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ASSET PURCHASE AGREEMENT
by and between
PHP HEALTHCARE CORPORATION
and
HIP OF NEW JERSEY, INC.
Dated as of July 24, 1997
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ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of July 24,
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1997 is by and between PHP HEALTHCARE CORPORATION, a Delaware corporation
("PHP"), and HIP OF NEW JERSEY, INC., a New Jersey health maintenance
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organization (the "Plan").
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W I T N E S S E T H:
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WHEREAS, the Plan owns certain assets utilized in the conduct of the
Plan's New Jersey Physician Operations business, a staff model group of primary
care and select specialist physicians providing and arranging medical and
ancillary services at 18 health care centers (the "New Jersey Physician
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Operations"); and
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WHEREAS, as part of a restructuring of its New Jersey Physician
Operations, the Plan has agreed to sell, transfer and assign certain assets and
liabilities to PHP, and PHP has agreed to purchase such assets from the Plan and
assume such liabilities, pursuant to the terms and provisions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
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1.1 Defined Terms. As used herein, the terms below shall have the
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following meanings.
"Assigned Contracts" shall mean those Contracts listed or described
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on Schedule 4.5 hereto.
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"Acquired Assets" shall have the meaning set forth in Section 2.1
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hereof.
"Affiliate" shall have the meaning set forth in Rule 12b-2 under the
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Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder. With respect to the Plan, the term "Affiliate" includes Health
Insurance Plan of Greater New York, HIP of Pennsylvania, Inc., HIP of Florida,
Inc. and HIP Insurance Company of New Jersey, Inc.
"Assumed Liabilities" shall have the meaning set forth in Section 2.2
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hereof.
"Assumption Agreement" shall mean the Assumption Agreement,
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substantially in the form of Schedule 1.1(a) hereto to be executed and delivered
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by PHP (or its designated Affiliate) to the Plan at the Closing pursuant to
which PHP (or its designated Affiliate) shall assume and agree to discharge and
perform the Assumed Liabilities.
"Books and Records" shall mean all books, records, files, plans,
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studies, surveys and reports of, or maintained by the Plan and necessary for the
operation of the Health Care Centers.
"Business Day" shall mean any day other than a Saturday, Sunday or a
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day on which banks in the State of New Jersey or the Commonwealth of Virginia
are authorized or obligated by law or executive order to close.
"Center Covered Persons" shall have the meaning ascribed to such term
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in the Health Services Agreement.
"Closing" and "Closing Date" shall have the meaning set forth in
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Section 3.1 hereof.
"Closing Net Asset Statement" shall have the meaning set forth in
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Section 2.5(a) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Confidentiality Agreements" shall mean the letter agreements
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regarding confidentiality dated February 17, 1997 and July 8, 1997 between the
Plan and PHP.
"Contract" shall mean any agreement, contract, lease, purchase order,
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instrument or commitment, whether oral or written, to which the Plan is a party
or by which it is bound and which relates to the Acquired Assets or the
operation of any Health Care Center as of the Closing Date.
"Covered Persons" shall have the meaning ascribed to such term in the
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Health Services Agreement.
"Employee" shall mean any person employed by the Plan immediately
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prior to the Closing Date who (i) is employed in one of the Health Care Centers,
(ii) directly performs a Delegated Function (as defined in the Health Services
Agreement) or (iii) performs functions that the parties hereto agree in the
Transition Plan (as defined in Section 6.9 hereof) are needed by PHE to perform
its obligations under the Health Services Agreement. Schedule 4.20(a) hereto
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contains a list of all Employees identified in (i) and (ii) above as of the date
set forth therein.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
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easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, encumbrance or right or claim of
others of any kind whatsoever whether voluntarily incurred or arising by
operation of law, and includes any existing agreement to give any of the
foregoing in the future, and any contingent sale or other title retention
agreement or lease in the nature thereof.
"Environmental Claims" shall mean all written notices accusations,
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allegations, notices of violation, liens, claims, demands, civil, criminal or
administrative actions, suits, hearings, investigations, inquiries or
proceedings for any damage, including personal injury, property damage
(including any depreciation of property values), lost use of property or
punitive or consequential damages, arising out of Environmental Conditions or
Environmental Laws.
"Environmental Conditions" shall mean the state of the environment
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relating to the Acquired Assets or the operations of the Health Care Centers
prior to or as of the Closing Date, including natural resources, soil, surface
water, ground water, any present or potential drinking water supply, subsurface
strata or ambient air, relating to or arising out of the use, handling, storage,
treatment, recycling, generation, transportation, release, spilling, leaking,
pumping, pouring, emptying, discharging, injecting, escaping, leaching,
disposal, dumping or threatened release of Hazardous Substances by the Plan or
its predecessors or successors in interest, or by their employees, contractors
or other agents, the exposure of persons to Hazardous Substances at the work
place or the exposure of persons or property to Hazardous Substances migrating
from or otherwise emanating from or located on property owned, leased or
operated by the Plan.
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"Environmental Laws" shall mean all Laws, regulations, notices or
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permits relating to pollution or protection of the environment (including
ambient air, (indoor or outdoor) surface, water, ground water, land surface or
subsurface strata), human health or safety, or the use, handling, storage,
treatment, recycling, generation, transportation, release, spilling, leaking,
pumping, pouring, emptying, discharging, injecting, escaping, leaching,
disposing, dumping and threatened release of Hazardous Substances. Environmental
Laws shall include, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), the
Toxic Substances Control Act, as amended, the Hazardous Materials Transportation
Act, as amended, the Resource Conservation and Recovery Act, as amended
("RCRA"), the Clean Water Act, as amended, the Safe Drinking Water Act, as
amended, the Clean Air Act, as amended, the Atomic Energy Act of 1954, as
amended, the Occupational Safety and Health Act, as amended, the New Jersey
Industrial Site Recovery Act (formerly known as the Environmental Cleanup
Responsibility Act) ("ISRA") and all laws promulgated or issued by any federal,
state or other governmental authority.
"ERISA" shall mean the Employee Retirement Income Security Act of
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1974, as amended, and any regulations promulgated or proposed thereunder.
"Estimated Net Working Capital Balance" shall mean the amount of
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current assets included within the Acquired Assets, less the amount of all
current liabilities included with the Assumed Liabilities, as reflected on the
Summary Balance Sheet attached hereto as Schedule 4.7 hereto.
"Excluded Assets" shall mean all right, title and interest of the Plan
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in and to (i) the properties, assets and rights which are set forth in Schedule
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1.1(b) hereto, (ii) all cash, marketable securities and accounts receivable of
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the Plan, (iii) the Intellectual Property, (iv) all claims, causes of action,
rights of recovery and rights of set-off of any kind against any Person arising
out of or relating to the Acquired Assets to the extent arising prior to the
Closing, (v) the Plan's interest in this Agreement and in any of the Related
Agreements, and (vi) all claims, causes of action, rights of recovery and rights
of set-off of any kind against any Person arising out of or relating to any of
the foregoing.
"Excluded Liabilities" shall have the meaning set forth in Section 2.3
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hereof.
"GAAP" shall mean U.S. generally accepted accounting principles, as in
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effect from time to time.
"Governmental Authority" shall mean any federal, state or local court,
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governmental agency, administrative authority or body, arbitrator or arbitration
panel.
"Hazardous Substances" shall mean any and all pollutants,
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contaminants, chemicals, wastes, and any other carcinogenic, ignitable,
corrosive, reactive, toxic, radioactive or otherwise hazardous substances or
materials that are now or in the future regulated under Environmental Laws.
"Health Care Centers" shall mean the health care centers operated by
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the Plan and listed on Schedule 1.1(c) hereto.
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"Health Services Agreement" shall mean that certain Health Services
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Agreement entered into concurrently herewith between the Plan and PHE.
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"HIP Benefit Plan" shall mean each plan, program, policy, payroll
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practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits of any kind, whether formal or
informal, funded or unfunded, written or oral, including without limitation,
each "employee benefit plan," within the meaning of Section 3(3) of ERISA and
each "multi-employer plan" within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA which is now or previously has been sponsored, maintained, contributed to,
or required to be contributed to, or with respect to which any withdrawal
liability (within the meaning of Section 4201 of ERISA) has been incurred, by
the Plan for the benefit of any Employee, and pursuant to which the Plan has or
may have any liability, contingent or otherwise.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
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of 1976, as amended, and the rules and regulations promulgated thereunder.
"including" or to "include" any item shall mean containing or to
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contain such item as part of a whole, without any implied exclusion of other
items.
"Intellectual Property" shall mean all patents, trademarks, service
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marks, trade names and copy rights and applications or registrations owned or
used by the Plan, including the trademark "HIP" and "HIP Health Plan of New
Jersey" and goodwill associated therewith.
"Laws" shall mean all laws, statutes, ordinances, regulations, rules,
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codes, orders, consent decrees and governmental requirements (including any
ruling or requirement having the affect of law and applicable to PHP or the
Plan) of any federal, state or local government and any other governmental
department or agency, and any judgment, decision, decree, writ, injunction,
award, ruling or order of any Governmental Authority.
"Leased Real Property" shall mean the real property leased on the date
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hereof by the Plan as lessee or sublessee, including all buildings, structures
and improvements thereon or appurtenances thereto which are set forth in
Schedule 4.11(e) hereto.
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"Material Adverse Effect" or "Material Adverse Change" shall mean any
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material adverse effect on or change in the assets, properties, condition
(financial or other), business or results of operations, of the Plan and/or the
Acquired Assets or on the ability of the Plan to consummate the transactions
contemplated hereby, excluding, however, continuing operating losses incurred by
the Plan prior to the Closing Date.
"Medical Group" shall mean Pinnacle Medical Group, P.A., a New Jersey
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professional corporation.
"Net Working Capital Balance" shall have the meaning set forth in
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Section 2.5(b) hereof.
"Note Purchase Agreement" shall mean that certain Note Purchase
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Agreement, dated the date hereof, by and among PHP, the Plan and Health
Insurance Plan of Greater New York.
"Notice of Dispute" shall have the meaning set forth in Section 2.5(d)
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hereof.
"Order" shall mean any award, decision, injunction, judgment, order,
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ruling, subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other Governmental Authority.
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"Owned Real Property" shall mean the real property beneficially owned
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by the Plan, including all buildings, structures and improvements thereon or
appurtenances thereto, described on Schedule 4.11(a) hereto.
"Permits" shall mean all licenses, permits, authorizations,
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registrations, certificates, consents or other approvals of any Governmental
Authority owned, used or held for use exclusively in connection with the
operation of the Health Care Centers, excluding, however, any of the foregoing
which relate to the operation of the Plan as a health maintenance organization.
Schedule 4.13 hereto sets forth a list of the Permits as of the date hereof.
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"Person" shall mean an individual, a partnership, a corporation, a
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limited liability company, a trust, an unincorporated organization, a government
or any department or agency thereof or any other entity.
"Personal Property" shall mean all fixtures, installations, machinery
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and equipment, to the extent not constituting real property under applicable
law, and all vehicles, furniture, furnishings, tools, spare parts, supplies,
items historically expensed, office and laboratory equipment, materials and
other personal property of every kind and nature, tangible or intangible, owned,
used or held for use exclusively in connection with the operation of the Health
Care Centers.
"PHE" shall mean Pinnacle Health Enterprises, L.L.C., a Delaware
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limited liability company.
"Proceeding" shall mean any action, arbitration, audit, hearing,
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investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, formal or informal) commenced, brought, conducted or heard by or
before, or otherwise involving any Governmental Authority.
"Related Agreements" shall mean the other agreements listed entered
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into on or prior to the Closing Date between or among any of the parties hereto
or thereto in connection with the transaction contemplated hereby which are in
Schedule 1.1(d) hereto and identified as the "Related Agreements."
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"Representative" shall mean any officer, director, principal,
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attorney, agent, employee or other representative.
"Summary Balance Sheet" shall have the meaning set forth in Section
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4.7 hereof.
"Surplus Notes" shall mean the surplus notes in the aggregate
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principal amount of Forty Million One Hundred Seventy Five Thousand Dollars
($40,175,000.00), each made by the Plan and held by Health Insurance Plan of
Greater New York.
"Tax" shall mean any federal, state, local foreign or other tax, levy,
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impost, fee, assessment or other government charge, including income, estimated
income, business, occupation, property, payroll, personal property, sales,
transfer, use, employment, commercial rent, occupancy, franchise or withholding
taxes, and any premium, including interest, penalties and additions in
connection therewith.
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ARTICLE II.
PURCHASE AND SALE OF ACQUIRED ASSETS
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2.1 Transfer of Acquired Assets.
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(a) Upon the terms and subject to the conditions contained
herein, at the Closing, the Plan will sell, convey, transfer, assign and deliver
to PHP (or its designated Affiliate), and PHP (or its designated Affiliate) will
acquire from the Plan, all right, title and interest of the Plan in and to the
following assets (excluding the Excluded Assets), being referred to herein as
the "Acquired Assets":
(i) All the Owned Real Property and Leased Real
Property;
(ii) All the Personal Property;
(iii) All rights and benefits of the Plan under the
Assigned Contracts;
(iv) All rights and benefits of the Plan under
the Permits, to the extent assignable;
(v) Originals (where available) or copies of all
Books and Records;
(vi) All prepaid charges, expenses and security
deposits, including such charges, expenses and security deposits with
respect to insurance premiums, salaries, leases and rentals and
utilities, in each case, to the extent related to the Acquired Assets
and set forth in the Closing Net Asset Statement;
(vii) All goodwill associated with or attributable to
the operation of the Health Care Centers; and
(viii) All claims and similar rights (and
benefits arising therefrom) of the Plan, including without
limitation, all warranty rights against suppliers, to the extent
related to the Acquired Assets.
(b) To the extent any asset used exclusively in connection
with the operation of the Health Care Centers is owned, used or held for use by
any Affiliate of the Plan, such asset shall be included within the term
"Acquired Assets," and the Plan shall cause such Affiliate, at the Closing, to
convey such asset to PHP (or its designated Affiliate) in accordance with the
provisions of this Agreement.
2.2 Assumption of Liabilities. Subject to Section 2.3, upon the
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terms and subject to the conditions contained herein, at the Closing, PHP (or
its designated Affiliate) shall assume the following obligations and liabilities
of the Plan (the "Assumed Liabilities"):
(a) All obligations and liabilities accruing, or arising
out of, or relating to, events or occurrences happening after the Closing under
the Contracts acquired by PHP pursuant to this Agreement, but not including any
liability for any breach by the Plan of any such Contract occurring on or prior
to the Closing;
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(b) All accounts payable of the Plan as of the Closing
which directly relate to the Acquired Assets and the operation of the Health
Centers but only to the extent of the amount reflected as a liability on the
Closing Net Asset Statement; and
(c) All obligations and liabilities of the Plan for accrued
compensation and employee benefit obligations owed to employees who accept
employment with PHP (other than severance payments as provided in Section 6.7
hereof), but only to the extent of the amount reflected as a current liability
on the Closing Net Asset Statement.
The assumption by PHP (or its designated Affiliate) of the Assumed Liabilities
shall not enlarge the rights of any Person under any Contract. Nothing contained
herein shall prevent PHP (or its designated Affiliate) from contesting any of
the Assumed Liabilities with any third party obligee.
2.3 Excluded Liabilities. Notwithstanding any other
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provision of this Agreement, PHP shall not assume, or otherwise be responsible
for, any of the following liabilities or obligations of the Plan, whether actual
or contingent, matured or unmatured, liquidated or unliquidated, or known or
unknown ("Excluded Liabilities"):
(a) Liabilities for Taxes;
(b) Liabilities for violation of any Laws, including any
Environmental Laws, including without limitation, liabilities relating to the
alleged exposure of medical group personnel to glutaraldehyde;
(c) Liabilities relating to Excluded Assets;
(d) Liabilities of the Plan under this Agreement and the
Related Agreements;
(e) Liabilities for medical malpractice claims relating to
services provided or omitted to be provided prior to the Closing;
(f) Liabilities incurred prior to the Closing in connection
with medical records;
(g) Liabilities or obligations of the Plan with respect to
incurred but not reported claims as of the Closing Date. For this purpose, a
claim is incurred on the date of service and not the date the claim is submitted
or paid;
(h) Liabilities or obligations for medical services
provided to Covered Persons in any Institutional Care Facility (as defined in
the Health Services Agreement) through the date of discharge (whether before or
after the Closing) for all Covered Persons admitted to such an Institutional
Care Facility on or prior to the Closing Date;
(i) Liabilities or obligations of the Plan with respect to
indebtedness for borrowed money;
(j) Except as set forth in Sections 2.2(c) and 6.7,
liabilities or obligations of the Plan arising out of any HIP Benefit Plan
established or maintained by the Plan or to which the Plan contributes, or any
liability of the Plan relating to the termination of any such HIP Benefit Plan
or the participation of Employees of the Plan in any such HIP Benefit Plan;
(k) Except as specifically set forth in Sections 2.2(c) and
6.7, liabilities or obligations in respect of any Employee or former employee of
the Plan, including without
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limitation (i) any liability to make payments for accrued sick days, (ii) any
liability to pay any retention bonus, accrued vacation days, unpaid wages or
overtime obligations, (iii) any liability to make severance or similar payments,
(iv) any employment agreement, whether or not written, between the Plan and any
employee and (v) any claim of an unfair labor practice, or any claim under state
unemployment compensation or any federal or state workers' compensation law or
regulation or any claim of harassment or discrimination under any other federal
or state employment law or regulation, or employment policy of the Plan, which
shall have been asserted on or prior to the Closing Date or is based on acts or
omissions which occurred on or prior to the Closing Date;
(l) Liabilities or obligations arising out of any
Proceedings pending or threatened prior to the Closing or based on acts or
omissions which occurred prior to the Closing, including without limitation the
Proceedings described in Schedule 4.8 hereto;
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(m) Liabilities to indemnify any person by reason of the
fact that such person was a director, officer, employee or agent of the Plan or
was serving at the request of the Plan as a partner, trustee, director, officer,
employee or agent of another entity; and
(n) Any and all other liabilities and obligations not
expressly assumed under Section 2.2 hereof.
2.4 Purchase Price.
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(a) Purchase Price. Subject to the terms and conditions
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contained herein, and in consideration of the consummation of the transactions
contemplated under the Health Services Agreement and the sale, assignment,
transfer, conveyance and delivery to PHP (or its designated Affiliate) of the
Acquired Assets hereunder, but subject to the adjustments provided for herein,
PHP (or its designated Affiliate) shall pay:
(i) PHP (or its designated Affiliate) will deliver to
the Plan at the Closing, by wire transfer of immediately available
funds to an account designated by the Plan, an amount in cash equal
to $72,600,000 minus the negative amount of the Estimated Net Working
Capital Balance (the "Purchase Price");
(ii) PHP (or its designated Affiliate) will assume the
Assumed Liabilities and deliver to the Plan at the Closing an
executed copy of the Assumption Agreement; and
(iii) PHP (or its designated Affiliate) will pay to the
Plan certain additional payments based upon the number of Plan
members subject to, and in accordance with, the terms and provisions
set forth in Schedule 2.4(a) hereto.
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(b) Purchase Price Allocation. The Purchase Price shall be
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allocated among the Acquired Assets and the other transactions described in the
Related Agreements in the manner required by Section 1060 of the Code and
regulations thereunder and in accordance with an allocation to be jointly
prepared on a reasonable basis and in good faith by PHP and the Plan prior to
the Closing, subject to the post-Closing adjustment set forth herein.
2.5 Post-Closing Adjustments.
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(a) Closing Net Asset Statement. On or before the date
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which is 90 days after the Closing Date, the Plan shall prepare and deliver to
PHP a statement (the "Closing Net Asset
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Statement") setting forth the Acquired Assets and Assumed Liabilities as of the
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Closing. The Closing Net Asset Statement shall be prepared in accordance with
GAAP on a basis consistent with the accounting methodologies, practices and
procedures (including the basis for calculation of both the adequacy and amounts
of accruals and reserves and including valuation methods and practices) used in
the preparation of the Summary Balance Sheet (which methodologies, practices and
procedures are described on Schedule 2.5 hereto) and shall fairly present the
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Acquired Assets and Assumed Liabilities as of the Closing Date.
(b) Net Working Capital Balance. Together with the Closing
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Net Asset Statement, the Plan shall deliver to PHP a statement setting forth the
Net Working Capital Balance as of the Closing. The "Net Working Capital Balance"
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shall mean the amount of current assets included within the Acquired Assets,
less the amount of current liabilities included within the Assumed Liabilities
as of the Closing Date determined in accordance with GAAP.
(c) Purchase Price Adjustment. Upon final determination of
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the Net Working Capital Balance, either by agreement between the Plan and PHP or
determination in accordance with Section 2.5(e) hereof,
(i) if the Estimated Net Working Capital Balance is
greater than the Net Working Capital Balance, the Purchase Price
shall be decreased by the amount of such difference; and
(ii) if the Estimated Net Working Capital Balance is
less than the Net Working Capital Balance, the Purchase Price shall
be increased by the amount of such difference.
No later than 10 days following the final determination thereof, the Plan shall
pay to PHP the amount of any decrease in the Purchase Price or PHP shall pay to
the Plan the amount of any increase in the Purchase Price as appropriate, in
each case, together with interest on the amount of such payment at an annual
rate of interest equal to the prime rate of major commercial banks as of the
Closing Date (as reported in the Wall Street Journal) for the period commencing
on the Closing Date through the date of payment. All payments shall be made by
wire transfer of immediately available funds to an account designated by the
recipient.
(d) Adjustment Dispute. PHP shall have 90 days following
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its receipt thereof to review the Closing Net Asset Statement and the
calculation of the Net Working Capital Balance, and the Plan shall promptly
provide for review by PHP and its accountants such documentation, records and
other information used in the preparation of the Closing Net Asset Statement and
the calculation of the Net Working Capital Balance as the Plan shall reasonably
request. If PHP shall disagree with the Closing Net Asset Statement and/or the
calculation of the Net Working Capital Balance, PHP shall notify the Plan in
writing (the "Notice of Dispute") of such disagreement setting forth in
reasonable detail the nature of such disagreement and the basis thereof. In the
event PHP shall fail to deliver a Notice of Dispute within 90 days following its
receipt of the Closing Net Asset Statement and calculation of the Net Working
Capital Balance prepared by the Plan, the same shall be deemed final and
conclusive and binding upon the parties in all respects.
(e) Resolution of Disputed Adjustment Amounts. PHP and the
-----------------------------------------
Plan shall use all reasonable efforts for a period of 60 days after PHP's
delivery of the Notice of Dispute (or such longer period as PHP and the Plan
shall mutually agree upon) to resolve any disagreements raised by PHP with
respect to the Closing Net Asset Statement and the calculation of the Net
Working Capital Balance. If, at the end of such period, PHP and the Plan are
unable to resolve such
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disagreements, a mutually agreed upon nationally recognized accounting firm
shall be retained to resolve any remaining disagreements. The determination by
such independent accounting firm shall be final, binding and conclusive on the
parties. PHP and the Plan shall use all reasonable efforts to cause such
independent accounting firm to make its determination within 30 days of
accepting its selection. The fees and expenses of such independent accounting
firm shall be borne by PHP and the Plan equally.
2.6 Closing Costs; Transfer Taxes and Fees. The Plan shall be
--------------------------------------
responsible for any documentary and transfer taxes and any sales or use taxes
imposed on the transfer of Acquired Assets provided hereunder and any
deficiency, interest or penalty asserted with respect thereto. PHP shall pay the
fees and costs of recording or filing all applicable conveyancing instruments
arising in connection with the purchase and sale of the Acquired Assets.
ARTICLE III.
CLOSING
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3.1 Closing. The Closing of the transactions contemplated herein (the
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"Closing") shall be at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇, P.A., ▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ on the earliest possible date; provided that such
date is at least five Business Days following the satisfaction or waiver of all
conditions to the obligations of the parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions to be taken
at the Closing itself), or at such other place, time, and date as the parties
hereto may agree (the "Closing Date").
3.2 Closing Documents.
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(a) At the Closing, the Plan shall make (or cause to be made) the
following deliveries:
(i) The Plan shall execute and deliver to PHP (or its
designated Affiliate) such bills of sale, endorsements, assignments
and other instruments and documents (collectively, "Instruments of
Assignment"), in each case reasonably satisfactory in form and
substance to PHP and its counsel, as shall vest in PHP (or its
designated Affiliate) on the Closing Date good and marketable title
to the Acquired Assets (other than the Owned Real Property) subject
to no Encumbrances. Simultaneously with such delivery, the Plan shall
take all additional steps as may be necessary to put PHP (or its
designated Affiliate) in possession and operating control of the
Acquired Assets and the operation of the Health Care Centers.
(ii) The Plan shall execute and deliver to PHP the Related
Agreements.
(iii) The Plan shall execute and deliver to PHP the
certificates described in Section 8.4 hereof and the legal opinion
described in Section 8.3 hereof, and such other documents,
instruments and writings as may be reasonably requested by PHP at
least three Business Days prior to the Closing.
(b) At the Closing, PHP shall make (or cause to be made) the
following deliveries:
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(i) PHP (or its designated Affiliate) shall
execute and deliver to the Plan the Assumption Agreement as shall
evidence such party's assumption of the Assumed Liabilities.
(ii) PHP (or its designated Affiliate) shall pay the
Purchase Price to the Plan.
(iii) PHP (or its designated Affiliate) shall execute and
deliver to the Plan the Related Agreements to the extent not
previously executed and delivered.
(iv) PHP (or its designated Affiliate) shall execute and
deliver to the Plan the certificates described in Section 7.4 hereof
and the legal opinion described in Section 7.3 hereof, and such other
documents, instruments and writings as may be reasonably requested by
the Plan at least three Business Days prior to the Closing.
3.3 Notices of Sale. The Plan (as reasonably requested by PHP) shall
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from time to time, prepare and mail notices to any other party under each of the
Acquired Assets sold, transferred, assigned, delivered and conveyed to PHP (or
its designated Affiliate) pursuant to this Agreement advising such other party
that such Acquired Asset has been sold to PHP (or its designated Affiliate) and
directing such other party to send to PHP all future payments on account,
notices and correspondence relating to the foregoing.
3.4 Owned Real Property. The Plan shall deliver marketable and
-------------------
insurable title as evidenced by a title insurance commitment issued by a New
Jersey title insurer, underwritten by a national insurance carrier, without
exceptions or additional premiums. The Plan agrees to transfer, and PHP (or its
designated Affiliate) agrees to accept, ownership of the subject property free
of all claims and rights of others including liens and/or encumbrances except
for (a) the rights of utility companies to maintain pipes, poles, cables and
wires over, on and under the street, the part of the subject property next to
the street or running to any building, structure or other improvement on the
premises; or (b) recorded agreements, known as restrictive covenants, which
limit the use of property being conveyed unless the agreements: (1) are
presently violated; or (2) provide that the premises would be forfeited if they
are violated; or (3) unreasonably limit PHP's intended use of the premises as a
health care center; and (c) Utility Easement recorded in Middlesex County Deed
Book 324, Page 146; Utility Easement recorded in Middlesex County Deed Book 326,
Page 259, and slope drainage and other rights of the State of New Jersey as set
forth in Middlesex County Deed Book 1024, Page 357 and Middlesex County Deed
Book 2354, Page 421. The Plan shall provide a Survey Affidavit for the 6/26/96
survey of the property prepared by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, P.L.S., Inc. confirming no
changes thereto. PHP agrees that it will obtain a current title insurance binder
and report in connection with the property and shall supply same to the Plan's
attorney upon receipt. In the event such title binder or PHP shall raise
objections to title, PHP shall provide written notice to the Plan's attorney. If
the objection is a lien or encumbrance caused or created by the Plan, the Plan
shall take the necessary steps to discharge the lien or encumbrance. If any
other objections cannot be cured or removed by the Plan prior to closing or
within a period of time thereafter reasonably acceptable to PHP, then PHP shall
have the right to 1) delete this property from the transaction (with an
appropriate price abatement), 2) withhold from the Purchase Price the amount
needed to clear the lien or encumbrance, 3) accept the property with the
objection but with an adjustment of the Purchase Price, or 4) lease the premises
from the Plan at market rate. In the event this property is deleted from this
transaction based on title issues, the Plan shall reimburse PHP for its actual
out of pocket cost for its title search and survey costs and any and all
engineering or legal costs actually incurred by PHP in connection with any
application for occupancy or development in addition to
-11-
the Purchase Price adjustment for the assets purchased hereunder to reflect the
deletion of the property from the assets purchased.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE PLAN
------------------------------------------
The Plan hereby represents and warrants to PHP as follows:
4.1 Organization of the Plan. The Plan is a federally qualified and
------------------------
state certified health maintenance organization duly organized and validly
existing under the laws of the State of New Jersey with all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
4.2 Authorization. The Plan has full power and authority to enter into
-------------
and perform this Agreement and the other agreements and documents contemplated
herein and to carry out the transactions contemplated herein and therein. This
Agreement has been duly and validly authorized, executed and delivered by the
Plan, and constitutes the legally valid and binding obligation of the Plan,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws and equitable principles relating to or limiting creditors' rights
generally and general principles of equity.
4.3 No Conflict or Violation. Except as set forth in Schedule 4.3
------------------------ ------------
hereto, none of the execution, delivery and performance of this Agreement, the
consummation of the transactions contemplated hereby, and the compliance by the
Plan with any of the provisions hereof, will (a) violate or conflict with any
provision of the Certificate of Authority of the Plan, (b) violate, conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or result in a right of termination or acceleration under, or result in the
creation of any Encumbrance upon any of the Acquired Assets under, any of the
terms, conditions or provisions of any material Contract, indebtedness, note,
bond, indenture, security or pledge agreement, commitment, license, lease,
franchise, permit, agreement, or other instrument or obligation (i) to which the
Plan is a party or (ii) by which the Acquired Assets are bound, or (c) violate
any Laws.
4.4 Ownership of Acquired Assets. Except as set forth in Section 3.4
----------------------------
hereof, or Schedule 4.4 hereto, the Plan has good and marketable title to the
------------
Acquired Assets owned by it, free and clear of any Encumbrances, and, upon the
consummation of the transactions contemplated by this Agreement, PHP will
acquire good and marketable title to such Acquired Assets, free and clear of any
Encumbrances.
4.5 Contracts and Commitments.
-------------------------
(a) Contracts. Schedule 4.5 hereto contains a complete and
--------- ------------
accurate list of all written Contracts and an accurate description of the
material terms of all oral Contracts included in the Acquired Assets. The Plan
has delivered to PHP true, correct and complete copies of all of the Contracts
listed on Schedule 4.5 hereto, including all amendments and supplements thereto.
------------
(b) Absence of Breaches or Defaults. All of the Contracts
-------------------------------
set forth, listed or described on Schedule 4.5 hereto are, with respect to the
------------
Plan, and, to the Plan's knowledge, with
-12-
respect to all other parties thereto, valid and binding, and in full force and
effect in accordance with all of their material terms. The Plan has duly
performed all of its material obligations under such Contracts to the extent
those obligations to perform have accrued, and no material violation of, or
material default (or condition or event which with notice or lapse of time or
both would constitute a material default) or material breach under any such
Contracts by the Plan or, to the Plan's knowledge, any other party, has occurred
and neither the Plan nor, to the Plan's knowledge, any other party thereto has
repudiated any provisions thereof.
4.6 Governmental Filings. Except as set forth in Schedule 4.6 hereto,
-------------------- ------------
no notice to, declaration, filing or registration with, or permit, waiver or
approval from, any Governmental Authority is required to be made or obtained by
the Plan in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement.
4.7 Summary Balance Sheet. The Plan has provided PHP with a summary
---------------------
balance sheet of the Acquired Assets and Assumed Liabilities as of May 31, 1997
as set forth in Schedule 4.7 hereto (the "Summary Balance Sheet"). The Summary
------------ ---------------------
Balance Sheet has been prepared in accordance with GAAP and fairly presents the
Acquired Assets and Assumed Liabilities as of the date thereof.
4.8 Litigation.
----------
(a) Except as set forth in Schedule 4.8 hereto, there are no
------------
Proceedings with respect to the Plan, pending or threatened in writing against
the Plan or any officers or directors thereof in their capacity as such.
(b) (i) There is no Order to which any of the Health Care
Centers or the Acquired Assets is subject; and (ii) the Plan is not subject to
any Order that relates to the operation of the Health Care Centers or the
Acquired Assets.
(c) Except as set forth in Schedule 4.8 hereto, as of the date
------------
hereof (but not any later date), to the Plan's knowledge, no representation
proceedings or union authorization cards have been filed with the National Labor
Relations Board ("NLRB"), or otherwise communicated to the Plan.
4.9 Compliance with Laws. Except as set forth in Schedule 4.9 hereto:
-------------------- ------------
(a) the Plan is in full compliance in all material respects with
the Laws that are applicable to the conduct or operation of the Health Care
Centers or the ownership or use of any of the Acquired Assets;
(b) with respect to the Acquired Assets, no event has occurred or
circumstance exists that (with or without notice or lapse of time) (A) may
constitute or result in a violation by the Plan of, or a failure on the part of
the Plan to comply with, any Law, or (B) may give rise to any obligation on the
part of the Plan to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and
(c) with respect to the Acquired Assets, the Plan has not received
any written notice or other communication from any Governmental Authority
regarding (A) any actual or alleged violation of, or failure to comply with, any
Law, or (B) any actual or alleged obligation on the part of the Plan to
undertake, or to bear all or any portion of the cost of, any remedial
-13-
action of any nature, nor does the Plan have knowledge of any such violation,
failure or obligation.
4.10 Environmental Matters.
---------------------
(a) Except as set forth in Schedule 4.10 or in the November
-------------
21, 1995 Environmental Site Assessment prepared for HIP Health Plan of New
Jersey by PMK Group, Consulting Engineers, to the best of the Plan's knowledge
and belief, at present and at no time since the Plan has owned, or possessed the
Owned Real Property or Leased Real Property have Hazardous Substance, or other
toxic or hazardous materials, been used, stored or disposed of at or on such
premises, other than deminimus quantities not exceeding levels as set forth in
N.J.S.A. 13:1K-10 and used in the ordinary course of business of a health care
center, and the Plan has no knowledge that such premises were so used prior to
the Plan's acquisition of title to, or interest in, such premises. The Plan has
not received any letter or other written communication from any Governmental
Authority relating to the presence of toxic or other hazardous materials on such
premises.
(b) Except as set forth in Schedule 4.10 or the November
-------------
21, 1995 Environmental Site Assessment prepared for HIP Health Plan of New
Jersey by PMK Group, Consulting Engineers, the Plan has no actual knowledge of
underground fuel or storage tanks or abandoned septic tanks or asbestos, PCB
transformers, or toxic, hazardous or contaminated substances in, on, or about
the Owned Real Property or Leased Real Property.
4.11 Real Property.
-------------
(a) The Plan has no knowledge of, and has received no
notice that, the Owned Real Property and Leased Real Property are not in full
compliance with applicable zoning laws, ordinances, codes and governmental
regulations adopted by any authority having jurisdiction which relate to such
property, nor any violation notices thereof.
(b) The Plan has no knowledge of, and has received no notice of,
condemnation or eminent domain proceedings affecting all or any portion of the
Owned Real Property or Leased Real Property or any access thereto or therefrom.
(c) All liabilities or liens against the Owned Real Property and
the Plan's interest in the Leased Real Property, including mortgages, shall be
paid or otherwise satisfied by the Plan prior to or at the Closing and the Plan
hereby agrees to indemnify and hold PHP harmless from and against any of said
liabilities and/or liens.
(d) The Plan has no knowledge of any material adverse information
regarding the Owned Real Property and Leased Real Property and its ability to
convey marketable title thereto or a valid leasehold interest therein, except as
otherwise disclosed to PHP.
(e) The Plan has valid and subsisting leasehold estates in the
Leased Real Property set forth in Schedule 4.11(e) hereto free and clear of all
----------------
liens and encumbrances except for the encumbrances on the lessor's fee interest.
The Plan hereby warrants and represents that, except as set forth in Schedule
--------
4.11(e):
-------
(i) There is no notice of cancellation or termination under
any option or right reserved to the lessor, or any notice of default,
under any lease of the Leased Real Properties, and no event has
occurred which, with notice or lapse of time or both, would
constitute a default by the Plan under any lease of the Leased Real
Properties.
-14-
(ii) The Plan has not assigned any interest in, nor
subleased the premises constituting, any Leased Real Properties.
(iii) There are no restrictions to the assignment or transfer
of, or any other restriction with respect to, the Leased Real
Properties that will affect the rights of PHP (or its designated
Affiliate) with respect thereto as a consequence of the transfer of
the Acquired Assets to PHP (or its designated Affiliate).
4.12 Members. As of July 23, 1997, the Plan had 199,272 Covered
-------
Persons, including 148,230 Center Covered Persons.
4.13 Permits.
-------
(a) Schedule 4.13 hereto contains a complete and accurate
-------------
list of each Permit that is held by the Plan that relates to the operation of
the Health Care Centers or the ownership or use of the Acquired Assets. Each
Permit listed or required to be listed in Schedule 4.13 hereto is valid and in
-------------
full force and effect. Except as set forth in Schedule 4.13 hereto:
-------------
(i) the Plan is and at all times has been, in material
compliance with all of the terms and requirements of each Permit
identified or required to be identified in Schedule 4.13 hereto;
-------------
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of, or default or deficiency
with respect to, or a failure to comply with any term or requirement
of any Permit listed or required to be listed in Schedule 4.13
-------------
hereto, the violation, default, deficiency or failure of which would
have a Material Adverse Effect, or (B) result directly or indirectly
in the revocation, withdrawal, suspension, cancellation, or
termination of any Permit listed or required to be listed in Schedule
--------
4.13 hereto;
----
(iii) the Plan has not received any written notice or other
communication from any Governmental Authority regarding (A) any
actual or alleged violation of, default or deficiency with respect
to, or failure to comply with any term or requirement of any Permit
listed or required to be listed on Schedule 4.13 hereto, the
-------------
violation, default, deficiency or failure of which would have a
Material Adverse Effect, or (B) any actual or proposed revocation,
withdrawal, suspension, cancellation, termination of any Permit
listed or required to be listed on Schedule 4.13 hereto, nor does the
-------------
Plan have knowledge of any such violation, default, deficiency or
failure to comply; and
(iv) all applications required to have been filed for the
renewal of the Permits listed or required to be listed in Schedule
--------
4.13 hereto have been duly filed on a timely basis with the
----
appropriate Governmental Authorities, and all other filings required
to have been made with respect to such Permits have been duly made on
a timely basis with the appropriate Governmental Authorities.
(b) The Permits listed in Schedule 4.13 hereto collectively
-------------
constitute all of the Permits necessary to permit the Plan to lawfully conduct
and operate the Health Care Centers in the manner that the Health Care Centers
are currently conducted and operated and to permit the Plan to own and use the
Acquired Assets in the manner in which the Plan currently owns and uses such
assets.
-15-
4.14 Consents. Except as set forth in Schedule 4.14 hereto, the Plan
-------- -------------
is not or will not be required to give any notice to or obtain any consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the transactions contemplated hereby.
4.15 Books and Records. The Books and Records are in all material
-----------------
respects true and complete, are maintained in accordance with good business
practice and all applicable Laws, and accurately present and reflect in all
material respects all of the events and transactions therein described.
4.16 Insurance. Schedule 4.16 hereto sets forth a list of all
--------- -------------
insurance policies or binders which are currently in effect insuring the Health
Care Centers and the Acquired Assets, and true and complete copies thereof have
been delivered or made available to PHP. All such policies and other instruments
are in full force and effect and all premiums with respect to thereto up to the
Closing Date have been paid. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not result in any
violation of or default or loss of any benefit (including the right to receive
any claim) under, or permit the termination of, any of such insurance policies.
The Plan has not failed to give any notice or present any claim under any
insurance policy in due and timely fashion or as required by any of such
insurance policies or has otherwise, through any act, omission or nondisclosure,
jeopardized or impaired full recovery under such policies, and there are no
claims by the Plan under any of such policies as to which any insurance company
is denying liability or defending under a reservation of rights or similar
clause except as set forth in Schedule 4.8. The Plan has not received notice of
------------
any pending or threatened termination of any of such policies or any premium
increases for the current policy period with respect to any of such policies.
4.17 Taxes. The Plan is qualified as a tax-exempt organization as
-----
defined in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.
The Plan has timely filed or will timely file with the appropriate Governmental
Bodies all tax returns required to be filed before the Closing Date, and will
timely file all tax returns required to be filed after the Closing Date, in
respect of periods ending on or prior to the Closing Date, and has maintained,
or caused to be maintained, and will maintain all required records with respect
to Taxes, and has timely paid, or caused to be paid, or will timely pay in full
all Taxes, if any, shown to be due on such returns, or otherwise due from the
Plan for all periods up to and including the Closing Date. The Plan will pay
when due all Taxes arising out of the transactions contemplated hereby.
4.18 No Material Adverse Change. Since May 31, 1997, no Material
--------------------------
Adverse Change has occurred in the business, assets, liabilities, financial
condition or results of operations of the Plan.
4.19 Brokers and Finders. The Plan has not employed any broker or
-------------------
finder or incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated hereby, except for
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc., the fees and expenses of which shall be paid by
the Plan or its Affiliates.
4.20 Employee Benefits.
-----------------
(a) Employees. Schedule 4.20(a) hereto contains a true and
--------- ----------------
complete list, by Health Care Center, of the position and rate of compensation
of each Employee and the date of commencement of such person's employment with
the Plan. The Plan has no employment
-16-
agreements with Employees other than employed physicians except as set forth in
Schedule 4.20(a).
----------------
(b) Schedule. Schedule 4.20(b) hereto contains a true and
-------- ----------------
complete list of each HIP Benefit Plan. The Plan has no plan or commitment,
whether legally binding or not, to establish any new HIP Benefit Plan or to
modify or to terminate any HIP Benefit Plan (except to the extent required by
law or to conform any such HIP Benefit Plan to the requirements of any
applicable law, in each case as previously disclosed to PHP, or as required by
this Agreement), nor has any intention to do any of the foregoing been
communicated to Employees.
(c) Documents. The Plan has provided, or has caused to be
---------
provided, to PHP current, accurate and complete summaries of all documents
embodying or relating to each HIP Benefit Plan, including all amendments
thereto, written interpretations thereof and trust or funding agreements with
respect thereto.
(d) Compliance. With respect to each HIP Benefit Plan, (i)
----------
the Plan has performed all obligations required to be performed by it under each
HIP Benefit Plan and the Plan is not in default under or in violation of, any
HIP Benefit Plan, (ii) each HIP Benefit Plan has been established and maintained
in accordance with its terms and in compliance with all applicable laws,
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, including without limiting the foregoing, the timely filing of all
required reports, documents and notices, where applicable, with the IRS and the
Department of Labor, (iii) the Plan has made all payments with respect to all
periods through the date hereof, and will make a pro-rata payment for the period
ending as of the Closing Date, in each case which are required by each HIP
Benefit Plan, each related trust, or by law to be made to, or with respect to
each HIP Benefit Plan (including all insurance premiums or intercompany charges
with respect to each HIP Benefit Plan and (iv) the Plan has no obligation to
contribute to, and has not contributed to, any multiemployer pension plan on
behalf of any Employee of the Plan.
(e) Effect of Transaction. Except as otherwise arising in
---------------------
connection with the termination of Employees as contemplated herein, the
execution of, and performance of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any HIP Benefit Plan, trust or loan
that will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee.
(f) Employment Matters. The Plan (i) is in compliance in
------------------
all material respects with all Laws respecting employment, employment practices,
labor, terms and conditions of employment and wages and hours, in each case,
with respect to Employees; (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits for Employees.
(g) Labor. As of the date of this Agreement (and not any
-----
later date) and, except as otherwise set forth in Schedule 4.20(g) hereto: (1)
----------------
no work stoppage or labor strike against the Plan by Employees is pending or
threatened; (2) the Plan (i) is not involved in or threatened with any labor
dispute, grievance, or litigation relating to labor matters involving any
Employees, including, without limitation, violation of any federal, state or
local labor, safety or
-17-
employment laws (domestic or foreign), charges of unfair labor practices or
discrimination complaints; (ii) has not engaged in any unfair labor practices
within the meaning of the National Labor Relations Act or the Railway Labor Act;
or (iii) is not presently, nor has been in the past a party to, or bound by, any
collective bargaining agreement or union contract with respect to Employees and
no such agreement or contract is currently being negotiated by the Plan or any
of its affiliates; (3) the Plan has fulfilled any bargaining obligation
applicable to the transactions contemplated by this Agreement; and no Employees
are currently represented by any labor union for purposes of collective
bargaining and (4) no activities the purpose of which is to achieve such
representation of all or some of such Employees are threatened or ongoing.
4.21 Financial Statements. The Plan has furnished PHP with true,
--------------------
correct and complete copies of the following financial statements (collectively,
the "HIP Financial Statements"): (i) consolidated financial statements for the
fiscal year ended December 31, 1996 audited by Ernst & Young LLP and (ii)
unaudited consolidated statements of income and cash flows for the five-month
period ended May 31, 1997 and the accompanying consolidated balance sheets as of
such dates. The HIP Financial Statements present fairly, in all material
respects, the consolidated financial position of the Plan and the results of its
operations and its cash flows as of the respective dates and periods thereof in
conformity with GAAP and applied on a consistent basis, except as noted therein
and except that in the case of the unaudited financial statements, no notes are
included and such unaudited financial statements may be subject to normal,
recurring adjustments that would be made in the course of an audit and that
would be not material. Except as set forth in Schedule 4.21 hereto, the Plan has
-------------
no liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the most recent balance sheet
included in the HIP Financial Statements and liabilities incurred in the
ordinary course of business since May 31, 1997.
4.22 Disclosure. No representation or warranty of the Plan contained
----------
in this Agreement, or any Related Agreement, or in any Schedule hereto or
thereto, or in any certificate or related document delivered to PHP pursuant
hereto or thereto, or in connection herewith or therewith, contains a false,
misleading or untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements made, in
the light of the circumstances in which they were made, not misleading.
ARTICLE V.
REPRESENTATIONS OF PHP
PHP hereby represents and warrants to the Plan as follows:
5.1 Organization of PHP. PHP is a corporation duly organized,
-------------------
validly existing and in good standing under the laws of the State of Delaware
and is qualified to do business in the State of New Jersey and in each other
jurisdiction in which it is required to be so qualified.
5.2 Authorization. PHP has full power and authority to enter into
-------------
and perform this Agreement and the other agreements and documents contemplated
herein and to carry out the transactions contemplated herein and therein. This
Agreement has been duly and validly authorized, executed and delivered by PHP
and constitutes a legally valid and binding obligation of PHP, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally and
general principles of equity.
-18-
5.3 No Conflict or Violation. None of the execution, delivery and
------------------------
performance of this Agreement, the consummation of the transactions contemplated
hereby, and the compliance by PHP with any of the provisions hereof, will (a)
violate or conflict with any provision of its organizational or charter
documents, (b) violate, conflict with or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, any of the terms, conditions or provisions of any contract,
indebtedness, note, bond, indenture, security or pledge agreement, commitment,
license, lease, franchise, permit, agreement, or other instrument or obligation
to which PHP is a party, or (c) violate any Laws.
5.4 Filings. No notice to, declaration, filing or registration with,
-------
or permit, waiver or approval from, any Governmental Authority is required to be
made or obtained by PHP in connection with the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement, except for filings required under the HSR Act
and the Securities Exchange Act of 1934, as amended.
5.5 SEC Documents. PHP has filed all required reports, schedules,
-------------
forms, statements and other documents with the Securities and Exchange
Commission since April 30, 1996 (the "SEC Documents"). All of the SEC Documents
---------------
(other than preliminary material or material which was subsequently amended), as
of their respective filing dates, complied in all material respects with all
applicable requirements of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and, in each case, the rules and
regulations promulgated thereunder applicable to such SEC Documents. None of the
SEC Documents, as of their respective dates, contained any untrue statements of
a material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
such statements have been amended, modified or superseded by later SEC
Documents. PHP's consolidated financial statements included in the SEC Documents
complied, as to form in all material respects, with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q promulgated under the Exchange
Act) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented, in accordance with the
applicable requirements of GAAP, the consolidated financial position thereof and
the consolidated results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal recurring adjustments
that would be made in the course of an audit and that would not be material).
Since April 30, 1997, no Material Adverse Change has occurred in the business,
assets, liabilities, condition (financial or other) or results of operations of
PHP.
5.6 Financial Ability. PHP has, or will obtain prior to the Closing,
-----------------
the funds available to pay the Purchase Price and consummate the transactions
described herein and in the Related Agreements to which it is a party.
5.7 Brokers and Finders. PHP has not employed any broker or finder
-------------------
or incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby.
5.8 Disclosure. No representation or warranty of PHP contained in
----------
this Agreement, or any Related Agreement, or in any Schedule hereto or thereto,
or in any certificate or related document delivered to the Plan pursuant hereto
or thereto, or in connection herewith or therewith, contains a false, misleading
or untrue statement of a material fact or omits to state a
-19-
material fact required to be stated therein or necessary to make the statements
made, in the light of the circumstances in which they were made, not misleading.
ARTICLE VI.
COVENANTS OF THE PLAN AND PHP
-----------------------------
The Plan and PHP each covenant with the other as follows:
6.1 Further Assurances. Upon the terms and subject to the conditions
------------------
contained herein, each of PHP and the Plan agrees, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to take, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (iii) to cooperate with each other in
connection with the foregoing, including using all reasonable efforts (A) to
obtain all necessary waivers, consents and approvals from other parties to the
Contracts to be assumed by PHP (or its designated Affiliate); provided, however,
-------- -------
that neither PHP nor the Plan shall be required to commence litigation or agree
to material modifications of the terms thereof in order to obtain any such
waivers, consents or approvals; provided, further, that the cost of obtaining
such waivers, consents and approvals shall be borne by the Plan, (B) to obtain
all permits or licenses required to be obtained under any applicable Laws, (C)
to effect all necessary registrations and filings, including submissions of
information requested by Governmental Authorities and all filings required under
the HSR Act, and (D) to fulfill all conditions to this Agreement. The Plan and
PHP will commence all action required under clauses (A) and (B) above (including
submitting all filings required under the HSR Act) as soon as reasonably
practicable following the execution and delivery of this Agreement. The HSR Act
filing fee shall be shared equally by the parties.
6.2 Notification of Certain Matters. From the date hereof through
-------------------------------
the Closing, each of PHP and the Plan shall give prompt notice to the other of
(i) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect and (ii) any
material failure of such party to comply with any covenant to be complied with
by it under this Agreement; provided, however, that such disclosure shall not be
-------- -------
deemed to cure any breach of a representation, warranty, covenant or agreement
or to satisfy any condition. The Plan shall give prompt notice to PHP of all
pending or threatened matters before the NLRB including the events which may
lead to the filing of representation petitions at any Health Care Centers. No
notice given pursuant to this Section 6.2 will contain any false, misleading or
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein or in this Agreement, in the light of the
circumstances in which they were made, not misleading.
6.3 Inspections. Subject to the provisions of the Confidentiality
-----------
Agreements, the parties agree that, prior to the Closing, each party will have
full access to such business, books, records, management, facilities and
operations of the other as may be reasonably necessary to evaluate the
transactions contemplated by this Agreement. PHP and the Plan will exercise
reasonable efforts to minimize interference with each other's businesses. Each
party further agrees to provide the other with reasonable notice before visiting
the other's facilities or contacting the other's employees, practitioners or
allied health professionals for the purposes of inspecting and conducting the
due diligence contemplated by this Section.
-20-
6.4 Conduct of Business. Except as specifically contemplated by this
-------------------
Agreement and the Related Agreements, from the date hereof until the earlier of
the Closing or the termination of this Agreement, or as otherwise approved in
writing by PHP, the Plan shall:
(a) operate the Health Care Centers and conduct its business
in, and not take any action except in, the ordinary course of business;
(b) perform in all material respects its obligations under all
Contracts;
(c) use its reasonable best efforts to preserve intact its
corporate existence, goodwill and business organization, to keep available the
services of its present officers and employees and to preserve its relationships
with patients, physicians, hospitals, landlords, suppliers, customers,
subcontractors and others having material business relations with it;
(d) in connection with the continuing operation of the Health
Care Centers between the date of this Agreement and the Closing, use all
reasonable best efforts to consult in good faith on a regular and frequent basis
with representatives of PHP to report material operational developments and the
general status of ongoing operations. The Plan acknowledges that any such
consultation shall not constitute a waiver by PHP of any rights it may have
under this Agreement and that PHP shall have no liability or responsibility for
any actions of the Plan or any of its officers or directors with respect to
matters which are the subject of such consultations;
(e) maintain all of the tangible fixed assets included in the
Acquired Assets in good operating condition and repair in order to enable them
to be operated after the Closing in the manner in which they are currently
operated (ordinary wear and tear excepted);
(f) maintain the Health Care Center books and records in the
usual, regular and ordinary manner, on a basis consistent with prior years;
(g) not vary or amend the terms of any Assumed Liability
except in the ordinary course of business;
(h) not enter into, modify, terminate, amend or grant any
waiver in respect of any Assigned Contract, except in the ordinary course of
business;
(i) duly comply in all material respects with all Laws
applicable to the Health Care Centers and the Acquired Assets;
(j) not take, or agree to take, any of the actions prohibited
in this Section 6.4 or, any action which would make any representation or
warranty of the Plan contained in this Agreement untrue or incorrect in any
material respect as of the date when made or as of any future date on or prior
to the Closing; and
(k) inform PHP promptly of any development which may interfere
with the consummation of the transactions contemplated by this Agreement or the
Related Agreement or may interfere with the operation of the Health Care
Centers.
6.5 No Solicitation of Transactions. The Plan will not, and will
-------------------------------
cause its employees, representatives, investment bankers, consultants, advisors,
agents and affiliates not to, directly or indirectly, (a) initiate contact with,
solicit or encourage submission of any inquiries, proposals or offers by, or (b)
participate in any discussions or negotiations with, or disclose any information
-21-
concerning Health Care Centers to, or afford any access to the properties, books
or records of the Health Care Centers to, or otherwise assist, facilitate or
encourage, any Person (other than PHP, its affiliates, agents and
representatives) in connection with any possible proposal (an "Acquisition
Proposal") regarding a sale or acquisition of any interest in the Health Care
Centers, or a merger, consolidation or business combination involving Health
Care Centers or a sale of all or (other than in the ordinary course of business
consistent with past practice) any portion of the assets of Health Care Centers
or any similar transaction. The Plan represents that as of the date hereof it
has ceased any and all existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
6.6 Rights to Confidentiality. The Plan shall not, without the prior
-------------------------
consent of PHP, modify, terminate, amend or grant any waiver in respect of any
confidentiality agreement entered into with any other party in connection with
or relating to a possible sale of the New Jersey Physician Operations or the
Health Care Centers.
6.7 Employee Matters.
----------------
(a) Prior to the Closing Date, PHP may offer (or cause its
designated Affiliate to offer) employment to certain Employees (the "Continuing
Employees") on terms and conditions to be determined by PHP on the basis of an
open application process in which the Plan will encourage Employees to
participate. From and after the Closing Date, PHP will provide benefits to the
Continuing Employees which will, in the aggregate, be no less favorable than
those provided by PHP to its similarly situated employees from time to time.
With respect to the employee plans and welfare plans of PHP, PHP shall grant the
Continuing Employees, from and after the Closing Date, credit for all service
with the Plan prior to the Closing Date for all purposes for which such service
was recognized by the Plan. To the extent PHP's benefit plans (or any new
benefit plans entered into for the Continuing Employees) provide medical or
dental welfare benefits after the Closing Date, PHP shall use its reasonable
efforts to cause such plans to waive any pre-existing conditions and
actively-at-work exclusions and shall use reasonable efforts to provide that.
Any expenses incurred on or before the Closing Date shall be taken into account
under any PHP benefit plans for purposes of satisfying applicable deductible,
co-insurance and maximum out-of-pocket provisions. Nothing in this
Section 6.7(a) shall create any third party beneficiary rights.
(b) The Plan shall use its reasonable efforts to encourage
those Employees who receive employment offers to accept PHP's or its designated
Affiliate's offer of employment. The Plan shall also release such Continuing
Employees who accept such employment with PHP from any covenant not to compete
to which it is a party.
(c) With respect to any Employee who does not receive an offer
of employment from PHP or its designated Affiliate, if such Employee's
employment is terminated on or prior to the Closing Date in connection with the
transactions contemplated by this Agreement, and the Plan is obligated to pay
severance to such Employee, PHP agrees to indemnify the Plan and hold it
harmless for the amount of such severance payments. Any amounts paid by PHP to
the Plan under this Section 6.7(c) shall be treated for all purposes as an
increase to the Purchase Price.
(d) Prior to the Closing, PHP will advise the Plan in writing
of the identity of Employees to whom PHP (or its designated Affiliate) intends
to offer employment effective upon the Closing. Notwithstanding anything herein
to the contrary, PHP shall offer employment to a sufficient number of Employees
such that the termination of employment of Employees who do
-22-
not receive an employment offer will not, in and of itself, trigger a notice
obligation under the Workers Adjustment Retaining and Notification Act at any of
the Health Care Centers.
(e) From the date of this Agreement until the Closing Date,
the Plan agrees to make available to PHP all books and records, statistics and
other data regarding Employees in accordance with applicable law. To the extent
required in order to provide such access to personnel files, the Plan will
request permission from Employees and seek a written waiver of applicable law
which might otherwise prohibit such access. If any Employee refuses to grant
such a waiver, the Plan shall have no obligation to make personnel files
available in the absence of an indemnity from PHP.
6.8 Continuing Relationship. The parties recognize and agree that as
-----------------------
part of the restructuring of the New Jersey Physician Operations, the parties
will implement a continuing relationship designed to further their mutual growth
and advancement. Accordingly, the parties have agreed that PHP and its
Affiliates will offer their employees the opportunity to be the Plan members at
the same premium rate that the Plan charges its employees for becoming the Plan
members.
6.9 Transition Plan. Between the date of this Agreement and the
---------------
Closing, PHP and the Plan shall identify all assets and services which are
currently being provided by the Plan to the New Jersey Physician Operations but
with respect to which the related personnel and assets are not included among
Employees and/or the Acquired Assets, including, without limitation, computer
and data processing services and associated hardware and software (the "Shared
Services and Shared Assets"). Prior to the Closing, PHP and the Plan shall agree
upon a mutually acceptable transition plan (the "Transition Plan") pursuant to
---------------
which for a period of up to six months after the Closing, the Plan shall make
available to PHP (or its designated Affiliate) the Shared Assets and Shared
Services on a basis substantially consistent with the Plan's recent historical
practice.
6.10 Use of Purchase Price. The Purchase Price to be paid by PHP to
---------------------
the Plan under this Agreement shall not be used for any purpose other than for
working capital purposes in the ordinary course of the operation of the Plan's
HMO business in the State of New Jersey and for any other purpose expressly
permitted under the Health Services Agreement, excluding repayment of the
Surplus Notes or other indebtedness for borrowed money except the repayment of
up to $6 million of outstanding indebtedness.
ARTICLE VII.
CONDITIONS TO THE PLAN'S OBLIGATIONS
------------------------------------
The obligations of the Plan to consummate the transactions provided
for by this Agreement are subject, in the discretion of the Plan, to the
satisfaction, on or prior to the Closing, of each of the following conditions,
any of which may be waived by the Plan.
7.1 Representations, Warranties and Covenants. All representations
-----------------------------------------
and warranties of PHP contained in this Agreement or any Related Agreement shall
be true and correct in all material respects at and as of the date of this
Agreement and any Related Agreement and at and as of the Closing Date, and PHP
shall have performed in all material respects all covenants required by this
Agreement to be performed by it prior to the Closing.
-23-
7.2 No Proceedings, Litigation or Laws. No Proceeding by any
----------------------------------
Governmental Authority or other Person shall have been instituted or threatened
which questions the validity or legality of the transactions contemplated by
this Agreement, or any Related Agreement, nor shall there be any Law which makes
the purchase of any material portion of the Acquired Assets contemplated by this
Agreement illegal or otherwise prohibited.
7.3 Opinion of Counsel. PHP shall have delivered to the Plan an
------------------
opinion of Fried ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to PHP, dated as of
the Closing Date, covering the substantive matters referred to in Sections 5.1,
5.2, 5.3 and 5.4, in form reasonably satisfactory to the Plan.
7.4 Certificates and Corporate Documents. PHP shall furnish the Plan
------------------------------------
with certificates of its officers and others to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by the
Plan. The Plan shall have received from PHP resolutions adopted by the board of
directors of PHP approving this Agreement and the transactions contemplated by
this Agreement, certified by PHP's corporate secretary.
7.5 Assumption Agreement. PHP (or its designated Affiliate) shall
--------------------
have executed the Assumption Agreement.
7.6 HSR Act. The applicable waiting period, including any extension
-------
thereof under the HSR Act shall have expired.
7.7 Governmental Approvals. The Department of Banking and Insurance
----------------------
and the Department of Health and Senior Services of the State of New Jersey,
and/or such other New Jersey or federal governmental or regulatory authority as
may be required, shall have received notice of, or applications or other filings
with respect to, the transactions contemplated by this Agreement and the Related
Agreements and, where required, shall have approved same.
7.8 Related Agreements. PHP shall have executed and delivered the
------------------
Related Agreements.
7.9 Note Purchase Agreement. The closing of the purchase and sale of
-----------------------
the Surplus Notes pursuant to the Note Purchase Agreement shall have been
completed.
ARTICLE VIII.
CONDITIONS TO PHP'S OBLIGATIONS
-------------------------------
The obligations of PHP to consummate the transactions provided for by
this Agreement are subject, in the discretion of PHP, to the satisfaction, on or
prior to the Closing, of each of the following conditions, any of which may be
waived by PHP.
8.1 Representations, Warranties and Covenants. All representations
-----------------------------------------
and warranties of the Plan contained in this Agreement or any Related Agreement
shall be true and correct in all material respects at and as of the date of this
Agreement or any Related Agreement and at and as of the Closing Date, and the
Plan shall have performed in all material respects all covenants required by
this Agreement to be performed by it prior to the Closing.
8.2 No Proceedings, Litigation or Laws. No Proceeding by any
----------------------------------
Governmental Authority or other Person shall have been instituted or threatened
which questions the validity or legality of the transactions contemplated by
this Agreement, or any Related Agreement, nor shall there be any
-24-
Laws which make the purchase of any material portion of the Acquired Assets
contemplated by this Agreement illegal or otherwise prohibited.
8.3 Opinion of Counsel. The Plan shall have delivered to PHP an
------------------
opinion of ▇▇▇▇▇ & Samson, P.A., counsel to the Plan, covering the substantive
matters referred to in Sections 4.1, 4.2, 4.3 and 4.6, in form reasonably
satisfactory to PHP.
8.4 Certificates and Corporate Documents. The Plan shall furnish PHP
------------------------------------
with such certificates of its officers and others to evidence compliance with
the conditions set forth in this Article VIII as may be reasonably requested by
PHP. PHP shall have received from the Plan resolutions adopted by the board of
directors of the Plan approving this Agreement and the transactions contemplated
by this Agreement, certified by the Plan's corporate secretary.
8.5 Other Documents. The Plan shall have executed and delivered each
---------------
of the documents required by Section 3.2 hereof so as to effect the transfer and
assignment to PHP of all right, title and interest in and to the Acquired Assets
as provided in this Agreement, which documents shall be in a form reasonably
satisfactory to PHP's counsel.
8.6 HSR Act. The applicable waiting period, including any extension
-------
thereof, under the HSR Act shall have expired.
8.7 Governmental Approvals. All New Jersey or federal governmental
----------------------
or regulatory authority as may be required, shall have received notice of, or
applications or other filings with respect to, the transactions contemplated by
this Agreement and the Related Agreements and, where required, shall have
approved same.
8.8 Related Agreements. The Plan shall have executed and delivered
------------------
the Related Agreements.
8.9 Note Purchase Agreement. The closing of the purchase and sale of
-----------------------
the Surplus Notes pursuant to the Note Purchase Agreement shall have been
completed.
8.10 Consents. Each of the consents identified or referred to in
--------
Schedule 4.14 hereto shall have been obtained in form and substance reasonably
-------------
satisfactory to PHP and must be in full force and effect, and PHP shall have
obtained all consents or Permits necessary to operate the Health Care Centers
after the Closing as contemplated in the Related Agreements.
8.11 Title Insurance; Surveys. PHP shall have received title
------------------------
insurance commitments, policies and riders and surveys with respect to the Owned
Real Property, in accordance with Section 3.4.
8.12 Estoppel Certificates. With respect to each of the Leased Real
---------------------
Properties, PHP shall have received estoppel certificates executed on behalf of
the landlord, dated as of a date no more than ten days prior to the Closing
Date, substantially in the form attached to Schedule 1.1(d).
---------------
8.13 Employment Agreements. PHP shall have received executed
---------------------
employment agreements, in form and substance reasonably satisfactory to PHP, as
described in Schedule 8.13 hereto.
-------------
-25-
8.14 Schedules. PHP shall have received final and complete copies of
---------
all Schedules to this Agreement, in form and substance reasonably acceptable to
PHP. Within 10 Business Days after the date of this Agreement, the Plan shall
have delivered to PHP final copies of the Schedules to this Agreement, it being
understood that, without the prior consent of PHP, such Schedules shall not
contain references to any matter which was not disclosed to PHP prior to the
execution and delivery of this Agreement. PHP shall have 10 Business Days
following its receipt thereof to review such Schedules and notify the Plan of
any disagreement with the contents thereof.
ARTICLE IX.
RISK OF LOSS; CERTAIN ASSIGNMENTS
---------------------------------
9.1 Risk of Loss. From the date hereof through the Closing, all risk
------------
of loss or damage to the Acquired Assets (other than the Owned Real Property)
shall be borne by the Plan, and thereafter shall be borne by PHP (or its
designated Affiliate).
9.2 Risk of Loss of Owned Real Property. The Plan assumes the risk
-----------------------------------
of any material loss or damage to the Owned Real Property beyond ordinary wear
and tear until transfer and delivery to PHP of possession of the Owned Real
Property. If the Owned Real Property is destroyed or damaged as a result of fire
or other casualty, PHP shall have the right to: 1) require that the Plan repair
the destruction or damage; or 2) in the event the cost to repair the damage
exceeds $100,000.00, delete the Owned Real Property from the transaction in the
manner provided in Section 3.4 hereinabove; or 3) accept the Owned Real Property
subject to an agreed upon price reduction. If PHP elects to accept the Owned
Real Property, the Plan shall pay over or assign to PHP all insurance proceeds
recovered by the Plan or available to the Plan and not theretofore used to
repair or restore the Owned Real Property in the amount of any deductible, less
any expenses incurred by the Plan in seeking recovery of such insurance
proceeds, in which event PHP shall not be entitled to a price reduction.
9.3 Condemnation. If prior to Closing all or substantially all of
------------
the Owned Real Property shall be condemned or taken as the result of the
exercise of the power of eminent domain, PHP may elect to delete the Owned Real
Property from the transaction in the manner provided in Section 3.4 hereinabove.
If prior to the Closing, less than all or substantially all of the Owned Real
Property shall be condemned or taken as the result of the exercise of the power
of eminent domain and PHP in its reasonable judgment shall determine that
(i) the remaining portion of the Owned Real Property is not suitable for the
continued use of the Owned Real Property as a health care facility, then PHP may
elect to delete the Owned Real Property from the transaction (with an
appropriate price abatement in the manner provided in Section 3.4 hereinabove),
or (ii) if the remaining portion of the Owned Real Property is suitable for the
continued use of the Owned Real Property, then the Plan shall be entitled to any
award resulting from any condemnation proceeding, but PHP shall be entitled to a
credit in the amount of such award against the Purchase Price unless such
condemnation proceedings shall be pending on the day of closing, in which event
there shall be no such credit and, at Closing, the Plan shall assign all of its
right and interests in said proceedings to PHP.
9.4 Assessments. If at the Closing the Owned Real Property or any
-----------
part thereof shall be or shall have been affected by any assessments which are
or may become payable in annual installments of which the first installment is
then due or has been paid, then for the purposes of this Agreement all the
unpaid installments of any such assessment, including those which are to become
due and payable after the delivery of the deed shall be assumed by PHP. The cost
of all other assessments for work commenced after the date of this Agreement
will be borne by PHP.
-26-
9.5 Adjustments at Closing. With respect to the Owned Real Property
----------------------
and to the extent not otherwise set forth on the Closing Net Asset Statement,
PHP and the Plan agree to adjust the following expenses as of the Closing Date:
municipal water and sewer charges, if any, and real estate taxes. The Plan or
PHP may require that any person with a claim or right affecting the Owned Real
Property be paid off from the Purchase Price. The Plan shall pay the realty
transfer fee for the transfer of the Owned Real Property.
9.6 Certain Assignments. Anything in this Agreement to the contrary
-------------------
notwithstanding, this Agreement shall not constitute an agreement to assign or
transfer to PHP (or its designated Affiliate) any Acquired Asset if an attempted
assignment thereof, without the consent of a third party, would constitute a
breach thereof or a breach of any Laws or in any way adversely affect the rights
of PHP (or its designated Affiliate) with respect thereto. If such consent is
not obtained, or if any attempted assignment thereof would be ineffective or
would affect the rights with respect thereto so that PHP (or its designated
Affiliate) would not receive all such rights, the Plan will cooperate with PHP
(or its designated Affiliate), in all reasonable respects, to provide to PHP (or
its designated Affiliate) the benefits with respect to any such Acquired Asset,
including enforcement for the benefit of PHP (or its designated Affiliate) of
any and all rights of the Plan against a third party arising out of the breach
or cancellation by such third party or otherwise.
ARTICLE X.
ACTIONS BY THE PARTIES AFTER THE CLOSING
----------------------------------------
10.1 Books and Records. PHP and the Plan each agree to cooperate with
-----------------
and make available to the other, during normal business hours, all books and
records of such party, information and employees (without substantial disruption
of employment) retained and remaining in existence after the Closing which are
necessary or useful in connection with any tax inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any such
books and records, information or employees for any reasonable business purpose
related to the transactions described herein. The party requesting any such
books and records, information or employee shall bear all of the out-of-pocket
costs and expenses (including attorneys' fees, but excluding reimbursement of
salaries and employee benefits) reasonably incurred in connection with providing
such books and records, information or employees. Each of PHP and the Plan will
retain such books and records in accordance with its corporate records retention
policy or as required by law, whichever requires retention for a longer period.
All information received pursuant to this Section 10.1 shall be subject to the
terms of the Confidentiality Agreements.
10.2 Indemnifications.
----------------
(a) By the Plan. From and after the Closing, the Plan shall
-----------
indemnify, save and hold harmless PHP, its Affiliates and subsidiaries, and its
and their respective Representatives, from and against any and all Damages
incurred by PHP, its Affiliates and subsidiaries and its and their respective
Representatives in connection with, arising out of, resulting from or incident
to (i) any breach of any representation or warranty made by the Plan in or
pursuant to this Agreement; (ii) any breach of any covenant or agreement made by
the Plan in or pursuant to this Agreement; (iii) any Excluded Liability or
(iv) the use, ownership or operation of the Acquired Assets prior to the Closing
(except to the extent the same constitutes an Assumed Liability).
(b) By PHP. From and after the Closing, PHP shall indemnify,
------
save and hold harmless the Plan, its Affiliates and subsidiaries, and its and
their respective Representatives, from and against any and all Damages incurred
by the Plan, its Affiliates and subsidiaries and its and
-27-
their respective Representatives in connection with, arising out of, resulting
from and incident to (i) any breach of any representation or warranty made by
PHP in or pursuant to this Agreement; (ii) any breach or any covenant or
agreement made by PHP in or pursuant to this Agreement; (iii) any Assumed
Liability or (iv) the use, ownership or operation of the Acquired Assets after
the Closing (except to the extent the same constitutes an Excluded Liability).
(c) Damages; Remedies Cumulative. The term "Damages" shall
----------------------------
mean all actual costs, losses (including diminution in value), Taxes,
liabilities, obligations, damages, lawsuits, deficiencies, claims, demands, and
expenses, including interest, penalties, costs or mitigation or remedial action,
lost profits, response costs and other losses resulting from any shutdown or
curtailment of operations, reasonable attorneys' fees and all amounts paid in
defense or settlement of any of the foregoing and shall be net of any insurance
proceeds received by the indemnified party. The term "Damages" is not limited to
matters asserted by third parties against the Plan or PHP, but includes Damages
incurred or sustained by the Plan or PHP in the absence of third party claims;
provided, however, that other than with respect to third party claims, the
-------- -------
component of "Damages" incurred or sustained by either party to this Agreement
in order to comply with applicable Laws will include only those Damages that are
reasonably necessary costs of such compliance. The Plan's obligations to
indemnify PHP, and PHP's obligations to indemnify the Plan, shall not limit any
right of contribution which either party may have under statute or common law.
(d) Cooperation. The indemnified party shall cooperate in all
-----------
reasonable respects with the indemnifying party in the investigation, trial and
defense of any lawsuit or action that may be subject to this Section 10.2 and
any appeal arising therefrom; provided, however, that the indemnified party may,
-------- -------
at its own cost, participate in the investigation, trial and defense of such
lawsuit or action and any appeal arising therefrom. The parties shall cooperate
with each other in any notifications to insurers.
(e) Defense of Claims. If a claim for Damages (a "Claim") is
-----------------
to be made by a party entitled to indemnification hereunder against the
indemnifying party, the party claiming such indemnification shall give written
notice (a "Claim Notice") to the indemnifying party as soon as practicable after
the party entitled to indemnification becomes aware of any fact, condition or
event which may give rise to Damages for which indemnification may be sought
under this Section 10.2. If any lawsuit or enforcement action is filed against
any party entitled to the benefit of indemnity hereunder, written notice thereof
shall be given to the indemnifying party as promptly as practicable (and in any
event with fifteen (15) business days after the service of the citation or
summons). The failure of any indemnified party to give timely notice hereunder
shall not affect rights to indemnification hereunder, except to the extent that
the indemnifying party demonstrates actual damage caused by such failure. After
such notice, if the indemnifying party shall acknowledge in writing to the
indemnified party that the indemnifying party shall be obligated under the terms
of its indemnity hereunder in connection with such lawsuit or action, then the
indemnifying party shall be entitled, if it so elects, (i) to take control of
the defense and investigation of such lawsuit or action, (ii) to employ and
engage attorneys of its own choice to handle and defend the same, at the
indemnifying party's cost, risk and expense unless the named parties to such
action or proceeding include both the indemnifying party and the indemnified
party and the indemnified party has been advised in writing by counsel that
there may be one or more legal defenses available to such indemnified party that
are different from or additional to those available to the indemnifying party,
and (iii) to compromise or settle such claim, which compromise or settlement may
not be made without the consent of the indemnified party. If the indemnifying
party fails to assume the defense of such claim within fifteen (15) calendar
days after receipt of the Claim Notice, the indemnified party against which such
claim has been asserted will (upon delivering notice to such effect to the
indemnifying party) have the right to undertake, at the indemnifying party's
cost and expense, the
-28-
defense, compromise or settlement of such claim on behalf of and for the account
and risk of the indemnifying party and such Claim may be compromised or settled
without the consent of the indemnifying party. In the event the indemnified
party assumes the defense of the Claim, the indemnified party will keep the
indemnifying party reasonably informed of the progress of any such defense,
compromise or settlement. The indemnifying party shall be liable for any
settlement of any action effected pursuant to and in accordance with this
Section 10.2 and for any final judgment (subject to any right of appeal), and
the indemnifying party agrees to indemnify and hold harmless an indemnified
party from and against any Damages by reason of such settlement or judgment.
(f) Brokers and Finders. Pursuant to the provisions of this
-------------------
Section 10.2, each of PHP and the Plan shall indemnify, hold harmless and defend
the other from the payment of any and all broker's and finder's expenses,
commissions, fees or other forms of compensation which may be due or payable
from or by the indemnifying party, or may have been earned by any third party
acting on behalf of the indemnifying party in connection with the negotiation
and execution hereof and the consummation of the transactions contemplated by
this Agreement.
(g) Limitations.
-----------
(i) The Plan shall not be required to make any
indemnification payments pursuant to Section 10.2(a)(i) unless the
aggregate of all amounts for which indemnity would otherwise be payable
by the Plan under Section 10.2(a)(i) exceeds $150,000, and in such
event, the Plan shall be responsible only for the amount in excess of
$150,000.
(ii) PHP shall not be required to make any
indemnification payments pursuant to Section 10.2(b)(i) unless the
aggregate of all amounts for which indemnity would otherwise be payable
by PHP under Section 10.2(b)(i) exceeds $150,000, and in such event,
PHP shall be responsible only for the amount in excess of $150,000.
(h) Survival. All statements contained in this Agreement or
--------
any Schedule delivered by or on behalf of PHP or the Plan specifically pursuant
to this Agreement shall be deemed to be representations and warranties by such
party hereunder. Except as otherwise set forth in this Section 10.2, the
representations and warranties of the Plan and PHP contained herein shall
survive the consummation of the transactions contemplated by this Agreement
without regard to any investigation made by either of such parties. The
representations and warranties contained in Sections 4.1, 4.2, 4.3, 4.4, 4.17,
5.1, 5.2, 5.3 and 5.4 shall remain in full force and effect indefinitely, the
representations and warranties contained in Sections 4.10 and 4.11(a) shall
survive and remain in full force and effect for a period of three years after
the Closing, and all other representations and warranties shall survive and
remain in full force and effect for a period of two years after the Closing. Any
matter as to which a Claim has been asserted by notice to the other party that
is pending or unresolved at the end of any applicable limitation period shall
continue to be covered by this Article X notwithstanding any applicable statute
of limitations (which the parties hereby waive) until such matter is finally
terminated or otherwise resolved by the parties under this Agreement or by a
court of competent jurisdiction and any amounts payable hereunder are finally
determined and paid.
10.3 Taxes. The Plan shall pay, or cause to be paid, when due all
-----
Taxes for which the Plan is or may be liable or that are or may become payable
with respect to all periods ending on or prior to the Closing. PHP shall pay, or
cause to be paid, when due all Taxes for which PHP is or may be liable or that
are or may become payable with respect to all periods ending subsequent to the
Closing.
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ARTICLE XI.
MISCELLANEOUS
-------------
11.1 Termination.
-----------
(a) Termination. This Agreement may be terminated at any time
-----------
prior to Closing:
(i) By mutual written consent of PHP and the Plan;
(ii) By PHP if there is a material breach of any
representation or warranty set forth in Article IV hereof or any
covenant or agreement to be complied with or performed by the Plan
pursuant to the terms of this Agreement which would render impossible
the satisfaction of a condition set forth in Article VIII (and such
condition is not waived in writing by PHP);
(iii) By the Plan if there is a material breach of any
representation or warranty set forth in Article V hereof or of any
covenant or agreement to be complied with or performed by PHP pursuant
to the terms of this Agreement which would render impossible the
satisfaction of a condition set forth in Article VII (and such
condition is not waived in writing by the Plan);
(iv) By PHP or the Plan if the Closing has not occurred
within six months of the date hereof; provided that the terminating
party is not otherwise in default or in breach of the Agreement.
(b) In the Event of Termination. In the event of termination
---------------------------
of this Agreement:
(i) Each of PHP and the Plan will redeliver all
documents, work papers and other material of the other relating to the
transactions contemplated by this Agreement, whether so obtained
before or after the execution hereof, to the party furnishing the
same;
(ii) The provisions of the Confidentiality Agreements
shall continue in full force and effect;
(iii) In the event that this Agreement is terminated by
PHP pursuant to Section 11.1(a)(ii) and all other conditions to the
obligations of the Plan (other than conditions with respect to actions
to be taken at the Closing) have been satisfied, then the Plan shall
pay PHP a termination fee equal to $2,500,000 in cash;
(iv) In the event this Agreement is terminated by the
Plan pursuant to Section 11.1(a)(iii) and all other conditions to the
obligations of PHP (other than conditions with respect to actions to
be taken at the Closing) have been satisfied, then PHP shall pay the
Plan a termination fee equal to $2,500,000 in cash; and
(v) No party hereto shall have any liability or
further obligation to any other party to this Agreement, except (x) as
stated in subsections (i), (ii), (iii) and (iv) of this Section
11.1(b), and (y) for any breach of this Agreement occurring prior to
the proper termination of this Agreement (other than any termination
pursuant to Section 11.1(a)(ii) or Section 11.1(a)(iii), in which
event the termination fee provided for in Section 11.1(b)(iii) or
Section 11.1(b)(iv) shall be in the nature of liquidated damages).
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11.2 Assignment and No Third Party Beneficiaries. Neither this
-------------------------------------------
Agreement nor any of the rights or obligations hereunder may be assigned by any
party without the prior written consent of the other; except that PHP may,
without such consent, assign all such rights and obligations to any direct or
indirect wholly owned subsidiary (or a partnership directly or indirectly
controlled by it), so long as, in each case, PHP also remains liable for all of
its obligations and liabilities under this Agreement. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, and no other
person shall have any right, benefit or obligation under this Agreement as a
third party beneficiary or otherwise.
11.3 Notices. All notices, requests, demands and other
-------
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by facsimile; the day
after being sent, if sent for next day delivery by recognized overnight delivery
service (e.g., Federal Express); and upon receipt, if sent by certified or
----
registered mail, return receipt requested. In each case notice shall be given as
follows:
If to the Plan, addressed to:
HIP Health Plan of New Jersey
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. Title, Vice President &
General Counsel
With a copy to:
▇▇▇▇▇ & Samson, P.A.
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to PHP, addressed to:
PHP Healthcare Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Senior Vice
President and Counsel
With a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or to such other place and with such other copies as a party may designate as to
itself by written notice to the others.
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11.4 Choice of Law. This Agreement shall be construed, interpreted
-------------
and the rights of the parties determined in accordance with the laws of the
State of New Jersey (without reference to the choice of law provisions of New
Jersey law), except with respect to matters of law concerning the internal
corporate affairs of any corporate entity which is a party to or the subject of
this Agreement, and as to those matters the law of the jurisdiction under which
the respective entity derives its powers shall govern.
11.5 Entire Agreement; Amendments and Waivers. This Agreement and
----------------------------------------
the Related Agreements to which the parties hereto are parties, together with
all exhibits and schedules to be attached hereto and thereto, constitute or will
constitute the entire agreement among the parties pertaining to the subject
matter hereof and supersede or will supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties, other than the Confidentiality Agreement which shall remain in full
force and effect. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto. No amendment,
supplement, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
of other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
11.6 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.7 Expenses. Except as otherwise specified in this Agreement, each
--------
party hereto shall pay its own legal, accounting, out-of-pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect.
11.8 Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement, shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then to the maximum extent permitted by
law, such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or any other such instrument.
11.9 Publicity. Except as may be required by law, regulation or
---------
stock exchange rules, neither PHP nor the Plan shall issue any press release or
make any public statement regarding the transactions contemplated hereby,
without prior written approval of the other. In the event either party shall be
required by law to issue any press release or make any public statement or
disclosure regarding the transaction contemplated herein, such party shall
consult with the other party regarding such disclosure and shall not issue or
release the same without the prior written consent of the other party (which
shall not be unreasonably withheld or delayed).
11.10 Knowledge Convention. Whenever any statement herein or in any
--------------------
schedule, exhibit, certificate or other document delivered to any party pursuant
to this Agreement is made "to the Plan's or PHP's knowledge" or words of similar
intent or effect of any party or its Representative, such statement shall be
deemed to be made to the best knowledge of the designated officers of PHP and
the Plan set forth in Schedule 11.10 hereto, as the case may be, and shall be
--------------
deemed to include a representation that a reasonable investigation of the
subject matter thereof has been conducted.
-32-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
HIP OF NEW JERSEY, INC.
By:
----------------------
Name:
Title:
PHP HEALTHCARE CORPORATION
By:
----------------------
Name:
Title:
-33-
SCHEDULES TO ASSET PURCHASE AGREEMENT
-------------------------------------
Schedule 1.1(a) - Form of Assumption Agreement
Schedule 1.1(b) - Excluded Assets
Schedule 1.1(c) - Health Care Centers
Schedule 1.1(d) - Related Agreements
Schedule 2.4(a) - Membership Incentive Payments
Schedule 2.5 - Closing Net Asset Statement Accounting Methods
Schedule 4.3 - Conflicts and Violations
Schedule 4.4 - Encumbrances
Schedule 4.5 - Assigned Contracts
Schedule 4.6 - Governmental Filings
Schedule 4.7 - Summary Balance Sheet
Schedule 4.8 - Litigation
Schedule 4.9 - Compliance with Laws
Schedule 4.10 - Environmental Matters
Schedule 4.11(a) - Owned Real Property
Schedule 4.11(e) - Leased Real Property
Schedule 4.13 - Permits
Schedule 4.14 - Consents
Schedule 4.16 - Insurance
Schedule 4.20(a) - Employees
Schedule 4.20(b) - HIP Benefit Plans
Schedule 4.20(g) - Labor Matters
Schedule 4.21 - Undisclosed Liabilities
Schedule 8.13 - Employment Agreements
Schedule 11.10 - Knowledge of Officers
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