Exhibit 10.18
STOCK PURCHASE AGREEMENT
by and among
SPECTRUM HEALTHCARE SERVICES, INC.,
THE BENEFICIAL OWNERS OF SPECTRUM HEALTHCARE SERVICES, INC.,
TEAM HEALTH, INC.,
and
MADISON DEARBORN CAPITAL PARTNERS, L.P.,
AS THE REPRESENTATIVE
Dated as of March 29, 2002
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS....................................................................... 1
Section 1.1 Definitions....................................................... 1
ARTICLE 2 PURCHASE AND SALE................................................................. 10
Section 2.1 Purchase and Sale of Acquired Shares and Prudential Note.......... 10
Section 2.2 Purchase Price Adjustments........................................ 10
Section 2.3 The Closing....................................................... 12
Section 2.4 Repayment of Indebtedness......................................... 13
Section 2.5 Intercompany Accounts............................................. 13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY............................. 13
Section 3.1 Organization and Qualification.................................... 14
Section 3.2 Subsidiaries...................................................... 14
Section 3.3 Capitalization.................................................... 14
Section 3.4 Authority of the Company.......................................... 15
Section 3.5 Compliance with Laws.............................................. 16
Section 3.6 Health Care Matters............................................... 16
Section 3.7 Physician Independent Contractors. ............................... 17
Section 3.8 Advisory and Other Fees........................................... 18
Section 3.9 Taxes............................................................. 18
Section 3.10 Corporate Records................................................. 19
Section 3.11 Litigation........................................................ 19
Section 3.12 Financial Statements.............................................. 19
Section 3.13 Transactions with Affiliates...................................... 20
Section 3.14 Real Properties................................................... 20
Section 3.15 Absence of Undisclosed Liabilities. .............................. 21
Section 3.16 Absence of Certain Developments. ................................. 21
Section 3.17 Assets............................................................ 22
Section 3.18 Proprietary Rights................................................ 23
Section 3.19 Contracts......................................................... 23
Section 3.20 Insurance......................................................... 25
Section 3.21 Permits........................................................... 25
Section 3.22 Employee Benefit Plans............................................ 25
Section 3.23 Employees; Labor Matters.......................................... 26
Section 3.24 Environmental Matters............................................. 27
Section 3.25 Material Customers................................................ 27
Section 3.26 Employee Relations................................................ 28
Section 3.27 Officers, Directors and Employees. ............................... 29
Section 3.28 Disclosure........................................................ 29
Section 3.29 Closing Date...................................................... 29
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS.............................. 30
Section 4.1 Existence and Power............................................... 30
Section 4.2 Organizational Authorization...................................... 30
Section 4.3 Governmental Authorization........................................ 30
Section 4.4 Noncontravention.................................................. 30
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE BUYER....................................... 31
Section 5.1 Existence and Power............................................... 31
Section 5.2 Organizational Authorization...................................... 31
Section 5.3 Governmental Authorization........................................ 31
Section 5.4 Noncontravention.................................................. 31
Section 5.5 Financing......................................................... 31
Section 5.6 Purchase for Investment........................................... 31
Section 5.7 Finder's Fees..................................................... 31
Section 5.8 Solvency.......................................................... 32
ARTICLE 6 COVENANTS OF THE COMPANY.......................................................... 32
Section 6.1 Conduct of the Company and its Subsidiaries. ..................... 32
Section 6.2 Confidentiality................................................... 35
Section 6.3 Access............................................................ 35
Section 6.4 Exclusive Dealing................................................. 35
Section 6.5 Closing Options and Bonuses....................................... 35
ARTICLE 7 COVENANTS OF THE BUYER............................................................ 36
Section 7.1 Confidentiality................................................... 36
Section 7.2 Access............................................................ 36
Section 7.3 Director and Officer Liability and Indemnification................ 36
Section 7.4 Employment and Benefit Arrangements............................... 36
Section 7.5 Regulatory Filings................................................ 37
Section 7.6 Contact with Employees, Customers and Suppliers................... 37
Section 7.7 Notification...................................................... 37
Section 7.8 D&O Insurance..................................................... 37
Section 7.9 Financing......................................................... 37
ARTICLE 8 ADDITIONAL COVENANTS OF THE SELLERS AND THE BUYER................................. 38
Section 8.1 Best Efforts; Further Assurances.................................. 38
Section 8.2 Further Cooperation............................................... 38
Section 8.3 Public Announcements.............................................. 38
Section 8.4 Transfer Taxes.................................................... 38
Section 8.5 Acknowledgment by the Buyer....................................... 38
Section 8.6 Employee Benefit Plans............................................ 39
Section 8.7 Disclosure Generally.............................................. 41
Section 8.8 Use of Spectrum Name.............................................. 41
Section 8.9 Prudential Note................................................... 41
Section 8.10 Fund Dissolution.................................................. 41
Section 8.11 Certain Licenses.................................................. 42
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ARTICLE 9 CONDITIONS TO CLOSING............................................................. 42
Section 9.1 Conditions to the Buyer's Obligations. ........................... 42
Section 9.2 Conditions to the Sellers' Obligations. .......................... 44
ARTICLE 10 TERMINATION...................................................................... 45
Section 10.1 Termination....................................................... 45
Section 10.2 Effect of Termination............................................. 46
ARTICLE 11 INDEMNIFICATION AND RELATED MATTERS.............................................. 46
Section 11.1 Survival.......................................................... 46
Section 11.2 Indemnification................................................... 47
Section 11.3 Certain Tax Matters............................................... 52
ARTICLE 12 NON COMPETE...................................................................... 58
Section 12.1 Noncompetition, Nonsolicitation, and Confidentiality.............. 58
Section 12.2 Nonsolicitation by the Buyer...................................... 61
Section 12.3 Noncompetition and Nonsolicitation of Aramark. ................... 61
ARTICLE 13 MISCELLANEOUS.................................................................... 63
Section 13.1 Notices........................................................... 63
Section 13.2 Amendments and Waivers............................................ 64
Section 13.3 Construction; Severability........................................ 65
Section 13.4 Expenses.......................................................... 65
Section 13.5 Successors and Assigns............................................ 65
Section 13.6 Governing Law..................................................... 66
Section 13.7 Jurisdiction...................................................... 66
Section 13.8 Waiver of Jury Trial.............................................. 66
Section 13.9 Counterparts; Third Party Beneficiaries. ......................... 66
Section 13.10 Entire Agreement.................................................. 66
List of Exhibits
Exhibit A Form of Prudential Note
Exhibit B Form of Escrow Agreement
Exhibit C Executed Commitment Letter
Exhibit D Matters to be Covered in K&E Opinion
Exhibit E Form of Indemnification Agreement
Exhibit F Form of Guaranty
Exhibit G Form of Separation Side Letter
Exhibit H List of Resigning Officers and Directors
Exhibit I Matters to be Covered in H3GM Opinion
Exhibit J Calculation of Target Working Capital
Exhibit K Reviewed State Tax Returns
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of March
29, 2002, by and among Spectrum Healthcare Services, Inc., a Delaware
corporation (the "Company"), each of the Persons set forth on the "Schedule of
Sellers" hereto, each of which is as of the date hereof a beneficial owner of
the Company (each a "Seller" and, collectively, the "Sellers"), Team Health,
Inc., a Tennessee corporation (the "Buyer"), and Madison Dearborn Capital
Partners, L.P., in its capacity as representative of each of the Sellers (the
"Representative"). Unless otherwise provided, capitalized terms used herein are
defined in Article 1 below.
WHEREAS, upon the terms and subject to the conditions set forth herein,
the Buyer desires to acquire from the Sellers (other than Prudential) and the
Sellers (other than Prudential) desire to sell to the Buyer, all of the then
issued and outstanding shares of the Company's Common Stock, par value $.01 per
share ("Common Stock"), and the Buyer desires to acquire from Prudential, and
Prudential desires to sell to the Buyer, the Prudential Note;
WHEREAS, Spectrum Holdings of Delaware, LLC, a Delaware limited
liability company ("Holdings"), currently owns 9,221,294 shares of Common Stock;
and
WHEREAS, the Sellers, Holdings and the Company are parties to that
certain Distribution and Repurchase Agreement of even date herewith (the
"Distribution and Repurchase Agreement") pursuant to which, after the date
hereof and prior to the Closing, Holdings will, subject to the terms and
conditions set forth therein, distribute certain of the shares of Common Stock
to the Sellers and following such distributions the Company will, subject to the
terms and conditions set forth therein, repurchase the shares of Common Stock
held by Holdings and one of the Sellers.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS.
"Acquired Shares" means all of the issued and outstanding shares of
Common Stock following the distributions and repurchases pursuant to the
Distribution and Repurchase Agreement. For the avoidance of doubt, Acquired
Shares do not include any Repurchased Shares.
"Affiliate" means (except as otherwise specifically defined herein), as
to any Person, any other Person which, directly or indirectly, controls, or is
controlled by, or is under common control with, such Person. As used in this
definition, "control" (including, with its correlative meanings, "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of management or policies of a
Person,
whether through the ownership of securities or partnership or other ownership
interests, by contract or otherwise.
"Affiliated Group" means an affiliated group as defined in Section 1504
of the Code (or any analogous combined, consolidated or unitary group defined
under state or local income Tax law).
"Allocable Portion" means, with respect to the share of any Seller in a
particular amount, that fraction equal to such Seller's Seller Percentage.
"Cash" means cash, cash equivalents and marketable securities, however
and wherever held (including, without limitation, restricted cash).
"Closing Cash" means the aggregate balance of all Cash held by or for
the benefit of the Company or any Subsidiary (including, without limitation,
Related Entities) as of the close of business on the day immediately preceding
the Closing Date after giving effect to the elimination of intercompany accounts
as contemplated by Section 2.5; provided however, that if the restricted cash
required to be held by Healthcare Resources Medical Associates, Inc. as of the
close of business on the day immediately preceding the Closing Date exceeds
$50,000, then for purposes of the calculation of Closing Cash hereunder, Closing
Cash will be deemed to not include 50% of the amount by which such restricted
cash exceeds $50,000.
"Closing Indebtedness" means the balance of all outstanding
Indebtedness as of the close of business on the day immediately preceding the
Closing Date after giving effect to the elimination of intercompany accounts as
contemplated by Section 2.5.
"Closing Option and Bonus Amount" means an amount of cash, determined
by the Company's Board of Directors in its sole discretion at or prior to the
Closing Date, which will be paid out by the Company to one or more of its and/or
its Affiliates' employees immediately before the consummation of the
transactions contemplated by Section 2.1, which payments may, without
limitation, be in consideration for the cancellation of certain options such
employees have to acquire common units of Holdings.
"Closing Working Capital" means the net book value of the Working
Capital of the Company as of the close of business on the day immediately
preceding the Closing Date after giving effect to the elimination of
intercompany accounts as contemplated by Section 2.5.
"Code" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular Code section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"Employee Benefit Plan" means any employee benefit plan, program,
policy, practices, or other arrangement providing benefits to any current or
former employee, officer or director of the Company or any Subsidiary or any
beneficiary or dependent thereof that is sponsored or maintained by the Company
or any Subsidiary or to which the Company or any Subsidiary contributes or is
obligated to contribute, whether or not written, including without limitation
any employee welfare benefit plan within the meaning of Section 3(1) of ERISA,
any employee pension benefit plan within the meaning of Section 3(2) of ERISA
(whether or not such plan is
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subject to ERISA) and any bonus, incentive, deferred compensation, vacation,
sick leave or similar paid time off benefit, stock purchase, stock option,
continuing professional education, severance, employment, change of control or
other material fringe benefit plan, program or agreement. Employee Benefit Plans
include any such plan, program, policy, practice or other arrangement that is
sponsored or maintained by the Company or any Subsidiary covering: persons
providing services to Company or any Subsidiary as a Leased Employee as defined
under Code Section 414(n); persons employed by Company who provide services as
Leased Employees to others; and persons who are independent contractors with
respect to Company or any Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means the Person serving as the escrow agent under the
Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement, by and among the
Sellers, the Buyer and the Representative, to be entered into prior to or in
connection with the Closing, substantially in the form of Exhibit B hereto.
"Escrow Fund" has the meaning given to such term in the Escrow
Agreement.
"Estimated Gross Per Share Common Value" means the result of (i) the
sum of (A) all of the outstanding principal and interest amounts owing to the
Company under the Intercompany Note as of the close of business on the day
immediately preceding the Closing Date after giving effect to any transactions
undertaken in connection with the elimination of Intercompany Accounts pursuant
to Section 2.5 and (B) the Estimated Purchase Price, divided by (ii) the
aggregate number of shares of Common Stock issued and outstanding as of
immediately prior to the repurchase transactions contemplated by Section 2 of
the Distribution and Repurchase Agreement (i.e., including all Repurchased
Shares).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Existing Credit Agreement" means that certain Second Amended and
Restated Loan Agreement, dated as of November 17, 2000 (as the same may from
time to time be amended, restated, supplemented or otherwise modified), by and
among the Company, Spectrum Healthcare, Inc., the various lending institutions
party thereto, Fleet National Bank, as administrative agent, Firstar Bank, N.A.,
as documentation agent, Bank of America, N.A., as syndication agent, and Fleet
Securities, Inc., as arranger.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Guaranty Obligation" means the guaranty described in item 4. on
Schedule 3.13 hereto and each surety bond indemnity agreement described in item
3. on Schedule 3.15 hereto.
"Indebtedness" means, as of a given time, without duplication, all
amounts owing as of such time under the agreements or instruments, if any,
specified on Schedule 1.1 and all amounts
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owing with respect to the Existing Credit Agreement, including without
limitation, any accrued interest or fees, the net amounts due related to any
interest rate swap or letter of credit obligation (or related to the
cancellation thereof), termination or prepayment fees, and any other fees and
expenses payable under the Existing Credit Agreement or as a result of its
termination; provided that the Prudential Note shall not be deemed to be
Indebtedness as defined herein.
"Intercompany Note" means the Subordinated Intercompany Promissory Note
in the original principal amount of $25,656,868 issued by Spectrum Healthcare of
Delaware, Inc. to the Company on November 30, 2001.
"Knowledge" and "aware" and terms of similar import mean, (i) with
respect to an individual, the actual knowledge of such individual after making
reasonable inquiry and exercising reasonable diligence with respect to the
particular matter in question and (ii) with respect to an entity, the actual
knowledge of the executive officers and directors of such Person, in each case
after making reasonable inquiry and exercising reasonable diligence with respect
to the particular matter in question consistent with the standard appropriate
for a Person having or holding the title or office of such executive officer or
director; provided that if the individual or entity is the Company or a Seller,
"knowledge" and "aware" and terms of similar import mean the actual knowledge of
Xxxxxx X. Xxxx, Xx., Xxxxx Xxxxx, Xxxxx Xxxxxxxx, XxXxx Xxxxxx, Xxxx Xxx, Xxx
Xxxxxxx, Xxxxxx Xxxxx, Xxxxxxx Xxxxx and Xxxxx Xxxxxx, in each case after making
reasonable inquiry and exercising reasonable diligence with respect to the
particular matter in question consistent with the standard appropriate for an
individual having or holding the title or office of such individual).
"Loss" means, with respect to any Person, any damage, liability,
demand, claim, action, cost, imposed Tax, penalty, fine or other loss or
expense, whether or not arising out of a third party claim, including all
interest, penalties, reasonable attorneys' fees and expenses against or
affecting such Person; provided that "Loss" shall not include any form of
consequential or punitive damages except consequential or punitive damages
awarded to third parties.
"Material Adverse Effect" means a material adverse effect which has
occurred or occurs to the business, operations, assets, financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole; it
being understood that changes relating to the economy or factors affecting the
industry generally as well as changes arising from or relating to this
transaction, shall be excluded from the definition of "Material Adverse Effect."
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or any agency or instrumentality thereof.
"Proprietary Rights" means all of the following: (i) patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice) and any reissues, continuations,
continuations-in-part, revisions, extensions or reexaminations thereof; (ii)
trademarks, service marks, trade dress, logos, trade names and corporate names,
together with all goodwill associated therewith and all translations,
adaptations, derivations and combinations of the foregoing; (iii) copyrights and
copyrightable works, mask works; (iv) registrations, applications and renewals
for any of the foregoing; (v) trade secrets and
4
confidential information (including, without limitation, ideas, formulae,
compositions, know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, financial and accounting data, business and marketing
plans, and customer and supplier lists and related information); (vi) computer
software (including, without limitation, data, databases, proprietary
information systems and documentation); (vii) other proprietary rights; and
(viii) all copies and tangible embodiments of the foregoing (in whatever form or
medium).
"Prudential" means Prudential Private Equity Investors III, L.P.
"Prudential Note" means the promissory note issued by the Company,
substantially in the form of Exhibit A hereto.
"Related Entity" means any professional corporation or similar entity
the day to day business and administrative affairs of which are managed by the
Company or its Subsidiaries (other than any other Related Entities) and that has
entered into a management agreement with the Company or any Subsidiary for such
purpose, each of which are set forth on Schedule 3.2 hereto.
"Repurchased Holdings Shares" means the number of shares of Common
Stock repurchased by the Company from Holdings pursuant to the Distribution and
Repurchase Agreement.
"Repurchased Prudential Shares" means the number of shares of Common
Stock repurchased by the Company from Prudential pursuant to the Distribution
and Repurchase Agreement.
"Repurchased Shares" means the Repurchased Holdings Shares and the
Repurchased Prudential Shares.
"Seller Percentage" means, with respect to a Seller, (i) the aggregate
number of Acquired Shares sold by such Seller to the Buyer pursuant to this
Agreement (or, in the case of Prudential, the number of Repurchased Prudential
Shares) divided by (ii) the aggregate number of all Acquired Shares sold by all
of the Sellers to the Buyer pursuant to this Agreement plus the number of
Repurchased Prudential Shares; provided that if a determination of the Seller
Percentages is required to be made prior to the Closing, until such time as the
Closing has occurred, the Seller Percentages shall be based on the preceding
definition of Seller Percentage as if the transactions under the Distribution
and Repurchase Agreement and this Agreement were consummated on the date hereof.
"SHS Executives" means Xxxxxx Xxxx, Xxx Xxxxx; Xxx Xxxxxxx and Xxxxxx
Xxxxxxxxx (the "SHS Executives").
"Significant Seller" means Madison Dearborn Capital Partners, L.P.;
Healthcare Equity Partners, L.P.; Healthcare Equity QP Partners, L.P.;
Prudential Private Equity Investors III, L.P.; the Xxxxxx X. Xxxx, Xx. Revocable
Trust; and ARAMARK Organizational Services, Inc. (successor by merger to ARAMARK
Health & Education Services, Inc.).
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"Subsidiary" means with respect to a Person, any entity the securities
or other ownership interests of which having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are directly or indirectly owned by such Person and except as otherwise
specifically noted herein, the Company's Subsidiaries shall be deemed to include
the Related Entities.
"Target Working Capital" means $8,377,591, which was calculated as set
forth on Exhibit J hereto.
"Tax" means any federal, state, local or foreign income, gross
receipts, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, ad valorem/personal property, stamp,
excise, occupation, sales, use, transfer, value added, alternative minimum,
estimated or other tax, assessment, duty, fee, levy or other governmental
charge, including any interest, penalty or addition thereto, whether disputed or
not.
"Tax Returns" means any return, report, information return or other
document (including schedules or any related or supporting information) filed or
required to be filed with any Governmental Authority or other authority in
connection with the determination, assessment or collection of any Tax or the
administration of, any laws, regulations or administrative requirements relating
to any Tax.
"Working Capital" means, as of a given time, (i) the net book value of
the current assets of the Company (excluding Cash and deferred and current tax
assets) as of such time, minus (ii) the net book value of the current
liabilities of the Company (excluding deferred and current tax liabilities such
as accrued income taxes payable and excluding Indebtedness and any accruals for
the net self insured retention under the Company's malpractice insurance
policies ("SIR")) including, without limitation, accrued salary, bonuses,
benefits and other compensation owing to the SHS Executives, as of such time, in
each case determined on a consolidated basis, minus (iii) $125,000, which amount
represents the parties' adjustment for SIR, and minus (iv) without duplication
to any other adjustments, any accrued and unpaid Closing Option and Bonus
Amount; provided, however, that all intercompany accounts to be cancelled as
provided in Section 2.5 shall be excluded from the calculation of Working
Capital. With respect to any calculation of Working Capital, the following
accruals shall not be reduced or increased from the amount thereof at December
31, 2001 except for reductions for actual payment of liabilities or charge off
of accounts receivable or the final determination or settlement of any amount
determined to be payable with respect to such accrual: (i) bad debt reserve on
accounts receivable; and (ii) the accrued liability balances of $500,000 and
$281,136, respectively, included in the account analysis of General Ledger
Account 257000 (Accrued-Other Expenses). With respect to any calculation of
Working Capital, the Discretionary 401(k) and SERP plan accruals shall reflect
an accrual rate not less than fifty percent (50%) of the maximum amounts of
compensation eligible for a matching contribution for the period from January 1,
2002 to the Closing Date. With respect to any calculation of Working Capital,
except as otherwise provided in this definition, no change in accounting
principles will be made from those utilized in preparing the Latest Balance
Sheet including, without limitation, with respect to the nature of accounts,
types of reserves or accruals, and/or methodology and assumptions for
determining the levels of reserves or accruals. For purposes of the preceding
sentence, "changes in accounting principles" includes all changes in accounting
principles, policies, practices, procedures or
6
methodologies with respect to financial statements, their classification or
their display, as well as all changes in practices, methods, conventions or
assumptions utilized in making accounting estimates.
Cross-References to Other Defined Terms. Each term listed below is
defined in the Section of this Agreement listed opposite such term:
Term Section
---- -------
Aramark Section 12.1(a)
Actual Purchase Price Section 2.2(b)
Agreement Preface
Applicable Limitation Date Section 11.1
Approvals Section 3.21
Audited Financial Statements Section 3.12(a)(ii)
Basket Section 11.2(b)(ii)
Buyer Preface
Buyer Comments Section 11.3(b)(i)
Buyer Parties Section 11.2
Buyer's Representatives Section 7.1
Buyer Tax Group Section 11.3(a)(i)
Cap Section 11.2(b)(i)
Clinical Services Section 3.7(b)
Closing Section 2.3
Closing Date Section 2.3
CMS Section 9.1(i)
Commitment Letter Section 5.5
Common Stock Recitals
Company Preface
Company Proprietary Rights Section 3.18
Confidential Information Section 12.1(c)
Confidentiality Agreement Section 7.1
Covenantors Section 12.1(a)
Customers Section 3.25(b)
Distribution and Repurchase Agreement Recitals
Draft Computation Section 2.2(b)
Environmental Requirements Section 3.24
Escrow Amount Section 2.3(b)(iii)
Estimated Cash Section 2.2(a)(ii)
Estimated Indebtedness Section 2.2(a)(iii)
Estimated Purchase Price Section 2.2(a)
Estimated Working Capital Increase Section 2.2(a)(i)
Estimated Working Capital Decrease Section 2.2(a)(i)
Financing Section 7.9
Financing Agreements Section 7.9
Firm Section 2.2(b)
Governmental Authority Section 3.5
7
Term Section
---- -------
Guaranty Section 9.1(j)
Healthcare Facility Section 3.25(a)
Holdings Preface
Company Tax Group Section 11.3(a)(iii)
HSR Act Section 3.4(b)
Indemnification Agreement Section 9.1(i)
Indemnified Party Section 11.2(e)(i)
Indemnifying Party Section 11.2(e)(i)
Individual Covenantors Section 12.1(e)
Intercompany Accounts Section 2.5
Joint Defense Proceeding Section 11.2(e)(iii)
Latest Balance Sheet Section 3.12(a)(iii)
Laws Section 3.5
Leased Property Section 3.14(b)
Liens Section 3.14(a)
Marks Section 8.8
Material Contracts Section 3.19
Material Customers Section 3.25
Mirror SRP Section 8.6
Noncompete Period Section 12.1(e)
Non-Military Line of Business Section 12.1(e)
Objection Notice Section 2.2(b)
Other Material Section 13.10
Physician Contract Section 3.7(a)
Prime Contractor Section 3.25(a)
Purchase Price Section 2.1
Pre-Closing Period Section 11.3(a)(ii)
Pre-Closing Period Returns Section 11.3(b)(i)
Real Property Section 3.14(a)
Real Property Lease Section 3.14(b)
Representative Preface
Schedule Article 3
Schedule of Sellers Preface
Schedule Update Section 3.29
Seller Section 2.1
Seller Comments Section 11.3(b)(iii)
Seller Parties Section 11.2(c)
Seller's Tax Obligation Section 11.3(b)
Seller Transaction Expenses Section 13.4
Separation Side Letter Section 9.1(k)
SHD Section 8.11
SHR Audited Financial Statements Section 3.12(a)(ii)
SHS Audited Financial Statements Section 3.12(a)(i)
Spectrum 401(k) Plan Section 8.6(a)
Xxxxx Act Section 3.6(b)
8
Term Section
---- -------
Straddle Period Section 11.3(a)(iv)
Straddle Period Returns Section 11.3(b)(ii)
Tax Benefit Section 11.3(b)(vi)
Tax Cap Section 11.3(d)(iii)
Tax Claim Section 11.3(e)
Tax Obligation Statement Section 11.3(b)(iii)
Transaction Value Section 2.1
Unaudited Financial Statements Section 3.12(a)(iii)
Welfare Benefits Transition Period Section 8.6(c)(i)
[Intentionally left blank]
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ARTICLE 2
PURCHASE AND SALE
SECTION 2.1 PURCHASE AND SALE OF ACQUIRED SHARES AND PRUDENTIAL NOTE.
Following the completion of the distribution and repurchase transactions
contemplated by the Distribution and Repurchase Agreement, upon the terms and
subject to the conditions set forth herein: (a) each Seller other than
Prudential shall sell, assign, transfer and convey to the Buyer, and the Buyer
shall purchase and acquire from each such Seller, all of the Acquired Shares
then held by such Seller at a price per share equal to the Estimated Gross Per
Share Common Value; and (b) Prudential shall sell, assign, transfer and convey
to the Buyer, and the Buyer shall purchase and acquire from Prudential, the
Prudential Note for a purchase price equal to the original principal amount
thereof. Subject to Section 2.2(c), the aggregate purchase price to be paid by
the Buyer to the Sellers for the Prudential Note and the Acquired Shares (the
"Purchase Price") at the Closing shall equal $147 million cash (the "Transaction
Value"), as adjusted pursuant to Section 2.2(a); provided, however, that $10
million of the Purchase Price to be otherwise paid at the Closing shall be
deposited by the Buyer with the Escrow Agent to be held and disbursed in
accordance with the Escrow Agreement. The Purchase Price shall be allocated and
paid to the Sellers pro rata based on each Seller's Seller Percentage.
SECTION 2.2 PURCHASE PRICE ADJUSTMENTS.
(a) Closing Date Adjustments. At the Closing, the Purchase
Price shall be adjusted dollar-for-dollar as set forth in this Section
2.2(a). The Purchase Price, as adjusted pursuant to this Section
2.2(a), is referred to herein as the "Estimated Purchase Price."
(i) Working Capital. On or before the Closing Date,
the Buyer and the Representative shall jointly in good faith
estimate the amount by which Closing Working Capital exceeds
Target Working Capital (such excess is referred to herein as
an "Estimated Working Capital Increase") or the amount by
which Closing Working Capital is less than Target Working
Capital (such deficiency is referred to herein as an
"Estimated Working Capital Decrease"). At the Closing, if
there is an Estimated Working Capital Increase, then the
Purchase Price shall be increased by the amount of such
excess, or if there is an Estimated Working Capital Decrease,
then the Purchase Price shall be decreased by the amount of
such deficiency.
(ii) Cash. On or before the Closing Date, the Buyer
and the Representative shall jointly in good faith estimate
the amount of Closing Cash (the "Estimated Cash"). At the
Closing, the Purchase Price shall be increased by the amount
of Estimated Cash.
(iii) Indebtedness. On or before the Closing Date,
the Buyer and the Representative shall jointly in good faith
estimate the amount of Closing Indebtedness (the "Estimated
Indebtedness"). At the Closing, the Purchase Price shall be
decreased by the amount of Estimated Indebtedness.
10
(iv) Dispute Resolution. In the event the Buyer and
the Representative are unable to agree on the Estimated
Working Capital Increase or the Estimated Working Capital
Decrease, as the case may be, or the Estimated Cash or the
Estimated Indebtedness as provided in Sections 2.2(a)(i)
through (iii), each such estimate in dispute shall be the
average of the good faith estimate of the Buyer and the good
faith estimate of the Representative for such Section
2.2(a)(i), (ii) and/or (iii) as the case may be.
(b) Post-Closing Determination. Within 90 days after the
Closing Date, the Buyer and its auditors shall prepare, and deliver to
the Representative, (i) the Buyer's determinations of Closing Working
Capital, Closing Cash and Closing Indebtedness, and (ii) the Buyer's
calculation of the Actual Purchase Price (collectively, the "Draft
Computation"). The Buyer and its auditors will make available to the
Representative and its auditors all records and work papers used in
preparing the Draft Computation. If the Representative disagrees with
any aspect of the Draft Computation, the Representative may, within 60
days after receipt of the Draft Computation, deliver a notice (an
"Objection Notice") to the Buyer setting forth the Representative's
determination of Closing Working Capital, Closing Cash and/or Closing
Indebtedness and the Representative's calculation of the Actual
Purchase Price. The Buyer and the Representative shall use reasonable
best efforts to resolve any disagreements as to the Draft Computation
and the Objection Notice, but if they do not obtain a final resolution
within 60 days after the Buyer has received the Objection Notice, the
Buyer and the Representative shall jointly retain an independent
accounting firm of recognized national standing (the "Firm") to resolve
any remaining disagreements. If the Buyer and the Representative are
unable to agree on the choice of the Firm, then the Firm shall be a
"big-five" accounting firm (or a successor) selected by lot (after
excluding one firm designated by the Buyer and one firm designated by
the Representative). The Buyer and the Representative shall direct the
Firm to render a determination within 30 days after its retention and
the Buyer, the Representative and their respective agents shall
cooperate with the Firm during its engagement. The Firm may consider
only those items and amounts in the Draft Computation or Objection
Notice which the Buyer and the Representative are unable to resolve. In
resolving any disputed item, the Firm may not assign a value to any
item greater than the greatest value for such item claimed by either
party or less than the smallest value for such item claimed by either
party. The Firm's determination shall be based solely on written
submissions by the Buyer and the Representative (i.e., not on
independent review) and on the definitions included herein. The
determination of the Firm shall be conclusive and binding upon each of
the parties hereto. The Buyer and the Sellers shall bear the costs and
expenses of the Firm based on the percentage which the portion of the
contested amount not awarded to each party bears to the amount actually
contested by such party.
The "Actual Purchase Price" means (i) the Transaction Value, plus
(ii) the amount, if any, by which Closing Working Capital exceeds Target Working
Capital, minus (iii) the amount, if any, by which Closing Working Capital is
less than Target Working Capital, plus (iv) the amount of Closing Cash, minus
(v) the amount of Closing Indebtedness, in each case as finally determined
pursuant to this Section 2.2(b); provided that, in the event the Buyer and its
auditors do not deliver the Draft Computation to the Representative within 90
days after the Closing Date,
11
at the written election of the Representative, the Actual Purchase Price shall
mean an amount equal to the Estimated Purchase Price.
(c) Post-Closing Adjustment.
(i) Payment by the Buyer. If the Actual Purchase
Price is greater than the Estimated Purchase Price, the Buyer
shall, within five (5) business days after the final
determination of the Actual Purchase Price, pay to the
Representative (for the benefit of the Sellers in accordance
with their respective Seller Percentages) an amount equal to
such difference plus simple interest thereon from the Closing
Date to the date of payment at an interest rate equal to 6%
per annum. Such payment will be made by wire transfer or
delivery of other immediately available funds.
(ii) Payment by the Sellers. If the Actual Purchase
Price is less than the Estimated Purchase Price, each Seller
shall, within five (5) business days after the determination
thereof, pay to the Buyer an amount equal to such Seller's
Allocable Portion of such difference plus simple interest
thereon from the Closing Date to the date of payment at an
interest rate equal to 6% per annum. Such payments will be
made by wire transfer or delivery of other immediately
available funds.
(iii) Dispute. If, pursuant to Section 2.2(b) above,
there is a dispute as to the final determination of the Actual
Purchase Price, the Buyer and the Sellers shall promptly pay
to the other, as appropriate, such amounts as are not in
dispute, together with interest thereon, pending final
determination of such dispute pursuant to Section 2.2(b).
SECTION 2.3 THE CLOSING.
(a) The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxx &
Xxxxx in Chicago, Illinois, at 10:00 A.M. on the third business day
following full satisfaction or due waiver of all of the closing
conditions set forth in Article 9 hereof (other than those to be
satisfied at the Closing) or on such other date as is mutually
agreeable to the Buyer and the Representative. The date and time of the
Closing are referred to herein as the "Closing Date."
(b) Upon the terms and subject to the conditions set forth in
this Agreement, the parties hereto shall consummate the following
transactions on the Closing Date (but only after giving effect to all
distributions of shares of Common Stock by Holdings to the Sellers and
all repurchases of shares of Common Stock by the Company from Holdings
and Prudential, in each case, pursuant to the Distribution and
Repurchase Agreement):
(i) each Seller (other than Prudential) shall deliver
to the Buyer one or more stock certificates representing all
of the Acquired Shares then held such Seller, if any, duly
endorsed for transfer or accompanied by duly executed stock
powers or other form of assignment and transfer;
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(ii) Prudential shall deliver the Prudential Note,
accompanied by a duly executed assignment, to the Buyer;
(iii) the Buyer shall deliver to the Escrow Agent $10
million (the "Escrow Amount") cash by wire transfer of
immediately available funds to the account designated by the
Escrow Agent;
(iv) the Buyer shall deliver to the Representative
(for the benefit of the Sellers), by wire transfer of
immediately available funds to the account(s) designated by
the Representative, cash in an amount equal to the Estimated
Purchase Price less the Escrow Amount; and
(v) the Buyer, the Company, the Representative and
the Sellers shall make such other deliveries as are required
by and in accordance with Article 9 hereof.
SECTION 2.4 REPAYMENT OF INDEBTEDNESS. Immediately after consummation
of the transactions contemplated by Section 2.3(b), the Buyer shall pay on
behalf of the Company, or cause the Company to repay, all of the Indebtedness in
accordance with the terms thereof.
SECTION 2.5 INTERCOMPANY ACCOUNTS. All balances (other than the
Intercompany Note) between the Company and any of its Subsidiaries due and owing
to or from Holdings or any of its Subsidiaries (other than the Company and its
Subsidiaries) (the "Intercompany Accounts"), shall be canceled as of the close
of business on the day immediately preceding the Closing Date (i.e., after the
day immediately preceding the Closing Date the Company and its Subsidiaries
shall not have any obligation to repay any Intercompany Accounts and the Company
and its Subsidiaries shall no longer have the right to be paid in respect of any
Intercompany Accounts). Notwithstanding anything to the contrary contained
herein, the Sellers may cause the aforementioned settlement of the Intercompany
Accounts to be accomplished by means of transfer, offset, assumption,
cancellation, distribution, dividend, forgiveness, repayment, contribution or
any combination of the foregoing; provided, however, that the settlement of such
Intercompany Accounts shall be appropriately reflected in all Pre-Closing Period
Returns and Straddle Period Returns. This Section 2.5 shall not require the
cancellation of the Intercompany Note and the Intercompany Note shall remain
outstanding at the close of business on the day immediately preceding the
Closing Date and shall be transferred at the Closing to Holdings as provided in
Section 2 of the Distribution and Repurchase Agreement; provided that, for the
avoidance of doubt, any amount outstanding under the Intercompany Note shall be
excluded from the determinations of Working Capital and Indebtedness; provided
further that, at the option of the Sellers, amounts outstanding under the
Intercompany Note as of the close of business on the day immediately preceding
the Closing Date may be increased or decreased in connection with any
settlements undertaken in accordance with the prior sentence.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Company represents and warrants to the Buyer that each statement
contained in this Article 3 is correct and complete, with the exceptions set
forth in the Schedules accompanying
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this Agreement (each a "Schedule" and, collectively, the "Schedules"). The
Schedules shall constitute exceptions to this Article 3 whether or not any
particular representation makes reference to a Schedule. The Schedules have been
arranged for purposes of convenience only, as separately titled Schedules
corresponding to the sections of this Article 3; however, each Schedule shall be
deemed to incorporate by reference all information disclosed in any other
Schedule to the extent such information clearly on its face applies to such
first Schedule. Capitalized terms used in the Schedules and not otherwise
defined therein shall have the meanings ascribed to such terms in this
Agreement.
SECTION 3.1 ORGANIZATION AND QUALIFICATION. The Company and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its organization. The Company and each
Subsidiary has full corporate power and authority to own or lease its properties
and to conduct its business in the manner and in the places where such
properties are owned or leased and where such business is currently conducted or
proposed to be conducted. The copies of the Company's and each Subsidiary's
certificate of incorporation and by-laws, each as amended to date and each
heretofore made available to the Buyer and/or its agents, are complete and
correct, and no amendments thereto are pending. The Company and each Subsidiary
is duly licensed and qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification to do business necessary,
except where the failure to be so licensed or qualified would not, individually
or in the aggregate, have a Material Adverse Effect.
SECTION 3.2 SUBSIDIARIES. The Company has no direct or indirect
Subsidiaries other than those listed on Schedule 3.2 hereto. Except as set forth
on Schedule 3.2 hereto, neither the Company nor any Subsidiary owns any
securities issued by any other business organization or Governmental Authority
(other than U.S. Government securities, bank certificates of deposit and money
market accounts acquired as short-term investments in the ordinary course of
business).
SECTION 3.3 CAPITALIZATION.
(a) The total authorized capital stock of the Company consists
of (i) 20,100,000 shares of Common Stock, of which 9,221,294 shares are
issued and outstanding as of the date hereof, (ii) 100,000 shares of
Class A Preferred Stock, $.01 par value per share, of which no shares
are issued and outstanding as of the date hereof, and (iii) 200,000
shares of Class B Preferred Stock, $.01 par value per share, of which
no shares are issued and outstanding as of the date hereof. All of the
issued and outstanding shares of Common Stock are duly and validly
issued and outstanding, and are fully paid and non-assessable. On the
date hereof, all of the issued and outstanding shares of Common Stock
are owned by Holdings, free and clear of all pledges, liens,
encumbrances or other claims or charges, except pledges, liens,
encumbrances or other claims or charges which will be released at or
prior to the Closing. Other than the Distribution and Repurchase
Agreement, there are no outstanding subscriptions, options, warrants,
commitments, preemptive rights, agreements, arrangements or commitments
of any kind for or relating to the issuance, sale, registration or
voting of, or outstanding securities convertible into or exchangeable
for, any shares of capital stock of any class or other equity interests
of the Company.
14
(b) All of the issued and outstanding shares of capital stock
of each Subsidiary (other than any Related Entity) are duly and validly
issued and outstanding, and are fully paid and non-assessable. All of
the issued and outstanding shares of capital stock of each Subsidiary
are directly or indirectly owned by the Company, free and clear of all
pledges, liens, encumbrances or other claims or charges, except
pledges, liens, encumbrances or other claims or charges which will be
released at the Closing. There are no outstanding subscriptions,
options, warrants, commitments, preemptive rights, agreements,
arrangements or commitments of any kind for or relating to the
issuance, sale, registration or voting of, or outstanding securities
convertible into or exchangeable for, any shares of capital stock of
any class or other equity interests of any Subsidiary.
(c) There are no outstanding or authorized stock appreciation,
phantom stock, or similar rights with respect to the Company or any
Subsidiary (other than any Related Entity). There are no voting trusts,
proxies, or any other agreements or understandings with respect to the
voting of the common stock of the Company or any Subsidiary. Other than
the Distribution and Repurchase Agreement, neither the Company nor any
Subsidiary is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of Common Stock.
SECTION 3.4 AUTHORITY OF THE COMPANY.
(a) The Company has full right, power and authority to enter
into this Agreement and each agreement, document and instrument to be
executed and delivered by it pursuant to or as contemplated by this
Agreement and to carry out the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the
performance of the Company's obligations hereunder have been duly
authorized by all necessary corporate action on the part of the
Company. This Agreement and each agreement, document and instrument to
be executed and delivered by the Company pursuant to this Agreement
constitute, or will when executed and delivered constitute, valid and
binding obligations of the Company, enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
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).
(b) The execution, delivery and performance by the Company of
this Agreement and all other agreements contemplated hereby to which
the Company is a party, the repurchase of common stock contemplated by
the Distribution and Repurchase Agreement and the fulfillment of and
compliance with the respective terms hereof and thereof by the Company
do not and will not (i) materially conflict with or result in a
material breach of the terms, conditions or provisions of, (ii)
constitute a material default under, (iii) result in the creation of
any lien, security interest, charge or encumbrance upon the respective
capital stock or assets of the Company or any of its Subsidiaries
pursuant to, (iv) result in a material violation of, or (vi) require
any material authorization, consent, approval, exemption or other
material action by or material notice or declaration to, or material
filing with (except for any actions required under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 as amended (the
"HSR Act")), any
15
court or administrative or governmental body or agency, the charter,
bylaws or similar organizational documents of the Company or any of its
Subsidiaries, or any material law, statute, rule or regulation to which
the Company or any of its Subsidiaries are subject, or any material
agreement, instrument, order, judgment or decree to which the Company
or any of its Subsidiaries are subject, except as set forth on Schedule
3.4 hereto.
SECTION 3.5 COMPLIANCE WITH LAWS. Except as set forth on Schedule 3.5
hereto, (i) the Company and each Subsidiary is in compliance with all applicable
statutes, ordinances, orders, rules and regulations ("Laws") promulgated by any
federal, state, municipal or other governmental authority (a "Governmental
Authority") which apply to the conduct of its business, except where the failure
to do so would not have a Material Adverse Effect, and (ii) during the preceding
three years neither the Company nor any Subsidiary has received written notice
of a material violation or an alleged material violation of any such Law.
SECTION 3.6 HEALTH CARE MATTERS. Except as set forth on Schedule 3.6:
(a) To the Knowledge of the Company, all physicians
contracting with or employed by the Company or any of its Subsidiaries
have and are maintaining in good standing their license to practice
medicine in the state(s) in which they practice medicine and their DEA
controlled substances registration, except where the failure to have or
maintain such license or registration in good standing would not have a
Material Adverse Effect.
(b) To the Knowledge of the Company, no person or entity has
submitted any claim for or on behalf of the Company or any of its
Subsidiaries that violates any applicable self-referral law, including
the Federal Ethics in Patient Referrals Act, 42 U.S.C. Section 13955nn
(known as the "Xxxxx Act"), or any applicable state self-referral law.
To the Knowledge of the Company, no person or entity has submitted any
claim for or on behalf of the Company or any of its Subsidiaries for
payment to any payor source, either governmental or nongovernmental, in
violation of any false claim or fraud law, including the "False Claim
Act," 31 U.S.C. Section 3729, or any other applicable federal or state
false claim or fraud law.
(c) To the Knowledge of the Company, no person or entity
(including without limitation any current or former manager, officer,
member, partner, independent contractor, or employee of the Company or
any of its Subsidiaries), nor any agent acting on behalf of or for the
benefit thereof, has directly or indirectly, (i) knowingly and
willfully offered or paid or received any remuneration, in cash or in
kind, to, or made any financial arrangements with, any past or present
customers, past or present suppliers, contractors or third party payors
in order to obtain business or payments from such persons other than
entertainment activities in the ordinary and lawful course of business,
(ii) knowingly and willfully given or agreed to give, or is aware that
there has been made or that there is any agreement to make or to
receive, any gift or gratuitous payment of any kind, nature or
description (whether in money, property or services) to any customer or
potential customer, supplier or potential supplier, contractor, third
party payor other than in connection with promotional or entertainment
expenses in the ordinary and lawful course of business, (iii) knowingly
and willfully made or agreed to make, or is aware that
16
there has been made or that there is any agreement to make, any
contribution, payment or gift of funds or property to, or for the
private use of, any governmental official, employee or agent where
either the contribution, payment or gift is or was illegal under the
laws of the United States or under the laws of any state thereof or any
other jurisdiction (foreign or domestic) under which such payment,
contribution or gift was made, (iv) knowingly and willfully established
or maintained any unrecorded fund or asset for any purpose or made any
false or artificial entries on any of its books or records for any
reason, (v) knowingly and willfully made, or agreed to make, or is
aware that there has been made or that there is any agreement to make,
any payment to any Person with the intention or understanding that any
part of such payment would be used for any purpose other than that
described in the documents supporting such payment, or (vi) knowingly
and willfully paid or offered to pay or accepted or offered to accept
any remuneration for any referral to or by the Company or any of its
Subsidiaries in violation of any applicable anti-kickback law,
including the Federal Anti-Kickback Statute, 42 U.S.C. Section
1320a-7b(b), or any applicable state anti-kickback law.
(d) To the Knowledge of the Company, neither the Company nor
any of its Subsidiaries (including without limitation any current or
former manager, officer, member, partner, independent contractor, or
employee of the Company or its Subsidiaries) has violated, been
convicted of, charged with, or investigated for a Medicare, Medicaid,
Champus, TRICARE or state or federal health program or law related
offense, or violated, been convicted of, charged with, or investigated
for a violation of federal or state law related to fraud, theft,
embezzlement breach of fiduciary responsibility, financial misconduct,
obstruction of an investigation or controlled substances, or has been
excluded or suspended from participation in Medicare, Medicaid,
Champus, TRICARE or any federal or state health program or been subject
to any order or consent decree of, or criminal or civil fine or penalty
imposed by, any court or governmental agency. To the Knowledge of the
Company, neither the Company nor any of its Subsidiaries has entered
into any agreement with (by employment or otherwise) any individual or
entity that it knows or knew is sanctioned, suspended, debarred,
excluded or otherwise prohibited from participation in a Federal Health
Care Program, as defined in 42 U.S.C. Section 1320-7b(f), for the
provision of items or services for which payment may be made under such
Federal Health Care Program.
SECTION 3.7 PHYSICIAN INDEPENDENT CONTRACTORS. Except as set forth on
Schedule 3.7:
(a) The Company and/or a Subsidiary has a written contract
with all physician independent contractors (each a "Physician
Contract") who currently render services for the Company or any of its
Subsidiaries.
(b) All Physician Contracts are in full force and effect and
do not require the physician's consent by reason of the transactions
contemplated herein. The Company, each of its Subsidiaries and, to the
Company's Knowledge, each physician independent contractor are in
compliance in all material respects with the provisions thereof and
have performed in all material respects all obligations required
thereunder. To the Company's Knowledge, no act or event has occurred
which, with or without the giving of notice or
17
lapse of time or both, would constitute a default thereunder. To the
Company's Knowledge, (i) each physician while providing clinical
services (other than any administrative services related thereto)
("Clinical Services") to or through the Company or any of its
Subsidiaries has always provided Clinical Services as an independent
contractor regarding such Clinical Services for federal employment tax
purposes, (ii) the Company has never issued a Form W-2 to any such
physician in respect of such Clinical Services and (iii) the Company
has annually issued a Form 1099 to each such physician in respect of
such Clinical Services. During the seven year period prior to the date
hereof, the Company and its Subsidiaries have not been the subject of
an audit under Section 530(c) of the Revenue Act of 1978, as amended.
SECTION 3.8 ADVISORY AND OTHER FEES. Neither Holdings, the Company, nor
any Subsidiary has incurred nor shall any of them become liable for any advisory
fee, broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement, other than an advisory fee payable
to Xxxxxx Brothers, which fee shall be paid as provided in Section 13.4.
SECTION 3.9 TAXES. Except as set forth on Schedule 3.9 hereto:
(a) All United States federal income Tax Returns of or with
respect to the Company and each Subsidiary required by Law to be filed
have been timely filed and all other material Tax Returns of or with
respect to the Company and each Subsidiary required by applicable
federal, foreign, state, local or other Law to be filed have been
filed, and all such Tax Returns are true and complete in all material
respects.
(b) The Company and each Subsidiary has timely paid or caused
to be paid as of the date hereof all Taxes due and payable by them
whether or not shown on the Tax Returns referred to in Section 3.9(a),
except as set forth on Schedule 3.9(a) or to the extent such Taxes (i)
are being contested in good faith by the Company or any Subsidiary and
(ii) are properly reserved for on the Audited Financial Statements (as
hereinafter defined) as such reserves are adjusted for the passage of
time through the Closing Date in accordance with the past custom and
practice of the Company and its Subsidiaries. The Company and each of
its Subsidiaries has properly withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any shareholder, employee, creditor, independent contractor, or other
third party. Neither the Company nor its Subsidiaries has any liability
for violation of the safe harbor contained in Section 530(c) of the
Revenue Act of 1978, as amended.
(c) No action, suit or proceeding is pending against or with
respect to the Company's Taxes. There has not been any audit of any Tax
Return filed by or with respect to the Company or any Subsidiary, no
audit of any such Tax Return of or including the Company or any
Subsidiary is in progress, and neither the Company nor any Subsidiary
has been notified in writing by any taxing authority that any audit is
contemplated or pending. No extension of time with respect to any date
on which a Tax Return was or is to be filed by or with respect to the
Company or any Subsidiary is in force, and no waiver or agreement by or
with respect to the Company or any Subsidiary is in force for the
extension of time for the assessment, payment or collection of any
18
Taxes. No written claim has been made by any Governmental Authority in
a jurisdiction where the Company or any Subsidiary does not file Tax
Returns that the Company or any Subsidiary is or may be subject to
taxation by that jurisdiction.
(d) Neither the Company nor any Subsidiary is a party to, is
bound by or has any obligation under, any agreement relating to
allocating or sharing the payment of, or liability for, Taxes or has
any liability for Taxes of any Person (other than members of the
affiliated group, within the meaning of Section 1504(a) of the Code,
filing consolidated federal income tax returns of which the Company is
the common parent) under Treasury Regulation Section 1.1502-6 (or a
similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise.
(e) The Company and each Subsidiary has made all required
estimated Tax payments sufficient to avoid any underpayment penalties.
No closing agreement pursuant to Section 7121 of the Code or any
similar provision of any state, local or foreign law has been entered
into by or with respect to the Company or any Subsidiary. No assessment
of Tax is proposed in writing against the Company or any Subsidiary or
any of their properties or assets. No consent to the application of
Section 341(f)(2) of the Code has been made or filed by or with respect
to the Company or any Subsidiary or with respect to any of their
properties or assets. Neither the Company nor any Subsidiary has agreed
to or is required to make any adjustment for any period after the
Closing Date pursuant to Section 481(a) of the Code by reason of any
change in any accounting method, there is no application pending with
any taxing authority requesting permission for any such change in any
accounting method of the Company or any Subsidiary and the Internal
Revenue Service has not proposed in writing any such adjustment or
change in accounting method.
(f) The Company and its Subsidiaries have made available to
the Buyer true, correct and complete copies of all Tax Returns,
examination reports, and statements of deficiencies assessed against or
agreed to by the Company or any Subsidiary for the five (5) year period
ending on the date hereof.
SECTION 3.10 CORPORATE RECORDS. The corporate record books of the
Company and each Subsidiary completely and accurately record all material
corporate action taken by their respective stockholders and boards of directors
and committees thereof. The copies of the corporate records of the Company and
each Subsidiary, as made available by the Company to the Buyer and/or its
agents, are true and complete copies of the originals of such documents.
SECTION 3.11 LITIGATION. Except as set forth on Schedule 3.11 hereto,
(a) there are no actions, suits, investigations or other proceedings pending or,
to the Sellers' Knowledge, threatened against the Company or any Subsidiary (or
against any of their respective officers, directors, agents or employees, in
each case in their capacity as officers, directors, agents or employees of the
Company), at law or in equity, or before or by any Governmental Authority and
(b) neither the Company nor any Subsidiary is subject to any outstanding and
unsatisfied judgment, order or decree of any Governmental Authority.
SECTION 3.12 FINANCIAL STATEMENTS.
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(a) The Representative has delivered to the Buyer the
following financial statements, attached as Schedule 3.12 hereto:
(i) Audited consolidated balance sheets of the
Company as of September 30, 2000 and September 30, 2001 and
audited consolidated statements of income, retained earnings
and cash flows for the 12-month periods then ended
(collectively, the "SHS Audited Financial Statements");
(ii) Audited combined balance sheets of Spectrum
Healthcare Resources as of September 30, 2000 and September
30, 2001, and audited combined statements of operations,
changes in owner's net investment, and cash flows for the
12-month periods then ended (collectively, the "SHR Audited
Financial Statements" and, together with the SHS Audited
Financial Statements, the "Audited Financial Statements"); and
(iii) Unaudited consolidated balance sheet of the
Company and Spectrum Healthcare Resources as of December 31,
2001 (the "Latest Balance Sheet") and the related statement of
income and cash flows for the three (3) months then ended
(collectively, the "Unaudited Financial Statements").
(b) The Audited Financial Statements have been prepared in
accordance with GAAP applied consistently during the periods covered
thereby, and present fairly in all material respects the financial
condition of the relevant entities at the dates of said statements and
the results of their operations and cash flows for the periods covered
thereby. The Unaudited Financial Statements have been prepared in
accordance with GAAP applied consistently during the period covered
thereby, and present fairly in all material respects the financial
condition of the Company and its Subsidiaries at the date of such
statements and the results of their operations and cash flows for the
period covered thereby, except that they do not contain the materials
and disclosures to be found in notes to financial statements prepared
in accordance with GAAP nor do they reflect year-end adjustments.
SECTION 3.13 TRANSACTIONS WITH AFFILIATES. Except as set forth on
Schedule 3.13 hereto and except to the extent reflected in the financial
statements attached as Schedule 3.12 hereto, during the preceding three years
there have been no material transactions, contracts, understandings or
agreements of any kind between the Company or any Subsidiary and any Person
(other than the Company or any of its Subsidiaries) who is an Affiliate of the
Company or any of its Subsidiaries or any of the Sellers or their Affiliates.
SECTION 3.14 REAL PROPERTIES.
(a) Schedule 3.14 hereto describes all material real
properties owned of record or beneficially by the Company and each
Subsidiary (individually, a "Real Property" and collectively, the "Real
Properties"). Except as set forth on Schedule 3.14 hereto, the Company
and each Subsidiary has good and marketable title to its Real
Properties, free and clear of all liens, leases, encumbrances, claims
under bailment and storage agreements, equities, conditional sales
contracts, encroachments, conditions, limitations,
20
security interests, charges and restrictions (collectively, "Liens"),
except for (i) Liens, if any, for real property taxes not yet due and
payable, (ii) Liens identified on Schedule 3.14 hereto and (iii) Liens
which do not, individually or in the aggregate, materially detract from
the value, or materially interfere with the present use, of the
property subject thereto.
(b) Schedule 3.14 hereto sets forth each lease or other
agreement under which the Company or any Subsidiary leases or has
rights in any material real property (the "Real Property Leases" and,
each individually, a "Real Property Lease"). True and complete copies
of the Real Property Leases have been made available to the Buyer
and/or its agents by the Company. Except as set forth on Schedule 3.14
hereto, there are no amendments or modifications to any of the Real
Property Leases. Except as set forth on Schedule 3.14 hereto, the
Company and each Subsidiary has a valid and subsisting leasehold
interest in all the real property which is the subject of each of the
respective Real Property Leases set forth on Schedule 3.14 hereto
(individually, a "Leased Property" and, collectively, the "Leased
Properties").
(c) None of the Real Properties are subject to any pending
condemnation or similar proceeding by any Governmental Authority, and,
to the Knowledge of the Company, no such condemnation is threatened. To
the Knowledge of the Company, no material permit, license or
certificate of occupancy pertaining to the ownership or operation of
any Real Property or pertaining to the leasing or operation of any
Leased Property, other than those which are transferable with such
property, is required by any Governmental Authority.
SECTION 3.15 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 3.15, there are not any material liabilities (whether accrued,
absolute, contingent, unliquidated, or otherwise, whether or not known, whether
due or to become due, and regardless of when asserted) arising out of or
relating to the operation of the Company's business at or before the Closing,
that are required to either be recorded in the consolidated financial statements
of the Company and its Subsidiaries or disclosed in footnotes to such financial
statements in accordance with GAAP except (i) liabilities under contracts or
commitments described on Schedule 3.19 or under contracts and commitments which
are not required to be disclosed thereon (but not material liabilities for
breaches thereof), (ii) liabilities reflected on the Latest Balance Sheet or the
notes thereto, (iii) liabilities which have arisen after the date of the Latest
Balance Sheet or otherwise in accordance with the terms and conditions of this
Agreement (none of which is a liability for breach of contract, breach of
warranty, tort, or infringement or a claim or lawsuit or any environmental
liability), and (iv) liabilities, contracts, commitments or obligations
disclosed elsewhere in this Agreement or the Schedules.
SECTION 3.16 ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly
contemplated by this Agreement and the agreements contemplated hereby, since the
date of the Latest Balance Sheet, the Company has not:
(a) suffered any theft, damage, destruction, or casualty loss
in excess of $100,000, to its assets, whether or not covered by
insurance, or suffered any substantial destruction of books and
records;
21
(b) subjected any portion of its properties or assets to any
lien other than liens, which individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect;
(c) sold, leased, assigned, or transferred (including, without
limitation, transfers to Holdings or any Affiliate of Holdings) a
material portion of its tangible assets, or canceled without fair
consideration any material debts or claims owing to or held by it,
except in the ordinary course of business of the Company;
(d) sold, assigned, licensed, or transferred (including,
without limitation, transfers to Holdings or any Affiliate of Holdings)
any material Proprietary Rights owned by, issued to, or licensed to the
Company or, to the Knowledge of the Company, disclosed any material
confidential information to (other than pursuant to agreements
requiring the recipient to maintain the confidentiality of such
confidential information) any third party in violation of any express
contractual obligation of confidentiality;
(e) suffered any Loss or waived any rights, the suffering or
waiver of which would result in a Material Adverse Effect;
(f) other than in the ordinary course of business of the
Company, entered into, amended, or terminated any Real Property Leases,
material personal property lease, contract, agreement, license or
commitment, or taken any other action or entered into any other
material transaction that has had or would reasonably be expected to
have a Material Adverse Effect;
(g) except in the ordinary course of business of the Company,
(i) paid or increased any bonuses, salaries, or other compensation to
any stockholder, director, officer, or employee (other than any SHS
Executives) or (ii) entered into any material employment, severance, or
similar contract or agreement with any director, officer, or employee
(other than any SHS Executives);
(h) except in the ordinary course of business, materially
increased the payments to or benefits under, any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or
other employee benefit plan for or with any employees of the Company
(other than any SHS Executives);
(i) made any capital expenditures or commitments for capital
expenditures in excess of $100,000 in the aggregate other than the
capital expenditures referenced on Schedule 3.16; or
(j) made a material change in its accounting methods except as
required by changes in GAAP since the date of the Latest Balance Sheet.
SECTION 3.17 ASSETS. Except as set forth on Schedule 3.17 hereto, (a)
the Company and each Subsidiary has good title to all of the items of tangible
personal property reflected on the Latest Balance Sheet, except as sold or
disposed of subsequent to the date thereof in the ordinary course of business
consistent with past practices, and (b) all such tangible personal property is
owned free and clear of all Liens, except for (i) Liens identified on Schedule
3.17 hereto,
22
(ii) Liens which, individually or in the aggregate, do not materially detract
from the value, or materially interfere with the present use, of the Company's
or any Subsidiary's aggregate tangible personal property and (iii) Liens for
taxes not yet due and payable. The tangible personal property of the Company and
each Subsidiary is in good repair and working order, except as would not,
individually or in the aggregate, have a Material Adverse Effect. Neither
Holdings nor any of its Subsidiaries (except the Company and its Subsidiaries)
owns any properties or assets (whether real, personal, or mixed and whether
tangible or intangible) which are primarily used in or necessary to operate the
business of the Company and its Subsidiaries as currently conducted other than
those properties or assets which will be made available to the Company after the
Closing pursuant to the Transition Services Agreement or which the Company or
any of its Subsidiaries otherwise has a contractual right to use.
SECTION 3.18 PROPRIETARY RIGHTS.
(a) Schedule 3.18 contains a complete and accurate list of:
(i) all patented and registered Proprietary Rights and all pending
patent applications and applications for the registration of other
Proprietary Rights filed by the Company or any Subsidiary; (ii) all
material trade names, material unregistered trademarks, material
unregistered service marks, material unregistered copyrights, material
proprietary information systems and proprietary databases owned by the
Company or any Subsidiary; and (iii) computer software owned and/or
used by the Company other than commercially available "off-the-shelf"
software (collectively, the "Company Proprietary Rights").
(b) The Company or a Subsidiary owns and possesses free and
clear of all liens (except liens, which individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect), all right, title, and interest in and to, or has the right to
use pursuant to a license, the Company Proprietary Rights. Neither
Company nor any Subsidiary has received any notice of the invalidity,
infringement, or misappropriation from any third party with respect to
any such Company Proprietary Rights. The Company has not received any
written notice that any Proprietary Rights of any third parties have
been interfered with, infringed upon, or misappropriated by the Company
or its Subsidiaries. To the Knowledge of the Company, no third party
has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any of the Company Proprietary Rights.
SECTION 3.19 CONTRACTS. Except for contracts, commitments, plans,
agreements and licenses listed on Schedule 3.19 hereto (true and complete copies
of which have been made available to the Buyer and/or its agents) (the "Material
Contracts"), neither the Company nor any Subsidiary is a party to or subject to:
(a) any plan or contract providing for bonuses, pensions,
options, stock purchases, deferred compensation, retirement payments,
profit sharing, collective bargaining or the like or any contract or
agreement with any labor union (other than the plans listed on Schedule
3.22);
(b) any employment contract or contract for services (other
than for services by independent contractors) which requires the
payment of more than $150,000 annually
23
in total compensation or contracts relating to loans in excess of
$25,000 in the aggregate to all officers and directors of the Company;
(c) any contract or agreement for the purchase of any
commodity, material or equipment in excess of $200,000 (other than
purchase orders entered into in the ordinary course of business);
(d) any other contracts or agreements creating any obligation
of the Company or any Subsidiary of $200,000 or more with respect to
any such contract;
(e) guaranty of any obligation in excess of $100,000;
(f) agreement for the lease of personal property except for
any lease or agreement for personal property under which the aggregate
annual payments do not exceed $100,000;
(g) any contract or agreement providing for the purchase of
all or substantially all of its requirements of a particular product
from a supplier;
(h) any contract or agreement that by its terms does not
terminate or is not terminable by the Company or any Subsidiary within
twelve months after the date hereof without payment of a penalty of
$50,000 or more;
(i) any material contract or agreement for the sale or lease
of any of its services or assets not made in the ordinary course of
business;
(j) any contract containing covenants materially limiting the
freedom of the Company or any Subsidiary to compete in any line of
business or with any Person;
(k) any contract or agreement for the purchase of any fixed
asset for a price in excess of $100,000 whether or not such purchase is
in the ordinary course of business;
(l) any other agreement, entered into other than in the
ordinary course of business, which involves consideration in excess of
$250,000 annually;
(m) any partnership, joint venture or other similar contract
or agreement; or
(n) any material contract or agreement providing for the
license of patents, trademark registrations, service xxxx
registrations, trade names or copyright registrations to or from the
Company or any Subsidiary.
All Material Contracts are valid and in full force and effect and
constitute legal, valid and binding obligations of the Company or its Subsidiary
and, to the Knowledge of the Company, the other parties thereto, and are
enforceable against such Company or Subsidiary in accordance with their
respective terms. Neither the Company nor any Subsidiary is in default in
complying with any material provisions thereof, and no condition or event or
facts exist which, with notice, lapse of time or both, would constitute a
default thereof on the part of any Company or Subsidiary which default would,
individually or in the aggregate with other such defaults, have a
24
Material Adverse Effect. To the Knowledge of the Company, no other party is in
default in complying with any material provisions thereof, and no condition or
event or facts exist which, with notice, lapse of time or both, would constitute
a default thereof on the part of such party, which default would reasonably be
expected to have, individually or in the aggregate with other such defaults, a
Material Adverse Effect.
SECTION 3.20 INSURANCE. Schedule 3.20 hereto is a complete and correct
list of all policies of insurance or fidelity bonds maintained by the Company
and each Subsidiary. Such policies are in full force and effect and, to the
Knowledge of the Company, neither the Company nor any Subsidiary is in material
default with respect to its obligations under any such policies.
SECTION 3.21 PERMITS. Except as set forth on Schedule 3.21 hereto, (i)
the Company and each Subsidiary has obtained all material permits,
registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") from federal, state or local authorities
necessary for the conduct of its business as presently conducted, (ii) all such
Approvals are valid and in full force and effect, (iii) none of such Approvals
is subject to termination by its terms as a result of the execution of this
Agreement by the Company or any Subsidiary or by the consummation of the
transactions contemplated by this Agreement, and (iv) no further material
Approvals will be required of the Company, any Subsidiary or the Buyer in order
for the Company or any Subsidiary to continue to conduct the business currently
conducted by the Company or such Subsidiary immediately following the Closing.
SECTION 3.22 EMPLOYEE BENEFIT PLANS. All Employee Benefit Plans
maintained by the Company and each Subsidiary, or to which the Company or any
Subsidiary is obligated to contribute, are listed on Schedule 3.22 hereto and
are payable on the terms described in such Employee Benefit Plans. Except as set
forth on Schedule 3.22 hereto:
(a) all such Employee Benefit Plans have been made available
to the Buyer and/or its agents;
(b) all such Employee Benefit Plans have been maintained,
funded and administered in compliance in all material respects with all
applicable Laws, including without limitation, ERISA and the Code;
(c) no such Employee Benefit Plan, or any trustee or
administrator thereof nor any employee or any "fiduciary" has, to the
Knowledge of the Company, engaged in any material breach of fiduciary
responsibility or any "prohibited transaction" (as such term is defined
in Section 406 of ERISA or Section 4975 of the Code) to which Section
406 of ERISA or Section 4975 of the Code applies and which could
subject any such Employee Benefit Plan or trustee or administration
thereof, or any party dealing with any such Employee Benefit Plan, to
the tax or penalty on prohibited transactions imposed by Section 4975
of the Code;
(d) no such Employee Benefit Plan (other than stock option
plans) holds as an asset any Employer Security or any Employer Real
Estate as those terms are defined in ERISA Section 407(d)(1) and (2)
respectively;
25
(e) no Employee Benefit Plan is or has within the last six
years been subject to the minimum funding requirements of Section 412
of the Code or Title IV of ERISA;
(f) neither the Company nor any Subsidiary has an obligation
to contribute to any "multiemployer plan" within the meaning of Section
3(37) of ERISA;
(g) neither the Company nor any Subsidiary is a party to, nor
administers for others, a multiple employer plan subject to Code
Section 413(c);
(h) no suit, action, or other litigation has been brought
against or with respect to any Employee Benefit Plan listed on Schedule
3.22;
(i) no voluntary or involuntary corrective action, or closing
agreement, under any PBGC, IRS or DOL Employee Benefit Plan corrective
program, formal or informal or on an anonymous basis, is pending or
uncompleted as to any Employee Benefit Plan;
(j) each Employee Benefit Plan intended to qualify under
Section 401 of the Code has received a favorable determination letter
from the Internal Revenue Service that such Employee Benefit Plan is a
"qualified plan" under Section 401(a) of the Code, the related trusts
are exempt from tax under Section 501(a) of the Code, and, to the
Knowledge of the Company, no facts or circumstances exist that would be
reasonably likely to jeopardize the qualification of such Employee
Benefit Plan;
(k) accruals for material liabilities relating to Employee
Benefit Plans, including, without limitation, self-funded medical
claims, have been accrued on the Company's and each Subsidiary's
financial statements in accordance with GAAP;
(l) neither the Company nor any Subsidiary has liability under
any Employee Benefit Plan, or otherwise, to provide medical or death
benefits with respect to current or former employees of the Company or
any Subsidiary beyond their termination of employment (other than
coverage mandated by law), and there are no reserve assets, surplus or
prepaid premiums under any such Employee Benefit Plan;
(m) the consummation of the transactions contemplated by this
Agreement will not (i) reasonably be expected to result in any "excess
parachute payment" under Section 280G of the Code or (ii) other than
pursuant to the Employee Benefit Plans listed on Schedule 3.22 or
pursuant to actions taken by the Buyer, result in any liability to any
present or former employee or independent contractor, including, but
not limited to, as a result of the Worker Adjustment Retraining and
Notification Act; and
(n) the consummation of the transactions contemplated hereby,
either alone or in conjunction with any other event, will not result in
the acceleration of payment or vesting, or an increase in the amount,
of any benefit paid or provided under any of the Employee Benefit
Plans.
SECTION 3.23 EMPLOYEES; LABOR MATTERS. Neither the Company nor any
Subsidiary is delinquent in any material payments to any of its employees or
independent contractors for any wages, salaries, commissions, bonuses,
severance, termination pay or other direct compensation
26
for any services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Except as set forth on Schedule 3.23 hereto,
neither the Company nor any Subsidiary has a policy, practice, plan or program
of paying severance pay or any form of severance compensation in connection with
the termination of employment. The Company and each Subsidiary is in material
compliance with all material applicable laws and regulations respecting labor,
employment, fair employment practices, terms and conditions of employment, and
wages and hours. Except as set forth on Schedule 3.23 hereto, no material
charges of employment discrimination or unfair labor practices have been brought
against the Company or any Subsidiary, nor are there any strikes, slowdowns,
stoppages of work, or any other concerted interference with normal operations
existing, pending or, to the Knowledge of the Company, threatened against or
involving, the Company or any Subsidiary, which would, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth on Schedule 3.23
hereto, neither the Company nor any Subsidiary has received written notice of
any impending strikes, slowdowns, concerted interference with normal operations
or union organization activities. Except as set forth on Schedule 3.23 hereto,
there are no material grievances, complaints or charges that have been filed
against the Company or any Subsidiary under any dispute resolution procedure
(including, but not limited to, any proceedings under any dispute resolution
procedure under any collective bargaining agreement) that have not been
dismissed. Except as set forth on Schedule 3.23 hereto, no collective bargaining
agreements are in effect or are currently being or are about to be negotiated by
the Company or any Subsidiary. Neither the Company nor any Subsidiary has
received written notice of pending or threatened changes with respect to
(including, without limitation, resignation of) the senior management or key
supervisory personnel of the Company or any Subsidiary.
SECTION 3.24 ENVIRONMENTAL MATTERS. The Company and its Subsidiaries
have obtained and possess all material permits, licenses and other material
authorizations required under federal, state and local laws and regulations
concerning pollution or protection of the environment, in each case in effect on
or prior to the date hereof, including all such laws and regulations relating to
the emission, discharge, release or threatened release of any petroleum,
pollutants, contaminants or hazardous or toxic materials, substances or wastes
into air, surface water, groundwater or lands ("Environmental Requirements").
Except as set forth on Schedule 3.24 hereto, the Company and each Subsidiary is
in compliance in all material respects with all terms and conditions of such
material permits, licenses and authorizations and are also in compliance in all
material respects with all other Environmental Requirements. Neither the Company
nor any Subsidiary has received written notice of material violations or
material liabilities arising under Environmental Requirements relating to the
Company, its Subsidiaries or their respective facilities.
SECTION 3.25 MATERIAL CUSTOMERS.
(a) Schedule 3.25(a) hereto lists (i) each hospital, hospital
department, military treatment facility, veterans treatment facility,
clinic, outpatient clinic, surgery center, or healthcare facility (each
a "Healthcare Facility") at which the Company and its Subsidiaries
earned revenue in excess of $500,000 during the twelve months ended
December 31, 2001, and (ii) each Person that is, as of the date hereof,
a contractor to the U.S. Department of Defense, the U.S. Department of
Veterans Affairs, or to any of their affiliates or through their
programs, and which has a contract with the Company or any of
27
its Subsidiaries that provided for annual payments to the Company and
its Subsidiaries in excess of $500,000 per year, (each a "Prime
Contractor" and together with the Healthcare Facilities, the "Material
Customers").
(b) Except as set forth on Schedule 3.25(b) hereto, (i) within
the last twelve months, no Material Customer has threatened in writing
or, to the Knowledge of the Company, otherwise threatened to cancel or
otherwise terminate, its relationship with the Company or any
Subsidiary, (ii) no Material Customer has during the last twelve months
decreased materially or threatened in writing or, to the Knowledge of
the Company, otherwise threatened to decrease or limit materially its
usage or purchase of services of the Company or any Subsidiary, or, to
the Knowledge of the Company, intends to modify materially its
relationship with the Company or any Subsidiary or intends to decrease
or limit materially its usage or purchase of services of the Company or
any Subsidiary, (iii) to the Knowledge of the Company, the acquisition
of the Common Stock by the Buyer and the consummation of the
transactions contemplated herein will not adversely affect the
relationship of the Company or any Subsidiary with any of its Material
Customers, (iv) within the last twelve months, none of the Material
Customers or any other Person that would be required to be set forth on
Schedule 3.25(a) but for the revenue thresholds described therein (the
"Customers"), have threatened in writing to cancel or otherwise
terminate or, to the Knowledge of the Company, intend to cancel or
otherwise terminate their relationships with the Company or any
Subsidiary, in each case, the loss of which would have, individually or
in the aggregate, a Material Adverse Effect, (v) within the last twelve
months, no Customers have decreased or threatened in writing or, to the
Knowledge of the Company, otherwise threatened to decrease or limit
their usage or purchase of services of the Company or any Subsidiary
or, to the Knowledge of the Company, intend to modify their
relationships with the Company or any Subsidiary, in each case, to the
extent of having, individually or in the aggregate, a Material Adverse
Effect and (vi) to the Knowledge of the Company, the acquisition of the
Common Stock by the Buyer and the consummation of the transactions
contemplated herein will not affect the relationships of the Company or
any Subsidiary with any Customers to the extent of having, individually
or in the aggregate, a Material Adverse Effect.
SECTION 3.26 EMPLOYEE RELATIONS.
(a) Schedule 3.26(a) hereto lists as of the date hereof the
number of employees in the aggregate, the number of full-time personnel
and the number of contract workers of the Company and each Subsidiary.
Except as set forth on Schedule 3.26(a) hereto, none of the employees
of the Company or any Subsidiary is represented by a union, and, to the
Knowledge of the Company, no union organizing efforts have been
conducted within the last three years or are now being conducted.
Except as disclosed in Schedule 3.26(a) hereto, neither the Company nor
any Subsidiary has at any time during the last three years had or, to
the Knowledge of the Company, is there now threatened, a strike,
picket, work stoppage, work slowdown or other material labor dispute.
(b) Set forth on Schedule 3.26(b) hereto is a list of all
material actions, suits and proceedings pending between the Company or
any Subsidiary and any independent contractors, employees, former
employees or prospective employees of the Company and
28
any Subsidiary or involving other labor-related matters. Neither the
Company nor any Subsidiary has violated in any material respect any
provision of any Law promulgated by any Governmental Authority
regarding the terms and conditions of independent contractors,
employees, former employees or prospective employees or other
labor-related matters, including, without limitation, Laws relating to
discrimination, fair labor standards and occupational health and
safety, wrongful discharge or violation of the personal rights of
employees, former employees or prospective employees of the Company or
any Subsidiary.
SECTION 3.27 OFFICERS, DIRECTORS AND EMPLOYEES. Schedule 3.27 hereto
sets forth: (a) the name and title of each officer and director of the Company
and each Subsidiary; (b) the total compensation of each officer and director of
the Company and each Subsidiary who was an employee of the Company or any
Subsidiary as of December 31, 2001; (c) the name, title and total compensation
for the 12-months ended December 31, 2001 of each individual independent
contractor whose compensation (including bonuses and commissions) exceeded
$125,000; (d) the name, title and total compensation for the 12-months ended
December 31, 2001 of each other individual employee, consultant, agent or other
representative of the Company or any Subsidiary (other than independent
contractors) whose compensation (including bonuses and commissions) exceeded
$125,000; (e) all wage and salary increases, bonuses and increases in any other
direct or indirect compensation received by such individuals since December 31,
2001, except for increases or bonuses in the ordinary course of business
consistent with past practice; (f) any payments or commitments to pay any
severance or termination pay to any current or former individual officer,
director, employee or independent contractor of the Company or any Subsidiary,
except for payments and commitments in the ordinary course of business; (g) any
accrual for, or any commitment or agreement by the Company or any Subsidiary to
pay, such increases, bonuses or pay and (h) any indebtedness not arising in the
ordinary course of business between the Company or any Subsidiary and any
individual employee or independent contractor of the Company or any Subsidiary.
Except as set forth on Schedule 3.19 or Schedule 3.27 hereto, to the Knowledge
of the Company, none of such individuals has indicated that he or she will
cancel or otherwise terminate such individual's relationship with the Company or
any Subsidiary.
SECTION 3.28 DISCLOSURE. The representations and warranties in this
Article 3 do not contain as of the date hereof any untrue statement of a
material fact or omit as of the date hereof a material fact necessary to make
each such statement not misleading.
SECTION 3.29 CLOSING DATE. All of the representations and warranties
contained in this Article 3 and in any certificate delivered to the Buyer
pursuant to this Agreement are true and correct on the date of this Agreement
and shall be true and correct on the Closing Date, except to the extent that the
Representative advises the Buyer otherwise in writing before the Closing (each,
a "Schedule Update"). Each Schedule Update delivered to the Buyer shall be
deemed to modify the representations and warranties herein for the purpose of
determining whether or not a representation or warranty has been breached for
purposes of any claims for indemnification, as long as such Schedule Update
discloses facts, events or circumstances which occurred after the date hereof or
which occurred prior to the date hereof but for which the Company had no
Knowledge as of the date hereof. No Schedule Update shall be taken into account
in
29
determining whether or not the conditions to the Closing set forth herein have
been satisfied unless the Buyer has objected to and not approved such Schedule
Update.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS
Each Seller represents and warrants severally, but not jointly, to
Buyer as to himself or itself as follows:
SECTION 4.1 EXISTENCE AND POWER. If such Person is an entity, such
Person is duly organized, validly existing and in good standing under the laws
of its state of organization.
SECTION 4.2 ORGANIZATIONAL AUTHORIZATION. If such Person is an entity,
the execution, delivery and performance by such Person of this Agreement and the
consummation of the transactions contemplated hereby are within the
organizational power of such Person and have been duly authorized by all
necessary action on the part of such Person. This Agreement constitutes a valid
and binding agreement of such Person, enforceable against such Person in
accordance with its terms, except as enforceability may be limited by applicable
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws from time to time in effect affecting the enforcement of
creditors' rights generally.
SECTION 4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by such Person of this Agreement and the consummation of the
transactions contemplated hereby require no material action by or in respect of,
or material filing with, any governmental body, agency or official other than
compliance with any applicable requirements of the HSR Act and federal and state
securities laws.
SECTION 4.4 NONCONTRAVENTION. The execution, delivery and performance
by such Person of this Agreement and the consummation of the transactions
contemplated hereby do not and will not (i) if such Person is an entity, violate
the partnership agreement or certificate of incorporation or bylaws (as
applicable) of such Person, (ii) assuming compliance with the matters referred
to in Section 4.3, violate any applicable material law, rule, regulation,
judgment, injunction, order or decree or (iii) require any material consent or
other material action by any Person under, constitute a material default under,
or give rise to any material right of termination, cancellation or acceleration
of any right or obligation of such Person under any provisions of any material
agreement or other material instrument binding upon such Person. Following the
distributions and repurchases of Common Stock pursuant to the Distribution and
Repurchase Agreement on the Closing Date (i) the Sellers (other than Prudential)
will, in the aggregate, hold of record and beneficially all of the issued and,
as of such time, outstanding shares of Common Stock (excluding for this purpose
any outstanding Repurchased Shares), free and clear of any pledges, liens,
encumbrances or other claims or charges except for pledges, liens, encumbrances
or other claims or charges which will be released at the Closing and (ii)
Prudential will hold the Prudential Note free and clear of any pledges, liens,
encumbrances or other claims or charges except for pledges, liens, encumbrances
or other claims or charges which will be released at the Closing.
30
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Sellers that:
SECTION 5.1 EXISTENCE AND POWER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Tennessee.
SECTION 5.2 ORGANIZATIONAL AUTHORIZATION. The execution, delivery and
performance by the Buyer of this Agreement and the consummation of the
transactions contemplated hereby are within the corporate power of the Buyer and
have been duly authorized by all necessary action on the part of the Buyer and
its board of directors. This Agreement constitutes a valid and binding agreement
of the Buyer, enforceable against the Buyer in accordance with its terms, except
as enforceability may be limited by applicable equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally.
SECTION 5.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Buyer of this Agreement and the consummation of the
transactions contemplated hereby require no material action by or in respect of,
or material filing with, any governmental body, agency or official other than
compliance with any applicable requirements of the HSR Act.
SECTION 5.4 NONCONTRAVENTION. The execution, delivery and performance
by the Buyer of this Agreement and the consummation of the transactions
contemplated hereby do not and will not (i) violate the charter or bylaws of the
Buyer, (ii) assuming compliance with the matters referred to in Section 5.3,
violate any applicable material law, rule, regulation, judgment, injunction,
order or decree or (iii) require any material consent or other material action
by any Person under, constitute a material default under, or give rise to any
material right of termination, cancellation or acceleration of any right or
obligation of the Buyer under any provisions of any material agreement or other
material instrument binding upon the Buyer.
SECTION 5.5 FINANCING. Attached hereto as Exhibit C is a true, complete
and correct copy of the financing commitment letter (the "Commitment Letter"),
together with all attachments thereto and other documents referenced therein,
issued to the Buyer by Fleet National Bank and Bank of America in order to
consummate the transactions contemplated hereby and to fund the working capital
requirements of the Buyer after the Closing.
SECTION 5.6 PURCHASE FOR INVESTMENT. The Buyer is purchasing the
Acquired Shares and the Prudential Note for investment for its own account and
not with a view to, or for sale in connection with, any distribution thereof.
The Buyer is an "accredited investor" and has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment in the Acquired Shares and the Prudential
Note and is capable of bearing the economic risks of such investment.
SECTION 5.7 FINDER'S FEES. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of the Buyer who might be entitled to any fee or commission upon the
consummation of the transactions contemplated by this Agreement.
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SECTION 5.8 SOLVENCY. Immediately after giving effect to the
transactions contemplated by this Agreement, the Company and each Subsidiary
will be able to pay their respective debts as they become due and will own
property which has a fair saleable value greater than the amounts required to
pay their respective debts (including a reasonable estimate of the amount of all
contingent liabilities). Immediately after giving effect to the transactions
contemplated by this Agreement, the Company and each Subsidiary will have
adequate capital to carry on their respective businesses. No transfer of
property is being made and no obligation is being incurred in connection with
the transactions contemplated by this Agreement with the intent to hinder, delay
or defraud either present or future creditors of the Company and its
Subsidiaries.
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.1 CONDUCT OF THE COMPANY AND ITS SUBSIDIARIES. During the
period from the date of this Agreement and continuing until the Closing, the
Company agrees as to itself and its Subsidiaries that, except (i) as expressly
contemplated or permitted by this Agreement or the Schedules, including, without
limitation, the transactions described in Article 2 and Section 6.5 hereof or in
the Distribution and Repurchase Agreement, (ii) as required by applicable law or
regulation and disclosed with reasonable promptness in writing to the Buyer, or
(iii) to the extent that the Buyer shall otherwise consent in writing, which
consent shall not be unreasonably withheld or delayed:
(a) the Company and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in all
material respects, in substantially the same manner as heretofore
conducted, and shall use reasonable efforts to preserve intact their
present lines of business, maintain their rights and franchises and
preserve their relationships with customers, suppliers and others
having business dealings with them to the end that their ongoing
businesses shall not be impaired in any material respect at the
Closing; provided, however, that no action by the Company or its
Subsidiaries with respect to matters specifically addressed by any
other provision of this Section 6.1 shall be deemed a breach of this
Section 6.1(a), unless such action would constitute a breach of one or
more of such other provisions;
(b) the Company shall not, and shall not permit any of its
Subsidiaries to, (i) enter into any new line of business or (ii) other
than the capital expenditures referenced on Schedule 3.16, incur or
commit to any capital expenditures or any obligations or liabilities in
connection with capital expenditures, except for (A) capital
expenditures and obligations or liabilities in connection therewith
incurred or committed to in the ordinary course of business consistent
with past practice, and (B) other capital expenditures and obligations
or liabilities in connection therewith in an amount not to exceed
$100,000 in the aggregate;
(c) the Company shall not, and shall not permit any of its
Subsidiaries to, and shall not propose to, (i) declare or pay any
dividends on or make other distributions in respect of any of its
capital stock (except for dividends by direct or indirect wholly owned
Subsidiaries), (ii) split, combine or reclassify any of its capital
stock or issue or
32
authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its capital stock
(except for any such transaction by a direct or indirect wholly owned
Subsidiary that remains a direct or indirect wholly owned Subsidiary
after consummation of such transaction), or (iii) repurchase, redeem or
otherwise acquire any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock
(except for the Repurchased Shares);
(d) the Company shall not, and shall not permit any of its
Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any
class, or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any such shares of its capital
stock, or enter into any agreement with respect to any of the
foregoing, other than issuances of capital stock by a direct or
indirect wholly owned Subsidiary to such Subsidiary's parent or another
direct or indirect wholly-owned Subsidiary;
(e) other than to the extent required to comply with its
obligations hereunder or required by law, the Company and its
Subsidiaries shall not amend its certificate of incorporation, by-laws
or other governing documents;
(f) the Company shall not, and shall not permit any of its
Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing an equity interest in or a portion
of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire or in-license
any assets or rights (other than the acquisition or in-license of
assets used in the operations of the business of the Company and its
Subsidiaries in the ordinary course consistent with past practice);
provided, however, in the event (A) the Company or any Subsidiary makes
a bona fide request for the consent of the Buyer for an acquisition
that would otherwise by precluded by this Section 6.1(f), (B) the Buyer
does not give such consent and (C) this Agreement is terminated
pursuant to Section 10.1, the Buyer shall not, directly or indirectly,
acquire or offer to acquire the business that was the subject of such
request for a period of one year following such termination;
(g) the Company shall not, and shall not permit any of its
Subsidiaries to, sell, lease, out-license, encumber or otherwise
dispose of, or agree to sell, lease, out-license, encumber or otherwise
dispose of, any of its assets for consideration in excess of $100,000
in the aggregate;
(h) the Company shall not, and shall not permit any of its
Subsidiaries to (i) make any loans, advances or capital contributions
to, or investments in, any other Person, other than (A) by the Company
or a direct or indirect wholly owned Subsidiary to or in the Company or
any other direct or indirect wholly owned Subsidiary, (B) pursuant to
any contract or other legal obligation of the Company or any Subsidiary
as in effect as of the date hereof or (C) in an aggregate amount
outstanding from time to time of less than $50,000 or (ii) create,
incur, assume or suffer to exist any indebtedness, issuances of debt
securities, guarantees, loans or advances not in existence as of the
date of this Agreement except pursuant to the credit facilities,
indentures (but not in excess of
33
amounts authorized for issuance thereunder as of the date of this
Agreement) and other arrangements in existence on the date of this
Agreement or trade debt and commercial finance in the ordinary course
of business consistent with past practice, in each case as such credit
facilities, indentures and other arrangements and other existing
indebtedness may be amended, extended, modified, refunded, renewed or
refinanced after the date of this Agreement which does not increase the
aggregate principal amount or amounts of the facility, as the case may
be;
(i) other than with respect to the SHS Executives and other
than as required by an existing contract or agreement as in effect on
the date hereof, the Company shall not, and shall not permit any of its
Subsidiaries to, (A) increase the amount of compensation or severance
pay of any director or executive officer, (B) make any material
increase in, or commitment to increase materially, any employee
benefits or (C) adopt or make any commitment to adopt any material new
Employee Benefit Plan or make any material contribution, other than
regularly scheduled contributions, to any Employee Benefit Plan;
(j) the Company shall not (i) change its fiscal year, (ii)
make any material Tax election (except in the ordinary course of
business consistent with past practice or as otherwise required by
applicable law or regulation) or (iii) except as required by changes in
GAAP as concurred with by the Company's independent auditors or as
required by applicable law or regulation, change its methods of
accounting in effect as of the date of the Latest Balance Sheet, as
modified by changes set forth on Schedule 3.12;
(k) the Company shall not, and shall not permit any of its
Subsidiaries to, make any contributions to any grantor trust or other
funding arrangement for any nonqualified deferred compensation that is
considered "unfunded" for purposes of ERISA;
(l) other than in connection with any action expressly
permitted by any other subsection of this Section 6.1, the Company
shall not, and shall not permit any of its Subsidiaries to (i) enter
into or become bound by, or permit any of the assets owned or used by
it to become bound by, any contract of the type required to be
disclosed pursuant to Section 3.19 of this Agreement (other than in the
ordinary course of business), or (ii) amend or prematurely terminate
(other than in the ordinary course of business), or waive any material
right or remedy under, any such contract;
(m) the Company shall not, and shall not cause or permit any
Subsidiary to, commence or settle any action, suit, investigation or
other proceeding (except for (i) protest actions on contract awards,
(ii) collection or enforcement actions under existing contracts and
(iii) any other action, suit, investigation or other proceeding not
required to be set forth on Schedule 3.11); and
(n) the Company shall not, and shall not cause or permit any
Subsidiary to, agree or commit to take any of the actions described in
subsections (a) through (m) of this Section 6.1.
34
SECTION 6.2 CONFIDENTIALITY. After the Closing, the Sellers will and
will cause Holdings to hold, and will use their reasonable efforts to cause
Holdings' officers, directors, employees, accountants, counsel, consultants,
advisors and agents to hold, in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
confidential documents and information concerning the Company and its
Subsidiaries, except to the extent that such information can be shown to have
been (a) previously known on a nonconfidential basis by the Sellers or Holdings,
(b) in the public domain through no fault of the Sellers or Holdings or (c)
later lawfully acquired by the Sellers or Holdings from sources other than those
related to its prior ownership of the Company and its Subsidiaries. The
obligation of the Sellers to cause Holdings to hold any such information in
confidence shall be satisfied if the Sellers cause Holdings to exercise the same
care with respect to such information as Holdings would take to preserve the
confidentiality of its own similar information.
SECTION 6.3 ACCESS. From the date hereof until the Closing Date, the
Company and each Subsidiary will (a) give the Buyer, its counsel, financial
advisors, auditors and other authorized representatives full access to the
offices, properties, books and records of the Company and its Subsidiaries;
provided that any such access shall be during normal business hours on
reasonable notice and shall not otherwise unreasonably interfere with the
conduct of the business of the Company or any Subsidiary, (b) furnish to the
Buyer, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information relating
to the Company or any Subsidiary as such Person may reasonably request and (c)
instruct the employees, counsel and financial advisors of the Company and its
Subsidiaries to cooperate with the Buyer in its investigation of the Company and
its Subsidiaries.
SECTION 6.4 EXCLUSIVE DEALING. During the period from the date of this
Agreement through the Closing or the earlier termination of this Agreement
pursuant to Section 10.1, the Sellers covenant and agree to cause Holdings to
not and the Sellers and the Company covenant and agree to not initiate or engage
in discussions with any Person (other than the Buyer and its permitted assigns)
concerning the purchase of any shares of capital stock of the Company or any
merger, sale of all or substantially all of the assets of the Company or similar
transaction involving the Company.
SECTION 6.5 CLOSING OPTIONS AND BONUSES. Immediately before the
consummation of the transactions contemplated by Section 2.1, the Company shall
make bonus payments in an aggregate amount equal to the Closing Option and Bonus
Amount (net of applicable withholding) to the persons designated to receive such
payments by the Company's Board of Directors on or prior to the Closing Date,
which payments may, without limitation, be in consideration for the cancellation
of certain options such employees have to acquire common units of Holdings.
ARTICLE 7
COVENANTS OF THE BUYER
SECTION 7.1 CONFIDENTIALITY. Prior to the Closing Date and after any
termination of this Agreement, the Buyer shall hold and shall cause its
Affiliates, officers, directors, employees, accountants, counsel, consultants,
advisors and agents (collectively, the "Buyer's Representatives") to hold, in
confidence, all confidential documents and information concerning
35
the Company or any Subsidiary furnished to the Buyer or the Buyer's
Representatives in connection with the transactions contemplated by this
Agreement in the manner specified in the Confidentiality Agreement, dated as of
January 15, 2002, between the Buyer and the Company (the "Confidentiality
Agreement").
SECTION 7.2 ACCESS. From and after the Closing, the Buyer, the Company
and each Subsidiary shall afford promptly to the Representative (on behalf of
the Sellers) and its representatives reasonable access to the books, records
(including accountants' work papers) and employees of the Buyer, the Company and
its Subsidiaries to the extent necessary to permit the Representative to
determine any matter relating to the rights and obligations any Seller hereunder
or to any period ending on or before the Closing Date; provided that any such
access by the Representative shall be during normal business hours on reasonable
notice and shall not otherwise unreasonably interfere with the conduct of the
business of the Buyer, the Company or its Subsidiaries. Unless otherwise
consented to in writing by the Representative, neither the Buyer, the Company
nor any Subsidiary shall, for a period of three years after the Closing Date or,
in the case of tax and billing records, seven years after the Closing Date,
destroy, alter or otherwise dispose of any of the books and records of the
Company and its Subsidiaries for any period prior to the Closing Date without
first offering to surrender to the Representative such books and records or any
portion thereof the Buyer, the Company or any Subsidiary may intend to dispose
of or destroy.
SECTION 7.3 DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION. For a
period of six years after the Closing Date, the Buyer shall not, and shall not
permit the Company or any Subsidiary to amend, repeal or modify any provision in
the Company's or any Subsidiary's certificate of incorporation or bylaws
relating to the exculpation or indemnification of any current or former officer
or director (unless required by law), it being the intent of the parties that
the officers and directors of the Company and its Subsidiaries shall continue to
be entitled to such exculpation and indemnification to the full extent of the
law. Nothing herein shall be construed to require the Company to indemnify any
Person hereunder for claims of the Buyer against the Sellers.
SECTION 7.4 EMPLOYMENT AND BENEFIT ARRANGEMENTS. From and after the
Closing Date, the Buyer shall cause the Company and its Subsidiaries to honor
all employment, severance, termination, consulting, retirement and other
compensation and benefit plans, arrangements and agreements to which the Company
or any Subsidiary is a party, as such plans, arrangements and agreements are in
effect on the date hereof. Other than in consultation with and approval by
senior management of the Company, until September 30, 2002, the Buyer shall
continue to employ and shall cause the Company and its Subsidiaries to provide
those employees who are employees of the Company or any Subsidiary as of
immediately prior to the Closing with compensation and benefits that are no less
favorable to such employees than the compensation and benefits of the Company
and its Subsidiaries available to such employees immediately prior to the
Closing. This Section 7.4 shall survive the Closing, is intended to benefit the
Company and the employees of the Company and its Subsidiaries, and shall be
binding on all successors and assigns of the Buyer and the Company.
SECTION 7.5 REGULATORY FILINGS. The Buyer shall, within five business
days after the date hereof, make or cause to be made all filings and submissions
required of the Buyer under
36
the HSR Act or any other laws or regulations applicable to the Buyer for the
consummation of the transactions contemplated herein. The Buyer shall be
responsible for all filing fees under the HSR Act and under any such other laws
or regulations applicable to the Buyer.
SECTION 7.6 CONTACT WITH EMPLOYEES, CUSTOMERS AND SUPPLIERS. Prior to
the Closing, neither the Buyer nor any of the Buyer's representatives shall
contact or otherwise communicate with any employees, customers or suppliers of
the Company or any Subsidiary in connection with or regarding the transactions
contemplated hereby, except to the extent approved in writing by the Company,
which consent will not be unreasonably withheld.
SECTION 7.7 NOTIFICATION. Prior to the Closing, upon discovery the
Buyer shall promptly inform the Company and the Representative in writing of any
material variances from the Buyer's representations and warranties contained in
Article 5.
SECTION 7.8 D&O INSURANCE. Prior to the Closing, the Buyer shall obtain
at its sole cost and expense a tail policy or policies for the Company's
directors and officers insurance covering a six year period from Closing and
relating to the operation of the Company and its Subsidiaries through the
Closing (but not relating to the operation of Spectrum Healthcare of Delaware,
Inc. and its Subsidiaries through the Closing).
SECTION 7.9 FINANCING. The Buyer will use its best efforts to cause the
financing contemplated by the Commitment Letter (the "Financing") to be closed
on terms consistent with the terms and conditions contemplated by the Commitment
Letter. In the event that any portion of the Financing becomes unavailable,
regardless of the reason therefor, the Buyer will use its best efforts to
arrange alternative financing from other reasonably acceptable sources on and
subject to substantially the same terms and conditions as the portion of the
Financing that has become unavailable. The Buyer shall use its best efforts to
(i) satisfy on or before the Closing all requirements of the definitive
agreements pursuant to which the Financing will be obtained (the "Financing
Agreements") which are conditions to closing to be satisfied by the Buyer with
respect to all transactions constituting the Financing and to drawing down the
cash proceeds thereunder; (ii) defend all lawsuits or other legal proceedings
challenging the Financing Agreements or the consummation of the transactions
contemplated thereby; and (iii) lift or rescind any injunction or restraining
order or other order adversely affecting the ability of the parties to
consummate the transactions contemplated thereby. The Buyer shall keep the
Representative apprised of all material developments relating to the Financing.
Any fees to be paid by the Company or any other obligations to be incurred by
the Company in connection with the Financing shall be subject to the occurrence
of the Closing.
ARTICLE 8
ADDITIONAL COVENANTS OF THE SELLERS AND THE BUYER
SECTION 8.1 BEST EFFORTS; FURTHER ASSURANCES. Subject to the terms and
conditions of this Agreement, the Buyer and the Sellers shall use their best
efforts to take, or cause to be taken, all actions necessary or desirable to
cause the conditions set forth in Article 9 to be satisfied and the transactions
contemplated by this Agreement to be consummated, in each case as promptly after
the date hereof as practicable. Each of the Sellers, the Company and the Buyer
agree to execute and deliver such other documents, certificates, agreements and
other writings
37
and to take such other actions as may be necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by this
Agreement.
SECTION 8.2 FURTHER COOPERATION. Each of the Sellers and the Buyer
shall cooperate with the other (i) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or authority
is required, or any actions, consents, approvals or waivers are required to be
obtained under any material contracts, in each case in connection with the
consummation of the transactions contemplated by this Agreement, and (ii) in
taking such actions or making any such filings, in furnishing information
required in connection therewith and in seeking timely to obtain any such
actions, consents, approvals or waivers.
SECTION 8.3 PUBLIC ANNOUNCEMENTS. No press release or other public
announcement related to this Agreement or the transactions contemplated herein
shall be issued or made without the joint approval of the Buyer and the
Representative, unless required by law (in the reasonable opinion of counsel),
in which case the Buyer and the Representative shall have the right to review
such public announcement prior to publication.
SECTION 8.4 TRANSFER TAXES. All transfer, documentary, sales, use,
stamp, registration, value added and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement shall be
borne and paid 50% by the Buyer and 50% by the Sellers when due, and the Buyer
will file all necessary Tax returns and other documentation with respect to all
such Taxes and fees with the expense of such filings being shared 50% by the
Buyer and 50% by the Sellers, and, if required by applicable law or regulation,
each Seller will execute and deliver, and will cause its Affiliates to join in
the execution and delivery of, any such Tax Returns and other documentation.
SECTION 8.5 ACKNOWLEDGMENT BY THE BUYER. The Buyer acknowledges that it
has conducted to its satisfaction, an independent investigation and verification
of the financial condition, results of operations, assets, liabilities,
properties and projected operations of the Company and its Subsidiaries and, in
making its determination to proceed with the transactions contemplated by this
Agreement, the Buyer has relied on the results of its own independent
investigation and verification and the representations and warranties of the
Company and the Sellers expressly and specifically set forth in this Agreement.
Such representations and warranties by the Company and the Sellers constitute
the sole and exclusive representations and warranties of the Company, its
Subsidiaries, the Sellers and the Representative (on behalf of the Sellers) to
the Buyer in connection with the transactions contemplated hereby, and the Buyer
understands, acknowledges and agrees that all other representations and
warranties of any kind or nature expressed or implied (including, without
limitation, any relating to the projected financial condition, results of
operations, assets or liabilities of the Company or its Subsidiaries or the
quality, quantity or condition of the assets of the Company or its Subsidiaries)
are specifically disclaimed by the Company, its Subsidiaries, the Sellers and
the Representative (on behalf of the Sellers). Neither the Company, its
Subsidiaries, the Sellers, nor the Representative (on behalf of the Sellers)
make or provide, and the Buyer hereby waives, any warranty or representation,
express or implied, as to the quality, merchantability, fitness for a particular
purpose, conformity to samples, or condition of the Company's assets or any part
thereto.
38
SECTION 8.6 EMPLOYEE BENEFIT PLANS
(a) 401(k) and Supplemental Retirement Plan. Prior to the
Closing Date, the Sellers shall cause Holdings to cause Spectrum
Healthcare of Delaware, Inc. to establish a new supplemental retirement
plan ("Mirror SRP") that is substantially similar to the supplemental
retirement plan under which the employees of the Company and its
Subsidiaries currently participate. Prior to the Closing Date, the
Sellers shall cause Holdings to cause the Spectrum Healthcare Services,
Inc. Supplemental Retirement Plan's trust to transfer to the Mirror
SRP's trust, assets (and related liabilities) that are equal to the
account balances of each employee of Holdings or its Subsidiaries
(other than the Company and its Subsidiaries). Prior to the Closing
Date, the Company shall transfer sponsorship of the Spectrum Healthcare
Services, Inc. 401(k) Retirement Plan (the "Spectrum 401(k) Plan") to
Spectrum Healthcare of Delaware, Inc. and the Sellers shall cause
Holdings to cause Spectrum Healthcare of Delaware, Inc. to accept such
transfer. During the period from the Closing Date until September 30,
2002, Spectrum Healthcare of Delaware, Inc. shall permit eligible
employees of the Company and its Subsidiaries to continue to
participate in the Spectrum 401(k) Plan. The Company shall reimburse
Spectrum Healthcare of Delaware, Inc. for any reasonable administrative
costs and employer matching contributions relating to the continued
participation of current and former employees of the Company and its
Subsidiaries in the Spectrum 401(k) Plan on and after the Closing Date.
As soon as reasonably practical after the Closing Date, but in no event
later than December 31, 2002, Spectrum Healthcare of Delaware, Inc.
shall cause the Spectrum 401(k) Plan to transfer to a 401(k) plan
sponsored by Buyer or its Subsidiaries the account balances (and the
related assets and liabilities) of current and former employees of the
Company and its Subsidiaries.
(b) Pre-Existing Limitations; Deductibles; Service Credit.
With respect to any Employee Benefit Plans in which any employees of
the Company and its Subsidiaries participate on or after the Closing,
the Buyer shall cause the Company and its Subsidiaries to: (i) waive
all pre-existing conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to such
employees, except to the extent such pre-existing conditions,
exclusions or waiting periods applied under the similar plan in effect
immediately prior to the Closing; (ii) provide each such employee with
credit for any co-payments and deductibles paid (to the same extent
such credit was given for the year under the similar plan in effect
immediately prior to the Closing) in satisfying any applicable
deductible or out-of-pocket requirements; and (iii) recognize all
continuous service of the Company's and each Subsidiary's employees
with the Company or any of its Subsidiaries, as applicable, for all
purposes (including, without limitation, for purposes of eligibility to
participate, vesting credit and entitlement to benefits, but excluding
benefit accrual under a defined benefit pension plan) under any
Employee Benefit Plan in which such employees may be eligible to
participate after the Closing; provided that the foregoing shall not
apply to the extent it would result in a duplication of benefits.
(c) Shared Welfare Benefit Coverages.
39
(i) During the period beginning on the Closing Date
and ending on the earlier of the date that is 60 days after
the Closing Date or the date elected by Spectrum Healthcare of
Delaware, Inc. (the "Welfare Benefits Transition Period"),
eligible employees of Spectrum Healthcare of Delaware, Inc.
and its Subsidiaries (and their covered dependents) shall be
permitted to participate under (a) the Cigna Healthcare
Administrative Services Agreements, for Cigna Healthcare PPO,
Cigna Healthcare Dental Preferred Provider Benefit, Cigna
Healthcare Passive PPO, Cigna Healthcare COBRA Administration
and FSA (Section 125) Administration Agreement, Connecticut
General Life Insurance Prime Rx Plan and Tel-Drug Pharmacy
Services Administration Agreement and (b) Connecticut General
Life Insurance Company Stop-Loss Insurance Policy (to the
extent that such coverages applied to each respective employee
workforce immediately prior to the Closing Date). The Company
shall not make any changes to the coverages referred to in the
preceding sentence during the Welfare Benefits Transition
Period, without written consent from an officer of Spectrum
Healthcare of Delaware, Inc. Effective as of the date
following the Welfare Benefits Transition Period, current and
former employees of Spectrum Healthcare of Delaware, Inc. and
its Subsidiaries (and their covered dependents) shall cease
participating in such coverages and such entities shall adopt
replacement welfare benefit coverages for such individuals.
(ii) Prior to the Closing Date, the Company shall
assign and transfer to Spectrum Healthcare of Delaware, Inc.
the United Healthcare Services Administrative Services
Agreement for SHS Medical Plan. During the period beginning on
the Closing Date and ending on December 31, 2002, eligible
employees of the Company and its Subsidiaries (and their
covered dependents) shall be permitted to participate under
the United Healthcare Services medical coverage (to the extent
that such coverage applied to each respective employee
workforce immediately prior to the Closing Date). Effective
January 1, 2003, current and former employees of the Company
and its Subsidiaries (and their covered dependents) shall
cease participating in such coverages and such entities shall
adopt replacement welfare benefit coverages for such
individuals.
(iii) Notwithstanding anything to the contrary,
Spectrum Healthcare of Delaware, Inc. and its Subsidiaries and
the Company and its Subsidiaries shall each be responsible for
all respective costs relating to benefit coverages for current
and former employees of each respective business for periods
before and after the Closing, including, without limitation,
the actual cost of claims incurred under self-funded coverages
(subject to the limits under applicable stop-loss policies).
In addition, the Company and its Subsidiaries and Spectrum
Healthcare of Delaware, Inc. and its Subsidiaries shall
continue to be liable under the Management, Administrative and
Support Services Agreement, dated as of November 30, 2001, as
long as applicable transitional services are being provided.
SECTION 8.7 DISCLOSURE GENERALLY. Information set forth in any Schedule
or incorporated in any Section of this Agreement shall be considered to have
been set forth in each other Schedule to the extent that it is clear on its face
that it applies to such first Schedule. The
40
specification of any dollar amount in the representations and warranties
contained in this Agreement or the inclusion of any specific item in the
Schedules is not intended to imply that such amounts, or higher or lower
amounts, or the items so included or other items, are or are not required to be
disclosed or are within or outside of the ordinary course of business, and
neither party shall use the fact of the setting of such amounts or the fact of
the inclusion of any such item in the Schedules in any dispute or controversy
with any party as to whether any obligation, item or matter not described herein
or included in a Schedule is or is not required to be disclosed (including,
without limitation, whether such amounts are required to be disclosed as
material) or in the ordinary course of business for the purposes of this
Agreement. The information contained in the Schedules is disclosed solely for
the purposes of this Agreement, and no information contained therein shall be
deemed to be an admission by any party hereto to any third party of any matter
whatsoever, including of any violation of law or breach of any agreement.
SECTION 8.8 USE OF SPECTRUM NAME. At the Closing, the Sellers shall
cause Holdings and its Subsidiaries (other than the Company and its
Subsidiaries) to assign all their right, title and interest in and to the
Spectrum name (or any other confusingly similar variation thereof) to the
Company by executing an assignment in a form mutually agreed upon by the Buyer
and the Representative. In addition, for a period of six (6) months after the
Closing Date and without any payment to the Company, Holdings and its
Subsidiaries shall have the right to continue using the Spectrum name (or any
variations thereof) that is used in connection with the operation of the
businesses of Holdings and its Subsidiaries (collectively the "Marks") in a
manner consistent with the manner in which such Marks are currently used by
Holdings and its Subsidiaries; provided however, nothing in this Section 8.8
shall permit Holdings or its Subsidiaries to take any action in violation of
Article 12.
SECTION 8.9 PRUDENTIAL NOTE. The Company and the Buyer covenant and
agree that, from and after the Closing until the date that is two years
following the Closing Date, (i) the Company shall not pay or offset any
principal outstanding under the Prudential Note and the Buyer shall not accept
any such payment or offset, (ii) the Buyer shall continue to hold the Prudential
Note and shall not sell, assign, contribute to the Company or otherwise
transfer, directly or indirectly, the Prudential Note or any interest therein
and (iii) the terms of the Prudential Note shall not be amended, modified or
waived.
SECTION 8.10 FUND DISSOLUTION. If any of Madison Dearborn Capital
Partners, L.P., Healthcare Equity Partners, L.P., Healthcare Equity QP Partners,
L.P., and Prudential Private Equity Investors III, L.P. terminates, dissolves or
otherwise ceases to exist prior to five years from the date of Closing, such
fund will make adequate arrangements prior to termination to provide for such
Person's Allocable Portion of any remaining indemnity obligation under Article
11 hereof.
SECTION 8.11 CERTAIN LICENSES. The parties hereto agree that to the
extent the licenses for the software provided by PeopleSoft referenced on
Schedule 3.19(n) hereto have not been assigned to Spectrum Healthcare of
Delaware, Inc. ("SHD") from the Company and its Subsidiaries prior to the
Closing, the Company shall and the Sellers shall cause Holdings to cause SHD to
enter into an amendment to the Management, Administrative and Support Services
Agreement, dated November 30, 2001, by and among the Company and SHD that will
provide
41
for SHD to continue to obtain the use and/or benefits of the use of such
software from or through the Company at cost except to the extent not permitted
by any such license until such assignment has taken place.
ARTICLE 9
CONDITIONS TO CLOSING
SECTION 9.1 CONDITIONS TO THE BUYER'S OBLIGATIONS. The obligations of
the Buyer to consummate the transactions contemplated by this Agreement are
subject to the satisfaction (or the Buyer's waiver) of the following conditions
as of the Closing Date:
(a) the representations and warranties of the Company and the
Sellers contained in Article 3 and Article 4 hereof shall have been
true and correct as of the date of this Agreement and as of the Closing
Date, except (i) to the extent that the failure of such representations
and warranties to be true and correct has not caused a Material Adverse
Effect, (ii) for changes contemplated by this Agreement, and (iii) for
those representations and warranties that address matters only as of
the date of this Agreement or any other particular date (in which case
such representations and warranties shall have been true and correct as
of such particular date, except to the extent that the failure of such
representations and warranties to have been true and correct as of such
particular date has not caused a Material Adverse Effect); it being
understood that, for purposes of determining the accuracy of such
representations and warranties, all "Material Adverse Effect"
qualifications and other qualifications based on the word "material" or
similar phrases contained in such representations and warranties shall
be disregarded;
(b) The Company and the Sellers shall have performed in all
material respects all of the covenants and agreements required to be
performed by them under this Agreement at or prior to the Closing and
the Company, Holdings and the Sellers shall have performed in all
material respects all of the covenants and agreements required to be
performed by them under the Distribution and Repurchase Agreement at or
prior to the Closing;
(c) All consents that are set forth on Schedule 9.1(c) shall
have been obtained;
(d) The applicable waiting periods, if any, under the HSR Act
shall have expired or been terminated, and all other material
governmental filings, consents, authorizations and approvals that are
required for the consummation of the transactions contemplated hereby
and set forth on Schedule 9.1(d) attached hereto shall have been made
and obtained;
(e) No action or proceeding before any court or government
body shall be pending wherein an unfavorable judgment, decree or order
would prevent the performance of this Agreement or the consummation of
any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement or cause such transactions
to be rescinded;
(f) The Buyer shall have obtained the financing necessary to
complete the transaction contemplated hereby;
42
(g) Since the date hereof, there shall have been no Material
Adverse Effect (without limiting the generality of the foregoing, since
the date hereof, there shall have been no modification or change in the
Tricare program, of any Medicare or Medicaid law, rule, regulation or
payment policy, or any rule or policy of any third party payor, or any
other applicable law or regulation, which has had or could reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect);
(h) The Buyer shall have received an opinion, dated the
Closing Date, of Xxxxxxxx & Xxxxx, counsel to the Company and the
Sellers, with respect to the matters set forth on Exhibit D, attached
hereto, and the lenders providing debt financing in connection with the
transactions contemplated by this Agreement shall be entitled to rely
thereon;
(i) The Buyer, the Company, Spectrum Healthcare of Delaware,
Inc. and Correctional Medical Services, Inc. ("CMS") shall have entered
into an Indemnification Agreement in the form of Exhibit E hereto (the
"Indemnification Agreement") and the Indemnification Agreement shall be
in full force and effect as of the Closing;
(j) Holdings shall have executed the Guaranty in the form of
Exhibit F hereto (the "Guaranty") and the Guaranty shall be in full
force and effect as of the Closing;
(k) The Buyer and CMS shall have entered into the letter
agreement in the form of Exhibit G hereto (the "Separation Side
Letter") and the Separation Side Letter shall be in full force and
effect as of the Closing;
(l) The Sellers, the Representative and the Escrow Agent shall
have entered into and delivered to the Buyer the Escrow Agreement;
(m) The Buyer shall have received evidence that the Company's
professional liability insurance provided by Truck Insurance Exchange
does not or will not as of the Closing contain a quota sharing or
similar co-payment arrangement to which the Company would be subject;
(n) With respect to each Guarantee Obligation, either (A) the
Company shall be released from or otherwise no be longer liable on such
Guarantee Obligation or (B) the Company shall be the beneficiary of an
indemnity or other form of credit protection from a bank, an insurance
company or another reputable bonding company (such as a letter of
credit, a surety bond or a cash escrow) for the liability of the
Company under such Guarantee Obligation in an amount equal to the
maximum outstanding face amount of such Guarantee Obligation; and
(o) The Representative shall have delivered to the Buyer each
of the following:
(i) a certificate of the Company and each Seller,
dated the Closing Date, stating that the preconditions
specified in Sections 9.1(a) and 9.1(b), as they relate to the
Company and its Subsidiaries and each Seller, have been
satisfied;
43
(ii) all minute books, stock books, ledgers and
registers and corporate seals in its possession relating to
the organization, ownership and maintenance of the Company and
its Subsidiaries;
(iii) certified copies of the charter and bylaws of
each of the Company and its Subsidiaries;
(iv) a copy of the resolutions of the board of
directors of the Company and each Seller which is an entity,
approving the transactions contemplated by this Agreement,
certified by the Company or such Seller, as the case may be;
(v) certificates from appropriate authorities, dated
as of or about the Closing Date, as to the good standing and
qualification to do business of the Company or its
Subsidiaries in each jurisdiction where they are so qualified
and each Seller which is an entity in its jurisdiction of
organization;
(vi) all stock certificates or other instruments
evidencing ownership of each of the Company's Subsidiaries;
and
(vii) copies of the resignations of the officers and
directors of the Company and its Subsidiaries set forth on
Exhibit H hereto.
SECTION 9.2 CONDITIONS TO THE SELLERS' OBLIGATIONS. The obligations of
each Seller to consummate the transactions contemplated by this Agreement are
subject to the satisfaction (or the Representative's waiver) of the following
conditions as of the Closing Date:
(a) The representations and warranties of the Buyer contained
in Article 5 hereof shall have been true and correct in all material
respects as of the date of this Agreement and as of the Closing Date,
except (i) for changes contemplated by this Agreement, and (ii) for
those representations and warranties that address matters only as of
the date of this Agreement or any other particular date (in which case
such representations and warranties shall have been true and correct in
all material respects as of such particular date); it being understood
that, for purposes of determining the accuracy of such representations
and warranties, all qualifications based on the word "material" or
similar phrases contained in such representations and warranties shall
be disregarded;
(b) The Buyer shall have performed in all material respects
all of the covenants and agreements required to be performed by it
under this Agreement at or prior to the Closing;
(c) All consents which are set forth on Schedule 9.1(c)
attached hereto shall have been obtained;
(d) The applicable waiting periods, if any, under the HSR Act
shall have expired or been terminated, and all other material
governmental filings, consents, authorizations and approvals that are
required for the consummation of the transactions
44
contemplated hereby and set forth on the Schedule 9.1(d) attached
hereto shall have been made and obtained;
(e) No action or proceeding before any court or government
body shall be pending wherein an unfavorable judgment, decree or order
would prevent the performance of this Agreement or the consummation of
any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement or cause such transactions
to be rescinded;
(f) The Sellers, the Representative, the Buyer and the Escrow
Agent shall have executed and delivered to the Representative the
Escrow Agreement;
(g) The Sellers and the Representative shall have received an
opinion, dated the Closing Date, of Xxxxxxx, Xxxxxx, Xxxx, Xxxxxxx &
Manner, P.C., counsel to the Buyer, with respect to the matters set
forth on Exhibit I; and
(h) The Buyer shall have delivered to the Representative each
of the following:
(i) certified copies of the resolutions duly adopted
by the Buyer's board of directors authorizing the execution,
delivery and performance of this Agreement; and
(ii) a certificate of the Buyer, dated the Closing
Date, stating that the preconditions specified in Sections
9.2(a) and 9.2(b), as they relate to the Buyer, have been
satisfied.
ARTICLE 10
TERMINATION
SECTION 10.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of the Buyer and the
Representative;
(b) by the Buyer, if there has been a material breach by the
Company or a Significant Seller of any covenant or other agreement
contained herein which has prevented the satisfaction of any condition
to the obligations of the Buyer at the Closing and such breach has not
been waived by the Buyer or cured by the Company or a Significant
Seller within ten business days after the Representative's receipt of
written notice thereof from the Buyer;
(c) by the Representative, if there has been a material breach
by the Buyer of any covenant or other agreement contained herein which
has prevented the satisfaction of any condition to the obligations of
the Sellers at the Closing and such breach has not been waived by the
Representative or cured by the Buyer within ten business days after the
Buyer's receipt of written notice thereof from the Representative
(provided that the failure
45
to deliver the Purchase Price at the Closing as required hereunder
shall not be subject to cure hereunder unless otherwise agreed to in
writing by the Representative);
(d) by the Buyer, if the transactions contemplated hereby have
not been consummated on or before May 31, 2002; provided that the Buyer
shall not be entitled to terminate this Agreement pursuant to this
Section 10.1(d) if the Buyer's knowing or willful breach of this
Agreement has prevented the consummation of the transactions
contemplated hereby; or
(e) by the Representative, if the transactions contemplated
hereby have not been consummated on or before May 31, 2002; provided
that the Representative shall not be entitled to terminate this
Agreement pursuant to this Section 10.1(e) if the Company's or the
Significant Sellers' knowing or willful breach of this Agreement has
prevented the consummation of the transactions contemplated hereby.
The party desiring to terminate this Agreement pursuant to clauses (b),
(c), (d) or (e) of this Section 10.1 shall give written notice of such
termination to the other parties hereto.
SECTION 10.2 EFFECT OF TERMINATION. In the event this Agreement is
terminated by either the Buyer or the Representative as provided in Section
10.1, the provisions of this Agreement shall immediately become void and of no
further force and effect (other than Section 7.1 (Confidentiality), Section 7.6
(Contact with Employees, Customers and Suppliers), Section 8.3 (Public
Announcements), this Section 10.2, Section 12.2 (other than clause (b) of such
Section 12.2) (Nonsolicitation by the Buyer) and Article 11, each of which shall
survive the termination of this Agreement), and there shall be no liability on
the part of either the Buyer, the Company, any Significant Sellers, any other
Seller or the Representative to any other party hereto, except for willful or
knowing breaches of this Agreement prior to the time of such termination.
ARTICLE 11
INDEMNIFICATION AND RELATED MATTERS
SECTION 11.1 SURVIVAL. All representations, warranties, covenants, and
agreements set forth in this Agreement or in any writing or certificate
delivered pursuant to this Agreement shall survive the Closing Date and the
consummation of the transactions contemplated hereby. Notwithstanding the
foregoing, no party shall be entitled to recover for any Loss pursuant to
Section 11.2(a), Section 11.2(c), or Section 11.3 unless written notice of a
claim thereof is delivered to the other party before the Applicable Limitation
Date. For purposes of this Agreement, the term "Applicable Limitation Date"
shall mean the date that is eighteen (18) months after the Closing Date;
provided that (A) the Applicable Limitation Date with respect to a breach of the
representations and warranties of the Sellers set forth in Sections 3.6 shall be
the date that is five (5) years after the Closing Date; and (B) the Applicable
Limitation Date with respect to (x) a breach of the representations and
warranties of the Sellers set forth in Section 3.9 and (y) the tax matters set
forth in Section 11.3, shall be the date that is three (3) years after the
Closing Date.
SECTION 11.2 INDEMNIFICATION.
46
(a) Indemnification by Sellers. Subject to Section 11.2(f),
each Seller shall, on a several basis, indemnify the Buyer and the
Company and its Subsidiaries, and each of their respective officers,
directors, stockholders, employees, agents, representatives,
affiliates, successors, and permitted assigns (collectively, the "Buyer
Parties") and hold each of them harmless from and against and pay on
behalf of or reimburse such Buyer Parties in respect of such Seller's
Allocable Portion of any Loss that any such Buyer Party may suffer,
sustain, or become subject to, as a result of:
(i) the breach of any representation or warranty
(other than any representation or warranties in Section 3.9)
made by the Company or any Seller contained in this Agreement
or in any certificate delivered by the Company or any Seller
with respect thereto in connection with the Closing; or
(ii) the breach of any covenant or agreement made by
the Company or any Seller contained in this Agreement (other
than any breach of Section 11.3(d) hereof, the remedies for
which are addressed in Section 11.3(d)).
(b) Limitations on Indemnification by each the Seller. The
indemnification provided for in Section 11.2(a) above is subject to the
following limitations:
(i) With respect to each Seller, the aggregate amount
of (x) such Seller's Allocable Portion of the aggregate
disbursements to the Buyer Parties from the Escrow Fund in
respect of indemnification under Section 11.2 and (y) all
payments made by such Seller in satisfaction of claims for
indemnification pursuant to Section 11.2, shall not exceed
such Seller's Allocable Portion of $10,000,000 (the "Cap");
provided that the Cap shall not apply to indemnification
claims for breaches of Section 2.2(c), Section 2.3(b), the
second sentence of Section 11.3(b)(i), and sentences (D), (F)
and (G) of Section 11.3(b)(iii).
(ii) The Sellers shall not be liable to indemnify any
Buyer Parties pursuant to Section 11.2(a) unless and until the
Buyer Parties have collectively suffered Losses by such
breaches pursuant to such Section 11.2(a) in excess of a
$500,000 aggregate basket (the "Basket") (at which point,
subject to the other limitations herein, the Sellers will be
liable to the Buyer Parties for all Losses in excess of such
Basket); provided that the Basket shall not apply to
indemnification claims for breaches of Section 2.2(c), Section
2.3(b), the second sentence of Section 11.3(b)(i), and
sentences (D), (F) and (G) of Section 11.3(b)(iii).
(iii) The Buyer Parties shall take all reasonable
steps to mitigate all indemnifiable liabilities and damages
upon and after becoming aware of any event which could
reasonably be expected to give rise to any liabilities or
damages that are indemnifiable hereunder.
(iv) Notwithstanding anything to the contrary in this
Agreement, the indemnification rights provided in Section
11.2(a) and Section 11.3(d) of this Agreement, the Guaranty,
and the Indemnification Agreement shall be the sole
47
and exclusive remedy of the Buyer Parties with respect to any
dispute arising out of or related to this Agreement or any
Loss that any Buyer Party may suffer, sustain or become
subject to, as a result of or relating to this Agreement and
the transactions contemplated hereby, including, without
limitation, any breaches by the Representative, in its
capacity as the Representative, hereunder, except for the
right to seek specific performance of any of the agreements
contained herein.
(v) Payments by the Sellers pursuant to Section 11.2
and Section 11.3 (including, without limitation, disbursements
from the Escrow Fund) shall be limited to the amount of any
Loss that remains after deducting therefrom (A) any insurance
or other third party recoveries actually received by the
person seeking indemnification offsetting the amount of such
Loss (net of cost of recovery) and (B) any recoveries actually
received by such person or any of its affiliates pursuant to
indemnification or otherwise with respect thereto (net of cost
of recovery and exclusive of recoveries pursuant to this
Agreement or any agreement referenced herein), and (C) any
federal Tax benefit actually realized as a reduction of cash
Taxes owed by such person attributable to the Loss amounts
indemnified against. A Tax benefit will be considered to be
realized only at the time and to the extent that it actually
reduces the applicable federal tax return's aggregate cash Tax
due for the tax period in which such Loss is included in such
tax returns. For purposes of this determination, such Loss
shall be treated as the last incremental dollars considered in
calculating taxable income in such tax returns and the
applicable Tax due. Notwithstanding the foregoing, if such
amount is carried back to a prior tax period return and
results in a refund for such period, then such Loss shall be
considered to have been actually realized, and such Tax
benefit shall be remitted to Sellers upon receipt by Buyer of
such refund. The amount of any such Tax benefits shall be paid
by the Buyer to the Representative (on behalf of the Sellers)
promptly following the time they are realized, as contemplated
herein. The Indemnified Parties shall exercise reasonable best
efforts to obtain such proceeds, benefits and recoveries. The
Buyer Parties shall seek full recovery under all insurance
policies and similar agreements covering any Loss to the same
extent as they would if such Loss were not subject to
indemnification hereunder. The amount of any insurance
recovery or other third party recovery (net of the cost of
recovery) made by any Buyer Party with respect to any Loss for
which any such Person has been indemnified hereunder shall be
paid by the Buyer promptly to the Representative (for the
benefit of the Sellers). Any indemnification payment under
this Section 11.2 shall be increased by the amount of any
federal Tax detriment actually incurred by such person
attributable to such payment, with such increase to be made at
the time of incurrence of such Tax detriment. A Tax detriment
will be considered to be incurred only at the time and to the
extent that it actually increases the aggregate Tax liability
of such Buyer Party in any tax period where such
indemnification payment is treated as taxable income to the
Buyer Parties and included in determining the Tax for such
period. For purposes of this determination, the
indemnification payment shall be treated as the last
incremental dollars considered in calculating the applicable
Tax. In the event that a Tax detriment as contemplated by the
foregoing is incurred by any Buyer Party after
48
indemnification has been made hereunder, then the Sellers
shall promptly pay to such Buyer Party an amount equal to the
amount of such Tax detriment. Any and all payments by the
Sellers pursuant to Section 11.2 and 11.3 shall be treated as
adjustments to the aggregate purchase price paid for Tax
purposes.
(vi) No Buyer Party shall be entitled to be
indemnified in respect of any Losses to the extent the Buyer
Parties shall have been compensated therefor in connection
with the purchase price adjustment in Section 2.2 or pursuant
to the Guaranty or the Indemnification Agreement. The Sellers
shall not be entitled to any duplicative payments or
indemnities.
(vii) With respect to any Tax Return for a
Pre-Closing Period or Straddle Period, once such Tax Return
has been initially filed and the liability as shown on such
Tax Return as filed shall have been paid, no Buyer Party shall
be entitled to make any claim against any Seller with respect
to Taxes arising out of the period covered by or relating to
such Pre-Closing Period Return or Straddle Period Return
except pursuant to Section 11.3(d)(ii), subject to the
limitations on indemnification relating thereto.
Notwithstanding any implication to the contrary contained in this
Agreement, so long as any Buyer Party delivers written notice of a
claim to the Representative no later than the Applicable Limitation
Date describing in reasonable detail the claim, the amount thereof if
known (or otherwise a good faith estimate thereof), the basis thereof
and the facts pertaining thereto, each Seller shall be required to
indemnify the Buyer Parties for all Losses (subject to the Basket and
Cap limitations and the other limitations set forth herein, if
applicable) that the Buyer Parties may incur in respect of the matters
that are the subject of such claim, regardless of when incurred, to the
extent such Losses are described in such written notice.
(c) Indemnification by the Buyer. The Buyer shall indemnify
the Sellers and the Representative and their respective officers,
directors, partners, managers stockholders, employees, agents,
representatives, affiliates, successors, and permitted assigns
(collectively, the "Seller Parties") harmless from and against and pay
on behalf of or reimburse such Seller Parties in respect of any Loss
that such Seller Party may suffer, sustain, or become subject to, as a
result of or relating to:
(i) the breach of any representation or warranty made
by the Buyer contained in this Agreement or in any certificate
delivered by the Buyer with respect thereto in connection with
the Closing; or
(ii) the breach of any covenant or agreement made by
the Buyer contained in this Agreement.
(d) Limitations on Indemnification by the Buyer. The
indemnification provided for in Section 11.2(c) above is subject to the
following limitations:
(i) Each Seller shall take all reasonable steps to
mitigate all indemnifiable liabilities and damages upon and
after becoming aware of any
49
event which could reasonably be expected to give rise to any
liabilities or damages that are indemnifiable hereunder.
(ii) The aggregate amount of payments made by the
Buyer in satisfaction of claims pursuant to Section 11.2(c),
shall not exceed $10,000,000; provided that the foregoing
limitation shall not apply to indemnification claims for
breaches of Section 2.2(c), Section 2.3(b), Section
11.3(b)(ii), or Section 11.3(b)(vi).
(iii) The Buyer shall not be liable to indemnify any
Seller Parties pursuant to Sections 11.2(c) unless and until
the Seller Parties have collectively suffered Losses by such
breaches pursuant to such Section 11.2(c) in excess of a
$500,000 aggregate basket (at which point, subject to the
other limitations herein, the Buyer will be liable to the
Seller Parties for all Losses in excess of such $500,000);
provided that the foregoing limitation shall not apply to
indemnification claims for breaches of Section 2.2(c), Section
2.3(b), Section 11.3(b)(ii), or Section 11.3(b)(vi).
(iv) The indemnification rights provided in Section
11.2(c) and Section 11.3(d) of this Agreement shall be the
sole and exclusive remedy of the Seller Parties with respect
to any dispute arising out of or related to this Agreement or
any Loss which any Seller Party may suffer, sustain or become
subject to, as a result of or relating to this Agreement and
the transactions contemplated hereby, except for the right to
seek specific performance of any of the agreements contained
herein.
Notwithstanding any implication to the contrary contained in this
Agreement, so long as any Seller Party delivers written notice of a
claim to the Buyer no later than the Applicable Limitation Date
describing in reasonable detail the claim, the amount thereof if known
(otherwise a good faith estimate thereof), the basis thereof and the
facts pertaining thereto, the Buyer shall be required to indemnify the
Seller Parties for all Losses (subject to the limitations set forth
herein, if applicable) that the Seller Parties may incur in respect of
the matters that are the subject of such claim, regardless of when
incurred, to the extent such Losses are described in such written
notice.
(e) Procedures.
(i) If a party hereto seeks indemnification under
this Article 11 (including any indemnification for Taxes
pursuant to Section 11.3), such party (the "Indemnified
Party") shall promptly give written notice to the other party
(the "Indemnifying Party") after receiving written notice of
any action, lawsuit, proceeding, audit, investigation, or
other claim against it (if by a third party) or discovering
the liability, obligation, or facts giving rise to such claim
for indemnification, describing in detail the claim, the
amount thereof (if known and quantifiable), and the basis
thereof; provided that no reasonable amount of delay in so
notifying the Indemnifying Party shall relieve the
Indemnifying Party of its obligations hereunder except to the
extent such failure shall have prejudiced the
50
Indemnifying Party or shall not have been made by the
Applicable Limitation Date. In that regard, if any action,
lawsuit, proceeding, investigation, or other claim shall be
brought or asserted by any third party which, if adversely
determined, would entitle the Indemnified Party to indemnity
pursuant to this Article 11, the Indemnified Party shall
promptly notify the Indemnifying Party of the same in writing,
specifying in detail the basis of such claim and the facts
pertaining thereto and the Indemnifying Party shall be
entitled to participate in the defense of such action,
lawsuit, proceeding, investigation, or other claim giving rise
to the Indemnified Party's claim for indemnification at its
expense, and at its option (subject to the exceptions in
paragraphs (ii) and (iii) below) shall be entitled to control
and appoint lead counsel of such defense with reputable
counsel reasonably acceptable to the Indemnified Party;
provided that, if the Indemnifying Party does not in
connection with the assumption of the control of such defense
agree in writing to be fully responsible for all Losses
relating to such claims and to provide full indemnification to
the Indemnified Party for all Losses relating to such claims,
in each case subject to the limitations set forth in this
Agreement, the Indemnifying Party shall be responsible for the
reasonable fees and expenses of the Indemnified Party's
separate counsel, if any, participating in the defense of such
claims.
(ii) Except as provided in paragraph (iii) below, if
the claim for which the Indemnifying Party seeks to assume
control (A) involves claims for non-monetary relief (except
where non-monetary relief is merely incidental to a primary
claim or claims for monetary damages), (B) involves criminal
allegations, (C) is one in which the Indemnifying Party is
also a party and involves a claim that, upon petition by the
Indemnified Party, the appropriate court rules that joint
representation would be inappropriate; (D) involves a
significant claim or matter that would reasonably be expected
to result in a significant disparagement or negative publicity
relating to the Indemnified Party or one of its Subsidiaries
or Affiliates, or (E) involves a claim that, upon petition by
the Indemnified Party, the appropriate court rules that the
Indemnifying Party failed or is failing to vigorously
prosecute or defend, then the Indemnifying Party shall not
have the right to assume control of such defense and shall pay
the fees and expenses of counsel retained by the Indemnified
Party subject to the limitations set forth herein.
(iii) If the claim for which the Indemnifying Party
seeks to assume control (A) involves claims for both monetary
and non-monetary relief (except where non-monetary relief is
merely incidental to a primary claim or claims for monetary
damages), or (B) involves both monetary claims and criminal
allegations (each, a "Joint Defense Proceeding"), the
Indemnifying Party and the Indemnified Party will jointly
participate in and control the defense of such Joint Defense
Proceeding, and the Indemnifying Party will pay the reasonable
fees and expenses of legal counsel jointly retained by the
Indemnifying Party and the Indemnified Party in connection
with such Joint Defense Proceeding subject to the limitations
set forth herein.
51
If the Indemnifying Party is permitted to assume and control the
defense and elects to do so, the Indemnified Party shall have the
right to employ counsel separate from counsel employed by the
Indemnifying Party in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel employed
by the Indemnified Party shall be at the expense of the Indemnified
Party unless the employment thereof has been specifically authorized
by the Indemnifying Party in writing.
If the Indemnifying Party shall control the defense of any such
claim, the Indemnifying Party shall obtain the prior written consent
of the Indemnified Party before entering into any settlement of a
claim or ceasing to defend such claim, if pursuant to or as a result
of such settlement or cessation, injunction, or other equitable
relief will be imposed against the Indemnified Party or any of the
Indemnified Party's respective Affiliates or if such settlement does
not expressly unconditionally release the Indemnified Party from all
liabilities and obligations with respect to such claim.
If the Indemnified Party shall control the defense of any such
claim, the Indemnifying Party shall not be bound by any settlement
or compromise of such claim or any consent to the entry of any
judgment with respect to such claim without the prior written
consent of the Indemnifying Party (which shall not be unreasonably
withheld).
(f) Payments by and Obligations of each Seller. Any payment required
under Section 11.2(a) or (at Buyer's option) Section 11.3(d) by a Seller
shall be made first by a disbursement from the Escrow Fund, in accordance
with the terms of the Escrow Agreement, until the Escrow Fund has been
exhausted, and second by each Seller in the amount of such Seller's
Allocable Portion of such payment, in each case subject to the limitations
on indemnification set forth in this Article 11.
SECTION 11.3 CERTAIN TAX MATTERS.(a) Certain Definitions. As used in this
Section 11.3:
(i) "Buyer Tax Group" means the Affiliated Group of which the
Buyer or Team Health Holdings, L.L.C. is the common parent.
(ii) "Pre-Closing Period" means any taxable period beginning
before and ending on or before the Closing Date.
(iii) "Company Tax Group" means the Affiliated Group of which
the Company is the common parent.
(iv) "Straddle Period" means any taxable period that includes
(but does not end on) the Closing Date.
(b) Return Filing; Refunds; Credits; and Tax Claims.
(i) The Representative (on behalf of the Sellers and at their
sole cost and expense) shall prepare, or cause to be prepared, and
file, or cause to be filed
52
on a timely basis all Tax Returns of or including the Company or any
of its Subsidiaries for all Pre-Closing Periods (the "Pre-Closing
Period Returns"). The Sellers shall pay all Taxes shown to be due on
the Pre-Closing Period Returns. The Representative shall provide the
Buyer with a copy of (1) the Pre-Closing Period Return that is the
U.S. federal income tax return of the Company filed after the
Closing Date at least 30 days prior to the due date thereof or the
earlier planned filing date (giving effect to any extensions
thereof) (the "Closing Federal Return"), (2) the Pre-Closing Period
Returns that are the state tax returns set forth on Exhibit K
attached hereto filed after the Closing Date at least 15 days prior
to the due date thereof or earlier planned filing date (giving
effect to any extensions thereof) (the "Significant State Returns"
and together with the Closing Federal Return, the "Review Returns")
and (3) any other Pre-Closing Period Returns filed after the Closing
Date at least 15 days prior to the due date thereof or earlier
planned filing date (giving effect to any extensions thereof)
("Other Pre-Closing Period Returns"), and shall permit Buyer (at
Buyer's sole expense) to review and comment on such Pre-Closing
Period Returns to be filed after the Closing Date ("Buyer
Comments"). Such Pre-Closing Period Returns (along with reasonable
supporting documentation requested by Buyer in writing at least 5
days prior to the date on which such Pre-Closing Period Return is
required to be delivered to the Buyer; provided that the
Representative shall give written notice to Buyer of the date of
delivery in the event that it plans to deliver a Pre-Closing Period
Return prior to the last day that it can be delivered, and Buyer's
request shall be required to be made at least 5 days prior to the
date specified in the Representative's notice) will be sent to the
Buyer for its review at the place of business of the Buyer
identified in Section 13.1 hereof. The Buyer shall have a period of
15 days after receipt of such Pre-Closing Period Return (along with
the reasonable supporting documentation as requested as described
above) to provide Buyer Comments. Nothing herein shall preclude
Buyer from requesting additional reasonable supporting
documentation, and the Representative shall provide such
documentation as soon as reasonably practicable; provided that no
such request shall have the effect of delaying or tolling any period
of review, negotiation or dispute resolution provided for herein.
Only with respect to Buyer Comments on the Review Returns, if the
Representative disagrees with any Buyer Comments, the Buyer and the
Representative shall consult and negotiate in good faith to try to
resolve such Buyer Comments on the Review Returns for a period of 5
days. If the parties are unable to resolve any Buyer Comments on the
Review Returns prior to end of such period, such dispute shall be
resolved by the Firm, which shall resolve any issue in dispute as
promptly as practicable but in no event later than the earlier of
(A) 10 days after such dispute is submitted to the Firm or (B) the
due date of such Review Return, provided that the Firm shall resolve
such dispute in favor of the Sellers unless the Firm determines that
the Review Return has not been prepared in accordance with the Code
and regulations thereunder (or any corresponding state law, as
applicable) and that there is no reasonable basis for the Sellers'
position under applicable law or regulations. All changes to the
Review Returns as agreed to by the Representative and the Buyer or
as determined by the Firm in accordance with the above procedures
shall be
53
reflected in the applicable Review Return and in any other
Pre-Closing Period Return filed after such agreement or
determination if and to the extent an identical item as so
determined is to be reflected in such other Pre-Closing Period
Return and such treatment is consistent with applicable state law
and regulations. The determination by the Firm shall be final,
conclusive and binding on the parties.
(ii) The Buyer shall cause the Company (at its sole expense)
to prepare, or cause to be prepared, and file, or cause to be filed
on a timely basis, all Tax Returns (other than the Pre-Closing
Period Returns of the Company and its Subsidiaries), including Tax
Returns, if any, for the Straddle Period (the "Straddle Period
Returns"). The Buyer shall cause the Company to pay all Taxes shown
to be due on the Straddle Period Returns.
(iii) (A) The Buyer shall cause the Company to provide to the
Representative copies of any Straddle Period Returns (along with
reasonable supporting documentation requested by the Representative
in writing at least 5 days prior to the date on which such Straddle
Period Return is required to be delivered to the Representative;
provided that the Buyer shall give written notice to Representative
of the date of delivery in the event that it plans to deliver a
Straddle Period Return prior to the last day that it can be
delivered, and Representative's request shall be required to be made
at least 5 days prior to the date specified in the Buyer's notice)
at least 30 days prior to the due date thereof or earlier planned
filing date (giving effect to any extensions thereto), accompanied
by a statement calculating in reasonable detail the amount of Taxes
shown on such Straddle Period Return for the portion of the related
Straddle Period that ends on and includes the Closing Date (the "Tax
Obligation Statement"). (B) The Representative shall have the right
to review and comment on such Straddle Period Returns and Tax
Obligation Statement prior to the filing of such Straddle Period
Returns and the Buyer shall cause the Company to make revisions and
changes to such Straddle Period Returns as are reasonably requested
by the Representative ("Seller Comments"), and the Tax Obligation
Statement shall be recalculated to properly reflect any such changes
to such Straddle Period Returns. The Representative shall have a
period of 15 days after receipt of such Straddle Period Returns
(along with reasonable supporting documentation as requested as
described above) to provide Seller Comments. Nothing herein shall
preclude the Representative from requesting additional reasonable
supporting documentation, and the Buyer shall provide such
documentation as soon as reasonably practicable; provided that no
such request shall have the effect of delaying or tolling any period
of review, negotiation or dispute resolution provided for herein.
(C) If the Buyer objects to any Seller Comments as not reasonably
requested or if the Representative disputes any amounts shown as due
on such Straddle Period Returns or the amount calculated in the Tax
Obligation Statement, the Representative and the Company shall
consult and negotiate in good faith to try to resolve such issues.
(D) If the Representative agrees to the preparation of such Straddle
Period Return and to the Tax Obligation Statement amount, the
Sellers shall pay to the Company an amount equal to the Taxes shown
on the Tax Obligation Statement allocable to the portion of the
Straddle
54
Period ending on and including the Closing Date less any amounts
paid by or on behalf of the Company or any of its Subsidiaries on or
before the Closing Date with respect to estimated Taxes thereto, not
later than three days before the due date (including any extensions
thereof) for payment of Taxes with respect to such Straddle Period
Return. (E) If the parties are unable to resolve any dispute prior
to the date which is 10 days prior to the due date (including any
extensions thereof) for payment of Taxes with respect to such
Straddle Period Return, such dispute shall be resolved by the Firm,
which shall resolve any issue in dispute as promptly as practicable.
(F) If the Firm is unable to make a determination with respect to
any disputed issue prior to the due date (including any extensions)
for the filing of the Straddle Period Return in question, (1) the
Company shall file, or shall cause to be filed, such Straddle Period
Return without such determination having been made and (2) the
Sellers shall pay to the Company, not later than three days before
the due date (including any extensions thereof), an amount
determined by the Representative as the proper amount chargeable to
the Sellers pursuant to this Section 11.3 less any amounts paid by
or on behalf of the Company or any of its Subsidiaries on or before
the Closing Date with respect to estimated Taxes thereto. (G) Upon
delivery to the Representative and the Company by the Firm of its
final determination, appropriate amendments to such Straddle Period
Return as required and appropriate payments will be made between the
Buyer and the Sellers in accordance with the immediately preceding
sentence in order to reflect the decision of the Firm. (H) The
determination by the Firm shall be final, conclusive and binding on
the parties. (I) The amount shown as due on the Pre-Closing Period
Returns that are not the Review Returns and the amount determined by
agreement or by the final determination of the Firm to be owed by
the Sellers for the Review Returns or Straddle Period Return is
herein referred to as the "Sellers Tax Obligation." Once the Sellers
Tax Obligation has been determined in accordance with the procedures
set forth above and paid by the Sellers or by the Sellers to the
Company, as the case may be, as set forth above, any claim by the
Buyer Parties for additional amounts owed related to Pre-Closing
Period Returns or Straddle Period Returns must be made as a claim
for a breach of the representations and warranties of Section 3.9
hereof pursuant to Section 11.3(d)(ii) hereof.
(iv) The Representative, the Buyer and the Company shall
reasonably cooperate with the other parties, and shall cause their
respective Affiliates, officers, employees, agents, auditors and
representatives reasonably to cooperate, in preparing and filing all
Tax Returns (including amended returns and claims for refund),
including maintaining and making available to each other all records
necessary in connection with Taxes and in resolving all disputes and
audits with respect to all taxable periods relating to Taxes. The
Buyer, the Company and the Representative recognize that the
Representative and its agents will need access, from time to time,
after the Closing Date, to certain accounting and Tax records and
information held by the Company and each of its Subsidiaries to the
extent such records and information pertain to events occurring
prior to the Closing Date; therefore, the Buyer and the Company
agree that from and after the Closing Date the Buyer shall
55
cause the Company to, and the Company shall, and shall cause each of
its Subsidiaries to, (A) retain and maintain such records until such
time as the Representative determines that such retention and
maintenance is no longer necessary and (B) allow the Representative
and its agents and representatives (and agents and representatives
of its Affiliates) to inspect, review and make copies of such
records as the Representative may deem necessary or appropriate from
time to time.
(v) The Company shall not, and shall cause each of its
Subsidiaries not to, dispose of or destroy any of the business
records and files of its Subsidiaries relating to Taxes in existence
on the Closing Date without first offering to turn over possession
thereof to the Representative by written notice to the
Representative at least 30 days prior to the proposed date of such
disposition or destruction.
(vi) Any refunds of Tax or credits against Taxes or similar
benefit (including any interest or similar benefit) received by
Buyer Tax Group or the Company and its Subsidiaries (a "Tax
Benefit") with respect to (A) any Pre-Closing Period or the portion
of any Straddle Period that ends on and includes the Closing Date or
(B) Taxes for which the Sellers have indemnified the Company under
this Agreement, shall be for the account of the Sellers, and Buyer
shall pay to the Representative (for the benefit of the Sellers)
within five business days after the Buyer, the Company or any of its
Subsidiaries receives or becomes entitled to any such Tax Benefit.
(c) Elections. The Buyer Tax Group and the Company shall not, and
shall cause the Company and each of its Subsidiaries not to make, amend
any Tax Return or revoke any Tax election unless required by law if such
action would adversely affect (i) the liability for Taxes of the Sellers
or any other Person (other than the Company or any of its Subsidiaries for
taxable periods beginning after the Closing Date) as to whom or with whom
the Company has filed a consolidated Tax Return, in each case, with
respect to any taxable period ending on or before the Closing Date or (ii)
any Tax refund or Tax credit with respect to any such period.
(d) Tax Indemnification.
(i) The Buyer Tax Group and the Company shall indemnify,
defend and hold harmless the Sellers, at any time after the Closing
and prior to the third anniversary of the Closing Date, from and
against (x) any penalties, additions to Tax or interest to the
extent resulting from any failure of Buyer and the Company or any of
its Subsidiaries to provide records or other information regarding
Taxes with respect to the Company or any of its Subsidiaries in a
timely manner to the extent that such records or other information
was delivered to the Buyer or was in the possession of any member of
the Buyer Tax Group, the Company or its Subsidiaries and (y) any
liability for Taxes of the Company or any of its Subsidiaries
acquired by Buyer at the time of acquisition of the Common Stock for
any taxable period ending after the Closing Date except in the case
of Straddle Periods, the Buyer's Tax Group and the Company's
indemnity will cover only that
56
portion of any such Taxes that is not attributable to the portion of
such Straddle Period that ends on the Closing Date.
(ii) Except as provided in Section 8.4 hereof, each Seller
shall indemnify, defend and hold harmless the Buyer Tax Group, at
any time after the Closing and prior to the third anniversary of the
Closing Date, from and against (x) such Seller's Allocable Portion
of any Loss resulting from a breach by the Sellers of the
representations and warranties in Section 3.9 and (y) such Seller's
Allocable Portion of any liability for (A) Taxes imposed on the
Company or any of its Subsidiaries (including any Taxes pursuant to
Treasury Regulation Section 1.1502-6 or any similar state, local or
foreign law or regulation with respect to the taxable income of any
member of Company Tax Group) for any taxable period that ends on or
before the Closing Date; and (B) any Taxes imposed on the Company or
any of its Subsidiaries as a successor or transferee, by contract or
pursuant to any law, rule or regulation, which Taxes relate to any
event or transaction occurring before the Closing.
(iii) With respect to each Seller, the aggregate amount of (x)
such Seller's Allocable Portion of the aggregate disbursements to
the Buyer Parties from the Escrow Fund in respect of the
indemnification provided in this Section 11.3(d) and (y) all
payments made by such Seller or behalf of such Seller in
satisfaction of claims for indemnification pursuant to this Section
11.3(d), shall not exceed such Seller's Allocable Portion of
$10,000,000 (the "Tax Cap") it being understood and agreed that the
Tax Cap is separate from and in addition to the Cap).
Notwithstanding anything to the contrary in this Agreement, the
indemnification rights provided in Section 11.3(d) of this Agreement
shall be the sole and exclusive remedy of the Buyer Tax Group and
the Buyer Parties with respect to any disputes, claims, actions or
other matters arising out of or related to the matters that are
indemnified under Section 11.3(d) of this Agreement.
(iv) The indemnification provided by each Seller in this
Section 11.3(d) shall be limited by and subject to the provisions of
Section 11.2(b)(iii) through (vii).
(v) The indemnification provided by the Buyer Tax Group and
the Company in this Section 11.3(d) to the Sellers is subject to the
following limitation: the aggregate amount of all payments made by
the Buyer and the Company in satisfaction of claims for
indemnification pursuant to Section 11.3(d) shall not exceed
$10,000,000. For purposes of clarity the parties intend that this
tax cap is separate from and in addition to the cap for non-tax
matters referred to in Section 11.2(b)(i).
(vi) In determining the responsibility of the Sellers and the
Buyer Tax Group for Taxes attributable to any Straddle Period, Taxes
based upon or related to gross or net income or receipts shall be
apportioned on the basis of an interim closing of the books as of
the Closing Date, and all other Taxes shall be prorated on a daily
basis.
57
(e) Contests. If a notice of deficiency, proposed adjustment,
assessment, audit, examination or other administrative or court
proceeding, suit, dispute or other claim (a "Tax Claim") shall be
delivered, sent, commenced, or initiated to or against any member of Buyer
Tax Group, the Company or any of its Subsidiaries by any Taxing authority
with respect to Taxes that results in or may result in a loss for which
indemnification may be claimed from the Sellers under this Agreement, the
Buyer shall promptly notify the Representative in writing of such Tax
Claim. The Representative shall have the sole right to represent the
Company's and each of its Subsidiaries' interests and to employ counsel of
its choice at its expense with respect to any such Tax Claim; and the
Buyer shall cause the Buyer Tax Group, the Company and each of its
Subsidiaries to execute any powers of attorney necessary in order to allow
the Representative to control such contest and to settle any such Tax
Claim; provided that in the case of any Tax Claim relating to any Tax for
a Straddle Period Return which Buyer and the Sellers share liability
pursuant to Section 11.3(b)(iii), the Buyer and the Representative shall
each be entitled to participate at their own expense in the conduct of
such Tax Claim to the extent it relates to a Tax for which such party
bears liability pursuant to Section 11.3(b)(iii). No party may settle or
otherwise dispose of any Tax Claim for which another party may have
liability under Section 11.3(b)(iii) without the prior written consent of
such other party, which consent may not be unreasonably withheld.
ARTICLE 12
NON COMPETE
SECTION 12.1 NONCOMPETITION, NONSOLICITATION, AND CONFIDENTIALITY. From
and after the Closing Date:
(a) Noncompetition. In consideration of the purchase by the Buyer of
the Common Stock and good will of the Company and of the mutual covenants
provided for herein to each Significant Seller (other than ARAMARK
Organizational Services, Inc., successor by merger to ARAMARK Health &
Education Services, Inc. ("Aramark")) and each Individual Covenantor
(collectively, the "Covenantors"), except as otherwise agreed by the
Buyer, each Significant Seller (other than Aramark) agrees to not engage
and agrees to cause Holdings and its Subsidiaries to not engage and each
Individual Covenantor agrees to not engage (whether as an owner, operator,
manager, employee, officer, director, consultant, advisor, representative,
or otherwise) directly or indirectly in the Military Line of Business
during the Noncompete Period applicable thereto or in the Non-Military
Line of Business during the Noncompete Period applicable thereto.
Notwithstanding anything to the contrary herein, the provisions of this
Section 12.1(a) and the provisions of Section 12.1(b) shall be subject to
the following limitations: (i) such Sections shall not apply to any
Affiliates of the Significant Sellers (other than Aramark and Holdings and
its Subsidiaries and the Individual Covenantors); (ii) if Holdings or its
Subsidiaries are acquired by a third party, the provisions of such
Sections shall not apply to such third party (but shall continue to apply
to the acquired Persons); (iii) ownership of less than 5% of the
outstanding stock of any publicly traded corporation shall not be deemed
to be engaging solely by reason thereof in any of its businesses; and (iv)
no Person shall be deemed to be in breach of such Sections solely as a
58
result of owning a direct or indirect interest in a business whose other
owner engages in the activities prohibited hereunder. The parties hereto
agree that, if the covenant set forth in this Section 12 is determined to
be invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable
as so modified after the expiration of the time within which the judgment
may be appealed. Notwithstanding anything herein to the contrary, the
Sellers and their Affiliates and the Holdings and its Subsidiaries may
continue to engage in or to pursue healthcare business operations in
military penal facilities and in community hospitals where such business
is, or is part of, the delivery of correctional healthcare, behavioral or
substance abuse treatment.
(b) Nonsolicitation. Except as otherwise agreed by the Buyer and
except for doctors and nurses that are being engaged to provide clinical
services by Holdings or its Subsidiaries, each Significant Seller (other
than Aramark) agrees that it will not and will cause Holdings and its
Subsidiaries to not and each Individual Covenantor agrees that it will
not, during the applicable Noncompete Period, directly or indirectly (but
excluding general advertisements seeking to hire generally) (i) contact,
approach, or solicit, for the purpose of offering employment to or hiring
(whether as an employee, consultant, agent, independent contractor, or
otherwise), or hire any employee or independent contractor of the Company
or its Subsidiaries as of the date hereof who is offered employment by the
Buyer or the Company; and (ii) solicit, induce or attempt to induce any
client, customer, contractor, supplier, licensee or other business
relation of the Company or any Subsidiary as of the date hereof to cease
doing business with the Company or such Subsidiary, or in any way
interfere with the relationship between any such client, customer,
contractor, supplier, licensee or other business relation and the Company
or any Subsidiary; provided that nothing in this Article 12 shall prohibit
the Covenantors or any of their respective Affiliates (other than Aramark)
or Holdings or its Subsidiaries from taking any action otherwise
prohibited by this Article 12 with respect to any Person whose employment
is first terminated by the Buyer, the Company or any of their respective
Affiliates, as the case may be.
(c) Confidentiality. Each of the Significant Sellers and Individual
Covenantors agree that they shall and shall cause Holdings and its
Subsidiaries to treat and hold as confidential any information concerning
the business and affairs of the Company that is not already generally
available to the public (the "Confidential Information"), refrain from
using any of the Confidential Information except in connection with this
Agreement, and at any time upon the request of the Buyer deliver promptly
to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information
which are in its possession or under its control. In the event that any of
the Covenantors, Aramark or Holdings or its Subsidiaries is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, it shall notify
the Buyer
59
promptly of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of
this Section 12.1(c). If, in the absence of a protective order or the
receipt of a waiver hereunder, any of the Covenantors, Aramark or Holdings
or its Subsidiaries is, on the advice of counsel, compelled to disclose
any Confidential Information to any tribunal or else stand liable for
contempt, it may disclose the Confidential Information to the tribunal;
provided that it shall use its best efforts to obtain, at the request and
expense of the Buyer, an order or other assurance that confidential
treatment shall be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate.
Notwithstanding the foregoing, the Sellers and their Affiliates and
Holdings and its Subsidiaries may disclose the Company and its
Subsidiaries' pre-Closing ownership history and corporate structure, and
the Company's and its Subsidiaries pre-Closing historical financial
information, to governmental or other agencies or entities, only to the
extent necessary to respond to bid solicitations, procurements, or
contract negotiations in which the Sellers or their Affiliates or Holdings
or its Subsidiaries participate in pursuit of business not restricted
pursuant to this Article 12.
(d) Remedy for Breach. Each Covenantor and Aramark acknowledges and
agrees that in the event of a breach of any of the provisions of this
Section 12.1, monetary damages may not constitute a sufficient remedy.
Consequently, in the event of any such breach, the Company, the Buyer,
and/or their respective successors or assigns may, in addition to other
rights and remedies existing in their favor, apply to any court of law or
equity of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof, in each case without the requirement of posting
a bond or proving actual damages.
(e) Certain Definitions. As used in this Article 12 and elsewhere in
this Agreement, the following terms have the following meanings:
"Individual Covenantors" means Xxxxxx X. Xxxx, Xx., Xxxxxxx Xxxxx
and Xxxxx Xxxxx.
"Military Line of Business" means the line of business as conducted
on the date hereof by the Company and its Subsidiaries and Related Entities
within the United States that directly or indirectly provides services to the
United States military, its contractors, personnel and their dependents.
"Noncompete Period" means, with respect to the Significant Sellers
(other than the Xxxxxx X. Xxxx, Xx. Revocable Trust and Aramark) and Holdings
and its Subsidiaries and the Military Line of Business, five years; with respect
to the Significant Sellers (other than the Xxxxxx X. Xxxx, Xx. Revocable Trust
and Aramark) and Holdings and its Subsidiaries and the Non-Military Line of
Business, two years; and with respect to the Individual Covenantors and the
Military Line of Business and the Non-Military Line of Business, two years.
"Non-Military Line of Business" means the lines of business as
conducted on the date hereof by the Company and its Subsidiaries within the
United States, other than the Military Line of Business.
60
SECTION 12.2 NONSOLICITATION BY THE BUYER. Except as otherwise agreed by
the Representative and except for doctors and nurses that are being engaged to
provide clinical services by the Buyer or its Subsidiaries, for a period of two
years following the date hereof (but excluding general advertisements seeking to
hire generally), (a) if this Agreement is terminated for any reason pursuant to
Article 10 (other than as a result of a termination pursuant to Section
10.1(b)), the Buyer shall not, directly or indirectly, actively solicit or
induce any employee, agent or contractor of Holdings, the Company or any of
their respective Subsidiaries or related entities to leave such employment and
become an employee, agent or contractor of the Buyer or any of its Affiliates,
or hire any such employee, agent or contractor of Holdings, the Company or any
of their respective Subsidiaries or related entities; and (b) none of the Buyer,
the Company or their respective Subsidiaries shall, directly or indirectly,
actively solicit or induce any employee, agent or contractor of Holdings or any
of its Subsidiaries or related entities to leave such employment or relationship
and become an employee, agent or contractor of the Buyer, the Company or any of
their respective Affiliates, or hire any such employee, agent or contractor of
Holdings or any of its Subsidiaries or related entities; provided that nothing
in this Section 12.2 shall prohibit the Buyer, the Company or any of their
Affiliates from taking any action otherwise prohibited by this Section 12.2 with
respect to any Person whose employment is first terminated by Holdings or any of
its Subsidiaries or related entities, as the case may be.
SECTION 12.3 NONCOMPETITION AND NONSOLICITATION OF ARAMARK. From and after
the Closing Date:
(a) Noncompetition. In consideration of the purchase by the Buyer of
the Common Stock and good will of the Company and of the mutual covenants
provided for herein to Aramark, during the period beginning on the Closing
Date and ending on the third anniversary of the Closing Date (the "Aramark
Noncompete Period"), except as otherwise agreed by the Buyer, Aramark
agrees to not engage (whether as an owner, operator, manager, employee,
officer, director, consultant, advisor, representative, or otherwise)
directly or indirectly in any line of business as conducted by the Company
and its Subsidiaries on the date hereof within the United States, defined
solely for purposes of defining Aramark's obligations under this Section
12.3(a) as (i) the provision of a full range of management and staffing
clinical health services in multiple clinical areas to health care
facilities, including those of physicians in many specialties, nurses,
clinical care specialty technicians and administrative support personnel
primarily related to clinical care to patients; (ii) the provision of
management services including recruiting, scheduling, credentialing,
employee relations, and personnel administration, the primary purpose of
which is directed to the provision of clinical care to patients; (iii) the
provision of certain financial analyses to facilities to ascertain the
cost-benefit of its services and those of other contractors with its
clients, the primary purpose of which is directed to the provision of
clinical care to patients; and (iv) the operation of a healthcare billing
function that provides billing to patients and payors, the primary purpose
of which is directed to the provision of clinical care of patients;
provided, that for purposes of the covenants contained in this Section
12.3(a), in the case of existing lines of business of the Company and its
Subsidiaries and related entities other than the military lines of
business, the Aramark Noncompete Period shall end on the date that is two
(2) years after the Closing Date; provided further that the provisions of
this Section 12.3(a) shall not apply to any Affiliates of Aramark (other
than Holdings and its Subsidiaries and the
61
Covenantors); provided further that if Aramark is acquired by a third
party, the provisions of this Section 12.3 shall not apply to such third
party (but shall continue to apply to Aramark); provided further that
ownership of less than 5% of the outstanding stock of any publicly traded
corporation shall not be deemed to be engaging solely by reason thereof in
any of its businesses; provided further that Aramark shall not be deemed
to be in breach of this Section 12.3(a) solely as a result of owning a
direct or indirect interest in a business whose other owner engages in the
activities prohibited hereunder; provided further that Aramark shall not
be deemed to be in breach of this Section 12.3(a) as a result of the
involuntary acquisition of a competitive business as a result of Aramark's
status as a creditor in a bankruptcy or insolvency proceeding; provided
further that Aramark shall not be deemed to be in breach of this Section
12.3(a) as a result of the acquisition of a competitive business provided
that the segment of the acquired business that is in competition does not
generate gross revenues in excess of 30% of the total revenues of the
acquired business; provided, further, that Aramark shall not be deemed to
be in breach of this Section 12.3(a) as a result of providing the
following services, to the extent that such services do not primarily
relate to the provision of clinical care to patients: food service,
housekeeping, servicing of clinical equipment, other facility services
(including, without limitation, maintenance), patient transportation,
HVAC, dietary consultation, and other services engaged in by Aramark as of
the date hereof. The Parties hereto agree that, if the covenant set forth
in this Section 12 is determined to be invalid or unenforceable, the
Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or
area of the term or provision, to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
(b) Nonsolicitation. Except as otherwise agreed by the Buyer,
Aramark agrees that it will not, during the applicable Aramark Noncompete
Period, directly or indirectly (but excluding general advertisements
seeking to hire generally) (i) contact, approach, or solicit, for the
purpose of offering employment to (whether as an employee, consultant,
agent, independent contractor, or otherwise) or hire the following: Xxxx
Quehnle, Xxx Xxxxx, Xxxx Xxxxxxxxx, Xx. Xxxxx Xxxxxx, Xxxxx Xxxxxxxx,
Xxxxxx Xxxxxx, XxXxx Xxxxxxx, Xx. Xxxxxxx Xxxxx and Xx. Xxxxx Xxxxxxx; or
(ii) solicit, induce or attempt to induce any client, customer,
contractor, supplier, licensee or other business relation of the Company
or any Subsidiary as of the date hereof to cease doing business with the
Company or such Subsidiary.
ARTICLE 13
MISCELLANEOUS
SECTION 13.1 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to the Company (after the Closing) or to the Buyer, then to:
62
Team Health, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxxxx, M.D.
Fax: 000-000-0000
with a copy to:
Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
0000 XxXxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx Manner
Fax: 000-000-0000
or, if to the Company (before the Closing), then to:
Spectrum Holdings of Delaware, LLC
00000 Xxxxx Xxxx.
X.X. Xxx 000000
Xx. Xxxxx, Xxxxxxxx 00000-0000
Attention: Chief Executive Officer
Fax: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Perl
Fax: (000) 000-0000
or, if to the Representative, then to:
Madison Dearborn Capital Partners, L.P.
Three First Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Perl
Fax: (000) 000-0000
63
or, if to a Seller, then to the address for such Seller set forth next to
such Seller's name on the Schedule of Sellers,
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Perl
Fax: (000) 000-0000
All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received on a
business day in the place of receipt prior to 5:00 p.m. in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
SECTION 13.2 AMENDMENTS AND WAIVERS.
(a) Except as otherwise provided herein, any provision of this
Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Buyer, the Company, the
Representative and the Sellers whose aggregate Seller Percentages exceed
fifty percent (50%) of all of the Seller Percentages.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
(c) Notwithstanding anything to the contrary herein, in the event
that between the date hereof and the Closing Date any Person who is not
already a signatory to this Agreement and listed on the Schedule of
Sellers hereto is intended to acquire any Acquired Shares pursuant to the
Distribution and Repurchase Agreement or otherwise (each, a "New Seller"),
the Company will not permit such New Seller to acquire such Acquired
Shares unless such New Seller first agrees to be bound by this Agreement
and executes and delivers to the Company a counterpart of this Agreement,
in which case such New Seller shall be deemed to be a Seller for purposes
of this Agreement and the Schedule of Sellers shall be updated
accordingly.
SECTION 13.3 CONSTRUCTION; SEVERABILITY. The language used in this
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be applied
against any Person. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof. In the
event a subject matter is addressed in more than one representation and warranty
in Article 3, the Buyer shall be entitled to rely only on the most specific
representation and warranty addressing such subject matter. Whenever possible,
each provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law or regulation, but if any provision of
64
this Agreement is held to be prohibited by or invalid under applicable law or
regulation, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
SECTION 13.4 EXPENSES. Except as otherwise provided herein, each party
shall pay all of its own fees, costs and expenses (including, without
limitation, fees, costs and expenses of legal counsel, investment bankers,
brokers or other representatives and consultants and appraisal fees, costs and
expenses) incurred in connection with the negotiation of this Agreement and the
other agreements contemplated hereby, the performance of its obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby; provided that the Buyer shall pay any and all expenses
relating to surveys, title insurance, filings under the HSR Act and any other
filings and consents required in connection with the transactions contemplated
by this Agreement. Notwithstanding the foregoing, to the extent the
Representative requests prior to the Closing that the Company pay at or after
the Closing any fees, costs or expenses for which a Seller is liable pursuant to
this Section 13.4 ("Seller Transaction Expenses"), then such Seller Transaction
Expenses shall be paid by the Company when due and there shall be a downward
adjustment to the Closing Working Capital and any estimates thereof equal to the
amount of such Seller Transaction Expenses to be paid by the Company at or after
the Closing and, for the avoidance of doubt, any Tax deductions taken in periods
after the Closing Date for the Seller Transactions Expenses that are paid after
the Closing Date shall be for the benefit of the Company.
SECTION 13.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that the Buyer may
transfer or assign, in whole or from time to time in part, to one or more of its
Affiliates, the right to purchase all or a portion of the Acquired Shares, but
no such transfer or assignment will relieve the Buyer of its obligations
hereunder.
SECTION 13.6 GOVERNING LAW. All issues and questions concerning the
construction, validity, interpretation and enforceability of this Agreement and
the exhibits and schedules hereto shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
SECTION 13.7 JURISDICTION. Except as otherwise expressly provided in this
Agreement, any suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby shall be brought in the United States
District Court for the Northern District of Illinois or any Illinois State court
sitting in Chicago, Illinois, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts herefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient form. Process in any such suit, action or
proceeding may be
65
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court.
SECTION 13.8 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 13.9 COUNTERPARTS; THIRD PARTY BENEFICIARIES. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. Holdings
shall be an intended third party beneficiary of this Agreement and shall have
the right to enforce this Agreement in its own name. Except as otherwise
specifically set forth herein, no provision of this Agreement is intended to
confer upon any Person other than the parties hereto any rights or remedies
hereunder.
SECTION 13.10 ENTIRE AGREEMENT. This Agreement and the documents referred
to herein (including the Confidentiality Agreement) contain the complete
agreement between the parties hereto and supersede any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way. The representations
and warranties made by the Company in this Agreement (as qualified by the
Schedules) supersede, replace and nullify in every respect the data set forth in
any other document, material or statement, whether written or oral, made
available to the Buyer (the "Other Material"), and the Buyer shall be deemed to
have not relied on any data contained in the Other Material for any purpose
whatsoever, including, without limitation, as a promise, projection, guaranty,
representation, warranty or covenant.
* * * * *
66
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
COMPANY: SPECTRUM HEALTHCARE SERVICES, INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
SELLERS: MADISON DEARBORN CAPITAL
PARTNERS, L.P.
By: Madison Dearborn Partners, L.P.
Its: General Partner
By: Madison Dearborn Partners, Inc.
Its: General Partner
By: _______________________________
Its: _______________________________
XXXXX & COMPANY INCORPORATED
By: _______________________________
Its: _______________________________
ARAMARK ORGANIZATIONAL SERVICES, INC.,
SUCCESSOR BY MERGER TO ARAMARK HEALTH &
EDUCATION SERVICES, INC.
By: _______________________________
Its: _______________________________
HEALTHCARE EQUITY PARTNERS, L.P.
By: Beecken, Xxxxx & Company, L.L.C.
Its: General Partner
By: _______________________________
Its: _______________________________
67
HEALTHCARE EQUITY QP PARTNERS, L.P.
By: _______________________________
Its: _______________________________
By: _______________________________
Its: _______________________________
XXXXXX PARTNERSHIP, L.P.
By: _______________________________
Its: _______________________________
By: _______________________________
Its: _______________________________
NORTHWESTERN UNIVERSITY
By: _______________________________
Its: _______________________________
PRUDENTIAL PRIVATE EQUITY
INVESTORS III, L.P.
By: Prudential Equity Investors, Inc.
Its: General Partner
By: Cornerstone Equity Investors, L.L.C.
Its: Investment Advisor
By: _______________________________
Its: _______________________________
68
XXXXXX X. XXXX, XX., AND XXXXXX X. XXXX,
TRUSTEES OF THE XXXXXX X. XXXX, XX.
REVOCABLE TRUST U/T/A DATED
JANUARY 15, 1993
By: _______________________________
Its: _______________________________
_______________________________
XXXX XXXXXX
_______________________________
XXXX X. XXXXXX
_______________________________
XXXX X. XXX
_______________________________
XXXXXX X. XXXXXXX AND XXXXX
XXXXXXX, AS JOINT TENANTS WITH
RIGHTS OF SURVIVORSHIP
XXXXXXX X. XXXXX, AS TRUSTEE U/I XXXXXXX
X. XXXXX DATED AUGUST 15, 1994
By: _______________________________
Its: _______________________________
XXXXX X. XXXXX REVOCABLE TRUST DATED
AUGUST 24, 1992, XXXXX X. XXXXX AND
XXXX X. XXXXX, TRUSTEES
By: _______________________________
Its: _______________________________
69
XXXX X. XXXXX REVOCABLE TRUST DATED
AUGUST 24, 1992, XXXX X. XXXXX AND XXXXX
X. XXXXX, TRUSTEES
By: _______________________________
Its: _______________________________
_______________________________
XXXXXX X. X'XXXX
_______________________________
XXXXXXX X. XXXXXXXX
_______________________________
XXXXX X. XXXXXX
_______________________________
XXXXX X. XXXXXX
_______________________________
XXXXXXX X. XXXXXX
_______________________________
XXXXXXX X. XXXXXX
_______________________________
XXXXXX X. XXXXX AND XXX X. XXXXX, AS
JOINT TENANTS WITH RIGHTS OF
SURVIVORSHIP
70
_______________________________
XXXXX X. TRIPOLI
_______________________________
XXXXX X. XXXXXXXX AND XXXXXX X. XXXXXXXX,
AS JOINT TENANTS WITH RIGHTS OF
SURVIVORSHIP
BUYER: TEAM HEALTH, INC.
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
Its: _______________________________
Each of the Individual Covenantors set forth below hereby (i) agrees to be bound
by and subject to such Individual Covenantor's obligations under Article 12 of
the Agreement and (ii) guarantees the full and prompt performance of the trust,
if any, which is a Seller under the Agreement and the name of which includes the
name of such Individual Covenantor, under the Agreement and the other agreements
contemplated by the Agreement.
_______________________________
XXXXXX X. XXXX, XX.
_______________________________
XXXXXXX X. XXXXX
_______________________________
XXXXX XXXXX
Each of the individuals set forth below hereby guarantees the full and prompt
performance of the trust, which is a Seller under the Agreement and the name of
which includes the name of such individual, under the Agreement and the other
agreements contemplated by the Agreement.
71
_______________________________
XXXXX X. XXXXXXXX
_______________________________
XXXXXX X. XXXXX
_______________________________
XXXXXX X. XXXXXXX
72
SCHEDULE OF SELLERS
NAME OF SELLER SELLER ADDRESS
-------------- --------------
ARAMARK ORGANIZATIONAL SERVICES, INC. ARAMARK Tower
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
ATTN: XXXXXXX XXXXXXX
MADISON DEARBORN CAPITAL PARTNERS, L.P. Three First Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
ATTN: XXX XXXXXXXX
HEALTHCARE EQUITY PARTNERS, L.P. 000 Xxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
ATTN: XXX X'XXXXX
HEALTHCARE EQUITY QP PARTNERS, L.P. 000 Xxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
ATTN: XXX X'XXXXX
PRUDENTIAL PRIVATE EQUITY INVESTORS III, L.P. 000 0xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
ATTN: XXXX X'XXXXX
XXXXX & COMPANY INCORPORATED 000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
ATTN: XXX XXXXXXX
XXXXXXX X. XXXXXX C/o Allen &Company Incorporated
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
ATTN: XXX XXXXXXX
XXXXX X. XXXXXX C/o Allen &Company Incorporated
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
ATTN: XXX XXXXXXX
73
NAME OF SELLER SELLER ADDRESS
-------------- --------------
XXXXXXX X. XXXXXX c/o Allen &Company Incorporated
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
ATTN: XXX XXXXXXX
XXXX XXXXXX c/o Allen &Company Incorporated
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
ATTN: XXX XXXXXXX
XXXXXX X. X'XXXX c/o Allen &Company Incorporated
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
ATTN: XXX XXXXXXX
NORTHWESTERN UNIVERSITY 000 Xxxxx Xxxxxx
Xxxxxxxx, XX 00000.0000
ATTN: XXXXX XXXXXX
XXXXXX X. XXXX XX. AND XXXXXX X. XXXX, TRUSTEES OF c/o Spectrum Holdings of Delaware, LLC
THE XXXXXX X. XXXX, XX. REVOCABLE TRUST U/T/A DATED 00000 Xxxxx Xxxx.
JANUARY 15, 1993 P. O. Xxx 000000
Xx. Xxxxx, XX 00000.0000
XXXXXX PARTNERSHIP, L.P. c/o Spectrum Holdings of Delaware, LLC
00000 Xxxxx Xxxx.
P. O. Box 419052
St. Louis, MO 63141.9052
ATTN: XXXXXX X. XXXX, XX.
74
NAME OF SELLER SELLER ADDRESS
-------------- --------------
XXXXXXX X. XXXXX, AS TRUSTEE U/I XXXXXXX X. XXXXX c/o Spectrum Holdings of Delaware, LLC
DATED AUGUST 15, 1994 00000 Xxxxx Xxxx.
P. O. Box 419052
St. Louis, MO 63141.9052
XXXXX X. XXXXX REVOCABLE TRUST DATED AUGUST 24, c/o Spectrum Holdings of Delaware, LLC
0000, XXXXX X. XXXXX AND XXXX X. XXXXX, TRUSTEES 00000 Xxxxx Xxxx.
P. O. Box 419052
St. Louis, MO 63141.9052
XXXX X. XXXXX REVOCABLE TRUST DATED AUGUST 24, 1992, c/o Spectrum Holdings of Delaware, LLC
XXXX X. XXXXX AND XXXXX X. XXXXX, TRUSTEES 00000 Xxxxx Xxxx.
P. O. Box 419052
St. Louis, MO 63141.9052
XXXXXXX X. XXXXXXXX c/o Spectrum Holdings of Delaware, LLC
00000 Xxxxx Xxxx.
P. O. Box 419052
St. Louis, MO 63141.9052
XXXXX X. XXXXXXXX AND XXXXXX X. XXXXXXXX, AS JOINT c/o Spectrum Holdings of Delaware, LLC
TENANTS WITH RIGHTS OF SURVIVORSHIP 00000 Xxxxx Xxxx.
P. O. Box 419052
St. Louis, MO 63141.9052
XXXXX X. XXXXXX c/o Spectrum Holdings of Delaware, LLC
00000 Xxxxx Xxxx.
P. O. Box 419052
St. Louis, MO 63141.9052
XXXX X. XXX c/o Spectrum Holdings of Delaware, LLC
00000 Xxxxx Xxxx.
P. O. Box 419052
St. Louis, MO 63141.9052
75
NAME OF SELLER SELLER ADDRESS
-------------- --------------
XXXXX X. TRIPOLI c/o Spectrum Holdings of Delaware, LLC
00000 Xxxxx Xxxx.
P. O. Box 419052
St. Louis, MO 63141.9052
XXXXXX X. XXXXX AND XXX X. XXXXX, AS JOINT TENANTS 000 Xxxxxxxxx Xxxxx
WITH RIGHTS OF SURVIVORSHIP Xxxxxxxx Xxxxxxx, XX 00000
XXXXXX X. XXXXXXX AND XXXXX XXXXXXX, AS JOINT c/o Spectrum Holdings of Delaware, LLC
TENANTS WITH RIGHTS OF SURVIVORSHIP 00000 Xxxxx Xxxx.
P. O. Box 419052
St. Louis, MO 63141.9052
XXXX X. XXXXXX Crobern, Inc.
000 Xxxxxxxx Xxxx
Xxxx Xxxxx, XX 00000
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