EXECUTION
STOCK PURCHASE AGREEMENT
among
CPS HOLDINGS, LLC, as SELLER
CURASCRIPT PHARMACY, INC.,
CURASCRIPT PBM SERVICES, INC.,
and
Express Scripts, Inc., as BUYER
December 19, 2003
TABLE OF CONTENTS
ARTICLE I
PURCHASE AND SALE OF SHARES AND BUYER PAYMENTS...............................1
1.01 Purchase and Sale of Shares...........................................1
1.02 Calculation of Actual and Estimated Purchase Price....................1
1.03 Estimated Net Working Capital; Transaction Tax Benefits...............2
1.04 The Closing; Payments for Shares, Indebtedness, Seller Expenses,
Retention Payments and Employee Bonus Payments...................... .2
1.05 Final Net Working Capital Calculation.................................3
1.06 Post-Closing Adjustment Payment.......................................4
1.07 Escrow................................................................4
ARTICLE II
CONDITIONS TO CLOSING........................................................5
2.01 Conditions to Each Party's Obligations................................5
2.02 Conditions to Buyer's Obligations.....................................5
2.03 Conditions to the Seller's Obligations................................7
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF SELLER.........................................................7
3.01 Organization and Authority............................................7
3.02 Execution and Delivery; Valid and Binding Agreement...................8
3.03 Noncontravention......................................................8
3.04 Ownership of Capital Stock............................................8
3.05 Brokers Fees..........................................................8
3.06 Assets and Business of Seller.........................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANIES AND THE COMPANY SUBSIDIARIES...................................9
4.01 Organization and Corporate Power......................................9
4.02 Subsidiaries..........................................................9
4.03 Authorization; No Breach; Valid and Binding Agreement................10
4.04 Capital Stock........................................................10
4.05 Financial Statements.................................................11
4.06 Absence of Certain Developments......................................11
4.07 Title to Properties..................................................13
4.08 Tax Matters..........................................................14
4.09 Contracts and Commitments............................................15
4.10 Intellectual Property................................................15
4.11 Litigation...........................................................15
i
4.12 Governmental Consents, etc...........................................15
4.13 Employee Benefit Plans...............................................15
4.14 Insurance............................................................15
4.15 Compliance with Laws.................................................15
4.16 Environmental Matters................................................15
4.17 Affiliated Transactions..............................................15
4.18 Employees............................................................15
4.19 Brokerage............................................................15
4.20 Undisclosed Liabilities..............................................15
4.21 Customers and Suppliers..............................................15
4.22 Inventory............................................................15
4.23 Accounts Receivable; Accounts Payable................................15
4.24 Bank Accounts........................................................15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER.....................................15
5.01 Organization and Power...............................................15
5.02 Authorization; Valid and Binding Agreement...........................15
5.03 No Breach............................................................15
5.04 Governmental Consents, etc...........................................15
5.05 Litigation...........................................................15
5.06 Brokerage............................................................15
5.07 Investment Representation............................................15
5.08 Financing............................................................15
ARTICLE VI
PRE-CLOSING COVENANTS.......................................................15
6.01 Conduct of the Business..............................................15
6.02 Access to Books and Records..........................................15
6.03 Regulatory Filings...................................................15
6.04 Conditions...........................................................15
6.05 Exclusive Dealing....................................................15
6.06 Notification.........................................................15
6.07 Insurance............................................................15
6.08 Certain Information..................................................15
ARTICLE VII
COVENANTS OF BUYER..........................................................15
7.01 Access to Books and Records..........................................15
7.02 Notification.........................................................15
7.03 Director and Officer Liability and Indemnification...................15
7.04 Regulatory Filings...................................................15
7.05 Conditions...........................................................15
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7.06 Contact with Customers and Suppliers.................................15
7.07 Employee Benefits....................................................15
7.08 Duke Letter of Credit................................................15
ARTICLE VIII
TERMINATION.................................................................15
8.01 Termination..........................................................15
8.02 Effect of Termination................................................15
ARTICLE IX
INDEMNIFICATION.............................................................15
9.01 Survival.............................................................15
9.02 Indemnification by the Seller for the Benefit of Buyer...............15
9.03 Indemnification by the Buyer for the Benefit of the Seller...........15
9.04 Manner of Payment....................................................15
9.05 Defense of Third Party Claims........................................15
9.06 Determination of Loss Amount.........................................15
ARTICLE X
TAX MATTERS.................................................................15
10.01 Tax Returns and Reports.............................................15
10.02 Liability for Taxes for Post-Closing Tax Periods....................15
10.03 Refunds and Credits.................................................15
10.04 Contest Provisions..................................................15
10.05 Cooperation.........................................................15
10.06 FIRPTA Certificate..................................................15
10.07 Transfer Taxes......................................................15
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES..........................15
11.01 Disclosure Generally................................................15
11.02 Acknowledgment by Buyer and Seller..................................15
11.03 Further Assurances..................................................15
11.04 Non-Compete for Employees...........................................15
ARTICLE XII
DEFINITIONS.................................................................15
12.01 Definitions.........................................................15
12.02 Cross-Reference of Other Definitions................................15
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ARTICLE XIII
MISCELLANEOUS...............................................................15
13.01 Press Releases and Communications; Certain Disclosure...............15
13.02 Expenses 15
13.03 Knowledge Defined...................................................15
13.04 Notices 15
13.05 Assignment..........................................................15
13.06 Severability........................................................15
13.07 References..........................................................15
13.08 No Strict Construction..............................................15
13.09 Amendment and Waiver................................................15
13.10 Complete Agreement..................................................15
13.11 Counterparts........................................................15
13.12 Specific Performance................................................15
13.13 Third Party Beneficiaries...........................................15
13.14 Waiver of Jury Trial................................................15
13.15 Consent to Jurisdiction.............................................15
13.16 Governing Law.......................................................15
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EXHIBITS
Exhibit A..................Closing Certificate of the Companies
Exhibit B..................Closing Certificate of the Seller
Exhibit C..................Closing Certificate of Buyer
Exhibit D..................Form of Escrow Agreement
Exhibit E..................Form of FIRPTA Certificate
Exhibit F..................Form of Release
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SCHEDULES
Section Reference
Affiliated Transactions Schedule.......................................4.17
Authorization Schedule..............................................4.03(b)
Bank Account Schedule..................................................4.24
Capital Expenditure Schedule........................................6.01(a)
Compliance Schedule.................................................4.15(e)
Contracts Schedule.....................................................4.09
Covenant Exceptions Schedule........................................6.01(b)
Developments Schedule..................................................4.06
Employee Benefits Schedule..........................................4.13(a)
Employee Bonus Payments Schedule......................................12.01
Employee Schedule......................................................4.18
Environmental Matters Schedule.........................................4.16
Financial Statements Schedule..........................................4.05
Indebtedness Schedule.................................................12.01
Insurance Schedule.....................................................4.14
Intellectual Property Schedule.........................................4.10
Leased Personal Property Schedule...................................4.07(a)
Leased Real Property Schedule.......................................4.07(b)
Liabilities Schedule...................................................4.20
Liens Schedule......................................................4.07(a)
Litigation Schedule....................................................4.11
Retention Payments Schedule...........................................12.01
vi
Seller Authorization Schedule..........................................3.03
Subsidiary Schedule....................................................4.02
Severance Schedule.....................................................7.07
Taxes Schedule.........................................................4.08
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of December
19, 2003, by and among Express Scripts, Inc., a Delaware corporation
("Buyer"), CuraScript Pharmacy, Inc., a Delaware corporation ("Pharmacy"),
CuraScript PBM Services, Inc., a Delaware corporation ("PBM Services") and CPS
Holdings, LLC, a Delaware limited liability company (the "Seller"). Each of
Pharmacy and PBM Services is referred to individually as a "Company," and
collectively, as the "Companies". Capitalized terms used and not otherwise
defined herein have the meanings set forth in Article XI. Each of the Seller,
Buyer and each Company shall be known herein as a "Party" and collectively as
the "Parties".
WHEREAS, as of the date hereof, the issued and outstanding shares of
Pharmacy's capital stock consists of 1,029.92 shares of common stock, par
value $0.01 per share (the "Pharmacy Common Stock"), and the issued and
outstanding shares of PBM Services' capital stock consists of 1,000 shares of
common stock, par value $0.01 per share (the "PBM Services Common Stock") and
Seller owns all of the Pharmacy Common Stock and PBM Services Common Stock
(collectively the "Shares"); and
WHEREAS, subject to the terms and conditions of this Agreement, Buyer
desires to acquire from the Seller all of the Shares and the Seller desires to
sell to Buyer all of the Shares.
NOW, THEREFORE, in consideration of the premises, representations and
warranties and mutual covenants contained herein and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES AND BUYER PAYMENTS
1.01 Purchase and Sale of Shares. Upon the terms and subject to the
conditions set forth in this Agreement, the Seller shall sell, assign,
transfer and convey to Buyer, and Buyer shall purchase and acquire from the
Seller, all of the Shares against payment by Buyer of an amount in cash equal
to the Purchase Price (as defined in Section 1.02(i)). The portion of the
Purchase Price to be paid at the Closing to the Seller will be an amount in
cash equal to the Estimated Purchase Price (as defined in Section 1.02(ii));
and such amount shall be paid at the Closing as follows: (i) Buyer shall pay
$40,000,000 of the Estimated Purchase Price (the "Escrow Deposit") to the
Escrow Agent to be held in escrow subject to the terms of this Agreement and
the Escrow Agreement, and (ii) Buyer shall pay the remainder of the Estimated
Purchase Price to Seller.
1.02 Calculation of Actual and Estimated Purchase Price.
(i) For purposes of this Agreement, "Purchase Price" shall mean an
amount equal to (A) $335,000,000 (the "Base Consideration"), minus (B)
the outstanding principal amount of and accrued interest on Indebtedness
(other than Retained Indebtedness on the Indebtedness Schedule) as of the
Closing, minus (C) the aggregate amount of the Employee Bonus Payments,
minus (D) the aggregate amount of the Retention Payments, plus (E) the
aggregate amount of the Transaction Tax Benefits, minus (F) the amount,
if any, of any Seller Expenses paid by Buyer or the Companies at the
Closing, plus (G) the amount, if any, by which the Net Working Capital
exceeds $31,100,000 (the "NWC Target"), minus (H) the amount, if any, by
which the Net Working Capital is less than the NWC Target.
(ii) For purposes of this Agreement, "Estimated Purchase Price"
shall mean an amount equal to (A) the Base Consideration, minus (B) the
outstanding principal amount of and accrued interest on Indebtedness
(other than Retained
Indebtedness on the Indebtedness Schedule) as of the Closing, minus
(C) the aggregate amount of the Employee Bonus Payments, minus (D) the
aggregate amount of the Retention Payments, plus (E) the aggregate amount
of the Transaction Tax Benefits, minus (F) the amount, if any, of any
Seller Expenses paid by Buyer or the Companies at the Closing, plus (G)
the amount, if any, by which the Estimated Net Working Capital exceeds
the NWC Target, minus (H) the amount, if any, by which the Estimated Net
Working Capital is less than the NWC Target.
1.03 Estimated Net Working Capital; Transaction Tax Benefits. Prior to
Closing, (a) Seller shall deliver to Buyer its calculation of the Transaction
Tax Benefits, which shall be subject to the reasonable approval of the Buyer
and (b) the Parties shall attempt to jointly agree upon an estimate of the Net
Working Capital (the "Estimated Net Working Capital"). In the event the
parties do not agree on the Estimated Net Working Capital, the Estimated Net
Working Capital will be deemed to equal the NWC Target.
1.04 The Closing; Payments for Shares, Indebtedness, Seller Expenses,
Retention Payments and Employee Bonus Payments.
(a) The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP located at
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ at 10:00 a.m. on January 30, 2004
or if any of the conditions to the Closing set forth in Article II (other than
those to be satisfied at the Closing) have not been satisfied or waived by the
party entitled to the benefit thereof then on the fifth Business Day following
satisfaction or waiver of all of the closing conditions set forth in Article
II (other than those to be satisfied at the Closing) or on such other date as
is mutually agreeable to Buyer and the Seller. The date and time of the
Closing are referred to herein as the "Closing Date."
(b) At the Closing, Seller and the Escrow Agent shall receive payment by
Buyer of an amount in cash as calculated in Section 1.02(ii) in exchange for
the delivery to Buyer of stock certificates evidencing the Shares duly
endorsed for transfer or accompanied by appropriate transfer documents.
Payment for the Shares shall be made by wire transfer of immediately available
funds to (i) in the case of Seller, an account or accounts specified by Seller
at least two Business Days prior to the Closing, and (ii) in the case of
Escrow Agent, to the account specified by the Escrow Agent at least two
Business Days prior to the Closing.
(c) At the Closing:
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(i) Buyer shall repay, or cause to be repaid, on behalf of the
Companies and the Company Subsidiaries, the then outstanding balance of
Closing Indebtedness by wire transfer of immediately available funds as
specified in the payoff letters referred to in Section 2.01(f)(iii);
(ii) Buyer shall pay, or cause to be paid, on behalf of the Seller,
the Seller Expenses by wire transfer of immediately available funds to
accounts specified by Seller prior to the Closing;
(iii) Buyer shall cause the Companies to pay with funds provided by
Buyer the Retention Payments less any and all applicable withholding
Taxes, through the Companies' payroll system by wire or check; and
(iv) Buyer shall cause the Companies to pay with funds provided by
Buyer the Employee Bonus Payments less any and all applicable withholding
Taxes, through the Companies' payroll system by wire or check.
Buyer shall cause the Companies to make timely payment to the appropriate
taxing authority or authorities of any amounts withheld from payment to the
Retention Payment Recipients and Employee Bonus Recipients pursuant to
Sections 1.04(c)(iii) and 1.04(c)(iv).
1.05 Final Net Working Capital Calculation.
(a) As promptly as possible, but in any event within 40 days after the
Closing Date, Buyer will deliver to the Seller its calculations of the Net
Working Capital (the "Preliminary Closing Statement"). After delivery of the
Preliminary Closing Statement, the Seller and its accountants shall be
permitted reasonable access to review the Companies' and Company Subsidiaries'
books and records and work papers related to the preparation of the
Preliminary Closing Statement. The Seller and its accountants may make
inquiries of Buyer, the Companies, the Company Subsidiaries and their
respective accountants regarding questions concerning or disagreements with
the Preliminary Closing Statement arising in the course of their review
thereof, and Buyer shall use its, and shall cause the Companies and Company
Subsidiaries to use their, reasonable best efforts to cause any such
accountants to cooperate with and respond to such inquiries. If the Seller has
any objections to the Preliminary Closing Statement, the Seller shall deliver
to Buyer a statement setting forth its objections thereto (an "Objections
Statement"). If an Objections Statement is not delivered to Buyer within 15
days after delivery of the Preliminary Closing Statement, the Preliminary
Closing Statement shall be final, binding and non-appealable by the parties
hereto. The Seller and Buyer shall negotiate in good faith to resolve any such
objections, but if they do not reach a final resolution within 15 days after
the delivery of the Objections Statement, the Seller and Buyer shall submit
such dispute to KPMG LLP, or if such firm is unwilling or unable to serve, the
Seller and Buyer shall engage some other mutually agreeable "Big 4" accounting
firm (the "Independent Auditor"). The Seller and Buyer shall use their
commercially reasonable efforts to cause the Independent Auditor to resolve
all disagreements as soon as practicable. The resolution of the dispute by the
Independent Auditor shall be final, binding and non-appealable on the parties
hereto. The costs and expenses of the Independent Auditor shall be paid
equally by Buyer and the Seller. The Preliminary Closing Statement as finally
modified by the parties' mutual agreement, the Seller's
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failure to file an Objections Statement and/or the decisions of the
Independent Auditor shall be referred to herein as the "Closing Statement".
(b) If the Net Working Capital as finally determined pursuant to clause
(a) above is greater than the Estimated Net Working Capital, Buyer shall pay
to the Seller such excess in accordance with Section 1.06. If the Net Working
Capital as finally determined pursuant to clause (a) above is less than the
Estimated Net Working Capital, the Seller shall pay such shortfall to Buyer in
accordance with Section 1.06.
1.06 Post-Closing Adjustment Payment. The Buyer shall promptly (but in
any event within five Business Days after the determination of the final
Closing Statement) deliver to the Seller the net positive amount, if any,
determined pursuant to Section 1.05 to be due by Buyer to Seller (plus simple
interest on such amount at the rate of interest announced publicly from time
to time by Citibank, N.A. as its prime rate from the Closing Date through the
date of payment) by wire transfer of immediately available funds to an account
or accounts designated by the Seller. The Seller shall direct the Escrow Agent
to promptly (but in any event within five Business Days after the
determination of the final Closing Statement) deliver to Buyer the net
positive amount, if any, determined pursuant to Section 1.05 to be due by the
Seller to Buyer (plus simple interest on such amount at the rate of interest
announced publicly from time to time by Citibank, N.A. as its prime rate from
the Closing Date through the date of payment), by wire transfer of immediately
available funds to one or more accounts designated by Buyer to the Seller and
the Escrow Agent.
1.07 Escrow. At the Closing, as provided in Section 1.01, Buyer will
deliver the Escrow Deposit to the Escrow Agent. The Escrow Deposit shall be
governed by the terms of this Agreement and of an escrow agreement (the
"Escrow Agreement") among Buyer, the Seller and the Escrow Agent,
substantially in the form of Exhibit A (subject to revisions required by the
Escrow Agent and agreed to by Buyer and the Seller). As provided in this
Agreement and the Escrow Agreement, the Escrow Deposit shall be held in an
account (the "Escrow Account"). Of the $40,000,000 initially deposited to the
Escrow Account, $30,000,000 (the "Indemnification Escrow Amount") shall be
available to satisfy the payment and discharge of obligations, if any, of
Seller under Section 1.06 and Section 9.02 and the remaining $10,000,000 (the
"NWC Escrow Amount") shall be available to satisfy only the payment and
discharge of obligations, if any, of Seller under Section 1.06. Subject to the
conditions and limitations set forth in the Escrow Agreement, after the
determination of the final Closing Statement and payment by Seller of amounts
due to Buyer, if any, under Section 1.06, the remainder of the NWC Escrow
Amount shall be paid to Seller in accordance with the terms of the Escrow
Agreement. Subject to the conditions and limitations set forth in the Escrow
Agreement, on March 30, 2005, the remainder of the Indemnification Escrow
Amount will be paid to Seller in accordance with the terms of the Escrow
Agreement.
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ARTICLE II
CONDITIONS TO CLOSING
2.01 Conditions to Each Party's Obligations. The respective obligations
of each Party to effect the transactions contemplated by this Agreement is
subject to the satisfaction of the following conditions as of the Closing:
(a) The applicable waiting periods, if any, under the HSR Act shall have
expired or been terminated;
(b) No statute, rule, regulation, injunction, writ, judgment, decree or
order shall have been enacted or issued by a Governmental Entity which would
impair the full performance of the terms of this Agreement or the consummation
of any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement or cause such transactions to be
rescinded and no proceeding or lawsuit will have been commenced by any
Governmental Entity for the purpose of obtaining any such injunction, writ,
judgment, decree or other order; and
(c) All consents, approvals, orders or authorizations of, or
registrations, declarations or filings with, any Governmental Entity required
in connection with the execution, delivery or performance of this Agreement
will have been obtained or made, except such consents, approvals,
registrations, declarations or filings which are permitted by Law to be
obtained or made after the Closing.
2.02 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of the Closing:
(a) The representations and warranties set forth in Articles III and IV
of this Agreement shall in each case, if specifically qualified by Material
Adverse Effect or materiality, be true and correct in all respects and, if not
so qualified, be true and correct in all material respects as of the date
hereof and at and as of the Closing Date as though then made (other than those
representations and warranties that address matters as of particular dates
which shall be true and correct or true and correct in all material respects,
as the case may be, at and as of such particular dates);
(b) The Companies and the Seller shall each have performed in all
material respects all of the covenants and agreements required to be performed
by them under this Agreement at or prior to the Closing;
(c) Between the date hereof and the Closing Date, there shall not have
occurred any Material Adverse Effect;
(d) All relationships between the Companies and any Company Subsidiary,
on the one hand, and GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇, LLC or, assuming payoff of the
Indebtedness owed to
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it, GTCR Capital Partners, L.P. on the other hand, shall have been terminated
without liability to the Companies, the Company Subsidiaries or Buyer to the
reasonable satisfaction of Buyer;
(e) The Companies or the Seller, as the case may be, shall have
delivered to Buyer each of the following:
(i) a certificate of each Company in the form set forth in Exhibit
A, dated the Closing Date, stating that the conditions specified in
Section 2.01(b) and in subsections (a) and (b) of Section 2.02, , as they
relate to such Company, have been satisfied;
(ii) a certificate of the Seller in the form of Exhibit B, dated the
Closing Date, stating that the preconditions specified in Section 2.01(b)
and in subsections (a) and (b) of Section 2.02, as they relate to the
Seller, have been satisfied;
(iii) payoff letters (which shall include commitments from the
obligees to fully discharge and release all Liens affecting property or
assets of the Companies and the Company Subsidiaries upon the receipt of
the payoff amount) for the Closing Indebtedness set forth on the
Indebtedness Schedule;
(iv) resignations effective as of the Closing Date from such
officers and directors of each Company and Company Subsidiary (solely
with respect to their officer and director designations but not from
employment by the Companies) as Buyer shall have requested in writing not
less than five days prior to the Closing Date;
(v) a copy of the certificate of incorporation of each Company and
Company Subsidiary, certified by the Secretary of State of Delaware and a
certificate of good standing from Delaware and each jurisdiction in which
it is duly qualified to transact business, in each case, dated within 5
Business Days of the Closing Date;
(vi) certified copies of the resolutions duly adopted by Seller's
board of managers and each Company's board of directors authorizing the
execution, delivery and performance of this Agreement and the other
agreements contemplated hereby, and the consummation of all transactions
contemplated hereby and thereby;
(vii) certified copies of the by-laws of each Company and Company
Subsidiary; and
(viii) the organizational record books, minute books and corporate
seal (if any) of each Company and Company Subsidiary;
(f) The Escrow Agreement shall have been executed and delivered by the
Escrow Agent and the Seller; and
(g) Buyer shall have received a legal opinion from counsel to the Seller
in a form reasonably satisfactory to the Buyer.
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If the Closing occurs, all closing conditions set forth in this Section 2.02
which have not been fully satisfied as of the Closing shall be deemed to have
been fully waived by Buyer unless agreed otherwise by Seller and Buyer.
2.03 Conditions to the Seller's Obligations. The obligations of the
Seller to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions as of the Closing:
(a) The representations and warranties set forth in Article V in this
Agreement shall, in each case, if specifically qualified by Material Adverse
Effect or materiality, be true and correct in all respects, and if not so
qualified, be true and correct in all material respects as of the date hereof
and as of the Closing as though then made (other than those representations
and warranties that address matters as of particular dates which shall be true
and correct or true and correct in all material respects, as the case may be,
at and as of such particular dates);
(b) Buyer shall have performed in all material respects all the covenants
and agreements required to be performed by it under this Agreement at or prior
to the Closing;
(c) Buyer shall have delivered to the Seller certified copies of the
resolutions duly adopted by Buyer's board of directors (or its equivalent
governing body) authorizing the execution, delivery and performance of this
Agreement and the Transaction Documents, and the consummation of all
transactions contemplated hereby and thereby;
(d) Buyer shall have delivered to the Seller a certificate in the form
set forth as Exhibit C, dated the Closing Date, stating that the preconditions
specified in Section 2.01(b) and in subsections (a) and (b) of Section 2.03,
as they relate to Buyer, have been satisfied;
(e) Seller shall have received a legal opinion from counsel to the Buyer
in a form reasonably satisfactory to the Seller; and
(f) The Escrow Agreement shall have been executed and delivered by the
Escrow Agent and the Buyer.
If the Closing occurs, all closing conditions set forth in this Section
2.03 which have not been fully satisfied as of the Closing shall be deemed to
have been fully waived by the Seller unless agreed otherwise by Seller and
Buyer.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.01 Organization and Authority. Seller is a limited liability company
duly organized, validly existing, and in good standing under the laws of the
state of Delaware, and Seller has all requisite limited liability company
power and authority and full legal capacity to execute and deliver this
Agreement and, as applicable, any other certificate, agreement, document or
other
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instrument to be executed and delivered in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Agreements"), and to perform its obligations hereunder and thereunder.
3.02 Execution and Delivery; Valid and Binding Agreement. All corporate
actions and proceedings necessary to be taken by or on the part of Seller in
connection with this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby have been or will prior to the
Closing be duly and validly taken. This Agreement has been, and at the Closing
the other Transaction Documents will be, duly and validly executed and
delivered by Seller, and this Agreement constitutes the valid and binding
obligation of Seller, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy laws, other similar laws affecting
creditors' rights and general principles of equity affecting the availability
of specific performance and other equitable remedies.
3.03 Noncontravention. Neither the execution and the delivery of this
Agreement and the other Transaction Documents, nor the consummation of the
transactions contemplated hereby and thereby, will (a) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any Governmental Entity (collectively,
"Laws") to which Seller is subject or any provision of Seller's limited
liability company agreement, (b) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other
arrangement to which Seller is a party or by which it is bound or to which any
of its assets is subject or result in the creation of any Lien upon the Shares
or (c) with respect to Seller, require the consent, approval, authorization,
license, order or permit of, or declaration, filing or registration with, or
notification to, any Governmental Entity, or any other Person, except those
specifically identified on the attached Seller Authorization Schedule and
except for the applicable requirements of the HSR Act.
3.04 Ownership of Capital Stock. Seller is the record owner of 1,029.92
shares of Pharmacy Common Stock and 1,000 shares of PBM Services Common Stock.
At the Closing, Seller shall transfer to Buyer good title to such Shares, free
and clear of all claims, pledges, security interests, liens, charges,
encumbrances (collectively, the "Liens"), options, proxies, purchase rights,
voting trusts or agreements and other restrictions and limitations of any
kind, other than applicable federal and state securities law restrictions.
3.05 Brokers Fees. Except for the fees and expenses of ▇.▇. ▇▇▇▇▇▇
Securities, Inc., Seller has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
3.06 Assets and Business of Seller. The Shares constitute the sole assets
of Seller, and Seller is not engaged in any business activity except as
necessary in connection with its ownership of the Shares.
3.07 Status of Seller. The Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Code.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANIES AND THE COMPANY SUBSIDIARIES
The Companies represent and warrant to Buyer that:
4.01 Organization and Corporate Power. Each Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, and each Company has all requisite corporate power and authority
and all authorizations, licenses and permits necessary to own and operate its
properties and to carry on its businesses as now conducted, except where the
failure to be in good standing would not have a Material Adverse Effect. Each
Company is duly qualified to do business and is in good standing as a foreign
corporation to transact business under the laws of each jurisdiction in which
its ownership of property or the conduct of businesses as now conducted
requires it to qualify, except where the failure to be so qualified would not
have a Material Adverse Effect. The Companies have made available to Buyer
true and complete copies of the organizational documents of each Company as
currently in effect and its corporate record books with respect to actions
taken by its shareholders and directors.
4.02 Subsidiaries. Except as set forth on the attached Subsidiary
Schedule, no Company or Company Subsidiary owns or holds the right to acquire
any stock, partnership interest, joint venture interest or other equity
ownership interest in any other Person. Each Company Subsidiary is wholly
owned by a Company as indicated on the Subsidiary Schedule. Each Company
Subsidiary identified on the Subsidiary Schedule is validly existing and in
good standing under the laws of the jurisdiction of its incorporation, (i) has
all requisite corporate power and authority and all authorizations, licenses
and permits necessary to own its properties and to carry on its businesses as
now conducted and (ii) is duly qualified to do business and is in good
standing as a foreign corporation to transact business under the laws of each
jurisdiction in which its ownership of property or the conduct of businesses
as now conducted requires it to qualify, except where the failure to be in
good standing or in the case of clause (i) to hold such authorizations,
licenses and permits or to be so qualified would not have a Material Adverse
Effect. The Companies have made available to Buyer true and complete copies of
the organizational documents of each Company Subsidiary as currently in effect
and its corporate record books with respect to actions taken by its
shareholders and directors.
4.03 Authorization; No Breach; Valid and Binding Agreement.
(a) Each Company has the corporate power and authority to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby. This
Agreement has been, and the Transaction Documents, as applicable, will be as
of Closing, duly authorized, executed and delivered by each Company. The
performance by each Company of the obligations under this Agreement and, to
the extent applicable, the Transaction Documents and the consummation of the
transactions contemplated herein and therein have been duly and validly
authorized by all necessary action or proceeding required to be taken
therefor. Assuming that this Agreement is a valid and binding obligation of
Buyer, this Agreement constitutes and each Transaction
- 9 -
Document will constitute a valid and binding obligation of each Company
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy laws, other similar laws affecting creditors' rights and
general principles of equity affecting the availability of specific
performance and other equitable remedies.
(b) Neither the execution and the delivery of this Agreement and the
other Transaction Documents, nor the consummation of the transactions
contemplated hereby and thereby, will (a) violate any Law which either Company
is subject or any provision of either Company's limited liability company
agreement, (b) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
either Company is a party or by which it is bound or to which any of its
assets is subject or result in the creation of any Lien upon the shares of any
Company Subsidiary or (c) require the consent, approval, authorization,
license, order or permit of, or declaration, filing or registration with, or
notification to, any Governmental Entity, or any other Person, except those
specifically identified on the attached Authorization Schedule and except for
the applicable requirements of the HSR Act.
4.04 Capital Stock.
(a) The entire authorized capital stock of Pharmacy consists of 3,000
shares of Pharmacy Common Stock, of which 1,029.92 shares are issued and
outstanding and none of which are held in treasury. The authorized capital
stock of PBM Services consists of 1,000 shares of PBM Services Common Stock,
all of which are issued and outstanding and none of which are held in
treasury. All issued and outstanding shares of the capital stock of the
Company are duly authorized, validly issued, fully paid and nonassessable.
Neither Company has any other capital stock, equity securities or securities
containing any equity features authorized, issued or outstanding, and there
are no agreements, options, warrants or other rights or arrangements existing
or outstanding (including any rights of first refusal, transfer restrictions
or preemptive rights) relating to the capital stock of either Company. There
are no rights, subscriptions, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise acquire any shares
of capital stock or other equity securities of either Company of any kind.
There are no agreements or other obligations (contingent or otherwise) which
require either Company to repurchase, redeem or otherwise acquire any shares
of such Company's capital stock or other equity securities. The attached
Indebtedness Schedule sets forth all of the outstanding Indebtedness and
capital leases of the Companies and the Company Subsidiaries as of the date
hereof. There are no outstanding bonds, debentures, notes or other
Indebtedness having the right to vote, whether contingent or otherwise, on any
matters on which stockholders of the Companies may vote.
(b) All of the issued and outstanding shares of capital stock of each
Company Subsidiary are beneficially owned directly by one of the Companies,
and all such shares have been validly issued, are fully paid and nonassessable
and are owned free and clear of all Liens except Permitted Liens. Except for
capital stock owned by the Companies, no Company Subsidiary has any other
capital stock, equity securities or securities containing any equity features
authorized, issued or outstanding, and there are no agreements, options,
warrants or other rights or arrangements existing or outstanding (including
any rights of first refusal, transfer
- 10 -
restrictions or preemptive rights) relating to the capital stock of any
Company Subsidiary. There are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or
otherwise acquire any shares of capital stock or other equity securities of
any Company Subsidiary of any kind. There are no agreements or other
obligations (contingent or otherwise) which require any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of such Company
Subsidiary's capital stock or other equity securities. There are no
outstanding bonds, debentures, notes or other Indebtedness having the right to
vote, whether contingent or otherwise, on any matters on which stockholders of
any Company Subsidiaries may vote.
4.05 Financial Statements. The Seller has furnished Buyer with true and
correct copies of (i) the unaudited consolidated balance sheet of the Seller
and its Subsidiaries as of October 31, 2003, and the related consolidated
statement of income and cash flows for the 10-month period then ended (the
"Interim Financial Statements") and (ii) the audited consolidated balance
sheets and statements of income and cash flows of Seller and its Subsidiaries
as of and for the fiscal years ended December 31, 2002 and December 31, 2001
(in each case including the related notes and schedules thereto) (the "Audited
Financial Statements"). Except as set forth on the attached Financial
Statements Schedule, such financial statements have been prepared in
accordance with GAAP consistently applied throughout the periods covered
thereby (subject, in the case of the unaudited financial statements, to normal
year-end audit adjustments and absence of footnotes) and have been based upon
the information concerning the Seller and its Subsidiaries contained in the
Seller's and its Subsidiaries' books and records, and present fairly in all
material respects the financial condition and results of operations of the
Seller and its Subsidiaries (taken as a whole) as of the times and for the
periods referred to therein.
4.06 Absence of Certain Developments. Since the date of the latest
Audited Financial Statements, there has not been any Material Adverse Effect
or any damage, destruction, loss or casualty to property or assets of the
Companies and the Company Subsidiaries with a value in excess of $50,000,
whether or not covered by insurance. Except as set forth on the attached
Developments Schedule and except as expressly contemplated by this Agreement,
since the date of the latest Audited Financial Statements, each Company and
Company Subsidiary has conducted its respective businesses in the ordinary
course of business and consistent with past practice and no Company or Company
Subsidiary has:
(a) borrowed any amount or incurred or become subject to any liabilities
(other than liabilities incurred in the ordinary course of business,
liabilities under contracts entered into in the ordinary course of business
and borrowings from banks (or similar financial institutions) necessary to
meet ordinary course working capital requirements);
(b) mortgaged, pledged or subjected to any material Lien, any portion of
its assets, except Permitted Liens;
(c) sold, assigned or transferred any portion of its tangible assets,
except in the ordinary course of business;
(d) sold, assigned or transferred any Intellectual Property, except in
the ordinary course of business;
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(e) suffered any material extraordinary losses or waived any rights of
material value;
(f) issued, sold or transferred any of its capital stock or other equity
securities, securities convertible into its capital stock or other equity
securities or warrants, options or other rights to acquire its capital stock
or other equity securities, any bonds or debt securities;
(g) made any material capital expenditures or commitments that aggregate
in excess of $50,000, other than capital expenditures made in accordance with
the Projections;
(h) changed any of the accounting policies, practices or procedures of
the Seller and its Subsidiaries except as required by GAAP;
(i) made any political contributions or made any bribes, kickback
payments or other illegal payments;
(j) amended or modified its charter or bylaws;
(k) declared any dividend-in-kind, pay or set aside for payment any
dividend-in-kind or other distribution of property or assets (other than
cash);
(l) (i) increased the compensation or fringe benefits of any Company
Employee (except for increases in salary or wages in the ordinary course of
business consistent with past practice), (ii) granted any severance or
termination pay to any Company Employee except in the ordinary course of
business consistent with past practice and not greater than $25,000 to any
individual, (iii) loaned or advanced money or other property to any Company
Employee, (iv) established, adopted, entered into, amended or terminated any
Plan, collective bargaining agreement (other than as may be required by the
terms of an existing Plan or collective bargaining agreement, or as may be
required by applicable law or in order to qualify under Sections 401 and 501
of the Code), or (v) granted any equity or equity-based awards to any Company
Employee;
(m) settled or compromised any suit, claim, proceeding or dispute or
threatened suit, claim, proceeding or dispute if such settlement or compromise
would result in (i) an injunction or similar relief or (ii) an obligation to
pay an amount after Closing the liability for which would not appear in the
Preliminary Closing Statement; and
(n) made or changed any material Tax election, changed any annual Tax
accounting period, changed any material method of Tax accounting or filed for
any change in accounting method, filed any material amended Tax Return,
entered into any closing agreement relating to Taxes, waived or extended the
statute of limitations in respect of material Taxes, settled any Tax claim or
assessment or surrendered any right to claim for a Tax refund.
4.07 Title to Properties.
(a) Except as set forth on the Liens Schedule, each of the Companies and
Company Subsidiaries own good and marketable title to, or hold pursuant to
valid and enforceable leases, all of the intangible and tangible personal
property (including equipment) and
- 12 -
assets of such entity, free and clear of all Liens, except for Permitted
Liens. No person other than the Companies and the Company Subsidiaries owns
any tangible personal property or assets situated on the premises of the
Companies or Company Subsidiaries or used to conduct the business of the
Companies, except for the leased items that are subject to the personal
property leases set forth on the attached Leased Personal Property Schedule.
(b) Part I of the Leased Real Property Schedule sets forth all of the
real property used by the Companies and the Company Subsidiaries. The real
property demised by the leases described on Part II of the attached Leased
Real Property Schedule (the "Leased Real Property") constitutes all of the
real property leased by each Company and Company Subsidiary. Except as set
forth on the attached Leased Real Property Schedule, the Leased Real Property
leases are in full force and effect against the Company or Company Subsidiary
party thereto, and to Companies' knowledge, to the other persons party
thereto, subject to the limitations of bankruptcy laws, other similar laws
affecting creditors' rights and general principles of equity affecting the
availability of specific performance and other equitable remedies. The
Companies have made available to Buyer true and correct copies of all leases
listed on the Leased Real Property Schedule (including all amendments,
extensions, renewals, guarantees and other Agreements with respect thereto).
(c) Each Leased Real Property lease is the legal, valid and binding
obligation of the Company or Company Subsidiary party thereto, and to
Companies' knowledge, to the other persons party thereto, and each is
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws from time to time in effect affecting creditors' rights
generally or by principles governing the availability of equitable remedies.
Except for such matters as would not result in a Material Adverse Effect, each
Company or Company Subsidiary has performed all obligations required to be
performed by it under the Leased Real Property lease and is not in default
thereunder, and no event has occurred which, with the lapse of time or action
by a third party, could result in a default by any Company or Company
Subsidiary, or, to Companies' knowledge, by any other party thereto, under any
Leased Real Property lease. Except for such matters as would not result in a
Material Adverse Effect, the Companies' and the Company Subsidiaries'
possession and quiet enjoyment of the Leased Real Property under such Leased
Real Property lease has not been distributed and to Companies' knowledge,
there are no disputes with respect to such Leased Real Property lease. No
security deposit or portion thereof deposited with respect to such Leased Real
Property lease has been applied in respect of a breach or default under such
Leased Real Property lease which has not been redeposited in full. The
Companies and the Company Subsidiaries do not, and will not in the future, owe
any brokerage commissions or finder's fees with respect to such Leased Real
Property lease. The other party to such Leased Real Property lease is not
Seller or an Affiliate of Seller. Except as set forth in the Leased Real
Property Schedule, Seller has not subleased, licensed or otherwise granted any
Person the right to use or occupy such Lease Real Property.
(d) No Company or Company Subsidiary owns any real property.
4.08 Tax Matters. Except as set forth on the Taxes Schedule, (i) the
Company and Company Subsidiaries have timely filed all Tax Returns required to
be filed by them (taking into account all applicable extensions), (ii) all
Taxes due and payable by the Company and Company
- 13 -
Subsidiaries (whether or not shown on any Tax Return) have been fully paid or
reserved for (excluding any reserve for deferred Taxes) on the Company's
financial statements in accordance with GAAP, (iii) no Company or Company
Subsidiary currently is the beneficiary of any extension of time within which
to file any Tax Return, (iv) no claim has ever been made by an authority in a
jurisdiction where the Company or any Company Subsidiary does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction, (v) no
federal, state, local or foreign Tax audits or administrative or judicial Tax
proceedings are pending or being conducted with respect to the Company or a
Company Subsidiary, (vi) no Company or Company Subsidiary has received from
any federal, state, local or foreign taxing authority (including jurisdictions
where the Company or Company Subsidiary has not filed Tax Returns) any (A)
written notice indicating an intent to open a Tax audit or other review of
Taxes, or (B) notice of deficiency or proposed adjustment for any amount of
Tax proposed, asserted, or assessed by any taxing authority against the
Company or Company Subsidiary, (vii) every Tax Return provided to the Buyer by
the Company and Company Subsidiaries is a correct and complete copy of such
Tax Return, (viii) no Company or Company Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency, (ix) no Company or Company
Subsidiary has any liability for the Taxes of another Person (other than a
Company or any Company Subsidiary) under Treasury Regulations Section 1.1502-6
(or any similar provision of applicable state, local or foreign law), (x) each
of the Company and the Company Subsidiaries has collected all sales and use
Taxes required to be collected, and has remitted, or will remit on a timely
basis, such amounts to the appropriate Governmental Entities, or has been
furnished properly completed exemption certificates and has maintained all
such records and supporting documents in the manner required by all applicable
sales and use Tax statutes and regulations; (xi) each of the Company and the
Company Subsidiaries has duly and timely withheld and paid over to the
appropriate taxing authorities all Taxes required to be have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party under all applicable
laws and regulations; (xii) there is no tax sharing agreement that will
require any payment by any of the Company or the Company Subsidiaries after
the Closing Date and (xiii) within the two years prior to the Closing Date, no
Company or Company Subsidiary has distributed the stock of another Person, or
has had its stock distributed by another Person, in a transaction that was
purported or intended to be governed in whole or in part by Sections 355 or
361 of the Code.
4.09 Contracts and Commitments.
(a) Except as set forth on the attached Contracts Schedule, no Company or
Company Subsidiary is party to any: (i) agreement relating to any acquisition
of a business by such Company or Company Subsidiary within the last three
years; (ii) collective bargaining agreement or contract with any labor union;
(iii) written bonus, pension, profit sharing, retirement or other form of
deferred compensation plan, other than as described in Section 4.13 or the
schedules relating thereto; (iv) stock purchase, stock option or similar plan;
(v) contract for the employment of any officer, individual employee or other
person on a full-time or consulting basis with annual payments in excess of
$100,000; (vi) agreement, indenture, note or any other evidence relating to
the borrowing of money or to mortgaging, pledging or otherwise placing a Lien
except Permitted Liens on any material portion of such Company's or such
Company
- 14 -
Subsidiary's assets; (vii) guaranty of any obligation for borrowed money or
other guaranty; (viii) lease or agreement under which it is lessee of, or
holds or operates any personal property owned by any other party, for which
the annual rental exceeds $100,000; (ix) lease or agreement under which it is
lessor of or permits any third party to hold or operate any property, real or
personal (including equipment), for which the annual rental exceeds $100,000;
(x) contract or group of related contracts with the same party and its
Affiliates to provide products or services under which the undelivered balance
of such products and services has a selling price in excess of $100,000; (xi)
contract which prohibits such Company or such Company Subsidiary from freely
engaging in business anywhere in the world; (xii) contract or group of
contracts with suppliers of pharmaceutical products under which the
undelivered balance of such products has a sales price in excess of $100,000;
(xiii) agreement for capital expenditures by the Companies or Company
Subsidiaries in excess of $50,000; (xiv) agreement, contract or other
arrangement with Seller or any Affiliate of Seller (other than a Company or
Company Subsidiary); (xv) any other Contract or group of related Contracts
either involving more than $500,000 of revenue or payments for the period from
January 1, 2003 through and including November 30, 2003, or not entered into
in the ordinary course of business, or (xvi) contract with any drug company
(all of the foregoing agreements, contracts and leases, the "Company
Contracts").
(b) The Companies have made available to Buyer true and correct copies of
all written contracts listed on the Contracts Schedule.
(c) Each Company Contract: (i) is legal, valid, binding, enforceable, and
in full force and effect against the Company party thereto and to the
Companies' knowledge, the other party thereto; and (ii) the Companies and the
Company Subsidiaries are not and to the Company's knowledge no other party is
in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination,
modification, or acceleration, under the Company Contract. There is no Company
Contract that under which any Company or Company Subsidiary (i) is at risk for
all or any part of the drug ingredient cost (including but not limited to any
capitated contracts, risk-sharing or "risk band" contracts, contracts with
performance guarantees related to the drug ingredient cost, or similar
contracts), (ii) guarantees a minimum rebate amount (whether stated as a
percentage, a specific amount per prescription, or otherwise) to the customer,
other than as set out on the attached Contracts Schedule, or (iii) except as
set forth on the Contracts Schedule, undertakes to offer the customer the best
pricing offered to any other customer or class of customers.
4.10 Intellectual Property.
(a) The Intellectual Property Schedule sets forth a complete and correct
list of all of the following that are owned by, used by, or entered into by
the Companies or Company Subsidiaries: (i) patents or pending patent
applications; (ii) registered or material trademarks, service marks, trade
names, corporate names and Internet domain names; (iii) registered copyrights;
(iv) Software; and (vi) all licenses covering intellectual property rights to
which the Seller or its Affiliates is a party, either as licensee or licensor,
or an express third-party beneficiary.
(b) Except as set forth on the Intellectual Property Schedule: (i) the
Companies or Company Subsidiaries own and possess all right, title and
interest in and to, or has
- 15 -
a valid and enforceable license to use, free and clear of all Liens (other
than Permitted Liens), all of the Intellectual Property set forth on the
Intellectual Property Schedule; (ii) no claim by any third Person contesting
the validity, enforceability, use or ownership of the scheduled Intellectual
Property has been made, is currently outstanding or, to the Companies'
knowledge, is threatened; (iii) to the Companies' knowledge, no expiration of
any of the scheduled Intellectual Property is threatened or pending, except
for patents expiring at the end of their statutory terms (and not as a result
of any act or omission by the Seller); and (v) to the Companies' knowledge, no
third Person has infringed, misappropriated or otherwise conflicted with any
of such Intellectual Property.
4.11 Litigation.
(a) Except as set forth on the attached Litigation Schedule, there are no
actions, suits or proceedings pending or, threatened in writing or, to the
Companies' knowledge, otherwise threatened against or relating to a Company or
Company Subsidiary, at law or in equity, or before or by any Governmental
Entity, which if determined adversely to such Company or Company Subsidiary
would have a Material Adverse Effect, and no Company or Company Subsidiary is
subject to any arbitration proceedings under collective bargaining agreements
or otherwise or outstanding judgment, order or decree of any court or
Governmental Entity, or, to the Companies' knowledge, any investigations or
inquiries by any Governmental Entity.
(b) The Companies have made available to Buyer copies of all material
correspondence and other material written information relating to (i) the
audit or review of the Companies' claims and records initiated by CIGNA in
2002 in its capacity as DMERC for Region D, (ii) the May 6, 2002 subpoena
issued by the U.S. Attorney's Office in Boston and the related investigation
and (iii) the August 5, 2003 letter to Pharmacy from the Department of Justice
and the related investigation. To the Companies' knowledge, no Company or
Company Subsidiary (or employee thereof) is a target of the investigations
described in clauses (ii) or (iii) in the prior sentence.
4.12 Governmental Consents, etc. Without limiting the generality of
Section 4.15 (a):
(1) Each Company and Company Subsidiary has all licenses, franchises,
permits, authorizations, certifications, easements, variances,
exceptions, consents, and orders, including permits from all
Governmental Entities, ("Permits") required for the conduct of its
business and the occupancy and operation, for its present uses, of
the real and personal property which each of the Company and Company
Subsidiary owns or leases, except where the failure to have such
Permits would not, individually or in the aggregate, have a Material
Adverse Effect.
(2) Each employee of any Company or Company Subsidiary, including
Affiliated Professionals, has all Permits required for the
performance of his or her duties for such Company or such Company
Subsidiary, except where the failure to have such Permits would not,
individually or in the aggregate, have a Material Adverse Effect.
- 16 -
(3) No Company of Company Subsidiary or any of their respective
Affiliated Professionals or other employees is in violation of any
Permit or any terms or conditions thereof, except for such
violations as would not, individually or in the aggregate, have a
Material Adverse Effect.
(4) Without limiting the foregoing, each Company and Company Subsidiary
possesses all material required Permits from the United States Drug
Enforcement Administration ("DEA"), relevant state agencies,
pharmacy boards and any Governmental Entity to receive, store and
distribute pharmaceutical products, including pharmaceutical
products regulated as controlled substances, at and from its
pharmacies.
4.13 Employee Benefit Plans.
(a) The Employee Benefits Schedule sets forth a true and complete list of
each Plan (other than any equity-incentive, employment, collective bargaining,
bonus or incentive agreements of any Company or Company Subsidiary). Each of
the Plans that is intended to be qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), is so qualified and
has received a favorable determination letter from the Internal Revenue
Service covering all tax law changes prior to the Economic Growth and Tax
Relief Reconciliation Act of 2001 or has applied to the IRS for such favorable
determination or prototype opinion letter within the applicable remedial
amendment period under Section 401(b) of the Code, and nothing has occurred,
whether by action or failure to act, that could reasonably be expected to
cause the loss of such qualification. Each Plan has been established and
administered in accordance with its terms, and in compliance with the
applicable provisions of ERISA, the Code and other applicable laws, rules and
regulations, except as would not result in a material liability.
(b) No Plan is a multiemployer plan (within the meaning of Section 3(37)
of ERISA, a "Multiemployer Plan") or is subject to Title IV of ERISA, and
neither of the Companies, the Company Subsidiaries, nor any of their
respective ERISA Affiliates, have any liability or obligation in respect of,
any Multiemployer Plan or any pension benefit plan subject to Title IV of
ERISA.
(c) With respect to the Plans, all material required contributions have
been made or properly accrued.
(d) With respect to the Plans, each Company has furnished to Buyer true
and correct copies or, to the extent no such copy exists, an accurate
description, (as applicable) of (i) the most recent determination or prototype
opinion letter received from the Internal Revenue Service, (ii) the three most
recent years Form 5500 annual reports, including attached schedules, audited
financial statements, and actuarial valuation reports; (iii) any related trust
agreement or other funding instrument; (iv) any summary plan description and
other written communications (or a description of any oral communications)
from any of the Companies or any Company Subsidiary to any Company Employee
concerning the extent of the benefits provided under a Plan; and (v) a summary
of any proposed amendments or changes anticipated to be made to the Plans at
any time within the twelve months immediately following the date hereof.
- 17 -
(e) (i) No event has occurred and no condition exists that would subject
either of the Companies or any Company Subsidiary, either directly or by
reason of their affiliation with any ERISA Affiliate, to any material tax,
fine, lien, penalty or other liability imposed by ERISA, the Code or other
applicable laws, rules and regulations; (ii) for each Plan with respect to
which a Form 5500 has been filed, no material change has occurred with respect
to the matters covered by the most recent Form since the date thereof; (iii)
no "prohibited transaction" (as such term is defined in Section 406 of ERISA
or Section 4975 of the Code) has occurred with respect to any Plan that would
result in a material liability, and no "reportable event" (as such term is
defined in Section 4043 of the Code) that could reasonably be expected to
result in material liability, or "accumulated funding deficiency" (as such
term is defined in Section 302 of ERISA and Section 412 of the Code (whether
or not waived)) has occurred with respect to any Plan; (iv) there is no
present intention that any Plan be materially amended, suspended or
terminated, or otherwise modified to adversely change benefits (or the levels
thereof) under any Plan at any time within the twelve months immediately
following the date hereof; (v) no Plan provides for loans to employees; (vi)
no Plan provides retiree welfare benefits and none of the Companies nor any
Company Subsidiary have any obligations to provide any retiree welfare
benefits, in each case, other than as required pursuant to Section 4980B of
the Code.
(f) With respect to any Plan: (i) no actions, suits or claims (other than
routine claims for benefits in the ordinary course) are pending or, or to the
Companies' knowledge, threatened; (ii) to the Companies' knowledge, no facts
or circumstances exist that could give rise to any such actions, suits or
claims; and (iii) no administrative investigation, audit or other
administrative proceeding by the Department of Labor, the Pension Benefit
Guaranty Corporation, the IRS or other governmental agencies are pending or in
progress, or to the Companies' knowledge, threatened.
(g) Other than the Employee Bonus Payments, the Retention Payments and
the Senior Management Agreements set forth on the Contracts Schedule, no Plan
exists that, as a result of the execution of this Agreement or the
transactions contemplated by this Agreement (whether alone or in connection
with any other events), could result in (i) the payment to any Company
Employee of any money or other property, (ii) the provision of any benefits or
other rights of any Company Employee, or (iii) the increase, acceleration or
provision of any payments, benefits or other rights to any Company Employee,
whether or not any such payment, right or benefit would constitute a
"parachute payment" within the meaning of Section 280G of the Code.
(h) There has been no amendment to, written interpretation of or
announcement (whether or not written) by any of the Companies or any Company
Subsidiary relating to, or any change in employee participation or coverage
under, any Plan that would materially increase the expense of maintaining such
Plan above the level of the expense incurred in respect thereof for the most
recent fiscal year ended prior to the date hereof.
(i) No Plan is maintained outside the jurisdiction of the United States,
or covers any employee residing or working outside the United States.
(j) All persons classified as independent contractors of any of the
Companies or any Company Subsidiary satisfy and have at all times satisfied
the requirements of applicable
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law to be so classified. Each of the Companies and the Company Subsidiaries
have fully and accurately reported such persons' compensation on IRS Form 1099
when required to do so. None of the Companies nor any Company Subsidiary has
or has had any obligations to provide benefits with respect to such persons
under any Plan or otherwise. Neither of the Companies nor any Company
Subsidiary employs nor has any of them employed any "leased employees" as
defined in Section 414(n) of the Code.
(k) There is no contract, plan or arrangement (written or otherwise)
covering any Company Employee that, individually or collectively, will, as of
or after the Closing, give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 280G of the Code or to an excise
tax to any Company Employee pursuant to the terms of Section 4999 of the Code.
4.14 Insurance. The attached Insurance Schedule lists each insurance
policy maintained by or for the benefit of each Company and Company
Subsidiary. All of such insurance policies are in full force and effect and
will be maintained in full force and effect as they apply to any matter,
action or event occurring through the Closing Date, and none of the Companies
or Company Subsidiaries has reached or exceeded its policy limits for any
insurance policies in effect at any time during the past three (3) years, no
Company or Company Subsidiary is in default with respect to its material
obligations under any of such insurance policies.
4.15 Compliance with Laws.
(a) Each of Seller, each Company and Company Subsidiary is in compliance
in all material respects with all applicable Laws.
(b) Without limiting the generality of clause (a) above, none of the
Seller, the Companies or any Company Subsidiaries, nor any of the officers,
directors, Affiliated Professionals and other employees of the Companies or
any of the Company Subsidiaries while acting on behalf of such Seller,
Companies or any Company Subsidiary, has engaged in any activity that would
likely constitute a violation of, or that would likely serve as cause for
criminal or civil penalties or mandatory or permissive exclusion from
Medicare, Medicaid or any other federal health care program under the Laws
pertaining to the federal Medicare and Medicaid programs, the federal Laws
applicable to health care fraud and abuse and kickbacks, (including without
limitation 42 U.S.C. ss. 1320a-7a, 42 U.S.C. ss. 1320a-7b, 42 U.S.C. ss.
1395nn and the federal Civil False Claims Act, 31 U.S.C. ss. 3729 et seq.,
related or similar statutes pertaining to the Federal Employees Health Benefit
Program, the TRICARE program or any other federal health care program or the
regulations promulgated pursuant to any of such statutes), or related or
similar state Laws pertaining to Medicaid or any state health care or health
insurance program, including without limitation:
(1) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application
for any benefit or payment
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(2) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in
determining rights to any benefit or payment;
(3) presenting or causing to be presented a claim for reimbursement
under Medicare, Medicaid or any other federal health care program
that is (1) for an item or service that the Person presenting or
causing to be presented knows or should know was not provided as
claimed, or (2) for an item or service that the Person presenting
knows or should know that the claim is false or fraudulent;
(4) knowingly and willfully offering, paying, soliciting or receiving
any remuneration (including any kickback, bribe or rebate), directly
or indirectly, overtly or covertly, in cash or in kind (1) in return
for referring, or to induce the referral of, an individual to a
Person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by
Medicare, Medicaid or any other federal health care program or (2)
in return for, or to induce, the purchase, lease or order, or the
arranging for or recommending of the purchase, lease or order, of
any good, facility, service or item for which payment may be made in
whole or in part by Medicare, Medicaid or any other federal health
care program; or
(5) knowingly and willfully making or causing to be made or inducing or
seeking to induce the making of any false statement or
representation (or omitting to state a material fact required to be
stated therein or necessary to make the statements contained therein
not misleading) of a material fact with respect to (1) the
conditions or operations of a pharmacy operated by any Company or
Company Subsidiary in order that the pharmacy may qualify for
Medicare, Medicaid or any other federal health care program
participation, or (2) information required to be provided under
Section 1124A of the Social Security Act.
(c) Without limiting the generality of clause (a) above, no Company,
Company Subsidiary, the Seller or their respective Affiliates (while acting on
behalf of Seller, any Company or Company Subsidiary) has made any payments to
unions or union officials, other than payments by the Companies pursuant to
pharmacy benefit management contracts made in the ordinary course of business,
consistent with past practice.
(d) Without limiting the generality of clause (a) above, as of the date
hereof, no Company or Company Subsidiary has received written notice, nor been
party to any action, to terminate the participation of such entity, or to
exclude such entity from participation, in any Government Health Care Program
or Private Health Care Plan. Without limiting the generality of the foregoing,
since July 31, 2000, none of the Companies nor any Company Subsidiaries nor,
to the Companies' knowledge, any Related Person or any Person that is a parent
company or shareholder of, or partner in, a Subsidiary who has an indirect
ownership interest (as that term is defined in 42 C.F.R. ss. 1001.1001(a)(2))
in any Company or any Company Subsidiary (i) has had
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a civil monetary penalty assessed against it under Section 1128A of the Social
Security Act, (ii) has been excluded from participation under Medicare,
Medicaid or any other federal health care program, or (iii) has been convicted
(as that term is defined in 42 C.F.R. ss. 1001.2) of any of the following
categories of offenses as described in Sections 1128(a) and 1128(b)(1), (2),
(3) of the Social Security Act:
(1) criminal offenses relating to the delivery of an item or service
under Medicare, Medicaid or any other federal health care program;
(2) criminal offenses under federal or state Law relating to patient
neglect or abuse in connection with the delivery of a health care
item or service;
(3) criminal offenses under federal or state Law relating to fraud,
theft, embezzlement, breach of fiduciary responsibility or other
financial misconduct in connection with the delivery of a health
care item or service or with respect to any act or omission in a
program operated by or financed in whole or in part by any federal,
state or local government agency;
(4) federal or state Laws relating to the interference with or
obstruction of any investigation into any criminal offense described
in (i) through (iii) above; or
(5) criminal offenses under federal or state Law relating to the
unlawful manufacture, distribution, prescription or dispensing of a
controlled substance.
For purposes of this Section 4.15(d), "Related Person" shall mean a
Person who has a direct or indirect ownership interest (as those terms are
defined in 42 C.F.R. ss. 1001.1001(a)(2)) in any Company or Company
Subsidiary, who has an ownership or control interest (as defined in Section
1124(a)(3) of the Social Security Act) in any Company or Company Subsidiary,
or who is an officer, director, agent (as defined in 42 C.F.R. ss.
1001.1001(a)(2)), or managing employee (as defined in Section 1126(b) of the
Social Security Act) of any Company or Company Subsidiary.
(e) Except as set forth on the Compliance Schedule, (i) each Company and
Company Subsidiary has paid or caused to be paid or has reflected in the
Interim Financial Statements all refunds, overpayments, discounts and
adjustments of which the Companies have knowledge that have become due, and
(ii) the reserves for refunds, overpayments, discounts and adjustments set
forth on the balance sheet included in the Interim Financial Statements has
been established consistent with past practice, and are sufficient to pay any
refund, overpayment, discount or adjustment of which the Companies is aware
under any Government Health Care Program or Private Health Care Plan, except
for any refund, overpayment, discount or adjustment incurred subsequent to the
date of the Interim Financial Statements in the ordinary course of business.
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(f) The Companies have made available to Buyer all material regulatory
agency forms, reports (including establishment, rating and inspection reports)
or correspondence received by such entity describing inspectional observations
by DEA or equivalent foreign or state regulatory agencies and all responses by
or on behalf of any of the Companies and Company Subsidiaries or their
Subsidiaries to such forms, reports or correspondence.
(g) The Companies have made available to Buyer all warning letters, other
regulatory letters, notices of violation, notices of hearing or adverse
findings received by such entity identifying potential violations of, or
deviations from, DEA or equivalent state agency regulatory requirements and
all responses by or on behalf of any of the Companies and Company Subsidiaries
to such letters and notices.
(h) Each of the Companies and its Company Subsidiaries performs internal
regulatory compliance audits on a regular basis, has made available to Buyer
any written information regarding these internal audits and has implemented
any corrective actions recommended by such reports.
(i) The Companies have made available to Buyer any available written
information regarding any regulatory audits by any outside auditor.
4.16 Environmental Matters. Except as set forth on the attached
Environmental Matters Schedule:
(a) Each Company and Company Subsidiary is in, and at all prior times has
been in compliance in, all material respects with all Environmental
Requirements.
(b) Each Company and Company Subsidiary has obtained all material
permits, licenses and other authorizations required under Environmental
Requirements, and are in compliance in all material respects with such
permits, licenses and authorizations.
(c) No Company or Company Subsidiary has, received any written notice of
violation of Environmental Requirements or any liability arising under or
relating to Environmental Requirements, including any investigatory, remedial
or corrective obligation, relating to such Company, its Subsidiaries or their
facilities, the subject of which is unresolved;
(d) The Companies have heretofore made available to Buyer true and
complete copies of all material reports, correspondence, memoranda and
computer data in the possession or control of the Seller that relate to
environmental matters;
(e) None of the Companies or Company Subsidiaries, has paid any fines or
penalties or failed to pay any fines or penalties since July 31, 2000 with
respect to environmental matters;
(f) None of the Companies or Companies Subsidiaries, with respect to any
location has, nor has any other Person with respect to the Leased Real
Property, imported, manufactured, stored, used, operated, transported, treated
or released (the term "release" meaning any actual or threatened spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaking, dumping, or arranging for the disposal of any
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Hazardous Material) any Hazardous Materials other than in compliance in all
material respects with all Environmental Requirements; and
(g) This Section 4.16 constitutes the sole and exclusive representations
and warranties of each Company with respect to any environmental, health or
safety matters, including without limitation any arising under Environmental
Requirements.
4.17 Affiliated Transactions. Except as set forth on the attached
Affiliated Transactions Schedule, no officer, director, stockholder or
Affiliate of Seller or either Company or any individual in such officer's,
director's or stockholder's immediate family is a party to any agreement,
contract, commitment or transaction with any Company or Company Subsidiary nor
has any material interest in any material property used by any Company or
Company Subsidiary.
4.18 Employees. (a) Except as set forth on the attached Employee
Schedule, no Company or Company Subsidiary has experienced any strike or
material grievance, claim of unfair labor practices, or other collective
bargaining dispute within the past two years. No Company or Company Subsidiary
has committed any material unfair labor practice. Except as set forth on the
attached Employee Schedule, to the Companies' knowledge, no organizational
effort is presently being made or threatened by or on behalf of any labor
union with respect to employees of either Company or any of its Subsidiaries
and no employee of any Company or Company Subsidiary is subject to any
noncompete, nondisclosure, confidentiality, employment or consulting
agreements in conflict with the present business activities of any Company or
Company Subsidiary except for agreements set forth on the attached Employee
Schedule. Each Company and Company Subsidiary is in compliance with its
obligations pursuant to the WARN Act and all other notification and bargaining
obligations arising under applicable Laws.
(b) The employees of the Companies and Company Subsidiaries have not
been, and currently are not, represented by a labor organization or group
which was either certified or voluntarily recognized by any labor relations
board, including, without limitation, the United States National Labor
Relations Board ("NLRB") or certified or voluntarily recognized by any other
Governmental Entity.
(c) Since July 31, 2000, no labor dispute, walk out, strike, slowdown,
hand billing, picketing, work stoppage (sympathetic or otherwise), or other
"concerted action" involving the employees of any of the Companies or Company
Subsidiaries has occurred, is in progress or, to the Companies' knowledge, has
been threatened;
(d) Since July 31, 2000, no discrimination and/or retaliation claim,
complaint, charge or investigation has been filed or is pending or, to the
Companies' knowledge, is threatened against any of the Companies or Company
Subsidiaries under the 1866 or 1964 Civil Rights Acts, the Equal Pay Act, the
Age Discrimination in Employment Act ("ADEA"), the Americans with Disabilities
Act, the Family and Medical Leave Act, the Fair Labor Standards Act, ERISA or
any other federal law or comparable state fair employment practices act or
foreign law.
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(e) If any of the Companies or Company Subsidiaries is a federal or state
contractor obligated to develop and maintain an affirmative action plan, no
discrimination claim, show cause notice, conciliation proceeding, sanction or
debarment proceeding has been filed or is pending or, to the Companies'
knowledge, is threatened with the Office of Federal Contract Compliance
Programs or any other federal agency or any comparable state or foreign agency
or court and no desk audit or on-site review is in progress.
(f) Since July 31, 2000, no citation has been issued by the Occupational
Safety and Health Administration ("OSHA") against any of the Companies or
Company Subsidiaries and no notice of contest, claim, complaint, charge,
investigation or other administrative enforcement proceeding involving any of
the Companies or Company Subsidiaries has been filed or is pending or, to the
Companies' knowledge, is threatened against any of the Companies or Company
Subsidiaries under OSHA or any other applicable law relating to occupational
safety and health.
4.19 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated
by this Agreement based on any arrangement or agreement made by or on behalf
of the Companies.
4.20 Undisclosed Liabilities. Except as disclosed in the Liabilities
Schedule, none of the Companies or Company Subsidiaries has any liabilities or
obligations (whether absolute, contingent or otherwise) which are not
adequately reflected or provided for in the balance sheet included in the
Interim Financial Statements, except (a) liabilities and obligations that have
been incurred since the date of such balance sheet in the ordinary course of
business consistent with the past practice and which would not have a Material
Adverse Effect and (b) liabilities and obligations of a type which are the
subject matter of any other representation (without regard to any specific
exclusions from such representations) in this Article IV (other than the
representation in Section 4.06).
4.21 Customers and Suppliers. As of the date hereof, since the latest
Audited Financial Statements, none of the Companies or Company Subsidiaries
has received any notice, to the effect that any of the 10 largest customers or
the ten largest suppliers (for the nine months ended September 30, 2003) may
terminate or materially reduce the volume of its business with any of the
Companies or Company Subsidiaries.
4.22 Inventory. As of the date hereof, the inventory of each of the
Companies is of a quality presently usable or saleable in the ordinary course
of business, subject to the reserves maintained for expired or obsolete goods
included on the balance sheet included in the Interim Financial Statements as
adjusted for the passage of time through the Closing Date in accordance with
the Companies' past custom and practice.
4.23 Accounts Receivable; Accounts Payable.
(a) Accounts Receivable. Except for accounts receivable which have been
collected or settled prior to Closing, all accounts receivable which are
reflected on the balance sheet included in the Interim Financial Statements
(i) are valid, (ii) represent monies due for goods and sold and delivered or
services rendered and (iii) arose in the ordinary course of
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business. None of the Companies or Company Subsidiaries has factored any of
its Receivables. As of the date hereof, to the Companies' knowledge, no debtor
who, as of the date of the balance sheet included in the Interim Financial
Statements, owed the Companies and Company Subsidiaries more than $50,000 (net
of reserves related thereto), is involved in or subject to a bankruptcy or
insolvency proceeding.
(b) Accounts Payable. The accounts payable of the Companies and Company
Subsidiaries reflected on the balance sheet included in the Interim Financial
Statements arose from bona fide transactions and in the ordinary course of
business.
4.24 Bank Accounts. The attached Bank Account Schedule sets forth a true
and complete list and description of the bank accounts, lock box accounts and
other accounts maintained by or for the benefit of each of the Companies and
Company Subsidiaries, and the signatories thereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Seller and the Company that:
5.01 Organization and Power. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full corporate power and authority to enter into this Agreement and
perform its obligations hereunder.
5.02 Authorization; Valid and Binding Agreement. The execution, delivery
and performance of this Agreement and, as applicable, the Transaction
Documents by Buyer and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all requisite
action (including all corporate action), and no other proceedings on its part
are necessary to authorize the execution, delivery or performance of this
Agreement. This Agreement has been duly executed and delivered by Buyer and
assuming the due authorization, execution and delivery by the other parties
hereto constitutes a legal, valid and binding obligation of Buyer, enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy laws, other similar laws affecting creditors' rights and general
principles of equity affecting the availability of specific performance and
other equitable remedies.
5.03 No Breach. Buyer is not subject to or obligated under its
certificate of incorporation, its bylaws, or similar organizational documents,
any Law of any Governmental Entity, or any material agreement or instrument,
or any Permit, or subject to any order, writ, injunction or decree, which
would be breached or violated in any material respect by Buyer's execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby except for breaches or violations which would
not have a material adverse effect on the Buyer's ability to consummate the
transactions contemplated hereby.
5.04 Governmental Consents, etc. Except for the applicable requirements
of the HSR Act, Buyer is not required to submit any notice, report or other
filing with any governmental authority in connection with the execution,
delivery or performance by it of this Agreement or
- 25 -
the consummation of the transactions contemplated hereby. No consent, approval
or authorization of any governmental or regulatory authority or any other
party or Person is required to be obtained by Buyer in connection with its
execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby.
5.05 Litigation. There are no actions, suits or proceedings pending or,
to the Buyer's knowledge, overtly threatened against or affecting Buyer at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which would adversely affect Buyer's performance under
this Agreement or the consummation of the transactions contemplated hereby.
5.06 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated
by this Agreement based on any arrangement or agreement made by or on behalf
of Buyer.
5.07 Investment Representation. Buyer is purchasing the Shares for its
own account with the present intention of holding such securities for
investment purposes and not with a view to or for sale in connection with any
public distribution of such securities in violation of any federal or state
securities laws. Buyer is an "accredited investor" as defined in Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Securities Act"). Buyer acknowledges that the Shares
have not been registered under the Securities Act or any state or foreign
securities laws and that the Shares may not be sold, transferred, offered for
sale, pledged hypothecated or otherwise disposed of unless such transfer,
sale, assignment, pledge, hypothecation or other disposition is pursuant to
the terms of an effective registration statement under the Securities Act and
are registered under any applicable state or foreign securities laws or
pursuant to an exemption from registration under the Securities Act and any
applicable state or foreign securities laws.
5.08 Financing. Buyer has and shall have at the Closing sufficient cash
and existing credit facilities to pay the full consideration payable to the
Seller hereunder, to make all other necessary payments by it in connection
with transactions contemplated hereby (including the repayment of
Indebtedness, and payment of the Employee Bonus Payments, Retention Payments
and Seller Expenses pursuant to Section 1.04(c), and the payment of any
purchase price adjustment pursuant to Section 1.05) and to pay all of its
related fees and expenses.
ARTICLE VI
PRE-CLOSING COVENANTS
6.01 Conduct of the Business.
(a) From the date hereof until the Closing Date, each Company and Company
Subsidiary shall (i) use its commercially reasonable efforts to make capital
expenditures generally in accordance with the Capital Expenditure Schedule,
(ii) make payment for capital expenditure goods upon delivery thereof in the
ordinary course consistent with past practice, and (iii) carry on its
businesses in the ordinary course of business in all material respects unless
Buyer shall have consented in writing; provided that, the foregoing
notwithstanding, each
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Company may use all available cash to repay any Closing Indebtedness on or
prior to the Closing.
(b) From the date hereof until the Closing Date, except as otherwise
provided for by this Agreement, as required by Law, as set forth on the
Covenant Exceptions Schedule, or as consented to in writing by Buyer, no
Company shall, nor shall it permit any Company Subsidiary to, (i) issue or
sell any shares of its or any Company Subsidiary's capital stock, (ii) issue
or sell any securities convertible into, or options with respect to, warrants
to purchase or rights to subscribe for any shares of its or any Company
Subsidiary's capital stock, (iii) effect any recapitalization,
reclassification, stock dividend, stock split or like change in its
capitalization, (iv) amend its or any Company Subsidiary's certificate or
articles of incorporation or bylaws, (v) discharge any Vice President-level or
higher employee, or the controller or director of information technology, of a
Company or Company Subsidiary or (vi) otherwise voluntarily take any action
that would require disclosure under Section 4.06(a)-(n) hereof.
6.02 Access to Books and Records. From the date hereof until the Closing
Date, each Company shall (and shall cause the respective officers, directors,
employees, auditors and agents of each Company and Company Subsidiary to)
provide Buyer and its accountants, investment bankers, counsel and other
authorized representatives ("Buyer's Representatives") with full access at all
reasonable times and upon reasonable notice to the offices, properties,
personnel, books, records and other information of such Company and its
Company Subsidiaries in order for Buyer to have the opportunity to make such
investigation as it shall reasonably desire to make of the affairs of such
Company and its Company Subsidiaries. Prior to the Closing, the Companies
shall give at least two days notice to Buyer prior to conducting its regular
month-end physical inventory and, at its option, Buyer may provide an observer
to each facility where a physical inventory is being conducted. Prior to the
Closing, Buyer shall have a reasonable opportunity to confirm that payments
from the Companies' payroll system in respect of the Employee Bonus Payments
and Retention Payments are made in the correct amounts and to the appropriate
persons, and that proper withholding has been made. Buyer acknowledges that it
remains bound by the Confidentiality Agreement, dated September 25, 2003, with
the Seller (the "Confidentiality Agreement"), the terms of which are
incorporated herein by reference. Effective upon Closing, the Confidentiality
Agreement shall terminate.
6.03 Regulatory Filings. As promptly as practicable after the date of
this Agreement, Seller and the Companies shall make or cause to be made all
filings and submissions under the HSR Act (requesting termination of the
waiting period thereunder) and any other material laws or regulations
applicable to Seller and the Companies and the Company Subsidiaries for the
consummation of the transactions contemplated herein. Seller and the Companies
shall coordinate and cooperate with Buyer in exchanging such information and
assistance as Buyer may reasonably request in connection with all of the
foregoing.
6.04 Conditions. Seller and the Companies shall use commercially
reasonable efforts to cause the conditions set forth in Section 2.01 to be
satisfied and to consummate the transactions contemplated herein; provided
that, no Company, Company Subsidiary or Seller shall be required to expend any
funds to obtain any governmental consents other than in connection with the
HSR Act.
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6.05 Exclusive Dealing. During the period from the date of this Agreement
through the Closing or the earlier termination of this Agreement pursuant to
Section 8.01 hereof, Seller shall not take or permit any other Person on its
behalf to take, and neither Company shall take, any action to encourage,
initiate or engage in discussions or negotiations with, or provide any
information to, any Person (other than Buyer and Buyer's Representatives)
concerning any purchase of the Shares, any merger involving the Companies, any
sale of all or substantially all of the assets of the Companies and the
Company Subsidiaries or similar transaction involving the Companies (other
than assets sold in the ordinary course of business).
6.06 Notification. From the date hereof until the Closing Date, the
Seller and each Company shall disclose to Buyer in writing (in the form of
updated schedules) any material variances from the representations and
warranties contained in Article III and Article IV, respectively, resulting
solely from events, occurrences or state of facts arising after the date
hereof, promptly upon the Seller's or the Companies' obtaining knowledge
thereof. Unless Buyer provides the Seller with a termination notice pursuant
to Section 8.01(b) (to the extent applicable) prior to the Closing following
delivery by such Company or the Seller of an updated disclosure schedule
pursuant to this Section 6.06, Buyer shall be deemed to have accepted the
updated disclosure schedules for all purposes under this Agreement, including
for indemnification under Article IX.
6.07 Insurance. The Companies shall use their commercially reasonable
efforts to keep in force, at their respective sole costs, all insurance
policies maintained for the benefit of the Companies and Company Subsidiaries
through the close of business on the Closing Date.
6.08 Certain Information. As soon as practicable following the date
hereof but in any event at least 20 days prior to the Closing Date, Seller and
each Company shall use commercially reasonable efforts to provide Buyer with
all data and information necessary for (or required by) Buyer to make a
determination as to whether or not any excess parachute payments under Code
Section 280G or any related excise taxes under Code Section 4999 could be made
or incurred in connection with the transactions contemplated by this Agreement
(whether alone or in connection with other events). Seller and each Company
shall cooperate in good faith with Buyer in assessing and updating such data
and information, and in providing such additional data and information
relating to potential parachute payments as Buyer shall reasonably request.
ARTICLE VII
COVENANTS OF BUYER
7.01 Access to Books and Records. From and after the Closing, Buyer
shall, and shall cause each Company to, provide the Seller and its authorized
representatives with reasonable access (for the purpose of examining and
copying), during normal business hours, to the books and records of each
Company and Company Subsidiary with respect to periods prior to the Closing
Date in connection with any matter whether or not relating to or arising out
of this Agreement or the transactions contemplated hereby. Unless otherwise
consented to in writing by the Seller, the Buyer shall not permit any Company
or Company Subsidiary, for a period of five years following the Closing Date,
to destroy, alter or otherwise dispose of any books and records of any Company
or Company Subsidiary, or any portions thereof, relating to periods prior to
the
- 28 -
Closing Date without first giving at least forty-five days prior written
notice to the Seller and offering to surrender to the Seller such books and
records or such portions thereof.
7.02 Notification. From the date hereof until the Closing Date, Buyer
shall promptly disclose to the Seller in writing any material variances from
Buyer's representations and warranties contained in Article V promptly upon
discovery thereof, and Buyer shall promptly notify the Seller if Buyer obtains
knowledge that the representations and warranties of the Seller or either
Company in this Agreement or the schedules (including updated schedules) are
not true and correct, to the extent such failure to be so true and correct
would cause the closing condition in Section 2.01(a) to not be satisfied.
7.03 Director and Officer Liability and Indemnification.
(a) After the Closing, Buyer shall cause the Companies to continue to
indemnify and hold harmless each present and former director and officer of
the Companies and the Company Subsidiaries (other than any director or officer
who was an associate (whether a director, employee, adviser or otherwise) of
the Seller (other than through the Companies and Company Subsidiaries) at the
time of such service) against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities of
any nature whatsoever, incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring
at or prior to Closing, whether asserted or claimed prior to, at or after the
Closing, to the fullest extent that the Companies would have been permitted
under the certificates of incorporation and by-laws of the Companies and
Company Subsidiaries in effect on the date hereof to indemnify such person
(including the advancing of expenses as incurred to the fullest extent
permitted under applicable law); provided, however, the person to whom such
expenses are advanced provides an unsecured undertaking to the Companies to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification.
(b) In the event that after the Closing Date, Buyer or the Companies, or
their respective successors or assigns, (i) consolidates with or merges into
any other Person and shall not be the continuing or surviving corporation or
entity in such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any Person, then, and in each case, proper
provision shall be made so that the successors and assigns of the Buyer or the
Companies, as the case may be, honor the indemnification and other obligations
set forth in this Section 7.03.
7.04 Regulatory Filings. As promptly as practicable after the date of
this Agreement, Buyer shall (i) make or cause to be made all filings and
submissions under the HSR Act (requesting and using its reasonable best
efforts to obtain termination of the waiting period thereunder) and any other
material laws or regulations applicable to Buyer for the consummation of the
transactions contemplated herein, (ii) be responsible for all filing fees
under the HSR Act and such other laws or regulations as are applicable to
Buyer and (iii) shall coordinate and cooperate with Seller and the Companies
in exchanging such information and assistance as Seller and the Companies may
reasonably request in connection with all of the foregoing.
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7.05 Conditions. Buyer shall use commercially reasonable efforts to cause
the conditions set forth in Section 2.03 to be satisfied and to consummate the
transactions contemplated herein.
7.06 Contact with Customers and Suppliers. Prior to the Closing, Buyer
and Buyer's Representatives shall contact and communicate with the employees,
customers and suppliers of the Companies and Company Subsidiaries in
connection with the transactions contemplated hereby only with the prior
written consent of the Seller, which consent shall not be unreasonably
withheld or delayed.
7.07 Employee Benefits. Until December 31, 2004 Buyer and its Affiliates
shall provide the employees who were employees of a Company or any Company
Subsidiary as of the Closing Date with employee benefits (but not equity
incentives) that are at least as favorable in the aggregate as those provided
to such employees immediately prior to the Closing Date. To the extent that
any such employees are terminated for a reason other than "cause" during such
period, Buyer and its Affiliates shall provide such employees with severance
in an amount that is no less than such employees would have received under the
severance policy set forth on the Severance Schedule; provided, however, that
the foregoing provision shall not apply in respect of any employee who is a
party to an individual employment agreement, severance agreement, or offer
letter that provides for severance following termination of employment with a
Company or a Company Subsidiary. For purposes of eligibility to participate
and vesting and for purposes of determining the level of benefits with respect
to vacation and sick pay, but not for purposes of benefit accruals under any
defined benefit plan, under the employee benefit plans of Buyer and its
Affiliates providing benefits after the Closing Date, each employee who is as
of the Closing Date an employee of a Company or a Company Subsidiary shall be
credited with his or her years of service with such Company or Company
Subsidiary, as applicable, before the Closing Date, to the same extent as such
employee was entitled, before the Closing Date, to credit for such service
under any similar Plans, except to the extent such credit would result in a
duplication of benefits. In addition, and without limiting the generality of
the foregoing: (i) each employee shall be immediately eligible to participate,
without any waiting time, in any and all employee benefit plans sponsored by
Buyer and its Affiliates for the benefit of employees (such plans,
collectively, the "New Plans") to the extent coverage under such New Plan
replaces coverage under a comparable Plan in which such employee participated
immediately before the Closing Date (such Plans, collectively, the "Old
Plans"); and (ii) for purposes of each New Plan providing medical, dental,
pharmaceutical or vision benefits to any employee, Buyer shall cause all
pre-existing condition exclusions and actively at work requirements of such
New Plan to be waived for such employee and his or her covered dependents to
the extent such waivers are permitted under the new Plan and such exclusions
or requirements had been waived under the Old Plan, and Buyer shall cause any
eligible expenses incurred by such employee and his or her covered dependents
during the portion of the plan year of the Old Plan ending on the date such
employee's participation in the corresponding New Plan begins to be taken into
account under such New Plan for purposes of satisfying all deductible,
coinsurance and maximum out-of-pocket requirements applicable to such employee
and his or her covered dependents for the applicable plan year as if such
amounts had been paid in accordance with such New Plan to the extent such
amounts were taken into account under the Old Plan.
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7.08 Duke Letter of Credit. Prior to the Closing, Buyer shall either (i)
provide a backing letter of credit or cash collateral to Fleet National Bank
("Fleet") sufficient to cause Fleet to keep outstanding after the Closing its
current Letter of Credit of January 10, 2003 (the "Fleet LOC") issued to Duke
Realty Limited Partnership in connection with the build-out of the Companies'
new leased Orlando, Florida facility at ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
notwithstanding the termination of Fleet's credit facility with the Companies
in connection with the consummation of the transactions contemplated by this
Agreement, or (ii) otherwise arrange for the termination of the Fleet LOC at
the Closing without cost or expense to Seller or the Companies.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) in writing by the mutual written consent of Buyer and Seller;
(b) by Buyer, if there has been a material violation or breach by the
Companies or the Seller of any covenant, representation or warranty contained
in this Agreement which has prevented the satisfaction of any condition to the
obligations of Buyer at the Closing and such violation or breach has not been
waived by Buyer or, in the case of a covenant breach, cured by the Companies
or the Seller within ten days after written notice thereof from Buyer;
(c) by the Seller, if there has been a material violation or breach by
Buyer of any covenant, representation or warranty contained in this Agreement
which has prevented the satisfaction of any condition to the obligations of
the Seller at the Closing and such violation or breach has not been waived by
the Seller or, with respect to a covenant breach, cured by Buyer within ten
days after written notice thereof by the Seller (provided that the failure of
Buyer to deliver the consideration pursuant to Section 1.04 at the Closing as
required hereunder shall not be subject to cure hereunder unless otherwise
agreed to in writing by the Seller);
(d) by either Buyer or the Seller if the Closing has not occurred on or
before February 27, 2004 (the "Optional Termination Date"); provided that the
Optional Termination Date shall be extended by one day for each day after
December 31, 2003 that Seller has failed to make its required filing under the
HSR Act in connection with the transactions contemplated by this Agreement.
(e) by either the Seller or Buyer if a Governmental Entity shall have
issued a judgment, decree or order or taken any other action, in each case
which has become final and non-appealable and which restrains or otherwise
prohibits the sale of the Shares to Buyer.
8.02 Effect of Termination. In the event of termination of this Agreement
by either Buyer or Seller as provided above, the provisions of this Agreement
shall immediately become void and of no further force and effect (other than
this Section 8.02, Section 13.01, Section 13.02 and the Confidentiality
Agreement which shall survive the termination of this Agreement), and there
shall be no liability on the part of any of Buyer, the Companies, or the
Seller to one
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another, except for knowing or willful breaches of this Agreement prior to the
time of such termination.
ARTICLE IX
INDEMNIFICATION
9.01 Survival. The representations, warranties and covenants in this
Agreement shall survive the Closing as follows:
(a) the representations and warranties in Section 3.01 (Authority),
Section 3.04 (Ownership of Capital Stock), Section 4.04 (Capital Stock) and
Section 4.19 (Brokerage) and any covenant or agreement to be performed after
the Closing shall survive and not terminate until sixty (60) days following
the expiration of the statute of limitations applicable to the matters covered
thereby; and
(b) all other representations and warranties in this Agreement, the
indemnities provided in Section 9.02(d) and any covenant or agreement to be
performed prior to the Closing shall terminate on March 30, 2005 (the "General
Expiration Date").
No claim for indemnification hereunder for breach of any such
representations or warranties may be made after the expiration of the survival
period applicable to such claims; provided, that any claim for indemnification
for which notice has been given within the prescribed period may be prosecuted
to conclusion notwithstanding the subsequent expiration of such period.
9.02 Indemnification by the Seller for the Benefit of Buyer.
(a) Seller shall indemnify each of Buyer, the Companies, their Affiliates
and their successors and assigns and their respective officers, directors,
employees, agents and representatives (the "Buyer Indemnified Parties") and
save and hold each of them harmless against any claim, loss, liability,
damage, cost or expense (including, but not limited to reasonable attorneys'
fees) (collectively, "Losses"), which any of them may suffer or sustain as a
result of or in connection with: (i) any breach by Seller of any
representation or warranty made by it in this Agreement under Article III, and
(ii) any non-fulfillment or breach of any covenant, agreement or other
provision by Seller.
(b) The Seller shall indemnify each Buyer Indemnified Party and save and
hold each of them harmless against any Losses which any of them may suffer or
sustain as a result of (i) any breach of any representation or warranty of the
Companies under Article IV and (ii) any non-fulfillment or breach of any
covenant, agreement or other provision by the Companies; provided that the
Seller shall have no liability under clause (i) of this subsection (b) (other
than with respect to breaches of representations and warranties in Sections
4.04, 4.13(e), 4.17 and 4.19), unless the aggregate of all Losses relating
thereto for which the Seller would, but for this proviso, be liable exceeds on
a cumulative basis an amount equal to three-quarters of one percent (0.75%) of
the Purchase Price (the "Deductible"), and then only to the extent such Losses
exceed the Deductible; and provided further that the Seller's aggregate
liability under this
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subsection (b) (other than with respect to (x) breaches of representations and
warranties in Sections 4.04, 4.17 and 4.19 and (y) with respect to covenants
the performance of which is due after the Closing) and subsection (d) below
shall in no event exceed $30,000,000 (the "Cap"); provided further that no
claim for indemnification by Buyer under this subsection (b) (other than with
respect to breaches of representations and warranties in Sections 4.04,
4.13(e), 4.17 and 4.19) shall be asserted where the amount that would
otherwise be payable by the Seller hereunder relating to such claim is less
than $10,000 and such claims shall not be aggregated for purposes of the first
proviso to this Section 9.02(b).
(c) All indemnification payments to be made by Seller under this Section
9.02 shall first be satisfied by payment from the Escrow Account until the
funds contained therein are exhausted or released in accordance with the terms
of the Escrow Agreement and then by Seller directly. For purposes of Sections
9.02(a)(i) and 9.02(b)(i), any qualification of such representations and
warranties by reference to the materiality of matters stated therein, or words
of similar effect, shall be disregarded in determining any breach thereof;
provided that this sentence shall not apply to (i) the second sentence of
Section 4.05 or (ii) the first sentence of Section 4.06. In no event shall the
aggregate liability of Seller for all Losses claimed under this Section 9.02
exceed the Purchase Price.
(d) The Seller shall indemnify each Buyer Indemnified Party and save and
hold each of them harmless from any and all Taxes with respect to any taxable
period of the Company and Company Subsidiaries ending on or before the Closing
Date and, in the case of any taxable year or period beginning before and
ending after the Closing Date (a "Straddle Period"), any and all Taxes with
respect to the portion of such taxable year or period ending on and including
the Closing Date, in each case determined in accordance with Section 10.01(b).
(e) The Seller shall indemnify each of Buyer, the Companies, their
Affiliates and their respective officers, directors, employees and agents and
save each of them harmless against any Losses which any of them may suffer or
sustain in respect of any Plan subject to Title IV of ERISA, in case whether
arising before, on or after the Closing Date. Notwithstanding any other
provision in this Agreement to the contrary, the Seller will not be liable to,
or indemnify, Buyer for any Losses to the extent that such Losses result from
or arise out of actions taken by Buyer or the Companies, their respective
Company Subsidiaries or any of their respective Affiliates after the Closing
Date.
(f) Notwithstanding any other provision in this Agreement to the
contrary, the Seller will not be liable to, or indemnify, the Buyer
Indemnified Parties for any punitive or exemplary damages.
(g) Buyer shall take, and shall cause the Companies and Company
Subsidiaries to take, all commercially reasonable steps to mitigate all Losses
upon and after becoming aware of any event, which could reasonably be expected
to give rise to Losses.
(h) Buyer shall not be entitled to recover any Losses relating to any
matter arising under one provision of this Agreement to the extent that Buyer
had already recovered Losses with respect to such matter pursuant to other
provisions of this Agreement. Without limiting the generality of the
foregoing, Buyer shall not be entitled to recover any Losses relating
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to Taxes (whether pursuant to Section 9.02(b) or Section 9.02(d)) until the
cumulative aggregate amount of such Losses exceeds the amount of liabilities
for Pre-Closing Tax Period Taxes (excluding any reserve for deferred Taxes
other than the current portion of such deferred Taxes) shown on the Closing
Statement and then only for the amount of such excess.
9.03 Indemnification by the Buyer for the Benefit of the Seller. Buyer
shall indemnify the Seller and its officers, directors, partners, members,
employees, agents, representatives, successors and permitted assigns
(collectively, the "Seller Indemnified Parties") and hold them harmless
against any Losses which the Seller Indemnified Parties may suffer or sustain,
as a result of: (a) any breach of any representation or warranty of Buyer
under this Agreement, (b) any non-fulfillment or breach of any covenant,
agreement or other provision by Buyer, (c) any claim or suit against any of
the Seller Indemnified Parties under the Worker Adjustment Retraining and
Notification Act or any Legal Requirement which relates to actions taken by
the Buyer, the Companies or Company Subsidiaries, or its or their Affiliates,
at any time after the Closing Date, with regard to any site of employment or
one or more facilities or operating units within any site of employment of
Buyer, the Companies or Company Subsidiaries, (d) any claims by any employee
of a Company or Company Subsidiary against any of the Seller Indemnified
Parties relating to any breach or violation of, or noncompliance with (i) any
employment agreement or contract or similar arrangement between a Company or
Company Subsidiary on the one hand, and such employee, on the other, or (ii)
or any other bonus or incentive or similar plan or arrangement, in each case
if and to the extent that the same occurs after the Closing Date; provided
that such employment agreement or contract or similar arrangement or bonus or
incentive or similar plan or arrangement was disclosed pursuant to this
Agreement, and (e) any claim or suit brought against any of the Seller
Indemnified Parties at any time on or after the Closing Date relating to
actions taken by the Buyer or a Company or Company Subsidiary on or after the
Closing Date.
9.04 Manner of Payment. Any indemnification of the Buyer Indemnified
Parties pursuant to Section 9.02 shall be effected by wire transfer of
immediately available funds from Seller or the Escrow Agent to an account
designated by Buyer within 15 days after the determination thereof. Any
indemnification of the Seller Indemnified Parties pursuant to Section 9.03
shall be effected by wire transfer of immediately available funds to an
account designated by any Seller Indemnified Party within 15 days after the
determination thereof.
9.05 Defense of Third Party Claims.
(a) Any Person making a claim for indemnification under this Section 9.02
or Section 9.03 (an "Indemnitee") shall notify the indemnifying party (an
"Indemnitor") of the claim in writing promptly after receiving written notice
of any action, lawsuit, proceeding, investigation or other claim against it
(if by a third party), describing the claim, the amount thereof (if known and
quantifiable) and the basis thereof (such written notice, an "Indemnification
Notice"); provided that the failure to so notify an Indemnitor shall not
relieve the Indemnitor of its obligations hereunder except to the extent that
(and only to the extent that) such failure shall have caused the damages for
which the Indemnitor is obligated to be greater than such damages would have
been had the Indemnitee given the Indemnitor prompt notice hereunder. Any
Indemnitor shall be entitled to participate in the defense of such action,
lawsuit, proceeding, investigation or other claim giving rise to an
Indemnitee's claim for indemnification
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at such Indemnitor's expense, and at its option shall be entitled to assume
the defense thereof by appointing a reputable counsel reasonably acceptable to
the Indemnitee to be the lead counsel in connection with such defense;
provided that the Indemnitee shall be entitled to participate in the defense
of such claim and to employ counsel of its choice for such purpose; provided
however, that the fees and expenses of such separate counsel shall be borne by
the Indemnitee unless such separate counsel is appointed because in the
reasonable judgment of the Indemnitee there is a conflict of interest with the
Indemnitor. If the Indemnitor shall control the defense of any such claim, the
Indemnitor shall be entitled to settle such claims; provided that the
Indemnitor shall obtain the prior written consent of the Indemnitee (which
consent shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim if, pursuant to or as a
result of such settlement or cessation, injunctive or other equitable relief
will be imposed against the Indemnitee or if such settlement does not
expressly and unconditionally release the Indemnitee from all liabilities and
obligations with respect to such claim, without prejudice except for payments
that would be required to be paid by Buyer representing the Deductible.
(b) Notwithstanding anything to the contrary in the foregoing, if any
lawsuit, proceeding, investigation or other claim against a Company or Company
Subsidiary would reasonably be expected to have an adverse effect on the
manner in which any Company or Company Subsidiary does business if determined
or otherwise resolved adversely, Buyer shall be entitled, at its sole expense,
to participate in the defense of such claim, lawsuit, proceeding or
investigation and employ counsel of its choice for such purpose, and Seller
shall not settle any such claim or lawsuit or make any plea or admission or
otherwise take any action that could reasonably be expected to adversely
affect the conduct of the business of any Company or Company Subsidiary
without the prior written consent of Buyer. The provisions of this Section
9.05(b) shall not apply in respect of any third party claim described in
clause (a) of this Section 9.05 for which indemnification is sought by the
Seller, it being understood by the Parties that the rights of the Indemnitor
provided in that section shall govern.
9.06 Determination of Loss Amount. The amount of any Loss subject to
indemnification under Section 9.02 or Section 9.03 shall be calculated net of
(i) any Tax Benefit inuring to the Indemnitee on account of such Loss and (ii)
any insurance proceeds received or receivable by the Indemnitee on account of
such Loss. If the Indemnitee receives a Tax Benefit on account of such Loss
after an indemnification payment is made to it, the Indemnitee shall promptly
pay to the Person or Persons that made such indemnification payment the amount
of such Tax Benefit at such time or times as and to the extent that such Tax
Benefit is realized by the Indemnitee. For purposes hereof, "Tax Benefit"
shall mean any refund of Taxes paid or reduction in the amount of Taxes which
are paid or otherwise would have been paid, in each case computed at the
highest marginal tax rates applicable to the recipient of such benefit; for
the avoidance of doubt, "Tax Benefit" shall not include any such benefit
available only as a result of a timing adjustment moving a tax attribute from
a Pre-Closing Tax Period to a Post-Closing Tax Period. The Indemnitee shall
seek full recovery under all insurance policies covering any Loss to the same
extent as they would if such Loss were not subject to indemnification
hereunder. In the event that an insurance or other recovery is made by any
Indemnitee with respect to any Loss for which any such Person has been
indemnified hereunder, then a refund equal to the aggregate amount of the
recovery shall be made promptly to the Person or Persons that provided such
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indemnity payments to such Indemnitee. For Tax purposes, the parties agree to
treat all payments made under this Article IX as adjustments to the Purchase
Price.
ARTICLE X
TAX MATTERS
10.01 Tax Returns and Reports.
(a) All Tax Periods. Buyer shall prepare or cause to be prepared and file
or cause to be filed all Tax Returns for the Companies for all taxable periods
which are filed after the Closing Date. Buyer shall permit Seller to review
and comment on all Tax Returns to be filed for any Straddle Period or for any
period ending on or before the Closing Date prior to filing. Buyer shall
provide a copy of such Tax Return to Seller at least 45 days (in the case of
federal and state income Tax Returns) and 15 days (in the case of all other
Tax Returns) prior to the due date (including applicable extensions) for the
filing thereof. Seller shall have the right to object to the Tax Return on the
grounds that such Tax Return does not conform with the prior practices of the
Companies or applicable law. If Buyer and Seller are unable to resolve any
disagreement by (x) 20 days prior to the due date of federal or state income
Tax Returns or (y) 5 days prior to the due date of all other Tax Returns, the
dispute shall be referred to the Independent Auditor whose determination shall
be binding upon all parties. Fees and expenses of the Independent Auditor
shall be allocated between the Buyer and the Seller based upon the percentage
which the portion of the aggregate contested amount not awarded to each party
bears to the aggregate amount actually contested by such party. In case a
dispute has been referred to the Independent Auditor and the decision of the
Independent Auditor is made after the due date for the relevant Tax Return,
Seller will file any amendment to the Tax Return which is necessary to reflect
the Independent Auditor's decision, and adjustment payments will be made
between the parties within 3 Business Days after such decision to reflect such
decision. In conjunction with the filing of any Tax Return for any Straddle
Period, Buyer shall cause the Companies to pay the Taxes due in connection
with the filing of such return; provided the Seller shall pay to the Companies
within 15 Business Days after the date on which the Taxes are paid with
respect to such periods an amount equal to the portion of such Taxes which
relates to the Pre-Closing Tax Period, to the extent Seller is liable for such
Taxes as provided by Section 9.02.
(b) Apportionment of Taxes for Straddle Periods. In order to apportion
appropriately any Taxes relating to a Straddle Period, the parties hereto
shall, to the extent permitted under applicable federal, state, local or
foreign law, elect with the relevant taxing authority to treat for all
purposes, the Closing Date as the last day of the taxable year or period of
the Company or Company Subsidiaries and the portion of such Straddle Period
ending on the Closing Date shall be treated as a short taxable year for
purposes of this Article X. In any case where applicable federal, state, local
or foreign law does not permit the Company or Company Subsidiaries to treat
the Closing Date as the last day of the taxable year or period of the Company
or Company Subsidiaries with respect to Taxes that are payable with respect to
such Straddle Period, the portion of any such Tax that can be calculated by
means of a closing of the books and that is allocable to the portion of such
Straddle Period ending on the Closing Date shall be determined by means of a
closing of the books and records of the Company or Company Subsidiaries as of
the close of business on the Closing Date and, to the extent not susceptible
to
- 36 -
such allocation, by apportionment on the basis of elapsed days.
Notwithstanding anything in this Section 10.01(c) to the contrary, any Taxes
based upon income or receipts that relate to a transaction not in the ordinary
course of business occurring on the Closing Date but after the Closing shall
be allocated to the Post-Closing Tax Period.
10.02 Liability for Taxes for Post-Closing Tax Periods. The Companies
shall be liable for and, together with Buyer, shall indemnify Seller and any
Affiliate of Seller for all Taxes of the Companies for any Post-Closing Tax
Period except as provided for in the next sentence. Notwithstanding anything
herein to the contrary, in no event shall Seller be liable to Buyer, the
Companies or any other party for Taxes of the Companies for any Post-Closing
Tax Period, except that Seller shall be liable for Post-Closing Tax Period
Taxes as a result of a breach of Section 4.08(xii).
10.03 Refunds and Credits.
(a) Seller shall be entitled to any refund of Taxes of the Companies
received by Seller on or before the General Expiration Date (or for which
notice has been given by Seller on or before the General Expiration Date) in
respect of any Pre-Closing Tax Period. If the Companies shall receive a refund
or credit of Taxes for any Pre-Closing Tax Period on or before the General
Expiration Date (or for which notice has been given by Seller on or before the
General Expiration Date) (other than a refund or credit attributable solely to
the carryback of losses, credits or similar items attributable to the
Companies for a Post-Closing Tax Period), the Buyer shall promptly pay, or
cause the Companies to promptly pay, to Seller the amount of such refund or
credit together with any interest thereon received from the taxing authority.
The amount of any refund for Taxes received after the General Expiration Date
(and for which no notice was given by Seller on or before the General
Expiration Date) shall reduce on a dollar-for-dollar basis any amount payable
by Seller to Buyer or the Companies under any indemnification claim for Taxes
pursuant to Section 9.02(b) or (d) that remains outstanding as of the General
Expiration Date. Notwithstanding anything in this Section 10.03 to the
contrary, if Seller shall receive a refund or credit of Taxes for any
Pre-Closing Tax Period, and such refund or credit is attributable solely to
the carryback of losses, credits or similar items attributable to the
Companies for a Post-Closing Tax Period, or such refund is received after the
General Expiration Date (and no notice thereof was given by Seller on or
before the General Expiration Date) Seller shall promptly pay to Buyer or the
Companies the amount of such refund or credit together with any interest
thereon received from the taxing authority. In the event that any refund or
credit of Taxes for which a payment has been made under the immediately
preceding sentence is subsequently reduced or disallowed, Buyer shall
indemnify and hold harmless Seller for any Tax liability, including interest
and penalties, assessed against Seller by reason of the reduction or
disallowance. Seller shall not be entitled to any refund of Taxes of the
Companies to the extent such refund was included in a receivable in the Net
Working Capital, or to the extent such refund is attributable to deductions
taken into account in determining Transaction Tax Benefits.
(b) The Companies shall be entitled to any refund or credit of Taxes of
the Companies received in respect of any Post-Closing Tax Period.
10.04 Contest Provisions. If any claim for Tax is asserted in a Contest
(as defined below) against any party hereto that would result in the
indemnification of any such party
- 37 -
pursuant to Sections 9.02(b), 9.02(d) or 10.02, then the parties agree that
the following provisions of this Section 10.04 will apply in handling any such
claim. For purposes of this Agreement, a "Contest" is any audit, court
proceeding or other dispute with respect to any Tax matter that affects the
Company or the Company Subsidiaries and which, if successful might result in
an indemnity payment pursuant to Sections 9.02(b), 9.02(d) or 10.02. Each of
Buyer and Seller shall promptly (and in any event within 15 Business Days)
notify the other party in writing upon receipt by the first party (or, in the
case of the Buyer, the Companies) of a notice of any pending or threatened
Contest; provided, however, that no failure or delay in giving any such notice
shall relieve the other party of its obligations under this Agreement except
to the extent that such other party is actually prejudiced thereby. With
respect to a Contest relating to a taxable year or period ending on or prior
to the Closing Date, the Seller shall, upon written notification to the Buyer,
control all proceedings and may make all decisions taken in connection with
such Contest (including selection of counsel) at its own expense; provided,
however, that Seller shall not settle or resolve any such Contest without the
consent of the Buyer (which consent shall not be unreasonably withheld) if
such settlement or resolution could, in the reasonable judgment of the Buyer,
have a material adverse impact on the Buyer, the Company or any of the Company
Subsidiaries in a Post-Closing Tax Period. The Seller and the Buyer shall,
each at its own expense, jointly control all proceedings in connection with
any Contest relating to Taxes of the Company and the Company Subsidiaries for
a Straddle Period. The Buyer shall control at its own expense all proceedings
with respect to any Contest relating to a tax period beginning after the
Closing Date. A party shall promptly notify the other party if it decides not
to control the defense or settlement of any Contest that it is entitled to
control pursuant to the Agreement, and the other party shall thereupon be
permitted to defend and settle such proceeding.
10.05 Cooperation. The Seller, the Company and Company Subsidiaries and
the Buyer shall reasonably cooperate, and shall cause their respective
Affiliates, officers, employees, agents, auditors and representatives
reasonably to cooperate, in preparing and timely filing all required returns,
reports and forms relating to Taxes of the Company and the Company
Subsidiaries, including maintaining and making available to each other all
records necessary in connection with Taxes.
10.06 FIRPTA Certificate. The Seller shall prepare or cause to be
prepared and shall provide to the Buyer a certificate in accordance with
Treasury Regulations Section 1.1445-2(b)(2) in substantially the form attached
hereto as Exhibit E that the Seller is not a foreign person under Section
1445(f)(3) of the Code.
10.07 Transfer Taxes. Any and all real property transfer or gains tax,
stamp tax, stock transfer tax, or other similar Tax imposed on the Companies,
the Company Subsidiaries, or Seller as a result of the transactions
contemplated by this Agreement (collectively, "Transfer Taxes"), and any
penalties or interest with respect to the Transfer Taxes shall be borne
one-half by Seller and one-half by Buyer. The Seller agrees to cooperate with
Buyer in the filing of any returns with respect to the Transfer Taxes,
including promptly supplying any information in its possession that is
reasonably necessary to complete such returns.
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ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES
11.01 Disclosure Generally. If and to the extent any information required
to be disclosed in a particular schedule (or updated schedule) is contained in
this Agreement or in any other schedule (or updated schedule), such
information shall be deemed to be included in such particular schedule (or
updated schedule) to the extent it is reasonably apparent that the existing
disclosure applies to the information requirement for such particular schedule
(or updated schedule). The inclusion of any information in any schedule (or
updated schedule) shall not be deemed to be an admission or acknowledgment by
the Companies or the Seller, in and of itself, that such information is
material to or outside the ordinary course of the businesses of the Companies
and the Company Subsidiaries.
11.02 Acknowledgment by Buyer and Seller. THE REPRESENTATIONS AND
WARRANTIES BY THE BUYER CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND
WARRANTIES OF THE BUYER TO THE SELLER IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY (OTHER THAN EXPRESSLY SET FORTH IN A TRANSACTION
DOCUMENT). THE REPRESENTATIONS AND WARRANTIES BY THE COMPANIES AND THE SELLER
CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE
COMPANIES AND THE SELLER TO BUYER IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY (OTHER THAN EXPRESSLY SET FORTH IN A TRANSACTION
DOCUMENT). NONE OF SELLER OR THE COMPANIES (EXCEPT AS SET FORTH HEREIN OR IN A
TRANSACTION DOCUMENT) NOR THEIR RESPECTIVE OFFICERS, DIRECTORS, PARTNERS,
MEMBERS, EMPLOYEES OR REPRESENTATIVES MAKE OR HAVE MADE ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN
RESPECT OF THE COMPANIES, THEIR BUSINESSES OR THE SHARES. OTHER THAN THE
INDEMNIFICATION OBLIGATIONS OF THE SELLER SET FORTH IN ARTICLE IX, NONE OF THE
SELLER, ITS AFFILIATES, NOR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
PARTNERS, MEMBERS, EMPLOYEES OR REPRESENTATIVES WILL HAVE OR BE SUBJECT TO ANY
LIABILITY OR INDEMNIFICATION OBLIGATION TO THE BUYER OR TO ANY OTHER PERSON
RESULTING FROM THE DISTRIBUTION TO THE BUYER, ITS AFFILIATES OR
REPRESENTATIVES OF, OR THE BUYER'S USE OF ANY INFORMATION RELATING TO THE
BUSINESS OF THE COMPANIES, INCLUDING THE CONFIDENTIAL OFFERING MEMORANDUM
DATED SEPTEMBER 2003, AND ANY INFORMATION, DOCUMENTS OR MATERIAL MADE
AVAILABLE TO THE BUYER, WHETHER ORALLY, IN WRITING OR ONLINE, IN CERTAIN "DATA
ROOMS," MANAGEMENT PRESENTATIONS, RESPONSES TO QUESTIONS SUBMITTED ON BEHALF
OF THE BUYER OR IN ANY OTHER FORM IN EXPECTATION OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. BUYER UNDERSTANDS, ACKNOWLEDGES AND AGREES
THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE EXPRESS OR
IMPLIED (INCLUDING,
- 39 -
BUT NOT LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL
CONDITION, RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE COMPANIES) ARE
SPECIFICALLY DISCLAIMED BY EACH COMPANY AND THE SELLER. No claim shall be
brought or maintained by any Company, Company Subsidiary or Buyer or their
respective successors or permitted assigns against any officer, director or
employee (present or former) of any Company, Company Subsidiary, the Seller or
any direct or indirect equityholder of the Seller, and no recourse shall be
brought or granted against any of them, by virtue of or based upon any alleged
misrepresentation or inaccuracy in, or breach of any of the representations,
warranties or covenants of the Seller set forth or contained in, this
Agreement or any certificate delivered hereunder, except to the extent
provided in Section 9.02 hereof.
11.03 Further Assurances. From time to time, as and when requested by any
party hereto and at such party's expense, any other party shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions as the requesting party may reasonably deem necessary or desirable to
evidence and effectuate the transactions contemplated by this Agreement.
11.04 Non-Compete for Employees. Seller acknowledges that continued
employment of employees of the Companies and Company Subsidiaries by the
Companies, the Company Subsidiaries, Buyer or any of their respective
Affiliates shall not be deemed to be a violation of any covenants not to
compete made by such employees in favor of the Seller. Effective as of the
Closing, Seller waives any rights that it may have to enforce the non-compete
covenants contained in any employment or other agreements between Seller and
any current or former employee of a Company or Company Subsidiary.
ARTICLE XII
DEFINITIONS
12.01 Definitions. For purposes hereof, the following terms, when used
herein with initial capital letters, shall have the respective meanings set
forth herein:
"Affiliate" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person. For the
purposes of this definition, "control" means the possession, directly or
indirectly, of the power to direct the management and policies of a Person
whether through the ownership of voting securities, contract or otherwise.
"Affiliated Group" shall mean an affiliated group as defined in Section
1504 of the Code (or any analogous combined, consolidated or unitary group
defined under state, local or foreign income Tax law) of which the Company is
or has been a member.
"Affiliated Professionals" means any physician, pharmacist, nurse or
other health care professional employed by or performing services on behalf of
the Companies or any of the Company Subsidiaries.
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"Business Day" means a day other than a Saturday or a Sunday or other day
on which commercial banks in Missouri and New York are authorized or required
by Law to close.
"Company Employee" means any present or former employee, director,
officer or consultant of any Company or any Company Subsidiary.
"Company Subsidiary" means any Subsidiary of Pharmacy or PBM Services.
"Employee Bonus Payments" means cash payments payable to the
Employee Bonus Recipients as a result of the consummation of the transactions
contemplated by this Agreement in such amounts as are to be determined by the
Companies and set forth opposite each such Person's name in an updated
Employee Bonus Payments Schedule to be delivered to Buyer not less than two
Business Days prior to the Closing plus the employer portion of any Medicare,
Social Security or unemployment Taxes payable by the Companies in respect
thereto.
"Employee Bonus Recipients" means the employees of the Companies
designated on the Employee Bonus Payments Schedule to receive Employee Bonus
Payments who have executed a release agreement in substantially the form
attached hereto as Exhibit F.
"Environmental Requirements" shall mean all federal, state and local
statutes, regulations, decrees, orders, rules common law and ordinances
enacted by any Governmental Entity and in effect on or prior to the Closing
Date, concerning pollution or protection of the environment, natural resources
or worker health and safety, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, but excluding for this purpose (a) any Laws
(other than Laws regulating pollution) regulating pharmaceuticals or
controlled substances, (b) the rules or regulations promulgated by the United
States Food and Drug Administration ("FDA"), or DEA, or (c) any requirements
arising under any Government Health Care Program.
"ERISA Affiliate" means any organization that is a member of a controlled
group of organizations within the meaning of Sections 414 of the Code, or any
organization that would be considered one employer with any of the Companies
or any Company Subsidiary under Section 4001 of ERISA.
"Escrow Agent" shall have the meaning given to such term in the Escrow
Agreement.
"GAAP" means United States generally accepted accounting principles
applied in a manner consistent with the principles used in preparing the
balance sheet included in the Interim Financial Statements.
"Governmental Entity" shall mean any federal, state, or local governments
or any court, administrative, department, board, bureau, instrumentality or
regulatory agency or commission or other domestic governmental authority or
agency.
- 41 -
"Government Health Care Program" means any of the Medicare program (Title
XVIII of the Social Security Act), the Medicaid program (Title XIX of the
Social Security Act), TRICARE, the Federal Employee Health Benefits Program,
and other federal, state and local governmental health care plans and
programs.
"Hazardous Materials" means all hazardous, dangerous or toxic materials
or substances, including without limitation, petroleum (including without
limitation crude oil or any fraction thereof), asbestos and
asbestos-containing materials, polychlorinated biphenyls, molds,
urea-formaldehyde insulation and any other material that is regulated pursuant
to any Environmental Requirements or that could result in liability under any
Environmental Requirements.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
"Indebtedness" means, without duplication, all obligations of the
Companies and the Company Subsidiaries for borrowed money set forth on the
Indebtedness Schedule and any accrued interest, prepayment premiums or
penalties related thereto. Indebtedness which will be discharged at Closing is
identified on the Indebtedness Schedule as "Closing Indebtedness" (the
"Closing Indebtedness"), and Indebtedness which will be retained by the
Companies after the Closing is identified on the Indebtedness Schedule as
"Retained Indebtedness" (the "Retained Indebtedness").
"Intellectual Property" means the Software and intellectual property
rights set forth on the attached Intellectual Property Schedule.
"Legal Requirement" means any federal, state, local, municipal, foreign,
international, multinational or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute or treaty.
"Material Adverse Effect" means (a) any change, effect, event,
occurrence, state of facts or development that is materially adverse (or could
reasonably be expected to be materially adverse) to the business, assets,
financial condition or results of operations of the Companies and the Company
Subsidiaries taken as a whole other than: (a) any adverse change, effect,
event, occurrence, state of facts or development attributable to conditions
affecting the industry in which the Companies and their Subsidiaries
participate, the U.S. economy as a whole or the capital markets in general or
the markets in which the Companies and their Subsidiaries operate which does
not disproportionately affect the Companies and the Company Subsidiaries taken
as a whole; (b) any adverse change, effect, event, occurrence, state of facts
or development attributable to the reaction of customers or suppliers of the
Companies to the public announcement of the transactions contemplated by this
Agreement, or (c) any adverse change, effect, event, occurrence, state of
facts or development arising from or relating to any change required by GAAP
in accounting requirements or principles or any change in applicable laws,
rules or regulations or the interpretation thereof which does not
disproportionately affect the Companies and the Company Subsidiaries taken as
a whole.
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"Net Working Capital" means the result of (i) all current assets
(excluding Transaction Tax Benefits, prepaid fees to ▇▇ ▇▇▇▇▇▇ Chase, GTCR
▇▇▇▇▇▇ ▇▇▇▇▇▇ LLC and prepaid initial public offering costs) of the Companies
and Company Subsidiaries minus (ii) all current liabilities (excluding
Indebtedness, accrued interest, accrued GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLC fees, accrued
bank fees and common stock subscription payables) of the Companies and Company
Subsidiaries, in each case determined as of the close of business on the
Closing Date (but without giving effect to the Closing) in accordance with
GAAP.
"Permitted Liens" shall mean (a) any Liens for Taxes not yet due and
payable or being contested by any of Seller, the Companies or the Company
Subsidiaries or an Affiliate thereof in good faith by appropriate proceedings,
(b) Liens resulting from a filing by a lessor as a precautionary filing for a
true lease, (c) landlord's Liens under leases, (d) any mechanics', carriers',
workers', repairers' and similar statutory Liens arising in the ordinary
course of business by operation of Law with respect to an obligation or
liability that is not yet due or payable, if, in each case, a reserve shall
have been made therefore in accordance with GAAP; (e) purchase money Liens and
Liens securing rental payments under capital lease arrangements, (f) Liens in
favor of the applicable lenders securing obligations arising under the
Companies' credit agreements identified on the Indebtedness Schedule and (g)
any other encumbrance affecting an asset which does not materially impede or
impair the ownership, use, operation or value of such asset; provided that,
for purposes of Section 4.04(b), Permitted Liens shall mean clauses (a) and
(f) above only.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Plan" means any "employee benefit plan" (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, without limitation, multiemployer plans within the
meaning of Section 3(37) of ERISA, and any equity-incentive, employment,
severance, change-in-control, retention, retiree welfare, collective
bargaining, bonus, incentive, deferred compensation, employee loan and all
other material fringe benefits, employee benefit plans, agreements, programs,
policies or other arrangements, whether or not subject to ERISA (including any
funding mechanism now in effect or required in the future as a result of the
transaction contemplated by this Agreement or otherwise), whether formal or
informal, oral or written, legally binding or not, (i) under which any Company
Employee has any present or future right to benefits and which are contributed
to, entered into, sponsored by or maintained by the Seller, any of the
Companies or any of their respective Subsidiaries, or (ii) under which any of
the Companies or any Company Subsidiary has had or has any present or future
liability (actual, contingent or otherwise).
"Post-Closing Tax Period" means any tax period (or portion thereof)
ending after the Closing Date.
"Pre-Closing Tax Period" means any tax period (or portion thereof) ending
on or before the Closing Date.
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"Private Health Care Plan" means any non-governmental third party health
care payor or plan, including without limitation insurance companies, health
maintenance organizations and other managed care organizations, self-funded
employers, Blue Cross and Blue Shield plans, and similar non-governmental
health care payors and plans.
"Retention Payments" means the cash payments payable to the Retention
Payment Recipients in the amounts set forth opposite each such Person's name
on the Retention Payments Schedule plus the employer portion of any Medicare,
Social Security or unemployment Taxes payable by the Companies in respect
thereto.
"Retention Payment Recipients" means those Persons designated on the
Retention Payments Schedule to receive Retention Payments.
"Seller Expenses" shall mean all fees and expenses payable to GTCR ▇▇▇▇▇▇
▇▇▇▇▇▇, LLC, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP and ▇.▇. ▇▇▇▇▇▇ Securities, Inc. in
connection with the transactions contemplated by this Agreement.
"Software" shall mean the following, in each case owned by Seller and
used solely in the Business: (a) computer software and subsequent versions
thereof developed or currently being developed, manufactured, sold or marketed
by Seller or acquired from third parties, including without limitation, source
code, object code, objects, comments, screens, user interfaces, report
formats, templates, menus, buttons and icons; and (b) all file, data
materials, manuals, design notes and other items and documentation related
thereto or associated therewith; provided that Software shall not include
readily available commercial products such as off-the-shelf or publicly vended
software programs.
"Subsidiary or Subsidiaries" means, with respect to any Person of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association or other business entity (other
than a corporation), a majority of partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly,
by that Person or one or more Subsidiaries of that Person or a combination
thereof and for this purpose, a Person or Persons owns a majority ownership
interest in such a business entity (other than a corporation) is such Person
or Persons shall be allocated a majority of such business entity's gains or
losses or shall be or control any managing director or general partner of such
business entity (other than a corporation). The term Subsidiary shall include
all Subsidiaries of such Subsidiary.
"Tax" or "Taxes" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales,
use, transfer, real property gains, registration, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, special assessment, personal
property, capital stock, social security, unemployment, disability, payroll,
license, employee or other withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or additional amounts in
respect of the foregoing.
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"Tax Return" shall mean any report, return, declaration or other
information required to be supplied to a governmental entity in connection
with Taxes, including, without limitation, any schedule or attachment thereto
and any estimated returns and reports, with respect to Taxes.
"Transaction Tax Benefits" means an amount equal to (i) the product of
38% multiplied by (ii) the total of (a) the Employee Bonus Payments, plus (b)
the Retention Payments, plus (c) any unamortized fees related to the
Indebtedness as of the Closing, minus (d) amounts paid or payable under
clauses (a) and (b) that are not deductible for Tax purposes to the Company
under Section 280G of the Code.
12.02 Cross-Reference of Other Definitions. Each capitalized term listed
below is defined in the corresponding Section of this Agreement:
Term Section No.
Agreement................................................Preamble
Audited Financial Statements.................................4.05
Base Consideration........................................1.02(i)
Buyer ...................................................Preamble
Buyer Indemnified Party...................................9.02(a)
Buyer's Representatives......................................6.02
Cap.......................................................9.02(b)
Closing...................................................1.04(a)
Closing Date..............................................1.04(a)
Closing Indebtedness........................................12.01
Closing Statement.........................................1.05(a)
Code......................................................4.13(a)
Company .................................................Preamble
Company Contracts.........................................4.09(a)
Confidentiality Agreement....................................6.02
Deductible ...............................................9.02(b)
ERISA.......................................................12.01
Escrow Account...............................................1.07
Escrow Agreement.............................................1.07
Escrow Deposit...............................................1.01
Estimated Net Working Capital................................1.03
Estimated Purchase Price.................................1.02(ii)
FDA.........................................................12.01
General Expiration Date...................................9.01(b)
Independent Auditor.......................................1.05(a)
Indemnification Notice....................................9.05(a)
Indemnitee................................................9.05(a)
Indemnitor................................................9.05(a)
Interim Financial Statements.................................4.05
Laws.........................................................3.03
Leased Real Property......................................4.07(b)
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Losses...........................................................9.02(a)
New Plans...........................................................7.07
Objections Statement.............................................1.05(a)
Old Plans...........................................................7.07
Optional Termination Date........................................8.01(d)
PBM Services....................................................Preamble
PBM Services Common Stock.......................................Recitals
Permits..........................................................4.12(1)
Pharmacy........................................................Preamble
Pharmacy Common Stock...........................................Recitals
Preliminary Closing Statement....................................1.05(a)
Retained Indebtedness..............................................12.01
Securities Act......................................................5.07
Seller..........................................................Preamble
Seller Indemnified Parties..........................................9.03
Shares..........................................................Recitals
the Companies' knowledge...........................................13.03
Tax Benefit.........................................................9.06
Transaction Agreements..............................................3.01
Transfer Taxes.....................................................10.07
ARTICLE XIII
MISCELLANEOUS
13.01 Press Releases and Communications; Certain Disclosure.
(a) No press release or public announcement related to this Agreement or
the transactions contemplated herein, or prior to the Closing, any other
announcement or communication to the employees, customers or suppliers of a
Company or Company Subsidiary, shall be issued or made by any party hereto
without the joint approval of Buyer and the Seller, unless required by law (in
the reasonable opinion of counsel) in which case Buyer and the Seller shall
have the right to review such press release, announcement or communication
prior to its issuance, distribution or publication.
(b) Notwithstanding anything herein or in the Confidentiality Agreement
to the contrary, any Party to this Agreement (and any employee,
representative, or other agent of any party to this Agreement) may disclose to
any and all persons, without limitation of any kind, the U.S. federal income
tax treatment and tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure; provided, however, that no Party (nor any employee, representative
or other agent thereof) shall disclose (i) any information that is not
relevant to an understanding of the U.S. federal income tax treatment of the
transactions contemplated by this Agreement, including the identity of any
Party to this Agreement (or its employees, representatives or agents) or other
information that could lead any Person to determine such identity (ii) any
information to the extent such disclosure could result in a violation of any
federal or state securities laws or (iii) any information until the earliest
of (a) the
- 46 -
date of the public announcement of discussions relating to the transactions
contemplated by this Agreement, (b) the date of the public announcement of
such transactions and (c) the date of the execution of this Agreement.
13.02 Expenses. Except as otherwise expressly provided herein, each of
Seller and Buyer shall pay all of its own respective expenses (including
brokers', investment bankers', attorneys' and accountants' fees and expenses)
in connection with the negotiation of this Agreement, the performance of its
obligations hereunder and the consummation of the transactions contemplated by
this Agreement (whether consummated or not).
13.03 Knowledge Defined. For purposes of this Agreement, the term "the
Companies' knowledge" as used herein shall mean the actual knowledge of any of
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇.
13.04 Notices. All notices, demands and other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be
in writing and shall be deemed to have been given when personally delivered,
one day after deposit with Federal Express or similar overnight courier
service or three days after being mailed by first class mail, return receipt
requested. Notices, demands and communications to Buyer, the Companies, and
the Seller shall, unless another address is specified in writing, be sent to
the addresses indicated below:
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Notices to Buyer:
Express Scripts, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Notices to Seller:
CPS Holdings, LLC
c/o GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (facsimile)
with a copy to:
--------------
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.C.
Notices to the Companies:
CuraScript Pharmacy, Inc.
CuraScript PBM Services, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
(▇▇▇) ▇▇▇-▇▇▇▇
- 48 -
with a copy to:
--------------
CPS Holdings, LLC
c/o GTCR ▇▇▇▇▇▇ ▇▇▇▇▇▇, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (facsimile)
and:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, P.C.
13.05 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned or delegated by Buyer without the prior written consent of the
Seller.
13.06 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
13.07 References. The table of contents and the section and other
headings and subheadings contained in this Agreement and the exhibits hereto
are solely for the purpose of reference, are not part of the agreement of the
parties hereto, and shall not in any way affect the meaning or interpretation
of this Agreement or any exhibit hereto. All references to days or months
shall be deemed references to calendar days or months. All references to "$"
shall be deemed references to United States dollars. Unless the context
otherwise requires, any reference to a "Section," "Exhibit," or "Schedule"
shall be deemed to refer to a section of this Agreement, exhibit to this
Agreement or a schedule to this Agreement, as applicable. The words "hereof,"
"herein" and "hereunder" and words of similar import referring to this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement.
13.08 No Strict Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
Person.
13.09 Amendment and Waiver. Any provision of this Agreement or the
schedules or exhibits may be amended or waived only in a writing signed by
Buyer, the Companies and the
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Seller. No waiver of any provision hereunder or any breach or default thereof
shall extend to or affect in any way any other provision or prior or
subsequent breach or default.
13.10 Complete Agreement. This Agreement and the documents referred to
herein (including the Confidentiality Agreement) contain the complete
agreement between the parties hereto and supersede any prior understandings,
agreements or representations by or between the parties, written or oral,
which may have related to the subject matter hereof in any way.
13.11 Counterparts. This Agreement may be executed in multiple
counterparts (including by means of telecopied signature pages), any one of
which need not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same instrument.
13.12 Specific Performance. Each of the Parties acknowledges and agrees
that the other parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof
having jurisdiction over the parties and the matter, in addition to any other
remedy to which they may be entitled, at law or in equity.
13.13 Third Party Beneficiaries. Nothing expressed or implied in this
Agreement is intended, or will be construed, to confer upon or give any Person
other than the Parties, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, or result in such other Person being deemed a
third party beneficiary of this Agreement, except as provided in Sections 9.02
and 9.03.
13.14 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.12.
13.15 Consent to Jurisdiction. Each Party irrevocably submits to the exclusive
jurisdiction of any federal court located in the State of Delaware and any
Delaware state court, for the purposes of any suit, action or other proceeding
arising out of this Agreement or Transaction Document or any transaction
contemplated hereby or thereby. Each party further agrees that service of any
process, summons, notice or document by U.S. registered mail to such
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Party's respective address set forth herein shall be effective service of
process, summons or notice for any such suit, action or proceeding pursuant to
this Section. Each Party irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
13.16 Governing Law. All matters relating to the interpretation,
construction, validity and enforcement of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Delaware
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of laws of any jurisdiction other than the State of Delaware.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement on the day and year first above written.
COMPANIES:
CURASCRIPT PHARMACY, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇ ▇▇▇▇▇
--------------------------------------
Its: President and Chief Executive Officer
CURASCRIPT PBM SERVICES, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇ ▇▇▇▇▇
--------------------------------------
Its: President and Chief Executive Officer
SELLER:
CPS HOLDINGS, LLC
By: /s/ ▇▇▇ ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇ ▇▇▇▇▇
--------------------------------------
Its: President and Chief Executive Officer
BUYER:
EXPRESS SCRIPTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇
--------------------------------------
Its: President