Closing Date shall be in form and
substance satisfactory to Buyer, in its sole discretion, and shall, among other
things, provide that any amendment is subject to approval by Buyer; provided,
however, that this Section 7.14 shall not apply to any agreement with respect to
which Buyer's approval is not required under Section 7.5 of the New
Stockholders' Agreement.
Section 7.15. Fairness Opinion. Buyer and its Board of Directors
shall have received an opinion of Xxxxx Xxxxxx Incorporated or other investment
banking firm engaged by Buyer to the effect that the transactions contemplated
by this Agreement, the Exchange Agreement, the New Stockholders' Agreement and
the GPA Stock Exchange Agreement are fair to Buyer and its stockholders from a
financial point of view; and such fairness opinion shall be in form and
substance satisfactory to Buyer, in its sole discretion.
Section 7.16. Credit Agreement. The Agent (as such term is defined in
the Credit Agreement) shall have consented to the final forms of, and the
execution, delivery and performance by Buyer of, this Agreement, the Exchange
Agreement and the New Stockholders' Agreement pursuant to the amendment referred
to in Section 5.9; such amendment shall be effective on the Closing Date; and
such amendment shall be in form and substance satisfactory to Buyer, in its sole
discretion.
Section 7.17. Certain Capital Contributions. Each of VI and MSAP
shall have made a cash capital contribution to GSHS in the amount of $163,333.
Section 7.18. Board Approvals. The Boards of Directors or authorized
committees of such Boards (i) of Buyer and Sellers shall have approved this
Agreement, (ii) of Buyer and Sellers (other than MSAP and VI) shall have
approved the Exchange Agreement, the New Stockholders' Agreement and the GPA
Stock Exchange Agreement (in the case of such Sellers, in their capacities as
stockholders of GSHS), and (iii) of GSHS shall have approved the GPA Stock
Exchange Agreement and the New Stockholders' Agreement; and the Board of
Directors or an authorized committee of such Board of any Seller (other than
MSAP and VI) shall not have exercised such Seller's right of termination
pursuant to Section 10.1(d).
Section 7.19. GSHS Long-Term Compensation Plan. The GSHS Long-Term
Compensation Plan shall have been terminated or amended (to the reasonable
satisfaction of Buyer) for a cost of not more than the amount set forth in
Section 6.11 of the GSHS Disclosure Schedule.
45
Section 7.20. Section 6.13. If Buyer, pursuant to the provisions of
Section 6.13(b), complies with Section 6.13(b) in lieu of complying with Section
6.13(a), then the proceeding described in Section 6.13(b) shall have been
completed and all permits and approvals requested by Buyer pursuant to such
proceeding shall have been issued.
ARTICLE 8.
CONDITIONS TO SELLERS' OBLIGATIONS TO CLOSE
Each Seller's obligation to consummate the Stock Purchase is subject
to the satisfaction on or prior to the Closing Date of all of the following
conditions (any of which may be waived in writing by such Seller, in its sole
discretion):
Section 8.1. Representations, Warranties and Covenants of Buyer and
GSHS. The representations and warranties of Buyer and GSHS in this Agreement
shall be true and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date
except for representations and warranties that speak as of a specific date or
time other than the Closing Date (which need only be true and correct as of such
date or time), and the covenants and agreements of Buyer and GSHS to be
performed on or before the Closing Date in accordance with this Agreement shall
have been performed in all material respects.
Section 8.2. Filings; Consents; Waiting Periods. All registrations,
filings, applications, notices, consents, approvals, waivers, authorizations,
qualifications and orders to be filed, made or obtained by Buyer, GSHS or any
Seller in order to consummate the transactions contemplated by this Agreement
and the GPA Stock Exchange Agreement and to operate the business of GSHS and the
Subsidiaries after Closing in compliance with all applicable laws and
regulations shall have been filed, made or obtained, and all waiting periods
applicable under the HSR Act shall have expired or been terminated. Buyer shall
have obtained the consents identified in Section 5.3 of the Buyer Disclosure
Schedule and Section 5.14(j) of the GPA Disclosure Letter, which consents shall
be in form and substance reasonably satisfactory to Sellers.
Section 8.3. No Injunction. The condition set forth in Section 7.3
shall have been satisfied.
Section 8.4. No Material Adverse Change. There shall not have
occurred, alone or in the aggregate, a material adverse change in the business,
operations or financial condition of Buyer since June 30, 1995.
Section 8.5. Closing Documents. Buyer shall have delivered or
caused to be delivered to each Seller the following documents:
(a) A Secretary's certificate attesting to the incumbency of
the officers executing this Agreement and the GPA Stock Exchange Agreement and
the other certificates and agreements delivered by Buyer at the Closing;
(b) A certificate of the Chairman of the Board of Buyer
attesting on behalf of Buyer to the matters set forth in Section 8.1;
(c) An opinion of counsel to the Buyer covering customary
matters for legal opinions in stock purchase transactions, in form and substance
reasonably satisfactory to Seller and its counsel;
46
(d) A resolution of the Board of Directors of Buyer
authorizing the execution, delivery and performance by Buyer of this Agreement,
the Exchange Agreement, the GPA Stock Exchange Agreement and the New
Stockholders' Agreement.
(e) Good standing certificates relating to Buyer in Delaware
and Georgia; and
(f) Buyer shall have paid and delivered to each Seller the
Purchase Price payable to each Seller pursuant to this Agreement.
Section 8.6. Absence of Litigation. The condition set forth in
Section 7.5 shall have been satisfied.
Section 8.7. Execution of Other Agreements. The conditions set forth
in Sections 7.8 and 7.10 shall have been satisfied.
Section 8.8. GPA Stock Exchange; New GSHS Shares; GSHS Certificate of
Incorporation and Bylaws. The conditions set forth in Sections 7.9, 7.12 and
7.13 shall have been satisfied.
Section 8.9. Credit Agreement. The conditions set forth in Section
7.16 shall have been satisfied.
Section 8.10. Board Approvals. The conditions set forth in Section
7.18 shall have been satisfied.
Section 8.11. Fairness Opinion. Sellers and each of their respective
Boards of Directors shall have received an opinion of Xxxx Xxxxxx Xxxxxxxx Inc.
or other investment banking firm engaged by Sellers or GSHS to the effect that
the transactions contemplated by this Agreement, the Exchange Agreement, the New
Stockholders' Agreement and the GPA Stock Exchange Agreement are fair to Sellers
(to the extent they are parties to such agreements) and their respective
stockholders from a financial point of view; and such fairness opinion shall be
in form and substance satisfactory to Sellers, in their sole discretion.
Section 8.12. Section 6.13. If Buyer, pursuant to the provisions of
Section 6.13(b), complies with Section 6.13(b), the conditions set forth in
Section 7.20 shall have been satisfied.
ARTICLE 9.
SURVIVAL; INDEMNIFICATION
Section 9.1. Survival. The representations and warranties of GSHS,
Sellers and Buyer shall survive the Closing, as follows:
(a) indefinitely with respect to the representations and warranties
contained in Sections 3.1 (first sentence only), 3.2, 3.3, 3.4(b), 3.22, 4.1,
4.2, 4.3, 5.1 (first sentence only), 5.2, 5.5 and 5.11;
47
(b) until sixty calendar days after the expiration of all applicable
statutes of limitation (including all periods of extension or tolling, whether
automatic, permissive or contractual) with respect to matters contained in
Sections 3.14 (insofar as it relates to ERISA or the Code) and 3.15;
(c) until one year and 180 days after the Closing in the case of all
other representations and warranties.
The covenants and agreements of Sellers and Buyer shall survive the
Closing, as follows:
(a) until two years after the Closing in the case of covenants and
agreements to be performed under this Agreement on or prior to Closing; and
(b) in the case of each other covenant and agreement to be performed
under this Agreement, until 180 days after the last date on which such covenant
or agreement is to be performed in accordance with this Agreement or, if no such
date is specified, 3 years following the Closing, except that the
indemnification provided by Sections 6.13(a)(4) and 5 and Section 9.2(b)(i)(B)
shall survive indefinitely.
The survival period of any representation, warranty, covenant or
agreement that would otherwise have terminated pursuant to the preceding two
sentences shall nonetheless continue to survive if a claim under this Article 9
shall have been timely given with respect to such representation, warranty,
covenant or agreement (but only as it relates to the claim) until the claim has
been satisfied or otherwise resolved pursuant to this Article 9.
Section 9.2. Indemnification.
(a) Indemnification by Sellers. Subject to Section 9.1, each Seller
agrees, severally and not jointly, to indemnify, defend and hold Buyer, its
Subsidiaries, its Affiliates and its and their respective officers, directors
and employees harmless from any and all Indemnifiable Damages which any of them
may suffer or incur by reason of: (i) the breach or failure to perform by such
Seller or GSHS of the covenants or agreements made by such Seller or GSHS in
this Agreement to be performed at or prior to the Closing and, in the case of
Sections 6.4, 6.7, 6.11 and 6.12, to be performed in whole or in part after the
Closing; (ii) from and after the Closing: (A) the breach of or inaccuracy in any
of the representations and warranties of GSHS or such Seller contained in this
Agreement; or (B) any misrepresentation contained in any statement or
certificate furnished by GSHS or such Seller to Buyer pursuant to this
Agreement; (iii) for a period of five years after the Closing, any and all
malpractice or professional liability claims against GSHS or a Subsidiary where
the occurrence giving rise to such claim preceded or occurred on the Closing
Date (provided, however, that the indemnification obligation of each Seller
under this clause (iii) is expressly conditioned on the maintaining by GSHS
continuously for a period of five years after the Closing Date of malpractice
and professional liability insurance for occurrences through the Closing Date in
amounts and on terms that are consistent with and comparable to the malpractice
and professional liability policy or policies of GSHS in effect on the date of
this Agreement); or (iv) the asset transfer provisions set forth in Section
2.1.1 of the Operating Agreement, dated May 1, 1992, by and between GSHS and
Community Mutual Life Insurance Company, to the extent such section is deemed to
be applicable to the assets of any Person other than GSHS and its Subsidiaries
existing prior to the Closing; and (v) any obligation of GSHS and its
Subsidiaries to Blue Cross and Blue Shield of Maryland, Inc. under Section 7.13
of the Stock Purchase Agreement, dated as of March 19, 1993, by and among VI,
HCSC, GS Holding, Inc. and Blue Cross and Blue Shield of Maryland, Inc. in
excess of the amount accrued specifically for such liability on the books and
records of GSHS as of the Balance Sheet Date.
(b) Indemnification by Buyer. Subject to Section 9.1, Buyer agrees to
indemnify, defend and hold GSHS, each Seller, its Affiliates and their
respective officers, directors and employees harmless from any and all
Indemnifiable Damages which any of them may suffer or incur by reason of (i)(A)
the breach of or failure to perform by Buyer of any of the covenants or
agreements made by it in this Agreement or (B) any liability for any Tax payable
by GPA or a GPA Subsidiary with respect to Tax liability of any member of any
affiliated group of corporations filing
48
a consolidated return for Federal income tax purposes, of which GPA or any GPA
Subsidiary shall have been a member at any time prior to the Closing, including
but not limited to, any liability for Taxes of the Buyer consolidated group
for which GPA or a GPA Subsidiary might be liable under Treasury Regulation
Section 1.1502-6 (or successor regulation), except for provisions for Taxes
accrued on the books of GPA prior to Closing; or (ii) from and after the
Closing: (A) the breach of or inaccuracy in any of the representations or
warranties of Buyer contained in this Agreement; or (B) any misrepresentation
contained in any statement or certificate furnished by Buyer to any Seller,
to Sellers or to GSHS pursuant to this Agreement.
(c) Third-Party Claims. If any claim or demand is asserted against
the indemnified party by a third party with respect to any matter under the
indemnities set forth in Sections 9.2(a) or (b) (a "Third Party Claim"), the
indemnified party shall promptly give written notice and details thereof,
including copies of all pleadings and the pertinent documents, to the
indemnifying party, but the indemnifying party's obligations shall not be
affected by the failure to give such notice except to the extent that it was
materially prejudiced by such failure to give notice. Within thirty days of
receipt of such notice, the indemnifying party shall (i) pay the Third Party
Claim either in full or upon compromise agreed to by the indemnified party or
(ii) notify the indemnified party that the indemnifying party disputes the Third
Party Claim and intends to defend against it, and so defend and pay any adverse
final judgment or award or settlement amount in regard to such third party
claim. Such defense shall be controlled by the indemnifying party, and the cost
of such defense shall be borne by it, except that the indemnified party shall
have the right to participate in such defense at its own expense, and in such
event counsel selected by the indemnified party shall be required to cooperate
with such counsel of the indemnifying party in such defense. The indemnified
party agrees that it will cooperate in all reasonable respects in the defense of
any such claim or demand, including making personnel, books, and records
relevant to the claim available to the indemnifying party, without charge,
except for reimbursement of reasonable out-of-pocket expenses. The indemnifying
party shall have the right to settle or compromise any Third Party Claim of
which it has assumed the defense only upon the receipt of written consent to
such settlement or compromise from the indemnified party, which consent shall
not be unreasonably withheld. If any indemnified party unreasonably withholds
consent pursuant to a settlement or compromise of a Third Party Claim of which
the sole relief provided is monetary damages only, and such Third Party Claim is
subsequently resolved or adjudicated for an amount of consideration which
exceeds the amount of the consideration contained in such settlement or
compromise, the indemnifying party's obligation with respect to such Third Party
Claim shall not exceed the amount of the consideration contained in such
settlement or compromise. The indemnified party may, in its sole discretion,
withhold its consent to a settlement or compromise (i) if there is a finding or
admission (A) of a violation of law by the indemnified party (which finding
adversely affects the indemnified party), or (B) of a violation of the rights of
any person which is not fully remedied by the payment to be made in settlement
or (C) that would have a material adverse effect on any other claims that may be
made against the indemnified party; (ii) if the sole relief provided is not
monetary damages that are paid in full by the indemnifying party (if such
non-monetary relief would adversely affect the indemnified party); or (iii) for
any other reason which is reasonable under the circumstances.
If the indemnifying party fails to take action within thirty days as
set forth above, then the indemnified party shall have the right to pay,
compromise or defend any Third Party Claim and to assert the amount of any
payment on the Third Party Claim plus the expense of defense or settlement as an
indemnity claim. The indemnified party shall also have the right, exercisable in
good faith and upon reasonable prior notice to the indemnifying party, to take
such action as may be necessary to avoid a default prior to the assumption of
the defense of the Third Party Claim by the indemnifying party and any expenses
incurred by so acting shall be paid by the indemnifying party.
(d) Payment. Payment of Third Party Claims shall be made in
accordance with Section 9.2(c). With respect to all claims other than Third
Party Claims, the indemnifying party shall promptly pay or reimburse the
indemnified party in respect of liability for Indemnifiable Damages to which the
foregoing indemnities relate after receipt of written notice from the
indemnified party outlining with reasonable particularity the nature and amount
of the claim(s) and accompanied by a reasonable amount of relevant
documentation. All claims for indemnity must be
49
submitted by the indemnified party to the indemnifying party within the
applicable survival periods set forth above.If the indemnifying party fails
or refuses to make payment for such claims within a period of thirty days
from the date of notice to the indemnifying party, the indemnified party
shall be entitled to exercise all legal means of relief available.
(e) Access and Information. With respect to any claim for
indemnification under this Agreement, the indemnified party will give to the
indemnifying party and its counsel, accountants and other representatives
reasonable access, during normal business hours and upon the giving of
reasonable prior notice, to their books and records relating to such claims, and
to their employees, accountants, counsel and other representatives, all without
charge to the indemnifying party, except for reimbursement of reasonable
out-of-pocket expenses. In this regard, after the assertion of a claim for
indemnity, the indemnified party agrees to maintain any of its books and records
which may relate to the claim for indemnification for such period of time as may
be necessary to enable the indemnifying party to resolve such claim.
(f) Monetary Limitations on Indemnification. Sellers shall not be
obligated under this Agreement to indemnify Buyer with respect to any
liabilities, losses, claims, judgments, damages, expenses and costs as to which
Buyer is otherwise entitled to indemnification under Section 9.2(a)(ii) and
(iii) unless and until the aggregate amount of indemnification so asserted
exceeds the Basket Amount, and thereafter Buyer shall be entitled to indemnity
from Sellers under this Agreement only with respect to any amounts in excess of
the Basket Amount. Each Seller's obligation to indemnify Buyer pursuant to this
Article 9 shall be limited to Twenty-four Million Seven Hundred Sixty-six
Thousand and Six Hundred Eighty-five and 79/100 Dollars ($24,766,685.79).
Buyer's obligation to indemnify Sellers pursuant to Section 9.2(b)(ii) shall be
subject to the same limitation based on the Basket Amount, and claims of
individual Sellers shall be aggregated for purposes of determining whether the
Basket Amount has been exceeded. No losses shall be asserted with respect to any
matter which is covered by insurance to the extent that proceeds of such
insurance are received. Each Seller is individually liable for one hundred
percent of the Indemnifiable Damages relating to any breach of its own
representations, warranties and covenants, and is liable for one-sixth of the
Indemnifiable Damages relating to any breach of any representations, warranties
and covenants of GSHS and of the matters set forth in clauses (iii) through (v)
of Section 9.2(a).
(g) Appointment of Agent for Service of Process; Submission to
Jurisdiction. Any legal action or proceeding with respect to this Agreement or
any document related to this Agreement may be brought in the courts of the State
of Delaware or of the United States of America for the District of Delaware,
and, by execution and delivery of this Agreement, Buyer, and each Seller
consents, for itself and in respect of its property, to the jurisdiction of the
aforesaid courts solely for the purpose of adjudicating its rights with respect
to this Agreement or any document related to this Agreement. Each party, at or
prior to Closing, shall designate an agent as the designee, appointee and agent
of such party to receive, for and on behalf of such party, service of process in
such jurisdictions in any legal action or proceeding with respect to this
Agreement or any document related to this Agreement and such service shall, to
the extent permitted by applicable law, be deemed completed ten days after
delivery thereof to said agent. It is understood that a copy of such process
served on such agent will be promptly forwarded by mail to such party at its
address set forth in Section 11.6, but the failure of such party to receive such
copy shall not, to the extent permitted by applicable law, affect in any way the
service of such process. Buyer and each Seller irrevocably waive, to the extent
permitted by applicable law, any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any action or
proceeding in such respective jurisdictions in respect of this Agreement or any
document related to this Agreement. Nothing in this Agreement shall affect the
right of any party to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against any other party in any
other jurisdiction.
Section 9.3. Exclusive Remedy.
(a) Buyer and each Seller acknowledge and agree that its sole and
exclusive remedy with respect to any and all claims as to any breach of or
inaccuracy in the representations and warranties or breach of or failure to
perform
50
the covenants or agreements contained in this Agreement shall be
pursuant to the indemnification provisions set forth in this Article 9. In
furtherance of the preceding sentence, Buyer and each Seller waive, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action it may have against Sellers, a Seller or Buyer, as the case
may be, arising under or based upon any federal, state or local statute,
law, ordinance, rule or regulation (including, without limitation,
any such rights, claims or causes of action arising under or based upon common
law or otherwise) with respect to any breach or inaccuracy of the
representations and warranties or failure to perform the covenants or agreements
contained in this Agreement. The written waiver of a closing condition by any
party shall constitute a waiver by such party of any claim under this Section 9
against any other party with respect to the matter or matters covered by such
written waiver.
(b) Notwithstanding the foregoing subsection (a), nothing contained
in this Section 9.3 shall prevent any party from seeking and obtaining specific
performance by the other party of any of its obligations under this Agreement as
provided in Section 11.10 or from seeking and obtaining injunctive relief
against the other party's activities in breach of this Agreement.
(c) Anything to the contrary in this Agreement notwithstanding, no
breach of any representation or warranty or failure to perform a covenant or
agreement contained in this Agreement shall give rise to any right on the part
of Buyer or any Seller after the Closing to rescind this Agreement or any of the
transactions contemplated by this Agreement.
ARTICLE 10.
TERMINATION
Section 10.1. Termination. This Agreement may be terminated at any
time prior to Closing by:
(a) the mutual consent of Sellers (acting jointly) and
Buyer;
(b) Sellers (acting jointly) or Buyer if the Closing has not
occurred by the close of business on February 29, 1996, so long as the failure
to consummate the transaction on or before such date did not result from a
breach of this Agreement by the party seeking termination of this Agreement;
(c) at any time before the Closing, by any Seller or Buyer,
in the event (i) of a material breach of this Agreement hereof by any
non-terminating party if such non-terminating party fails to cure such breach
within five Business Days following notification by any one or more of the
terminating parties or (ii) upon notification to the non-terminating parties by
the terminating party that the satisfaction of any condition to the terminating
party's obligations under this Agreement has become impossible or impracticable
with the use of best efforts if the failure of such condition to be satisfied is
not caused by a breach by the terminating party (and, for purposes of (b) and
(c) only, a breach or material breach by any Seller shall constitute a breach or
material breach, as the case may be, by Sellers); or
(d) If such termination is required pursuant to any final
and nonappealable judgment or order entered in any judicial or administrative
proceeding initiated by a Governmental Antitrust Authority.
Section 10.2. Procedure and Effect of Termination. In the event of
termination of this Agreement pursuant to Section 10.1, written notice of such
termination shall promptly be given by the terminating party to the other party,
and this Agreement shall upon that notice terminate and become void and have no
effect, and the transactions contemplated by this Agreement shall be abandoned
without further action by the parties, except that the provisions of
51
the Confidentiality Agreement and Section 11.5 shall survive the termination of
this Agreement, provided, however, that such termination shall not relieve any
party of any liability for any breach by it of this Agreement.
ARTICLE 11.
MISCELLANEOUS
Section 11.1. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party. The execution and delivery
of this Agreement by all Sellers shall constitute unanimous GSHS stockholder
approval of the execution and delivery of this Agreement by GSHS.
Section 11.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to a
contract executed and performed in such state without reference to the choice of
law principles of such state.
Section 11.3. No Third Party Beneficiaries. Nothing in this Agreement
is intended, nor shall it be construed, to confer any rights or benefits upon
any Person (including, but not limited to, any employee or former employee of
GSHS or any Subsidiary) other than Sellers and Buyer (and their successors and
assigns to the extent specifically permitted by Section 11.7) and no other
Person not a party to this Agreement shall have any rights or remedies under
this Agreement, except for Persons entitled to indemnification under Article 9
(and such rights and remedies shall be limited solely to those provided by
Article 9).
Section 11.4. Entire Agreement. This Agreement, the Buyer Disclosure
Schedule, the GPA Disclosure Letter, the GSHS Disclosure Schedule, the Seller
Disclosure Schedule, the letter agreement, dated the date of this Agreement,
between Buyer and Sellers, the Exchange Agreement, the GPA Stock Exchange
Agreement and the New Stockholders' Agreement contain the entire agreement
between the parties with respect to the subject matters of this Agreement and
such other agreements, and such agreements supersede all prior drafts of such
agreements, all prior and contemporaneous agreements, representations,
negotiations, discussions, correspondence, communications, the letter of intent,
dated September 14, 1995, between Buyer and GSHS, term sheets and understandings
of the parties, except for the Confidentiality Agreement, which agreement is
ratified and remains in full force and effect. There are no agreements,
understandings, representations and warranties between the parties other than
those set forth or referred to in this Agreement and such specifically listed
above other agreements.
Section 11.5. Expenses. Except as set forth in this Agreement,
whether the Stock Purchase is or is not consummated, all legal and other costs
and expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such costs
and expenses, except that Sellers and Buyer each shall pay and be responsible
for one-half of any stock transfer taxes applicable to the sale of the GSHS
Shares.
Section 11.6. Notices. All notices under this Agreement shall be
sufficiently given for all purposes under this Agreement if in writing (a) when
delivered personally; (b) three Business Days after mailing in the United States
Postal Service; (c) one day after sending by documented overnight delivery
service; or (d) when receipt is confirmed, by telecopy, telefax or other
electronic transmission service to the appropriate address or number as set
forth below.
Notices to Sellers shall be addressed to:
00
Xxxx Xxxxx xxx Xxxx Xxxxxx xx Xxx Xxxxxx, Inc.
0 Xxxx Xxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxxx X. Pures
Telecopier: (000) 000-0000
with a copy to:
Blue Cross and Blue Shield of New Jersey, Inc.
0 Xxxx Xxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
Health Care Service Corporation
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxx
Telecopier: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 X. Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Telecopier: (000) 000-0000
Independence Blue Cross
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
with copies to:
Independence Blue Cross
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
and
Dilworth, Paxson, Xxxxxx & Xxxxxxxx
3200 Mellon Bank Center
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
53
Telecopier: (000) 000-0000
Medical Service Association of Pennsylvania, Inc.
0000 Xxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx
Telecopier: (000) 000-0000
with a copy to:
Xxxxxxxx Ingersoll, P.C.
One Oxford Centre
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telecopier: (000) 000-0000
Xxxxxx County Medical Bureau, Inc.
0000 Xxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
Telecopier: (000) 000-0000
with a copy to:
Xxxx, Xxxxxx & Xxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxx, Esq.
Telecopier: (000) 000-0000
Veritus, Inc.
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxx
Telecopier: (000) 000-0000
with a copy to:
Doepken Keevican Xxxxx & Xxxxxx
37th Floor, USX Tower
000 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Telecopier: (000) 000-0000
and a copy of Notices to any Seller to:
54
Xxxxxxx, Baetjer and Xxxxxx, LLP
1800 Mercantile Bank and Trust Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
or at such other address and to the attention of such other person as each
Seller may designate by written notice to Buyer. Notices to GSHS shall be
addressed to:
Green Spring Health Services, Inc.
Xxxxx Xxxxxxxx, Xxxxx 000
0000 Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Telecopier: (000) 000-0000
with a copy to:
Xxxxxxx, Baetjer and Xxxxxx, LLP
1800 Mercantile Bank and Trust Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
or at such other address and to the attention of such other person as may
designate by written notice to Buyer. Notices to Buyer shall be addressed to:
Charter Medical Corporation
Suite 1400
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx
Telecopier: (000) 000-0000
with copies to:
Charter Medical Corporation
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopier: (000) 000-0000
and
00
Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
or to such other address and to the attention of such other
person as Buyer may designate by written notice to Sellers.
Section 11.7. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns; provided, however, except for the
right of Buyer to grant to or for the benefit of the lenders under the Credit
Agreement a security interest in its rights under this Agreement pursuant to the
Credit Agreement and the documents from time to time securing the same, no party
to this Agreement shall have the right to assign its rights or interests in or
delegate its obligations under this Agreement without the express prior written
consent of all other parties to this Agreement.
Section 11.8. Headings; Definitions. The section and article headings
contained in this Agreement are inserted for convenience and reference only and
will not affect the meaning or interpretation of this Agreement. All references
to Sections or Articles contained in this Agreement mean Sections or Articles of
this Agreement unless otherwise stated. All capitalized terms defined in this
Agreement are equally applicable to both the singular and plural forms of such
terms.
Section 11.9. Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
the party against whom enforcement of any such modification or amendment is
sought. Any party to this Agreement may, only by an instrument in writing, waive
compliance by the other party to this Agreement with any term or provision of
this Agreement. The waiver by any parties to this Agreement of a breach of any
term or provision of this Agreement shall not be construed as a waiver of any
subsequent breach.
Section 11.10. Specific Performance. Each of the parties acknowledges
that money damages would not be a sufficient remedy for any breach of this
Agreement and that irreparable harm would result if this Agreement were not
specifically enforced. Therefore, the rights and obligations of the parties
under this Agreement shall be enforceable by a decree of specific performance
issued by any court of competent jurisdiction, and appropriate injunctive relief
may be applied for and granted in connection with such decree. A party's right
to specific performance shall be in addition to all other legal or equitable
remedies available to such party.
Section 11.11. Severability of Provisions. If any provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner adverse to any party. Upon any such determination, the parties to
this Agreement shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated to this Agreement
are fulfilled to the extent possible.
56
Section 11.12. Seller Liability. Except as otherwise set forth in
this Agreement, any representations or warranties of, any obligations of, or
actions required to be taken by, Sellers set forth in this Agreement shall be
several and not joint.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the date first above written.
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.
By: /s/ Xxxxxx X. Pures
---------------------------------------------
Title: Senior Vice President -
Administration, Chief
Financial Officer and
Treasurer
HEALTH CARE SERVICE CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------------------
Title: Senior Vice President
INDEPENDENCE BLUE CROSS
By: /s/ G. Xxxx XxXxxx, Xx.
--------------------------------------------
Title: President and Chief
Executive Officer
MEDICAL SERVICE ASSOCIATION OF PENNSYLVANIA
By: /s/ Xxxxxx X. Xxxx
----------------------------------------------
Title: President and Chief
Executive Officer
57
XXXXXX COUNTY MEDICAL BUREAU
By: /s/ Xxxxxx X. Xxxxx
--------------------------------------------
Title: Chairman
VERITUS, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------------
Title: President and Chief
Executive Officer
CHARTER MEDICAL CORPORATION
By: /s/ X. X. Xxxxxxxx
--------------------------------------------
Title: Chief Executive Officer
GREEN SPRING HEALTH SERVICES, INC.
By: /s/ Xxxxx Xxxxxx
--------------------------------------------
Title: President and Chief
Executive Officer
58
