Exhibit 10.47
CONTRIBUTION
AND
STOCK PURCHASE AGREEMENT
This Contribution and Stock Purchase Agreement (this "Agreement"),
dated as of January 1, 1998 (the "Effective Time"), by and among American
Physicians Service Group, Inc., a Texas corporation ("APS"), those individuals
or entities set forth on Appendix I attached hereto (individually an "Additional
Purchaser" and collectively the "Additional Purchasers"), ▇▇▇▇▇▇ Acquisition,
Inc., a Texas corporation ("Newco"), ▇▇▇▇▇▇ House, Ltd., a Texas limited
partnership ("▇▇▇▇▇▇ House"), ▇▇▇▇▇▇ House at Oakwell Farms, Ltd., a Texas
limited partnership ("Oakwell"), Uncommon Care, Inc., a Texas corporation (the
"General Partner"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), ▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇")
and Uncommon Partners, Ltd., a Texas limited partnership (the "Limited
Partner"). ▇▇▇▇▇▇ House and Oakwell are sometimes collectively referred to
herein as the "Partnerships."
PRELIMINARY STATEMENTS
The General Partner is the sole general partner of each of the
Partnerships, and the Limited Partner, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ are the only limited
partners of each of the Partnerships.
▇▇▇▇▇▇▇▇ and Trevey own one hundred percent (100%) of the issued and
outstanding capital stock of the General Partner.
The parties desire for Newco to acquire substantially all of the
business and assets of the Partnerships and certain of the business and assets
of the General Partner, and to assume certain liabilities of the Partnerships
and the General Partner, on the terms and subject to the conditions contained
herein.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good, valuable and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
AGREEMENT OF PURCHASE AND SALE
Section 1.1 CONTRIBUTION OF ASSETS OF PARTNERSHIPS. Upon the basis of
the representations and warranties, for the consideration and subject to the
terms and conditions set forth in this Agreement, (a) ▇▇▇▇▇▇ House agrees to
contribute, as of the Effective Time, 100% of its Assets (as hereinafter
defined) to Newco in exchange for 520,000 shares of Newco's $0.001 par value per
share common stock (the "Common Stock") and $384,400 and (b) Oakwell agrees to
contribute, as of the Effective Time, 100% of its Assets to Newco in exchange
for 520,000 shares of Common Stock and $106,000.
2
Section 1.2 CONTRIBUTION OF ASSETS OF THE GENERAL PARTNER. Upon the
basis of the representations and warranties, for the consideration and subject
to the terms and conditions set forth in this Agreement, the General Partner
agrees to contribute to Newco, as of the Effective Time, those assets (including
contracts and rights thereunder) listed or described on Schedule 1.2 attached
hereto in exchange for 200,000 shares of Common Stock .
Section 1.3 CONTRIBUTION OF CASH BY APS. Upon the basis of the
representations and warranties, for the consideration and subject to the terms
and conditions set forth in this Agreement, APS agrees to purchase, as of the
Effective Time, from Newco 677,920 shares of Newco's $0.001 par value per share
Convertible Preferred Stock (the "Preferred Stock") for $1,962,400 (the "APS
Cash Contribution"). The Preferred Stock shall have such rights and preferences
as provided in the organizational documents of Newco, the form of which is
attached hereto as Exhibit A (the "Organizational Documents").
Section 1.4 CONTRIBUTION OF CASH BY ADDITIONAL PURCHASERS. Upon the
basis of the representations and warranties, for the consideration and subject
to the terms and conditions set forth in this Agreement, each Additional
Purchaser agrees to purchase, as of the Effective Time, from Newco that specific
number of shares of Common Stock as set forth on Appendix I attached hereto for
that specific price as set forth on Appendix I attached hereto (the "Additional
Purchasers' Cash Contribution").
3
Section 1.5 ASSETS. The term "Assets" shall include (a) those specific
assets of the General Partner listed or described on Schedule 1.2 attached
hereto and (b) except for those assets disposed of in the ordinary course of the
Partnerships' business in a transaction or series of related transactions not
exceeding $5,000 in value occurring between the Effective Time and the Closing,
all of the business and assets, tangible or intangible, wherever situated, of
the Partnerships as of the Effective Time, such assets to include, without
limitation: all real property, buildings, furniture, fixtures, equipment,
accounts receivable, inventory, work in process, prepaid expenses, supplies,
vehicles, all cash and cash equivalents, all securities or other investment
property, any cash or other property or amounts received for services rendered
on or after the Effective Time, all contract rights, all licenses, certificates
and permits, the telephone number(s), the names of ▇▇▇▇▇▇ House, Ltd., ▇▇▇▇▇▇
House at Oakwell Farms, Ltd. and all patents, tradenames, registered or
unregistered trademarks and servicemarks, copyrights and other intellectual
property (and all goodwill associated with any such patents, tradenames,
trademarks, servicemarks, copyrights or other intellectual property), all rights
under or to computer software licensed, owned or used by either of the
Partnerships in their operations, all rights under or to leasehold improvements
and other fixed assets owned or leased by either of the Partnerships and all
items of personal property owned or leased by either of the Partnerships
including, without limitation, all the assets specifically set out on Schedule
1.5 attached hereto. Notwithstanding the foregoing or any other provision of
this Agreement, the following shall not be Assets and shall be retained by the
General Partner or the Partnerships, as the case may be:
4
(a) the books of account and record books of the General Partner and
the Partnerships (complete and accurate copies of which shall be provided to APS
on or before the Closing Date (as hereinafter defined));
(b) their respective rights under this Agreement; and
(c) their respective consideration for the Assets as described
in Section 1.1 and Section
----------- --------
1.2.
---
Section 1.6 ASSUMED LIABILITIES. At the Closing (as hereinafter
defined), Newco shall only assume (a) the obligations of the General Partner or
Partnerships specifically described on Schedule 1.6 hereto, (b) those trade
payables on open account incurred by the Partnerships in the ordinary course of
the Partnerships' business from unrelated parties and (c) that certain note
dated June 1, 1997 in the original principal amount of $100,000, including
interest thereon at the rate of 12% per annum arising out of a loan by the
Limited Partner to the General Partner (the "Limited Partners' Note). Such
limited assumption shall be pursuant to that certain general conveyance,
assignment and transfer of assets and assumption of liabilities, in the form
attached hereto as Exhibit B (the "Assignment and Assumption Agreement") to be
executed by the parties hereto at the Closing, effective as of the Effective
Time. With respect to any lease or other contract obligations reflected on
Schedule 1.6 or otherwise described in the first sentence of this Section, it is
agreed that Newco will have no responsibility whatsoever for any breaches or
defaults which occurred prior to the Effective Time. Except for (a) those
liabilities and obligations specifically assumed by Newco as provided above and
(b) the obligations of makers
5
or guarantors on the notes described on Schedule
1.6, any and all debts, liabilities and obligations of the Partnerships, the
General Partner and/or any other parties hereto, whether known or unknown,
absolute, contingent or otherwise (including, but not limited to, federal, state
and local taxes, any sales taxes, use taxes and property taxes, any taxes
arising from the transactions contemplated by this Agreement and any liabilities
arising from any litigation or civil, criminal or regulatory proceeding
involving or related to the parties hereto or their business) shall remain the
sole responsibility of the party or parties responsible therefor prior to the
execution of this Agreement. At the Closing, the Limited Partners' Note
(including interest thereon) will be paid in full by Newco, or funds sufficient
in an amount to fully pay the Limited Partners' Note will be placed in escrow
with an escrow agent mutually acceptable to APS and the Limited Partner, and
such funds will be used to pay in full the Limited Partners' Note within three
(3) days from the Closing Date.
Section 1.7 CONVEYANCE OF NAME. The General Partner and each of the
Partnerships hereby transfer and convey to Newco all right, title and interest
in and to the corporate and business name of the General Partner, the name
"Uncommon Care" and the name "▇▇▇▇▇▇ House." Each party agrees that, after the
Closing, only Newco shall have the right to use "Uncommon Care" and/or "▇▇▇▇▇▇
House," the names of the Partnerships and all other names included in the
Assets. All parties (other than Newco) covenant and agree not to use those names
(or any portion thereof) or any names similar thereto, alone or in combination
with other words or phrases. The General Partner covenants and agrees to,
promptly after Closing, change its name to a name that does not contain the
terms "Uncommon", "Care", "▇▇▇▇▇▇", or "House", or
6
any names similar thereto,
alone or in combination with other words or phrases or any names included in the
Assets.
Section 1.8 RELEASE OF GUARANTEES. After the Closing, Newco shall use
its reasonable best efforts to relieve Trevey and ▇▇▇▇▇▇▇▇ of any and all
responsibility or liability under or pursuant to those personal guaranty
obligations and obligations as makers, listed and described on Schedule 1.8
attached hereto, which Trevey and ▇▇▇▇▇▇▇▇ hereby represent and warrant (a) are
directly related to one or more specific liabilities assumed by Newco pursuant
to Section 1.6, or (b) arose out of, or in connection with, the purchase of
Assets conveyed to Newco hereunder.
Section 1.9 STOCK TRANSFER RESTRICTION AND SHAREHOLDERS AGREEMENT. All
parties hereto agree, at the Closing, to execute that certain Stock Transfer
Restriction and Shareholders Agreement in the form attached hereto as Exhibit C
(the "Shareholders Agreement").
Section 1.10 TRANSFER OF REAL PROPERTY. The Partnerships and the
General Partner will be contributing certain real property interests (the "Real
Property") which are included in the Assets. Each such contributor of Real
Property is also referred to in this Section as the "Previous Owner." With
regard to each such contribution of Real Property, and on the Closing Date of
this Agreement, the Previous Owner shall execute, acknowledge and deliver or
cause to be delivered to Newco such documents of title and conveyance relating
to the Real Property as APS may request; provided that those liens on the Real
Property securing the mortgage indebtedness reflected on Schedule 1.6 and those
title exceptions reflected on Schedule 4.6-A may remain on the Real Property
after the Closing.
7
Section 1.11 CLOSING. The closing of the transactions contemplated in
this Agreement (the "Closing") shall take place at the offices of Akin, Gump,
Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P., 1900 Frost Bank Plaza, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at such other location as the parties may agree. The
date on which the Closing occurs is referred to herein as the "Closing Date."
Section 1.12 PAYMENT OF PURCHASE PRICE. The cash payments from Newco to
the Partnerships as described in Section 1.1, the APS Cash Contribution and the
Additional Purchasers Cash Contribution may be paid by regular check at the
Closing; provided that any payments due the Limited Partner hereunder will be
made by wire transfer of immediately available funds, or by cashier's check, at
the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF APS
AND ADDITIONAL PURCHASERS
APS and each Additional Purchaser (as to itself only and not as to any
other party) represents and warrants to each of the other parties hereto that
each of the following matters is true and correct in all respects as of the
Effective Time and the Closing Date (with the understanding that each of the
other parties hereto is relying materially on such representations and
warranties in entering into and performing this Agreement):
8
Section 2.1 DUE ORGANIZATION AND PRINCIPAL EXECUTIVE OFFICE. APS is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. APS's principal executive offices are located at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. APS and such Additional
Purchaser, as the case may be, has all necessary power and authority to carry on
its business as now conducted and as it is proposed to be conducted in the
future
Section 2.2 DUE AUTHORIZATION. APS and such Additional Purchaser, as
the case may be, has all necessary power and authority to enter into and perform
this Agreement and each other agreement, instrument and document required to be
executed by such party in connection herewith. This Agreement and each other
agreement, instrument and document required herein to be executed by APS or such
Additional Purchaser have been duly and validly authorized, executed and
delivered by such party and constitute the valid and binding obligations of such
party enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, conservatorship, receivership and other similar laws of
general application affecting the rights and remedies of creditors. The
execution, delivery and performance of this Agreement and each other agreement,
instrument and document required herein to be executed by APS or such Additional
Purchaser will not (a) violate any federal, state, county or local law, rule or
regulation applicable to APS, such Additional Purchaser or their respective
properties, (b) violate or conflict with, or permit the cancellation of, any
agreement to which APS or such Additional Purchaser is a party or by which it or
its properties are bound, or result in the creation of any lien, security
interest, charge or encumbrance upon any of such properties, (c) permit the
acceleration of the maturity of any indebtedness of, or any indebtedness secured
by the property of, APS or such Additional Purchaser or (d) violate or conflict
with any provision of the certificate of
9
incorporation or bylaws of APS or such
Additional Purchaser. No action, consent or approval of, or filing with, any
federal, state, county or local governmental authority is required of APS or
such Additional Purchaser in connection with the execution, delivery or
performance of this Agreement (or any agreement, instrument or other document
executed in connection herewith by APS or such Additional Purchaser).
Section 2.3 BROKERS AND FINDERS. Neither APS nor such Additional
Purchaser has engaged, or caused to be incurred any liability to, any finder,
broker or sales agent in connection with the execution, delivery or performance
of this Agreement or the transactions contemplated hereby.
Section 2.4 CLAIMS AND PROCEEDINGS. Neither APS nor such Additional
Purchaser is a party to any claims, actions, suits, proceedings or
investigations, at law or in equity, before or by any court, municipal or other
governmental department, commission, board, agency or instrumentality which
seeks to restrain or prohibit the carrying out of the transactions contemplated
by this Agreement or to challenge the validity of such transactions or any part
thereof or seeking damages on account thereof; and, to the knowledge of APS and
each Additional Purchaser, no such claim, action, suit, proceeding or
investigation is threatened.
Section 2.5 INVESTMENT INTENT. APS and such Additional Purchaser (a) is
acquiring the Preferred Stock and Common Stock, as applicable, for its own
account for investment and not with a view to, or in connection with, a
distribution thereof, within the meaning of the Securities Act of 1933, as
amended (the "Act"), (b) is an "accredited investor" within the meaning of Rule
10
501 under the Act, (c) will not sell or transfer such stock unless (i) such
transfer is provided for, or pursuant to, the provisions of the Shareholders
Agreement and (ii) such stock is registered under the Act or such sale or
transfer is exempt from such registration requirements, (d) is able to bear the
economic risk of its acquisition of such stock and (e) has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits of, and protecting its interests with respect to, its acquisition of
such stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE LIMITED PARTNER
The Limited Partner represents and warrants to each of the other
parties hereto that each of the following matters is true and correct in all
respects as of the Effective Time and the Closing (with the understanding that
each of the other parties hereto is relying materially on such representations
and warranties in entering into and performing this Agreement):
Section 3.1 DUE ORGANIZATION AND PRINCIPAL EXECUTIVE OFFICE. The
Limited Partner is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Texas and has all necessary power
and authority to carry on its business as now conducted and as proposed to be
conducted. The Limited Partner's principal executive offices are located at ▇▇▇
▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
Section 3.2 DUE AUTHORIZATION. The Limited Partner has all necessary
power and authority to enter into and perform this Agreement and each other
agreement, instrument and
11
document required to be executed by the Limited
Partner in connection herewith. This Agreement and each other agreement,
instrument and document required herein to be executed by the Limited Partner
have been duly and validly authorized, executed and delivered by the Limited
Partner and constitute the valid and binding obligations of the Limited Partner
enforceable against it in accordance with its terms. The execution, delivery and
performance of this Agreement and each other agreement, instrument and document
required herein to be executed by the Limited Partner will not (a) violate any
federal, state, county or local law, rule or regulation applicable to the
Limited Partner or its properties, (b) violate or conflict with, or permit the
cancellation of, any agreement to which the Limited Partner is a party or by
which it or its properties are bound, (c) permit the acceleration of the
maturity of any indebtedness of, or any indebtedness secured by the property of,
the Limited Partner or (d) violate or conflict with any provision of the
certificate of incorporation or bylaws of the Limited Partner. No action,
consent or approval of, or filing with, any federal, state, county or local
governmental authority is required of the Limited Partner in connection with the
execution, delivery or performance of this Agreement (or any agreement,
instrument or other document executed in connection herewith by the Limited
Partner).
Section 3.3 BROKERS AND FINDERS. The Limited Partner has not engaged,
or caused to be incurred any liability to, any finder, broker or sales agent in
connection with the execution, delivery or performance of this Agreement or the
transactions contemplated hereby.
Section 3.4 CLAIMS AND PROCEEDINGS. The Limited Partner is not a party
to any claims, actions, suits, proceedings or investigations, at law or in
equity, before or by any court,
12
municipal or other governmental department,
commission, board, agency or instrumentality which seeks to restrain or prohibit
the carrying out of the transactions contemplated by this Agreement or to
challenge the validity of such transactions or any part thereof or seeking
damages on account thereof; and, to the knowledge of the Limited Partner, no
such claim, action, suit, proceeding or investigation is threatened.
Section 3.5 INVESTMENT INTENT. With respect to any Common Stock
acquired, or to be acquired, by the Limited Partner in a distribution pursuant
to the liquidation of the Partnerships, the Limited Partner (a) is acquiring the
Common Stock for its own account for investment and not with a view to, or in
connection with, a distribution thereof (other than as permitted and
contemplated in this Agreement and the Shareholders Agreement), within the
meaning of the Act, (b) is an "accredited investor" within the meaning of Rule
501 under the Act, (c) will not sell or transfer the Common Stock unless (i)
such transfer is provided for, or pursuant to, the provisions of the
Shareholders Agreement and (ii) such Common Stock is registered under the Act or
such sale or transfer is exempt from such registration requirements, (d) is able
to bear the economic risk of its acquisition of the Common Stock and (e) has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits of, and protecting its interests with respect
to, its acquisition of the Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIPS,
THE GENERAL PARTNER, TREVEY AND ▇▇▇▇▇▇▇▇
13
The Partnerships, the General Partner, Trevey and ▇▇▇▇▇▇▇▇ (each of
which is sometimes referred to in this Agreement as a "Control Party" and
collectively, jointly and severally, as the "Control Parties") each hereby,
jointly and severally, represents and warrants to each of the other parties
hereto that each of the following matters is true and correct in all respects as
of the Closing (with the understanding that each of the other parties hereto is
relying materially on each such representation and warranty in entering into and
performing this Agreement); provided, however, that (i) any of the following
representations and warranties which refer specifically to the Assets will be
deemed to only be made, jointly and severally, by the General Partner, Trevey
and ▇▇▇▇▇▇▇▇, with respect to those Assets contributed by the General Partner
under Section 1.2 hereof and (ii) in no event shall any of the Control Parties
have any liability (whether based on contract or tort) to any other party hereto
for any negligent misrepresentation or breach of any warranty with respect to
any title defect to any Real Property included in the Assets, or with respect to
any claims or losses attributable to, or arising from, any contamination of any
such Real Property with any hazardous waste, hazardous substances or other
hazardous or toxic materials (whether in violation of environmental laws or
otherwise).
Section 4.1 DUE ORGANIZATION. The General Partner is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has full power and authority to carry on its business as now conducted
and as proposed to be conducted. Trevey and ▇▇▇▇▇▇▇▇ are the only shareholders
of the General Partner. ▇▇▇▇▇▇ House is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Texas and
has all necessary power and authority to carry on its business as now conducted
and as proposed to be conducted. Oakwell is a limited partnership duly
organized, validly existing and in good
14
standing under the laws of the State of
Texas and (except as disclosed on Schedule 4.6-B) has all necessary power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Limited Partner, Trevey and ▇▇▇▇▇▇▇▇ are the only limited
partners of each of the Partnerships, and the General Partner is the sole
general partner of each of the Partnerships. Complete and correct copies of the
Articles of Limited Partnership, Certificates of Limited Partnership and other
organizational documents of the Partnerships, and all amendments thereto, are
attached hereto as Schedule 4.1. The General Partner, ▇▇▇▇▇▇ House and Oakwell
are each qualified to do business, and each is in good standing, in Texas, which
represents the only jurisdiction where such qualification is required for the
conduct of any of the Control Parties' business as conducted on or prior to the
Closing Date.
Section 4.2 SUBSIDIARIES. Each of the Partnerships does not directly or
indirectly have (or possess any options or other rights to acquire) any
subsidiaries or any direct or indirect ownership interests in any person,
business, corporation, partnership, association, joint venture, trust or other
entity.
Section 4.3 DUE AUTHORIZATION. Each Control Party has all necessary
power and authority to enter into and perform this Agreement and each other
agreement, instrument and document required to be executed by it in connection
herewith. This Agreement and each other agreement, instrument and document
required herein to be executed by any Control Party have been duly and validly
authorized, executed and delivered by such party and constitute the valid and
binding obligations of such party enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, conservatorship, receivership and
other similar laws of general
15
application affecting the rights and remedies of
creditors. Except as disclosed on Schedule 4.21 attached hereto, the execution,
delivery and performance of this Agreement and each other agreement, instrument
and document required herein to be executed by any or all of the Control Parties
will not (a) violate any federal, state, county or local law, rule or regulation
applicable to the respective Control Party or its Assets, (b) violate or
conflict with, or permit the cancellation of, any agreement to which any Control
Party is a party, or by which any Control Party or its properties are bound, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of such properties, (c) permit the acceleration of the maturity of any
indebtedness of, or any indebtedness secured by the property of, any Control
Party or (d) violate or conflict with any provision of the organizational
documents of any Control Party. Except as disclosed on Schedule 4.21 attached
hereto, no action, consent or approval of, or filing with, any federal, state,
county or local governmental authority is required of any Control Party in
connection with the execution, delivery or performance of this Agreement (or any
agreement or other document executed in connection herewith by such Control
Party).
Section 4.4 FINANCIAL STATEMENTS. The unaudited balance sheet and
income statement of each of the Partnerships and the General Partner as of and
for the year ended December 31, 1997, (collectively, the "Financial Statements")
are attached hereto as Schedule 4.4. The Financial Statements have been prepared
from the books and records of the Partnerships and the General Partner,
respectively, on a basis consistent with the cash basis of accounting used in
preparation of the Partnerships' and General Partner's tax returns and represent
actual, bona fide transactions. The Financial Statements reflect, on a cost
basis, all assets owned by the Partnerships and the General Partner (and do not
include any assets not owned by the Partnerships or the General
16
Partner), and
reflect all liabilities for money borrowed. The representations contained in the
immediately preceding sentence are qualified in that (i) the Financial
Statements include no footnotes; (ii) the Financial Statements may exclude
accrued liabilities not yet due and amounts representing trade payables incurred
in the ordinary course of business, and (iii) no representation is made with
respect to the appropriateness or accuracy of methods of depreciation, with
respect to the existence or adequacy of any depreciation or other valuation
reserve, or with respect to the occurrence or non-occurrence of any event that
could, in accordance with generally accepted accounting principles, result in a
reduction in the carrying value of any asset. Except (a) for the obligations in
the amounts disclosed on Schedule 1.6 attached hereto, (b) to the extent
reflected in the Financial Statements, exclusive of any notes thereto and (c)
for obligations arising in the ordinary course of the Partnerships' and General
Partner's business in a transaction or related series of transactions not
exceeding $5,000 in value, the Partnerships and the General Partner had, as of
December 31, 1997, no liabilities of a type that would be required to be
reflected as such in the Financial Statements, exclusive of any notes thereto.
Except as set forth in Schedule 4.4 hereto, and except for increases in cost of
sales and expenses resulting from the operations of the Partnerships and the
General Partner in the ordinary course of its business consistent with past
practice, since December 31, 1997 there has been no material adverse change in
the financial position, assets, results of operations or business of the
Partnerships or the General Partner.
Section 4.5 CONDUCT OF BUSINESS; CERTAIN ACTIONS. Except as set forth
on Schedule 4.5-A attached hereto (or such other Schedules as are specifically
referred to below in this Section 4.5), since December 31, 1997, each of the
Partnerships has conducted its business and operations in
17
the ordinary course
and consistent with its past practices and has not (a) increased the
compensation of any of its employees, or, except for wage and salary increases
made in the ordinary course of business and consistent with its past practices,
increased the compensation of any other employees, (b) made capital expenditures
exceeding $2,500 individually or $2,500 in the aggregate, except for those
expenditures made directly and solely in connection with the ▇▇▇▇▇▇ ▇▇ project,
located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, (c) sold any asset (or any
group of related assets) in any transaction (or series of related transactions)
in which the purchase price for such asset (or group of related assets) exceeded
$2,500 (other than sales of inventory in the ordinary course of business), (d)
discharged or satisfied any lien or encumbrance or paid any obligation or
liability, absolute or contingent, other than current liabilities incurred and
paid in the ordinary course of business, (e) made or guaranteed any loans or
advances to any party whatsoever, (f) suffered or permitted any lien, security
interest, claim, charge or other encumbrance to arise or be granted or created
against or upon any of its assets, real or personal, tangible or intangible, (g)
canceled, waived or released any of its debts, rights or claims against third
parties, (h) except as set forth on Schedule 4.5-B attached hereto, amended the
Articles of Limited Partnership, Certificate of Limited Partnership or any other
organizational document of the Partnerships, (i) made or paid any severance or
termination payment to any employee or consultant in excess of $2,500, (j) made
any change in its method of accounting, (k) made any investment or commitment
therefor in any person, business, corporation, association, partnership, joint
venture, trust or other entity, (l) except as set forth on Schedule 4.11 and
Schedule 4.15, made, entered into, amended or terminated any written employment
contract, created, made, amended or terminated any bonus, stock option, pension,
retirement, profit sharing or other employee benefit plan or arrangement or
withdrawn from any "multi-employer plan" (as defined
18
in the Internal Revenue
Code of 1986, as amended (the "Code")) so as to create any liability under ERISA
(as hereinafter defined) to any entity, (m) amended, terminated or experienced a
termination of any material contract, agreement, lease, franchise or license to
which it is a party, (n) entered into any other material transactions except in
the ordinary course of business, (o) except for such fees and expenses of the
General Partner as have been approved in advance in writing by APS and as are
reflected on Schedule 4.5-C attached hereto, distributed any cash or property of
the Partnerships, directly or indirectly, to any partner (including, without
limitation, any party hereto) in any capacity, (p) entered into any contract,
commitment, agreement or understanding to do any acts described in the foregoing
clauses (a)-(o) of this Section, (q) suffered any material damage, destruction
or loss (whether or not covered by insurance) to any assets, (r) experienced any
strike, slowdown or demand for recognition by a labor organization by or with
respect to any of its employees, or (s) experienced or effected any shutdown,
slow-down or cessation of any operations conducted by, or constituting part of,
its business.
Section 4.6 OWNERSHIP OF ASSETS: LICENSES, PERMITS, ETC. The General
Partner and each of the Partnerships, as applicable, has good and indefeasible
title to all of the Assets being contributed by it hereunder, subject only to
the liens, security interests, claims and encumbrances specifically described on
Schedule 4.6-A. Except as disclosed on Schedule 4.6-B attached hereto, each of
the Partnerships has such property and assets, real, personal and mixed,
tangible and intangible, including leases and other contracts, which are
required for, or used in connection with, the operation of its business as
currently conducted. The Assets are in good operating condition and repair,
subject to ordinary wear and tear, taking into account the respective ages of
the properties involved and are adequate for the conduct of the business of each
19
of the Partnerships or, in the case of Assets contributed by the General
Partner, for their intended use. Attached hereto as Schedule 4.6-B is a list of
all material federal, state, county and local governmental licenses,
certificates and permits held or applied for by the General Partner and each of
the Partnerships. The General Partner and each of the Partnerships has complied
in all material respects, and each is in compliance in all material respects,
with the terms and conditions of any such licenses, certificates and permits.
Except as disclosed on Schedule 4.6-B attached hereto, no additional license,
certificate or permit is required from any federal, state, county or local
governmental agency or body thereof in connection with the conduct of the
business of the General Partner and each of the Partnerships. Except as
disclosed on Schedule 4.6-B attached hereto, no claim has been made by any
governmental authority (and, to the knowledge of each of the Control Parties, no
such claim has been threatened) to the effect that a license, permit,
certificate or order not possessed by either of the Partnerships or the General
Partner is necessary in respect of the business conducted by it. Except as
disclosed on Schedule 4.6-B attached hereto, all of the licenses, permits and
certificates noted on the attached Schedule 4.6-B are freely assignable to Newco
and are included in the Assets.
Section 4.7 ENVIRONMENTAL ISSUES.
(a) For purposes of this Agreement, the term "environmental laws" shall
mean all laws relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling, or the emission, discharge
or release, of any pollutant, contaminant, chemical or industrial toxic or
hazardous substance or waste and any order related thereto.
20
(b) Each of the Partnerships and the General Partner has complied in
all material respects with and obtained all authorizations and made all filings
required by all applicable environmental laws. The properties occupied or used
by each of the Partnerships and/or the General Partner, as the case may be, and
the ▇▇▇▇▇▇▇▇▇ Property (as hereinafter defined) have not been contaminated with
any hazardous wastes, hazardous substances or other hazardous or toxic materials
in violation of any applicable environmental law, the violation of which could
have a material adverse impact on its business or financial position.
(c) Neither of the Partnerships nor the General Partner has received
(i) any notice, whether actual or constructive, formal or informal, official or
unofficial, from the United States Environmental Protection Agency, that it is a
potentially responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund Notice"), as amended, (ii) any
citation from any federal, state or local governmental authority for
non-compliance with its requirements with respect to air, water or environmental
pollution, or the improper storage, use or discharge of any hazardous waste,
other waste or other substance or other material pertaining to its business
("Citations") or (iii) any written notice from any private party alleging any
such non-compliance; and there are no pending or unresolved Superfund Notices,
Citations or written notices from private parties alleging any such
non-compliance.
Section 4.8 INTELLECTUAL PROPERTY RIGHTS. Except for the trademarks
"▇▇▇▇▇▇ House" and "Uncommon Care", there are no patents, trademarks, tradenames
or copyrights, and no applications therefor, owned by or registered in the name
of either of the Partnerships or the General Partner or in which either of the
Partnerships or the General Partner has any right,
21
license or interest. Schedule
4.8 lists all jurisdictions in which applications for registration of the
registered trademarks have been made by either of the Partnerships or the
General Partner, and describes the status of such applications. Except for
software licenses included in the Assets, neither of the Partnerships nor the
General Partner is a party to any license agreements, either as licensor or
licensee, with respect to any patents, trademarks, tradenames or copyrights.
Neither of the Partnerships nor the General Partner has received any notice that
it is infringing any patent, trademark, tradename or copyright of others.
Section 4.9 COMPLIANCE WITH LAWS. Except as disclosed on Schedule 4.6-B
attached hereto, each of the Partnerships and the General Partner has complied
in all material respects, and each of such parties is in compliance in all
material respects, with all federal, state, county and local laws, rules,
regulations and ordinances currently in effect and applicable to its business.
No claim has been made by any governmental authority (and, to the knowledge of
each of the Control Parties, no such claim has been threatened) against either
of the Partnerships or the General Partner to the effect that the business
conducted by either of the Partnerships or the General Partner fails to comply
with any law, rule, regulation or ordinance.
Section 4.10 INSURANCE. Attached hereto as Schedule 4.10 is a list of
all policies of fire, liability, business interruption and other forms of
insurance and all fidelity bonds currently held by or applicable to either of
the Partnerships or the General Partner, which schedule sets forth in respect of
each such policy the policy name, policy number, carrier, term, type of
coverage, deductible amount or self-insured retention amount, limits of coverage
and annual premium. To the knowledge of each of the Control Parties, no event
directly relating to either of the
22
Partnerships or the General Partner has
occurred which will result in a retroactive upward adjustment of premiums under
any such policies or which is likely to result in any prospective upward
adjustment in such premiums. There have been no material changes in the type of
insurance coverage maintained by either of the Partnerships or the General
Partner during the past three (3) years, including, without limitation, any
change which has resulted in any period during which either of the Partnerships
had no insurance coverage. Excluding insurance policies which have expired and
been replaced, no insurance policy of either of the Partnerships or the General
Partner has been canceled within the last three (3) years and, to the knowledge
of each of the Control Parties, no threat has been made to cancel any insurance
policy of either of the Partnerships or the General Partner within such period.
Section 4.11 EMPLOYEE BENEFIT MATTERS. Except as set forth on Schedule
4.11, neither of the Partnerships maintains, contributes to, nor is required to
contribute to any "employee welfare benefit plan" (as defined in section 3(1) of
the Employee Retirement Income Security Act of 1974 (and any sections of the
Code amended by it) and all regulations promulgated thereunder, as the same have
from time to time been amended ("ERISA")) or any "employee pension benefit plan"
(as defined in ERISA). Neither of the Partnerships presently maintains, has ever
maintained, or had any obligation of any nature to contribute to, a "defined
benefit plan" within the meaning of the Code.
Section 4.12 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 4.12
is a list of all written or oral contracts, commitments, leases and other
agreements (including, without limitation, promissory notes, loan agreements and
other evidences of indebtedness) to which
23
each of the Partnerships is a party or
by which each of the Partnerships or their respective properties are bound,
pursuant to which the obligations thereunder of any party thereto are, or are
contemplated as being, in respect of any such individual contracts, commitments,
leases or other agreements during any year during the term thereof, $2,500 or
greater, or which are otherwise material to the business of either of the
Partnerships (including, without limitation, all mortgages, deeds of trust,
security agreements, pledge agreements, service agreements and similar
agreements and instruments and all confidentiality agreements). Neither of the
Partnerships, and to the best knowledge of each of the Control Parties, no other
party thereto, is in default (and no event has occurred which, with the passage
of time or the giving of notice, or both, would constitute a default by either
of the Partnerships or, to the best knowledge of each of the Control Parties, by
any other party thereto) under any such contracts, commitments, leases or other
agreements. Neither of the Partnerships has waived any material right under any
such contracts, commitments, leases or other agreements. Neither of the
Partnerships has guaranteed any obligations of any other person.
Section 4.13 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 4.13
is a list and description of all claims, actions, suits, proceedings and
investigations pending or, to the knowledge of each of the Control Parties,
threatened against either of the Partnerships or the General Partner or
affecting any of such respective entity's properties or assets, at law or in
equity, or before or by any court, municipal or other governmental department,
commission, board, agency or instrumentality. Except as set forth on Schedule
4.13 attached hereto, none of such claims, actions, suits, proceedings or
investigations will result in any liability or loss to either of the
Partnerships or the General Partner which (individually or in the aggregate) is
24
material, and neither of the Partnerships nor the General Partner has been, and
neither of the Partnerships nor the General Partner is now, subject to any
order, judgment, decree, stipulation or consent of any court, governmental body
or agency. No inquiry, action or proceeding has been asserted, instituted or, to
the best knowledge of each of the Control Parties, threatened against any of the
Control Parties to restrain or prohibit the carrying out of the transactions
contemplated by this Agreement or to challenge the validity of such transactions
or any part thereof or seeking damages on account thereof.
Section 4.14 TAXES. All federal, foreign, state, county and local
income, gross receipts, excise, property, franchise, license, sales, use,
withholding and other tax (collectively, "Taxes") returns, reports and
declarations of estimated tax (collectively, "Returns") which were required to
be filed by either of the Partnerships on or before the date hereof have been
filed within the time (including any applicable extensions) and in the manner
provided by law, and all such Returns are true and correct in all material
respects and accurately reflect the Tax liabilities of each of the respective
Partnerships. All Taxes, assessments, penalties and interest which have become
due pursuant to such Returns have been paid or adequately accrued in the
Financial Statements. As of the Closing Date, neither of the Partnerships will
owe any taxes for any period prior to the Closing Date which are not fully
reflected, by type and amount, on Schedule 4.14 attached hereto. As of the
Closing Date, neither of the Partnerships will owe any Taxes for any period
prior to the Closing which are not reflected on the Financial Statements or on
Schedule 4.14 attached hereto, except for Taxes attributable to the respective
operations of each of the Partnerships between the Effective Time and the
Closing Date. Neither of the Partnerships has executed any presently effective
waiver or extension of any statute of limitations against assessments and
26
collection of Taxes. There are no pending or, to the best knowledge of each of
the Control Parties, threatened claims, assessments, notices, proposals to
assess, deficiencies or audits, other than those disclosed on Schedule 4.13,
(collectively, "Tax Actions") against either of the Partnerships with respect to
any Taxes owed or allegedly owed by it. Otherwise, neither of the Partnerships'
Returns have been audited. Except for any statutory liens for taxes not yet due,
there are no tax liens on any of the assets of either of the Partnerships.
Proper and accurate amounts have been withheld and remitted by each of the
Partnerships from and in respect of all persons from whom it is required by
applicable law to withhold for all periods in compliance with the tax
withholding provisions of all applicable laws and regulations. Neither of the
Partnerships is a party to any tax sharing agreement.
Section 4.15 PERSONNEL. Attached hereto as Schedule 4.15 is a list of
names and current annual rates of compensation of the employees of each of the
Partnerships whose rates of compensation, on an annualized basis, during
calendar year 1997 (including base salary, bonus, commissions and incentive pay)
are expected to exceed $25,000. Except as set forth on Schedule 4.15, there are
no bonus, profit sharing, percentage compensation, company automobile, club
membership and other like benefits, if any, paid or payable by either of the
Partnerships to such employees from December 31, 1997 through the Closing Date.
Schedule 4.15 attached hereto also contains a brief description of all material
terms of employment agreements and confidentiality agreements to which either of
the Partnerships is a party and all severance benefits which any director,
officer, employee, agent or sales representative of either of the Partnerships
is or may be entitled to receive. Each of the Partnerships has delivered to APS
accurate and complete copies of all such employment
26
agreements, confidentiality
agreements and all other agreements, plans and other instruments to which it is
a party and under which its employees are entitled to receive benefits of any
nature. There is no pending or, to the best knowledge of each of the Control
Parties, threatened (a) labor dispute or union organization campaign relating to
either of the Partnerships, (b) claims against either of the Partnerships or any
of the Control Parties by any employees of either of the Partnerships (other
than Workers' Compensation claims specifically described on Schedule 4.13) or
(c) terminations, resignations or retirements of any employees of either of the
Partnerships. None of the employees of either of the Partnerships are
represented by any labor union or organization. There is no unfair labor
practice claim against either of the Partnerships before the National Labor
Relations Board or any strike, labor dispute, work slowdown or work stoppage
pending or, to the best knowledge of each of the Control Parties, threatened
against or involving either of the Partnerships.
Section 4.16 BUSINESS RELATIONS. None of Control Parties has been
notified that any supplier or customer of either of the Partnerships (other than
those listed in Schedule 4.16 attached hereto) will cease or refuse to do
business with either of the Partnerships or Newco in the same manner as
previously conducted with each of such entities as a result of or after the
consummation of the transactions contemplated hereby. Neither of the
Partnerships has received any notice of any disruption (including delayed
deliveries or allocations by suppliers) in the availability of the materials or
products used by it.
27
Section 4.17 ACCOUNTS RECEIVABLE. Except as set forth on Schedule 4.17
attached hereto, all of the accounts, notes and loans receivable that have been
recorded on the books of each of the Partnerships are bona fide and represent
amounts validly due.
Section 4.18 AGENTS. Except as set forth on Schedule 4.18 attached
hereto, neither of the Partnerships has designated or appointed any person
(except for the General Partner, solely in its capacity as the general partner
of the Partnership) or other entity to act for it or on its behalf pursuant to
any power of attorney or any agency which is presently in effect.
Section 4.19 INDEBTEDNESS TO AND FROM PARTNERS AND EMPLOYEES. Except as
set forth on Schedule 4.19 attached hereto, neither of the Partnerships owes any
indebtedness to any of its partners or employees or has indebtedness owed to it
from any of its partners or employees, excluding indebtedness for travel
advances or similar advances for expenses incurred on behalf of and in its
ordinary course of business and consistent with its past practices. As of the
Effective Time and the Closing Date all amounts due either of the Partnerships
from any partner or employee of it (or any of their family members) shall have
been repaid in full.
Section 4.20 COMMISSION SALES CONTRACTS. Except as disclosed in
Schedule 4.20 attached hereto, neither of the Partnerships employs or has any
relationship with any individual, corporation, partnership or other entity whose
compensation from either of the respective Partnerships is in whole or in part
determined on a commission basis.
28
Section 4.21 CERTAIN CONSENTS. Except as set forth on Schedule 4.21
attached hereto, there are no consents, waivers or approvals required to be
executed and/or obtained by any of the Control Parties from third parties
(including, without limitation, the spouse of Trevey or ▇▇▇▇▇▇▇▇) in connection
with the execution, delivery and performance of this Agreement.
Section 4.22 BROKERS. No Control Party has engaged, or caused any
liability to be incurred to, any finder, broker or sales agent in connection
with the execution, delivery or performance of this Agreement or the
transactions contemplated hereby.
Section 4.23 INTEREST IN COMPETITORS, SUPPLIERS AND CUSTOMERS. Except
as set forth on Schedule 4.23 attached hereto, no Control Party or any affiliate
of any Control Party, and to the knowledge of each of the Control Parties no
employee of either of the Partnerships or any affiliate of any employee of
either of the Partnerships, has any ownership interest in any competitor,
customer or supplier of either of the respective Partnerships or any property
used in the operation of the business of either of the respective Partnerships.
Section 4.24 WARRANTIES. Except as set forth on Schedule 4.24, neither
of the Partnerships has made any contractual warranties or guarantees (other
than warranties arising purely by operation of law), whether written or oral, to
third parties with respect to any products sold or services rendered by it.
Except as set forth on Schedule 4.24 attached hereto, no claims for breach of
product or service warranties have been made against either of the Partnerships.
29
Section 4.25 NO DEFAULTS. No Control Party is aware of any breach or
default by any other Control Party of any of the representations, warranties,
covenants or agreements contained herein.
Section 4.26 INVESTMENT INTENT. Each of the Control Parties who shall
receive Common Stock of Newco pursuant to this Agreement or any other
transaction contemplated by this Agreement or the Shareholders Agreement
(whether or not such receipt occurs subsequent to execution of this Agreement or
the Shareholders Agreement) (a) is acquiring the Common Stock for its own
account for investment and not with a view to, or in connection with, a
distribution thereof, within the meaning of the Act, (b) is an "accredited
investor" within the meaning of Rule 501 under the Act, (c) will not sell or
transfer the Common Stock unless (i) such transfer is provided for, or pursuant
to, the provisions of the Shareholders Agreement and (ii) such Common Stock is
registered under the Act or such sale or transfer is exempt from such
registration requirements, (d) is able to bear the economic risk of its
acquisition of the Common Stock and (e) has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits of,
and protecting its interests with respect to, its acquisition of the Common
Stock.
ARTICLE V
COVENANTS
Section 5.1 EXECUTION OF DOCUMENTS. Each and every party to this
Agreement agrees that it will execute, as necessary, or cause to be executed, at
or before the Closing Date, the
30
Organizational Documents, the Shareholders
Agreement, the Assignment and Assumption Agreement, and the respective
Employment Agreement, as well as all other agreements, documents or instruments
contemplated in this Agreement or relating to such agreements, documents or
instruments contemplated by this Agreement.
Section 5.2 COOPERATION RELATING TO FINANCIAL STATEMENTS. Each of the
parties hereto agrees to cooperate with APS, solely at the expense of Newco, in
the preparation of any financial statements of Newco which APS may be required
by any applicable law to prepare; provided, however, that APS shall pay, or
reimburse Newco, for any such financial statements prepared at the request of
APS or its affiliates and which Newco would not otherwise have been required to
prepare pursuant to any contractual agreements or other law. The parties agree
that the Limited Partner's obligations hereunder will be limited to providing
such information as is within its or its underlying partners' actual knowledge
without any obligation of inquiry.
Section 5.3 SHAREHOLDER AND DIRECTOR ACTION. Each of the parties hereto
(other than Newco) hereby expressly acknowledges and agrees that Newco has been
properly and lawfully formed, and that Newco possesses all necessary power and
authority to perform all of its obligations under this Agreement, the
Organizational Documents and all other agreements, documents and instruments
executed by Newco in connection herewith, including, without limitation, the
execution, acknowledgment and delivery of all agreements, documents and
instruments necessary to provide for a secured line of credit to Newco by APS in
the amount of $2.4 million and under the terms and conditions as set forth in
the documentation therefor, attached hereto as Exhibit D (the "Line of Credit").
Each party agrees, upon the request of any
31
other party hereto, to execute and
deliver such resolutions, written consents, documents and instruments, and take
such other actions, as necessary or convenient in order to more fully evidence
the authority of Newco hereunder and under such other agreements and the binding
and enforceable nature of Newco's commitment as a party hereunder and under such
other agreements, notwithstanding the official date of Newco's creation.
Section 5.4 CAPITAL CONTRIBUTIONS; LINE OF CREDIT. Except as provided
in Article I, no party hereto shall be obligated to contribute or provide for
any additional debt or equity capital to Newco; provided, however, APS shall
comply with its obligations arising under the Line of Credit.
Section 5.5 PROPERTY DISTRIBUTIONS. Except for such fees and expenses
of the General Partner as have been approved in advance in writing by APS and as
are reflected on Schedule 4.5-C attached hereto, each of the parties hereto
agrees that neither of the Partnerships shall make any distributions prior to
the Closing Date, whether in cash or other property, directly or indirectly, to
any partner (including, without limitation, any of the parties hereto) in any
capacity. Each party hereto agrees that it shall not accept any such
distribution and warrants that it has no knowledge, actual or constructive, of
any such distribution, except as disclosed on Schedule 4.5-C attached hereto.
Section 5.6 CONTINUED EXISTENCE OF PARTNERSHIPS. The Partnerships, the
General Partner, the Limited Partner, Trevey and ▇▇▇▇▇▇▇▇ each hereby covenants
and agrees that they will take such actions as necessary to continuously
maintain the lawful existence of each of the
32
Partnerships until December 31,
1998, including, without limitation, all such actions reasonably necessary to
prevent the dissolution, liquidation or termination of either of the
Partnerships. Notwithstanding the foregoing, the Partnerships, the General
Partner, the Limited Partner, Trevey or ▇▇▇▇▇▇▇▇ shall each be entitled to cause
the Partnerships and/or the General Partner to distribute the proceeds received
by the Partnerships and General Partner pursuant to Section 1.1 and Section 1.2
hereof.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 APS'S CLOSING OBLIGATIONS. At the Closing, subject to the
terms and conditions set forth in this Agreement, APS shall execute, acknowledge
and deliver or cause to be delivered, to the other parties, where required: (a)
the APS Cash Contribution to Newco; (b) the Line of Credit, the Assignment and
Assumption Agreement, the Organizational Documents and the Shareholders
Agreement; and (c) such good standing certificates, officer certificates and
similar documents and certificates as counsel for any of the parties hereto may
reasonably require.
Section 6.2 ADDITIONAL PURCHASERS' CLOSING OBLIGATIONS. At the Closing,
subject to the terms and conditions set forth in this Agreement, each Additional
Purchaser shall execute, acknowledge and deliver or cause to be delivered, to
the other parties, where required: (a) the Additional Purchaser's Cash
Contribution; (b) the Shareholders Agreement; and (c) such good standing
33
certificates, officer and/or partnership certificates and similar documents and
certificates as counsel for any of the parties may reasonably require.
Section 6.3 PARTNERSHIPS' CLOSING OBLIGATIONS. At the Closing, subject
to the terms and conditions set forth in this Agreement, each of the
Partnerships shall execute, acknowledge and deliver or cause to be delivered, to
the other parties, where required: (a) the Assignment and Assumption Agreement,
the Shareholders Agreement and the Organizational Documents; and (b) such good
standing certificates, officer and/or partnership certificates and similar
documents and certificates as counsel for any of the parties may reasonably
require.
Section 6.4 GENERAL PARTNER'S CLOSING OBLIGATIONS. At the Closing,
subject to the terms and conditions set forth in this Agreement, the General
Partner shall execute, acknowledge and deliver or cause to be delivered, to the
other parties, where required: (a) the Assignment and Assumption Agreement, the
Shareholders Agreement and the Organizational Documents; and (b) such good
standing certificates, officer and/or partnership certificates and similar
documents and certificates as counsel for any of the parties may reasonably
require.
Section 6.5 THE LIMITED PARTNER'S CLOSING OBLIGATIONS. At the Closing,
subject to the terms and conditions set forth in this Agreement, the Limited
Partner shall execute, acknowledge and deliver or cause to be delivered, to the
other parties, where required: (a) the Assignment and Assumption Agreement, the
Shareholders Agreement and the Organizational Documents; and (b) such good
standing certificates, officer and/or partnership certificates and similar
documents and certificates as counsel for any of the parties may reasonably
require.
34
Section 6.6 TREVEY'S CLOSING OBLIGATIONS. At the Closing, subject to
the terms and conditions set forth in this Agreement, Trevey shall execute,
acknowledge and deliver or cause to be delivered, to the other parties, where
required: (a) the Shareholders Agreement and the Organizational Documents; and
(b) such good standing certificates, officer and/or partnership certificates and
similar documents and certificates as counsel for APS may reasonably require.
Section 6.7 ▇▇▇▇▇▇▇▇'▇ CLOSING OBLIGATIONS. At the Closing, subject to
the terms and conditions set forth in this Agreement, ▇▇▇▇▇▇▇▇ shall execute,
acknowledge and deliver or cause to be delivered, to the other parties, where
required: (a) the Shareholders Agreement and the Organizational Documents; and
(b) such good standing certificates, officer and/or partnership certificates and
similar documents and certificates as counsel for any of the parties may
reasonably require.
ARTICLE VII
INDEMNIFICATION OF APS, LIMITED PARTNER AND NEWCO
Section 7.1 INDEMNIFICATION BY THE CONTROL PARTIES. The Control
Parties, each jointly and severally, agree to indemnify and hold harmless APS,
the Limited Partner and, following the Closing, Newco, and each officer,
director, partner, employee and affiliate of APS, the Limited Partner and,
following the Closing, Newco (collectively, the "APS Indemnified Parties") from
and against any and all damages, losses, claims, liabilities, demands, charges,
suits, penalties, costs and expenses (including court costs and attorneys' fees
and expenses incurred in
35
investigating and preparing for any litigation or
proceeding) (collectively, "Indemnified Costs") in connection with the
commencement or assertion of any action, proceeding, demand or claim by a third
party (collectively, a "third-party action") which any of the APS Indemnified
Parties may sustain, arising out of (a) any breach or default by any Control
Party of any of its representations, warranties, covenants or agreements
contained in this Agreement or any agreement or document executed in connection
herewith (including, without limitation, the Organizational Documents), (b) any
obligation or liability of either of the Partnerships or any of the Control
Parties not assumed by Newco pursuant to Section 1.6 of this Agreement and/or
(c) any obligations or liabilities with respect to any claims (including,
without limitation, claims for failure to be properly licensed) asserted before
or after the Closing based on the business, acts or omissions of the General
Partner or either of the Partnerships that occurred prior to the Closing.
Notwithstanding the foregoing or any other provision of this Agreement, (i) an
obligation of the Control Parties shall arise under this Section only if and to
the extent that Indemnified Costs owed to all APS Indemnified Parties hereunder,
in the aggregate, exceed $100,000, (ii) Trevey and ▇▇▇▇▇▇▇▇ shall have no
indemnity obligation hereunder with respect to any title defect to any Real
Property included in the Assets, and the Control Parties shall have no indemnity
obligation hereunder with respect to any claims or losses attributable to, or
arising from, any contamination of any such Real Property with any hazardous
waste, hazardous substances or other hazardous or toxic materials (whether in
violation of environmental laws or otherwise), and (iii) the Control Parties
shall have no indemnity obligation hereunder with respect to any claims or
causes of action which ultimately (x) are dismissed "with prejudice" without any
judgment having been entered against any of the APS Indemnified Parties or any
Control Parties, or (y) are resolved in
36
a final, nonappealable judicial
determination of no liability on the part of any APS Indemnified Parties or any
Control Parties.
The combined indemnity obligation of Trevey or ▇▇▇▇▇▇▇▇ arising from
the provisions of this Section for any one or more claimed losses or events of
damage, whether directly or by reason of their ownership of or receipt of
distributions from the General Partner or either Partnership, shall not exceed
an amount equal to the value, as of the time for payment of the indemnity
obligation in question and before taking into account the effect, if any, on
such value of the loss, claim or damage giving rise to the indemnity obligation
in question and any other alleged or asserted indemnity obligations then
outstanding, of an interest in Newco corresponding to an aggregate ownership
interest in Newco of 1,100,000 shares of Common Stock, reduced by the number of
shares of Common Stock previously transferred by ▇▇▇▇▇▇▇▇ or Trevey to any party
hereto pursuant to the indemnity provisions hereof (as the same may be adjusted
for stock splits and stock dividends occurring after the date hereof). The
indemnity obligation of each of Trevey and ▇▇▇▇▇▇▇▇ taken separately arising
from the provisions of this Section for any one or more claimed losses or events
of damage, whether directly or by reason of his ownership of or receipt of
distributions from the General Partner or either Partnership, shall not exceed
an amount equal to one-half the amount calculated pursuant to the preceding
sentence. Neither Trevey nor ▇▇▇▇▇▇▇▇ shall be obligated to pay any cash or
property other than Newco Common Stock on account of any indemnity obligation
accruing hereunder unless, in violation of any term or provision of the
Shareholders Agreement, he has previously transferred (other than in connection
with the payment of an indemnity obligation) any of the shares of Common Stock
issued to him at the Closing (including shares of Common Stock transferred to
him by the General Partner or the Partnerships from the shares initially
received by the General
37
Partner or the Partnerships at the Closing) or any
shares of Common Stock issued without consideration in respect of any such
shares; if either Trevey or ▇▇▇▇▇▇▇▇ has made such a transfer, he shall be
liable to pay cash in respect of any indemnity obligation arising hereunder only
to the amount of the value of such shares of Common Stock so transferred
(calculated in accordance with the first sentence of this paragraph), subject to
the limits on aggregate liability set forth in this paragraph. Any indemnity
obligation owed by either Trevey or ▇▇▇▇▇▇▇▇ hereunder shall be payable first,
and to the extent possible, by transfer by Trevey and/or ▇▇▇▇▇▇▇▇ to the
appropriate APS Indemnified Parties of that number of shares of Common Stock of
Newco equal in value (with value determined before taking into account the
effect, if any, on such value of the loss, claim or damage giving rise to the
indemnity obligation in question and any other alleged or asserted indemnity
obligations then outstanding) to the indemnified loss. Any actual recovery by
the APS Indemnified Parties from any other Control Party shall first be deducted
in arriving at the remaining aggregate indemnity obligations of Trevey and
▇▇▇▇▇▇▇▇. Any shares of Newco Common Stock transferred by Trevey or ▇▇▇▇▇▇▇▇
under the provisions of this Section shall be distributed pro rata to each of
the APS Indemnified Parties based upon the proportionate share of Indemnified
Costs incurred by each such party. In the event that Newco shall receive, as an
APS Indemnified Party, shares of stock forfeited by Trevey or ▇▇▇▇▇▇▇▇
hereunder, such stock shall be recorded on Newco's books and held by Newco as
treasury stock. In determining the value of Common Stock for purposes of this
Section, the methodology specified for determining "Appraised Value" under the
provisions of Section 5.2 of the Shareholders Agreement shall be utilized.
The APS Indemnified Parties and all parties claiming under the APS
Indemnified Parties waive any right of subrogation with respect to any matter
indemnified hereunder to the extent of insurance actually in force which
provides coverage with respect to such indemnified event. Furthermore, the APS
38
Indemnified Parties and all parties claiming under the APS Indemnified Parties
agree not to assign or transfer (by subrogation or otherwise) to any insurance
carrier or any third-party claiming under any insurance carrier, any right of
recovery under this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement,
any obligations arising in connection with a breach, or threatened breach, by
Trevey and/or ▇▇▇▇▇▇▇▇, as the case may be, of the provisions of Section 10.3 or
Article 9 hereof shall not be subject to the foregoing limitations or manner of
payment provisions, or any other limitations or qualifications, and in the event
of any such breach, or threatened breach, of any such provisions, the parties
seeking relief related thereto shall have all remedies available to them at law,
in equity, or otherwise.
Section 7.2 DEFENSE OF THIRD-PARTY CLAIMS. An APS Indemnified Party
shall give prompt written notice to each of the Control Parties of the
commencement or assertion of any third party action in respect of which such APS
Indemnified Party shall seek indemnification hereunder. Any failure so to notify
the Control Parties shall not relieve the Control Parties from any liability
that they may have to such APS Indemnified Party under this Article unless the
failure to give such notice materially and adversely prejudices the Control
Parties. The Control Parties shall have the right to assume control of the
defense of, settle or otherwise dispose of such third-party action on such terms
as it deems appropriate; provided, however, that:
(a) The APS Indemnified Party shall be entitled, at his, her, or its
own expense, to participate in the defense of such third-party action;
(b) The Control Parties shall obtain the prior written approval of the
APS Indemnified Party, which approval shall not be unreasonably withheld, before
entering into or making any settlement,
39
compromise, admission or acknowledgment
of the validity of such third-party action or any liability in respect thereof
if, pursuant to or as a result of such settlement, compromise, admission or
acknowledgment, injunctive or other equitable relief would be imposed against
the APS Indemnified Party;
(c) None of the Control Parties shall consent to the entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the execution and delivery of a release from all liability in
respect of such third-party action by each claimant or plaintiff to, and in
favor of, each APS Indemnified Party; and
(d) None of the Control Parties shall be entitled to control (but shall
be entitled to participate at their own expense in the defense of), and the APS
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission or acknowledgment of any third-party action as
to which the Control Parties fail to assume the defense within thirty (30) days;
provided, however, that the APS Indemnified Party shall make no settlement,
compromise, admission or acknowledgment which would give rise to liability on
the part of the Control Parties, without the prior written consent of the
Control Parties.
(e) The Control Parties shall make payments of all amounts required to
be made pursuant to the foregoing provisions of this Article to or for the
account of the APS Indemnified Party from time to time promptly upon receipt of
bills or invoices relating thereto or when otherwise due and payable, provided
that the APS Indemnified Party has agreed in writing to reimburse the Control
Parties for the full amount of such payments if the APS Indemnified Party is
ultimately determined not to be entitled to such indemnification. If the Control
Parties fail to timely remit payments of amounts owed hereunder, such amounts
40
shall accrue interest at the maximum rate of interest permissible under
applicable state or federal law.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this Article
and, in connection therewith, shall furnish such records, information and
testimony and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be reasonably requested.
ARTICLE VIII
INDEMNIFICATION OF THE CONTROL PARTIES
Section 8.1 Indemnification by APS. APS agrees to indemnify and hold
harmless the Control Parties and the Limited Partner (collectively, the
"Indemnified Control Parties") from and against any and all Indemnified Costs in
connection with the commencement or assertion of any third party action which
any of the Indemnified Control Parties may sustain, arising out of any breach or
default by APS of any of its representations, warranties, covenants or
agreements contained in this Agreement or any agreement or document executed in
connection herewith (including, without limitation, the Organizational
Documents). Notwithstanding the foregoing or any other provision of this
Agreement, an obligation of APS shall arise under this Section only if and to
the extent that Indemnified Costs owed to all Indemnified Control Parties
hereunder, in the aggregate, exceed $100,000.
The Indemnified Control Parties and all parties claiming under the
Indemnified Control Parties waive any right of subrogation with respect to any
matter indemnified hereunder to the extent of insurance actually in force which
provides coverage with respect to such indemnified event. Furthermore, the
Indemnified Control
41
Parties and all parties claiming under the Indemnified
Control Parties agree not to assign or transfer (by subrogation or otherwise) to
any insurance carrier or any third-party claiming under any insurance carrier,
any right of recovery under this Agreement.
Section 8.2 INDEMNIFICATION BY THE LIMITED PARTNER. The Limited Partner
agrees to indemnify and hold harmless the Control Parties and APS from and
against any and all Indemnified Costs in connection with the commencement or
assertion of any third party action which any Control Party or APS may sustain,
arising out of any breach or default by the Limited Partner of any of its
representations, warranties, covenants or agreements contained in this Agreement
or any agreement or document executed in connection herewith. Notwithstanding
the foregoing or any other provision of this Agreement, an obligation of the
Limited Partner shall arise under this Section only if and to the extent that
Indemnified Costs owed to all the Control Parties and APS hereunder, in the
aggregate, exceed $100,000.
Section 8.3 INDEMNIFICATION BY NEWCO. Newco agrees to indemnify and
hold harmless APS, the Control Parties and the Limited Partner from and against
any and all Indemnified Costs arising from, or in connection with, (a) any of
the liabilities specifically assumed by Newco at Closing pursuant to Section 1.6
hereof, (b) any demands made against Trevey and ▇▇▇▇▇▇▇▇ under the terms of the
personal guaranty and/or maker obligations described in Section 1.8 hereof,
and/or (c) any obligations or liabilities with respect to any claims asserted
based on the business of Newco conducted after the Closing. Notwithstanding the
foregoing or any other provision of this Agreement, an obligation of Newco shall
arise under this Section only if and to the extent that Indemnified Costs owed
to all the Control Parties and the Limited Partner hereunder (other than
obligations arising pursuant to subsection (b) above), in the aggregate, exceed
$100,000.
42
Section 8.4 DEFENSE OF THIRD-PARTY CLAIMS. The indemnified party or
parties (both individually and collectively, the "indemnified party") under the
foregoing provisions of this Article shall give prompt written notice to the
indemnifying party or parties (both individually and collectively, the
"indemnified party") under the foregoing provisions of this Article of the
commencement or assertion of any third party action in respect of which such
indemnified party shall seek indemnification hereunder. Any failure to so notify
the indemnifying party shall not relieve such indemnifying party from any
liability that it may have to such indemnified party under this Article unless
the failure to give such notice materially and adversely prejudices the
indemnifying party. The indemnifying party shall have the right to assume
control of the defense of, settle or otherwise dispose of such third-party
action on such terms as it deems appropriate; provided, however, that:
(a) The indemnified party shall be entitled, at his, her or its
own expense, to participate in the defense of such third-party action;
(b) The indemnifying party shall obtain the prior written approval of
the indemnified party, which approval shall not be unreasonably withheld, before
entering into or making any settlement, compromise, admission or acknowledgment
of the validity of such third-party action or any liability in respect thereof
if, pursuant to or as a result of such settlement, compromise, admission or
acknowledgment, injunctive or other equitable relief would be imposed against
the indemnified party;
(c) The indemnifying party shall not consent to the entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the execution and delivery of a release from all liability in
respect of such third-party action by each claimant or plaintiff to, and in
favor of, each indemnified party; and
43
(d) The indemnifying party shall not be entitled to control (but shall
be entitled to participate at its own expense in the defense of), and the
indemnified party shall be entitled to have sole control over, the defense or
settlement, compromise, admission or acknowledgment of any third-party action as
to which the indemnifying party fails to assume the defense within thirty (30)
days; provided, however, that the indemnified party shall make no settlement,
compromise, admission or acknowledgment which would give rise to liability
(other than liability to the indemnified party under this Agreement) on the part
of the indemnifying party without the prior written consent of such indemnifying
party.
(e) The indemnifying party shall make payments of all amounts required
to be made pursuant to the foregoing provisions of this Article to or for the
account of the indemnified party from time to time promptly upon receipt of
bills or invoices relating thereto or when otherwise due and payable, provided
that the indemnified party has agreed in writing to reimburse the indemnifying
party for the full amount of such payments if the indemnified party is
ultimately determined not to be entitled to such indemnification. If the
indemnifying party fails to timely remit payments of amounts owed hereunder,
such amounts shall accrue interest at the maximum rate of interest permissible
under applicable state or federal law.
(f) The parties hereto shall extend reasonable cooperation in
connection with the defense of any third-party action pursuant to this Article
and, in connection therewith, shall furnish such records, information and
testimony and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be reasonably requested.
44
ARTICLE IX
RESTRICTIVE COVENANTS
Section 9.1 RELEASE OF PARTNERSHIP PROVISIONS. Each of the
Partnerships, the General Partner, the Limited Partner, Trevey and ▇▇▇▇▇▇▇▇
hereby covenant and agree that the General Partner, Trevey and ▇▇▇▇▇▇▇▇ are
hereby released from any restrictive agreements, covenants, provisions or
conditions contained in the Articles of Limited Partnership, Certificate of
Limited Partnership or other organizational documents entered into with respect
to the Partnerships. Without limiting the foregoing, it is specifically
acknowledged and agreed that the provisions of ARTICLE XIII (Right of First
Refusal) of the Amended and Restated Articles of Limited Partnership of ▇▇▇▇▇▇
House, and the provisions of ARTICLE XIII (Right of First Refusal) of the
Articles of Limited Partnership of Oakwell, are hereby waived and released in
all respects and shall hereafter be null and void. It is expressly agreed and
understood that the provisions of this Section in no way modify, limit or
otherwise affect any obligations of the parties contained in
this Article, or elsewhere in this Agreement, or in any other contract or
agreement entered into pursuant to the transactions contemplated by this
Agreement.
Section 9.2 NON-DISCLOSURE OF PROPRIETARY INFORMATION. Each party
hereto agrees that through its relationship and dealings with Newco, it will be
exposed to confidential information and trade secrets ("Proprietary
Information") pertaining to, or arising from, the business of Newco or Newco's
affiliates, that such Proprietary Information is unique and valuable and that
Newco or Newco's affiliates would suffer irreparable injury if this information
were divulged to those in
45
competition with Newco or Newco's affiliates.
Therefore, each party agrees to keep in strict secrecy and confidence, both
during and after the period of its relationship or business dealings with Newco,
any and all information which it acquires, or to which it has access during such
relationship or through such dealings, that has not been publicly disclosed by
Newco or Newco's affiliates or that is not a matter of common knowledge by their
respective competitors. The Proprietary Information covered by this Agreement
shall include, but shall not be limited to, information relating to any
inventions, processes, software, formulae, plans, devices, compilations of
information, technical data, mailing lists, management strategies, business
distribution methods, names of suppliers (of both goods and services) and
customers, names of employees and terms of employment, arrangements entered into
with suppliers and customers, including, but not limited to, proposed expansion
plans of Newco, marketing and other business and pricing strategies and trade
secrets of Newco and Newco's affiliates; provided, however, that Proprietary
Information shall not include any such information which has become generally
known to the public or in the relevant trade or industry by means other than as
a result of unauthorized disclosure by or at the direction of the party relying
on this exception.
At all times after the Closing, except with prior written approval by
the Board of Directors of Newco (pursuant to Article VIII, subsection (t) of the
Shareholders Agreement and Article 3, Section 8(t) of Newco's Bylaws), in each
instance, no party shall: (a) directly or indirectly, disclose any Proprietary
Information to any person except authorized personnel of Newco, or (b) use
Proprietary Information in any way not related solely to the business of Newco.
If such party is an employee of Newco or Newco's affiliates, upon termination of
employment, whether voluntary or involuntary, within forty-eight (48) hours of
termination, such employee will deliver to Newco
46
(without retaining copies
thereof) all documents, records or other memorializations including copies of
documents and any notes which such employee has prepared, that contain
Proprietary Information or relate to Newco's or Newco's affiliates' business,
all other tangible Proprietary Information in such party's possession or control
and all of Newco's and Newco's affiliate's credit cards, keys, equipment,
vehicles, supplies and other materials that are in possession or under such
employee's control.
Notwithstanding the foregoing or any other provision of this Agreement,
any party shall be entitled to divulge or disclose Proprietary Information (x)
to its accountants, attorneys, bankers or financial advisors (its
"Representatives") for the sole purpose of representing it in connection with
the business of Newco, (y) in the event that it or its Representatives are
requested or required during or through legal proceedings by oral questions,
interrogatories, requests for information or documents, subpoenas, or other
similar legal process to disclose any of the Proprietary Information, but only
after such party provides the other parties hereto ten (10) days, following
written notice of any such request or requirement, to seek a protective order or
other appropriate remedy, or waive compliance with the provisions of this
subsection, (z) it or its Representatives are, in the written opinion of
qualified legal counsel addressed and delivered to the other parties hereto not
less than ten (10) days prior to any disclosure, legally compelled to disclose
Proprietary Information to any tribunal, agency or governmental regulatory body
or else stand liable for contempt or suffer other censure or penalty, but only
to the extent required under the circumstances.
Section 9.3 NON-COMPETITION. Each party to this Agreement (other than
Newco) hereby agrees that, such party will not directly or indirectly, either
through any kind of ownership
47
(other than ownership of securities of a publicly
held corporation, or other entity, of which it owns less than five percent (5%)
of any class of outstanding securities), or as a principal, shareholder, agent,
employer, advisor, consultant, co-partner or in any individual or representative
capacity whatever, either for its own benefit or for the benefit of any other
person, corporation or other entity, without the prior written consent of all
other parties hereto, commit any of the following acts, which acts shall be
considered violations of this covenant not to compete:
(a) Directly or indirectly (other than through Newco), anywhere within
any state of the United States in which, at the time such party's employment
relationship with Newco, if applicable, terminates, Newco owns, operates, or has
specific plans to acquire, develop or operate, a business location providing, or
to provide, any Covered Services (as herein defined), engage in, or provide any
services related to the provision of assisted living services to senior citizens
with dementia, or any related services. For purposes of this Agreement, "Covered
Services" means any services related to the provision of assisted living
services to senior citizens with dementia or any related services.
Notwithstanding the foregoing or any other provision of this Agreement,
(A) the restrictions contained in this subsection (a) shall lapse with respect
to Trevey on the later of (x) the fifth anniversary of the Closing Date and (y)
the second anniversary of the date that Trevey voluntarily terminates his
employment with Newco, (B) the restrictions contained in this subsection (a)
shall lapse with respect to ▇▇▇▇▇▇▇▇ on the later of (x) the fifth anniversary
of the Closing Date and (y) the second anniversary of the date that ▇▇▇▇▇▇▇▇
voluntarily terminates his employment with Newco, and (C) if Newco terminates
the employment of either ▇▇▇▇▇▇▇▇ or
48
Trevey, the restrictions contained in this
subsection (a) shall lapse with respect to the terminated party on the first
anniversary of such termination. The restrictions contained in this subsection
(a) shall cease to be effective with respect to all parties hereto at any time
that both ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ are not longer bound by such restrictions.
Furthermore, in no event shall any party be bound by the provisions of this
subsection (a) after the earlier to occur of (i) the expiration of five years
from the date the common stock of Newco becomes publicly traded pursuant to an
underwritten registered public offering, or (ii) the expiration of ten years
after the Closing Date.
(b) Directly or indirectly, for such party's own account or otherwise,
solicit business from, divert business from or attempt to convert to other
methods of using the same or similar products or services as provided by Newco
or Newco's affiliates, any client, account or location of Newco or Newco's
affiliates with which such party has had any contact as a result of its
relationship and business dealings with Newco hereunder.
(c) Directly or indirectly request or advise any person, firm,
physician, corporation or other entity having a business relationship with Newco
or any affiliate of Newco, to withdraw, curtail or cancel its business with
Newco or such affiliate.
(d) Directly or indirectly hire any employee of Newco or any affiliate
of Newco, or induce or attempt to influence any employee or independent
contractor of Newco or any such affiliate to terminate or modify his or her
employment or contractual arrangement with Newco or any such affiliate.
49
Section 9.4 AGREEMENT OF THE PARTIES. Each party hereto has reviewed
and carefully considered the provisions of this Article and, having done so,
agrees that the restrictions applicable to them as set forth herein (a) are fair
and reasonable with respect to time, geographic area and scope, (b) are not
unduly burdensome to them and (c) are reasonably required for the protection of
the interests of the other parties hereto for whose benefit such restrictions
were agreed upon.
Section 9.5 REMEDIES. Each party hereto understands, acknowledges and
agrees that a violation on its part of any applicable covenant contained in this
Article will cause the other parties hereto for whose benefit such restrictions
were agreed upon irreparable damage for which remedies at law alone will be
insufficient, and for that reason, each party hereto agrees that the other
parties shall be entitled as a matter of right, upon application to a court of
competent jurisdiction, to equitable remedies in the event of any such
violation, including specific performance and injunctive relief, therefor. The
right to specific performance and injunctive relief shall be cumulative and in
addition to whatever other remedies, at law or in equity, that the other parties
may have, including, specifically, recovery of additional damages.
ARTICLE X
POST CLOSING AGREEMENTS
Section 10.1 Transition of Business. Each of the Control Parties agrees
to cooperate fully with Newco in transitioning the business conducted, and
business relationships maintained
50
by each of the Partnerships (and by the
General Partner as to the Assets contributed to Newco by the General Partner)
prior to the Closing, to Newco after the Closing (including, without limitation,
the re-registration in all applicable jurisdictions, under the name of Newco, of
all registered trademarks or servicemarks included in the Assets); APS and each
Control Party agree not to take any action or make any disclosure, including
disclosures related to the transactions contemplated by this Agreement, which
might alter or impair any relationship with any customer, or other service
recipient, person or entity which did business with either of the Partnerships
prior to the Closing. Each Control Party agrees to promptly remit to Newco any
payments received by any Control Party for services provided by either of the
Partnerships after the Effective Time and before the Closing, or by Newco after
the Closing. Furthermore, each of the Control Parties agrees to deposit any such
payments received directly to a deposit account designated and controlled by
Newco or to take such other action as may be requested by APS to implement and
maintain a system for remitting payments due Newco which come into the
possession or control of any Control Party. The provisions of this Section shall
not require any party hereto to incur out-of-pocket costs unless Newco pays for,
or agrees to reimburse, such costs.
Section 10.2 RATIFICATION BY NEWCO. Each and every party to this
Agreement hereby expressly agrees that it will not challenge or contest, on
legal grounds or otherwise, Newco's execution of, and power and authority to
perform its obligations under, this Agreement, notwithstanding the official date
of Newco's creation.
51
Section 10.3 EMPLOYMENT WITH NEWCO. Trevey and ▇▇▇▇▇▇▇▇ each agree to
enter into an Employment Agreement in the form attached hereto as Exhibit E
(collectively, the "Employment Agreements") at the Closing. Trevey and ▇▇▇▇▇▇▇▇
each agree (a) to comply with the terms of his respective Employment Agreement
and (b) not to terminate his employment with Newco for so long as Newco complies
with the terms of the Employment Agreement.
Section 10.4 DISPOSITION OF SUGARLAND PROPERTY. After Closing, upon
maturity of that certain promissory note dated December 2, 1997 in the original
principal amount of $300,000, arising out of a loan by APS to the General
Partner, (the "Sugarland Note"), and secured by that certain real property
located at 3050 and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the
"Sugarland Property"), Newco agrees to purchase, and the General Partner agrees
to sell, the Sugarland Property to Newco (free of all liens, claims and
encumbrances) in exchange for Newco's paying to the General Partner, in
immediately available funds, an amount of money equal to all amounts due under
the Sugarland Note. The General Partner shall execute, acknowledge and deliver
or cause to be delivered to Newco and APS such documents of title and conveyance
relating to the Sugarland Property as Newco, APS or their counsel may request.
All such documents must be reasonably acceptable in both form and substance to
Newco and APS and their counsel, and Newco agrees to reimburse the General
Partner for reasonable and necessary out-of-pocket costs incurred in obtaining
or providing such documents.
Section 10.5 FORM D FILING. Following the Closing, Newco shall properly
and timely file with the Securities and Exchange Commission a Form D, and all
parties agree to cooperate, as necessary, to facilitate such filing.
52
ARTICLE XI
MISCELLANEOUS
Section 11.1 COLLATERAL AGREEMENTS, AMENDMENTS AND WAIVERS. This
Agreement (together with all documents delivered pursuant hereto, executed in
connection herewith, or contemplated herein) supersedes all other documents,
understandings and agreements, oral or written and constitutes the entire
understanding among the parties with respect to the subject matter hereof. Any
modification or amendment to, or waiver of, any provision of this Agreement (or
any document delivered pursuant to this Agreement or contemplated herein, unless
otherwise expressly provided therein) may be made only by an instrument in
writing executed by each party thereto.
Section 11.2 SUCCESSORS AND ASSIGNS. No party's rights or obligations
under this Agreement may be assigned, transferred, conveyed or otherwise
disposed of except pursuant to that certain Shareholders Agreement executed in
connection with this Agreement. Upon any such permitted assignment, the assignee
shall execute the Shareholders Agreement, or a counterpart thereof, and the
assignor and the assignee shall thereafter be jointly and severally responsible
for the obligations of assignor hereunder. Furthermore, no assignment, of any
type, of rights or obligations under this Agreement shall in any way limit,
modify or otherwise affect the obligations of the remaining parties to this
Agreement. Any assignment in violation of the foregoing shall be null and void.
Subject to the preceding sentences of this Section, the provisions of this
Agreement (and, unless otherwise expressly provided therein, of any document
53
delivered pursuant to this Agreement or contemplated herein) shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns.
Notwithstanding the foregoing or any other provision of this Agreement,
the parties hereto acknowledge and agree that APS shall have unrestricted
rights, upon written notice to the other parties hereto, to freely assign its
rights under this Agreement and the other contracts or agreements entered into
by APS pursuant hereto, to any entity, the majority of whose voting equity
securities is then owned directly or indirectly by APS; provided, however, that
APS shall remain fully liable for all its obligations hereunder or under such
other contracts or agreements after any such assignment.
Section 11.3 EXPENSES. Except as set forth in the following sentence,
regardless of whether the transactions contemplated hereby are consummated, each
party hereto shall pay all of the costs and expenses incurred by it in
connection with this Agreement, including the fees and disbursements of its
legal counsel and accountants. In the event the transactions contemplated herein
are consummated, Newco will pay, or promptly reimburse, all parties hereto for
the reasonable fees and disbursements of its legal counsel incurred in
connection with the negotiation and entering into of this Agreement and the
other contracts and agreements entered into in connection with the Closing.
Furthermore, Newco agrees to reimburse the General Partner for the ordinary and
necessary out-of-pocket costs incurred in preparing the 1997 and 1998 federal
income tax return of the Partnerships and the General Partner.
54
Section 11.4 INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement and as if there was substituted in place
thereof a provision which parallels as closely as allowed by law the severed
provision, and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement.
Section 11.5 WAIVER. No failure or delay on the part of any party in
exercising any right, power or privilege hereunder or under any of the documents
delivered in connection with this Agreement shall operate as a waiver of such
right, power or privilege; nor shall any single or partial exercise of any such
right, power or privilege preclude any other or future exercise thereof or the
exercise of any other right, power or privilege.
Section 11.6 NOTICES. Any notices required or permitted to be given
under this Agreement (and, unless otherwise expressly provided therein, under
any document delivered pursuant to this Agreement) shall be given in writing and
shall be deemed received (a) when delivered personally or by courier service to
the relevant party at its address as set forth below or (b) if sent by mail, on
the third day following the date when deposited in the United States mail,
certified or registered mail, postage prepaid, to the relevant party at its
address indicated below:
55
APS, NEWCO OR American Physicians Service Group, Inc.
THE ADDITIONAL ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇
PURCHASERS: ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
LIMITED PARTNER: Uncommon Partners, Ltd.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Jenkens & ▇▇▇▇▇▇▇▇▇
2200 One American Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
56
CONTROL PARTIES: Uncommon Care
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Each party may change its address for purposes of this Section by
proper notice to the other parties.
Section 11.7 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, indemnity obligations, representations and warranties
made or agreed to hereunder, pursuant hereto or in connection with the
transactions contemplated hereby, shall survive the Closing.
Section 11.8 FURTHER ASSURANCES. At, and from time to time after, the
Closing, each party shall, at the request of another party, but without further
consideration, execute and deliver such other instruments of conveyance,
assignment, assumption, transfer and delivery and take such other action as such
party may reasonably request in order to more effectively to consummate the
transactions contemplated hereby, consistent with the terms hereof.
57
Section 11.9 CONSTRUCTION AND KNOWLEDGE. This Agreement and any
documents or instruments delivered pursuant hereto or in connection herewith
shall be construed without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this Agreement and
such other documents and instruments shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable either to
this Agreement or such other documents and instruments.
Section 11.10 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
Section 11.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument. Any party hereto may
execute this Agreement by signing any one counterpart.
Section 11.12 POST EFFECTIVE TIME ADJUSTMENTS. The parties acknowledge
and agree that each of the Partnerships has, prior to the Closing Date, been
receiving revenues, making disbursements and incurring payables and receivables
pursuant to its operations in the ordinary course since the Effective Time,
including, without limitation, paying payroll, payroll taxes, trade vendors and
other expenses. Each of the Partnerships will promptly account for all such
activity and will remit to Newco any net profits made and other amounts, if any,
58
due Newco with respect to such post-Effective Time activity. Furthermore, Newco
shall reimburse the General Partner, the Limited Partner, Trevey and ▇▇▇▇▇▇▇▇
for any cash contributions made by them to the Partnerships between the
Effective Time and the Closing Date made on account of any cash basis net
operating losses incurred by the Partnerships in the ordinary course of business
between the Effective Time and the Closing Date.
[Signature pages follow]
59
SIGNATURE PAGES
CONTRIBUTION
AND
STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered on the day and year first above written.
APS: AMERICAN PHYSICIANS SERVICE GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Print Title: Senior VP
NEWCO: ▇▇▇▇▇▇ ACQUISITION, INC.
By: _____________________________________
Print Name: ___________________________
Print Title: ___________________________
▇-▇
▇▇▇▇▇▇ ▇▇▇▇▇: ▇▇▇▇▇▇ HOUSE, LTD.
By: Uncommon Care, Inc., its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Print Title: President
OAKWELL: ▇▇▇▇▇▇ HOUSE AT OAKWELL FARMS, LTD.
By: Uncommon Care, Inc., its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Print Title: President
S-2
GENERAL PARTNER: UNCOMMON CARE, INC.
By: Uncommon Care, Inc., its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Print Title: President
▇▇▇▇▇▇▇▇: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
TREVEY: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
S-3
LIMITED PARTNER: UNCOMMON PARTNERS, LTD.
By: LTZ, Inc., its General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, President
[Signature pages for Additional Purchasers follow]
S-4
SIGNATURE PAGES
CONTRIBUTION
AND
STOCK PURCHASE AGREEMENT
ADDITIONAL
PURCHASERS:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. TRUST
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. Trustee
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., Trustee
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
▇. ▇. ▇▇▇▇▇▇ DESCENDANTS' TRUST
By BANK OF BERMUDA, TRUSTEE
By /s/ ▇.▇. ▇▇▇▇▇▇▇
Name ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title Trust Manager
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
S-5
/s/ ▇. ▇. ▇▇▇▇▇
--------------------------
▇. ▇. ▇▇▇▇▇
/s/ ▇.▇. ▇▇▇▇▇▇. III
--------------------------
▇. ▇. ▇▇▇▇▇▇, III
S-6
APPENDIX I
ADDITIONAL PURCHASERS
Name Number of Shares Purchase Price
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 3,800 $11,000
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. Trust 19,000 55,000
▇▇▇▇▇▇ ▇. ▇▇▇▇ 17,100 49,500
▇. ▇. ▇▇▇▇▇▇ Descendants' Trust 7,600 22,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 9,880 28,600
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 11,400 33,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 3,800 11,000
▇. ▇. ▇▇▇▇▇ 7,600 22,000
▇. ▇. ▇▇▇▇▇▇, III 1,900 5,500
------- --------
Totals 82,080 $237,600
====== =======