EXHIBIT 2
ASSET PURCHASE AGREEMENT
dated as of April 1, 2004
among
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.,
INTEQ PBM, LP
THE INTEQ-RX GROUP, LLP,
and
THE OTHER PERSONS NAMED HEREIN
ASSET PURCHASE AGREEMENT, dated as of April 1, 2004, among National Medical
Health Card Systems, Inc., a Delaware corporation ("NMHC"), INTEQ PBM, LP, a
Texas limited partnership (the "Purchaser"), The INTEQ-RX Group, LLP, a Delaware
registered limited liability partnership (the "Seller"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and G. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ (each, an "Owner" and, collectively,
the "Owners").
W I T N E S S E T H:
WHEREAS, the Purchaser desires to purchase, and the Seller desires to sell,
substantially all of the assets of the Seller that are used in connection with
the Business (as hereinafter defined), all upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in reliance upon the covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.01 Certain Defined Terms. As used in this Agreement, NMHC, Purchaser,
Seller and Owner shall be defined as set forth in the preamble hereto and the
following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other Person
that, directly or indirectly through one or more intermediaries, Controls, is
Controlled by or is under common Control with such specified Person.
"Agreed Net Worth Amount" means $1,850,000.
"Agreement" means this Agreement, together with all Exhibits and Schedules
hereto, including the Disclosure Schedule, and all amendments hereto and
thereto.
"Ancillary Agreements" means the ▇▇▇▇ of Sale, the Note, the Escrow
Agreement, the Software License, and the Transitional Services Agreement.
"Basis" means any past or present fact, situation, circumstance, status,
condition, duty, activity, practice, plan, occurrence, event, incident, action,
failure to act or transaction that forms, or would reasonably be expected to
form, the basis for any specified consequence.
"▇▇▇▇ of Sale" means, collectively, the ▇▇▇▇ of sale and assignment, and
such other instruments of assignment and conveyance as may be necessary or
desirable to transfer and convey to the Purchaser all of the Assets.
"Business" means the pharmacy benefit management business of (i)
contracting with sponsors of pharmacy benefit plans, pharmacies or pharmacists
to provide pharmaceutical products and/or services to sponsors of pharmacy
benefit plans or individuals covered by pharmacy benefit plans; (ii) managing a
network of pharmacies or pharmacists; (iii) processing the claims for such
services; (iv) providing appropriate consulting services to managers of pharmacy
benefit plans and their clients; (v) contracting directly with pharmaceutical
manufacturers or third party rebate aggregators for the provision of rebates;
and (vi) all activities reasonably related to the conduct of the foregoing
activities, in each case as conducted by the Seller both prior and subsequent to
the Conversion (as defined in Section 3.25).
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by Law to be closed in either New
York, NY or Dallas, TX.
"Cash Escrow" means $4,740,000.
"Closing" means the completion of the sale and purchase of the Assets
pursuant to this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information relating to a party's
business or assets that is not generally known to the public, including, without
limitation, information, knowledge or data of an industrial, intellectual or
technical nature that relates to a party's business plans, business
opportunities, projections and costs, pricing or marketing data, finances,
products, designs, processes, know-how and personnel.
"Contract" means any oral or written agreement, lease, License or
sublicense, evidence of indebtedness, mortgage, indenture, security agreement,
deed of trust or other contract, commitment, arrangement or obligation.
"Control" means, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by Contract or otherwise. The term "Controlled"
shall have a correlative meaning.
"Copyrights" means copyrightable works, copyrights (whether or not
registered), and registrations and applications for registration therefor, and
all rights provided by international treaties or conventions with respect to the
foregoing.
"Disclosure Schedule" means the Disclosure Schedule delivered by the Seller
to the Purchaser on the date hereof and initialed by the parties hereto.
"Environmental Law" means any Law or Order relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" shall be ▇▇ ▇▇▇▇▇▇ Chase Bank.
"Escrow Agreement" means the Escrow Agreement to be entered into pursuant
to Section 2.10 (a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor Law, and rules and regulations issued by the SEC pursuant to that
act or any successor Law.
"Executives" means ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and G. ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇.
"Facility" means the Seller's offices located at ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means any United States federal, state, local or
foreign government, governmental, regulatory or administrative authority, agency
or commission or court, tribunal or judicial or arbitral body or any private
arbitrator.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"Gross Profit Escrow" means $3,000,000.
"Intellectual Property" means United States, international and foreign (i)
patents, patent applications and statutory invention registrations, including
reissuances, divisions, continuations, continuations in part, extensions and
reexaminations thereof, all inventions, all rights provided by international
treaties or conventions with respect to the foregoing, and all improvements
thereto, (ii) Trademarks, (iii) Copyrights, (iv) confidential and proprietary
information, including trade secrets, technology, know-how, formulae, databases
and customer and supplier lists, (v) computer software (including source codes,
data and related documentation), and (vi) all other proprietary rights, in each
case, whether owned or licensed; provided that the Software shall not be deemed
Intellectual Property of the Seller for purposes of this Agreement.
"Knowledge of the Seller" means the knowledge that the Executives, or any
of them, have or would reasonably be expected to have after having made due and
diligent inquiry into the subject matter of the representation and warranty.
"Law" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order or other requirement or rule of law.
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, filings, qualifications, privileges,
franchises and similar consents granted or issued by any Governmental Authority.
"Lien" means any mortgage, deed of trust, pledge, hypothecation, security
interest, encumbrance, claim, lien or charge of any kind, or any conditional
sales Contract, title retention Contract or other Contract to create any of the
foregoing (it being understood that a Contract that permits a purchaser to
return items purchased thereunder shall not be deemed to constitute a Lien
solely by virtue thereof).
"Maximum Liability Amount" means the sum of $6,600,000.
"PBM Services" mean services associated with the prescription benefit
management business, including but not limited to: (i) claims administration;
(ii) establishment and administration of a pharmacy network and benefits; (iii)
mail order pharmacy services (by phone, fax or internet); (iv) drug utilization
review; (v) disease state management and delivery of specialty pharmacy
benefits; (vi) formulary creation and administration, (vii) rebate negotiation
and administration; and (viii) therapeutic substitution programs.
"Permitted Liens" means the following Liens: (i) Liens for Taxes,
assessments or other governmental charges or levies not yet due or payable; (ii)
statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,
materialmen and repairmen and other Liens imposed by Law for amounts not yet
due; (iii) Liens incurred or deposits made in the ordinary course of business of
the Business consistent with past practice in connection with worker's
compensation, unemployment insurance or other types of social security; and (iv)
Liens not created by the Seller that affect the underlying fee interest of any
Leased Real Property (as defined herein).
"Person" means any natural person, general or limited partnership, trust,
corporation, limited liability company, firm, association, proprietorship,
Governmental Authority or other legal entity.
"Purchaser Material Adverse Change" means any event, circumstance,
development or change that has a Purchaser Material Adverse Effect.
"Purchaser Material Adverse Effect" means (a) a material adverse change in
the business, operations, results of operations or condition (financial or
otherwise) of NMHC and its Subsidiaries, taken as a whole, or (b) any occurrence
or state of facts that (i) materially impairs or delays the ability of NMHC or
the Purchaser to perform their respective obligations under this Agreement or
any of the Ancillary Agreements or (ii) prevents the consummation of the
transactions contemplated hereby or thereby.
"Reserved Amount" means the amount of $250,000, withheld from the Purchase
Price by the Purchaser on the Closing Date as security for the payment of any
balance sheet adjustment referred to in Section 2.09.
"Seller" means and includes (a) prior to the Conversion (as defined in
Section 3.25), The INTEQ Group, Inc., a Texas corporation and (b) after the
Conversion, The INTEQ-Rx Group, LLP, a Delaware registered limited liability
partnership.
"Seller Material Adverse Change" means any event, circumstance, development
or change that has a Seller Material Adverse Effect.
"Seller Material Adverse Effect" means (a) a material adverse change in the
Assets (as defined in Section 2.01), taken as a whole, or in the operations,
results of operations or condition (financial or otherwise) of the Business, or
(b) any occurrence or state of facts that (i) materially impairs or delays the
ability of the Seller or the Owners to perform their respective obligations
under this Agreement or any of the Ancillary Agreements or (ii) prevents the
consummation of the transactions contemplated hereby or thereby.
"Software" means the claims processing software, switching software and
related ancillary software (including all source code, derivatives and
documentation) owned or hereafter developed by Seller.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust, estate or other Person of which (or
in which) more than 50% of (i) the issued and outstanding capital stock or other
equity interests having ordinary voting power to elect a majority of the board
of directors of such corporation or Persons performing similar functions of any
other Person (irrespective of whether at the time capital stock or other equity
interests of any other class or classes of such corporation or other Person
shall or might have voting power upon the occurrence of any contingency), (ii)
the interest in the capital or profits of such partnership, joint venture or
limited liability company or other Person, or (iii) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or controlled
by such Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person's other Subsidiaries.
"Tax" or "Taxes" means all income, excise, gross receipts, ad valorem,
sales, use, employment, franchise, profits, gains, property, transfer, payroll,
withholding, severance, occupation, social security, unemployment compensation,
alternative minimum, value added, intangibles or other taxes, fees, stamp taxes,
duties, charges, levies or assessments of any kind whatsoever (whether payable
directly or by withholding), together with any interest and any penalties,
fines, additions to tax or additional amounts imposed by any Governmental
Authority with respect thereto.
"Trademarks" means trademarks, service marks, trade dress, logos,
proprietary icons, trade names, corporate names, internet domain names and other
source identifiers (whether or not registered) including all common law rights
therein, and registrations and applications for registration therefor, all
rights provided by international treaties or conventions with respect to the
foregoing, and all reissuances, extensions and renewals of any of the foregoing
and all goodwill associated therewith.
"Unrelated Business" means the design, development, marketing and sale of
the Software and/or the conduct of a prescription benefit management service
bureau business, in either case, to the extent marketed, offered or sold,
directly or indirectly, only to Persons who are not customers or vendors of the
Seller on the Closing Date and who were not such at any time during the twelve
months preceding the Closing Date.
1.02. Terms Generally. Words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include the other
gender, or neutral gender, as the context requires, the terms "hereof", "herein"
and "herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement and not to any particular provision of this
Agreement, and Article, Section and paragraph references are to the Articles,
Sections and paragraphs of this Agreement unless otherwise specified, and the
word "including" and words of similar import when used in this Agreement shall
mean "including, without limitation", unless otherwise specified.
ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.01. Purchase and Sale of Assets. At the Closing, on the terms and subject
to the conditions contained herein, the Seller shall sell, transfer, convey,
assign and deliver to the Purchaser, and the Purchaser shall purchase and accept
from the Seller, all of the Seller's right, title and interest in and to all
assets and properties that relate to or are used in connection with the Business
whether owned, leased or licensed by, or otherwise available to, the Seller,
free and clear of any Liens other than Permitted Liens (collectively, the
"Assets"), including, without limitation:
(a) all of the Seller's cash and cash equivalents on hand, less an amount
equal to the aggregate dollar amount of checks outstanding for payables owed in
connection with the Business as of the Closing Date ("Business Cash"), provided
that the amount of cash so excluded from the Business Cash shall be deemed an
Excluded Asset and not reflected in the calculation of the Closing Date Net
Worth;
(b) all of the Seller's trade and other accounts receivable ("Accounts
Receivable");
(c) all rights of the Seller in and to the Intellectual Property used in
connection with the Business, including without limitation the Intellectual
Property listed on Schedule 2.01(c) (the "Seller Intellectual Property");
(d) the goodwill and going concern value of the Business, including without
limitation the right to use the name "INTEQ";
(e) all credits, deferred charges, advance payments, security deposits and
prepaid expenses, that relate to or are used in connection with the Business;
(f) any other asset that would be classified as a current asset under GAAP
that relates to or is used in connection with the Business;
(g) all property, plant and equipment, machinery, supplies, furniture,
vehicles, fixtures, computers, computer files, books and records and other items
of personal property that relate to or are used in connection with the Business;
(h) all deposits, pre-payments and other noncurrent assets as reflected on
the Seller Balance Sheet and all deposits, pre-payments made and noncurrent
assets acquired since the date of the Seller Balance Sheet, that relate to or
are used in connection with the Business;
(i) all rights of and benefits accruing to the Seller under Contracts that
relate to or are used in connection with the Business, including rights to
assert claims and take other rightful actions in respect of breaches, defaults
and other violations of such Contracts, including without limitation the
Contracts listed on Schedule 2.01(i);
(j) to the extent assignable, all Licenses of the Seller, that relate to or
are used in connection with the Business, including without limitation the
Licenses listed on Schedule 2.01(j);
(k) all agreements with vendors, that relate to or are used in connection
with the Business and that are listed on Schedule 2.01(i);
(l) all rights to causes of action, lawsuits, judgments, claims and demands
of any nature available to or being pursued by or for the benefit of the Seller
with respect to the Business or the ownership, use, function, value of or other
rights pertaining to any Asset, whether arising by way of counterclaim or
otherwise;
(m) all guarantees, warranties, indemnities and similar rights in favor of
the Seller with respect to any Asset;
(n) all insurance proceeds attributable to the damage, destruction, or
casualty loss of any of the Assets prior to the Closing; and
(o) all operating data, books and records of the Seller, that relate to or
are used in connection with the Business including, without limitation, customer
lists and records, vendor lists, equipment logs, operating guides and manuals,
telephone numbers and connections, purchasing materials and records,
correspondence, files and other similar documents and books and records.
Notwithstanding the foregoing, to the extent that assignment hereunder by
the Seller to the Purchaser of any Assumed Contract or License is not permitted
or is not permitted without the consent of any third party, this Agreement will
not be deemed to be an assignment of the same or to constitute an undertaking to
assign the same if such consent is not given or if such an assignment or
undertaking to assign otherwise would constitute a breach of or cause a loss of
benefits thereunder. Nothing in this paragraph shall be deemed a waiver by the
Purchaser of its right to have received on or before the Closing an effective
assignment of all of the Assets nor shall this paragraph be deemed to constitute
an agreement to exclude from the Assets any assets described under this Section
2.01.
2.02. Excluded Assets. Anything to the contrary in Section 2.01
notwithstanding, the Assets shall not include, and the Purchaser shall not
purchase, those items described in Section 2.02 of the Disclosure Schedule
(collectively, the "Excluded Assets"). None of the Excluded Assets or Excluded
Liabilities (as defined below) shall be reflected on the Closing Balance Sheet.
2.03. Assumption of Liabilities. On the terms and subject to the conditions
contained herein, the Purchaser shall assume and agree to pay, perform and
discharge in accordance with their terms only the following obligations, debts
and liabilities of the Seller and no others (collectively, the "Assumed
Liabilities"):
(a) except as otherwise expressly provided herein, the accrued current
liabilities relating to the Business as of Closing and reflected as such on the
Closing Balance Sheet; and
(b) all of the Seller's obligations (other than obligations arising as a
result of breaches by the Seller) arising after the Closing under the Contracts
listed on Schedule 2.01(i) (the "Assumed Contracts") and Licenses listed on
Schedule 2.01(j), that are (i) executory obligations for future performance
thereunder or (ii) any liabilities thereunder existing on the Closing Date to
the extent, but only to the extent, such liabilities are reflected on the
Closing Balance Sheet.
The Assumed Liabilities shall not include any Excluded Liability, even if
reflected on the Closing Balance Sheet.
2.04. Excluded Liabilities. It is understood and agreed that the Purchaser
is not hereby assuming and shall not be deemed to have assumed or become subject
to or obligated for any liabilities of the Seller other than the Assumed
Liabilities (such liabilities other than the Assumed Liabilities being referred
to herein as the "Excluded Liabilities"). Without limiting the generality of the
preceding sentence, anything contained in this Agreement to the contrary
notwithstanding, the Assumed Liabilities do not include and, accordingly, the
Excluded Liabilities include, without limitation, the following liabilities:
(a) any obligation of the Seller or any Owner for Taxes, including without
limitation any Taxes arising from the operation of the Business or the ownership
of the Assets prior to the Closing or arising out of the consummation of the
transactions contemplated hereby, except any and all amounts accrued with
respect to personal property Taxes and reflected on the Closing Balance Sheet as
an accrued current liability;
(b) all borrowings on life insurance;
(c) all long-term debt of the Seller;
(d) any liabilities or obligations of any Owner or of the Seller to any
Owner;
(e) the liabilities and obligations of the Seller arising under this
Agreement or any of the Ancillary Agreements (provided that, this Section
2.04(e) shall not affect the Purchaser's obligation to reimburse the Seller for
certain costs and expenses related to the Business Employees (as defined in
Section 3.13(a) as provided in the Transitional Services Agreement, to the
extent such costs and expenses are incurred after the Closing);
(f) any liability or obligation, including, without limitation, any
liability for the Seller's attorney's fees or expenses, whenever incurred,
resulting from any litigation disclosed pursuant to Section 3.09;
(g) any liability or obligation arising under or in connection with any
pension, insurance, bonus, profit-sharing or other Employee Plan (as defined in
Section 3.13) or any obligation relating to salaries, wages, bonuses, vacation
or severance pay, or any obligation under any Law, including, without
limitation, ERISA and 4980B of the Code;
(h) any liability, Contract or other obligation of the Seller, known or
unknown, fixed or contingent, the existence of which constitutes or will
constitute a breach of any representation or warranty of the Seller contained in
or made pursuant to this Agreement or that the Purchaser is not expressly
assuming hereunder;
(i) any liabilities or obligations of the Seller (x) under any Contracts
relating to the Excluded Assets, (y) relating to the payables or other
obligations of the Seller in respect of which Seller has checks outstanding, or
(z) relating to the overpayment described in Section 2.02 of the Disclosure
Schedule;
(j) any liability or obligation resulting from or relating to any breach of
contract or violation of any Law by Seller or any Owner;
(k) any liability or obligation of the Seller arising prior to the Closing
Date not expressly assumed by the Purchaser pursuant to this Agreement;
(l) all legal fees and expenses incurred by Seller or for which Seller is
otherwise liable;
(m) all accounting fees and expenses incurred by Seller or for which Seller
is otherwise liable;
(n) any liability or obligation of the Seller resulting from or relating to
withholding rebate or other payments due and payable to past or present
customers of the Seller; and
(o) any other liability or obligation of the Seller not reflected or
reserved against in the computation of the Agreed Net Worth Amount on the
Closing Balance Sheet.
2.05. Purchase Price; Allocation of Purchase Price.
(a) The purchase price to be paid by the Purchaser for the Assets (the
"Purchase Price") shall consist of an aggregate of $31,500,000, payable as
follows: (i) $29,640,000 in cash and (ii) a promissory note in the principal
amount of $1,860,000 (subject to adjustment as provided below). In addition, the
Seller may earn additional earnout payments as set forth in Section 2.11 below,
partially secured by the Gross Profit Escrow. At the Closing, the Purchaser
shall deliver (i) to the Seller, a wire transfer of immediately available funds
in the amount of $24,900,000 less the Reserved Amount (the "Closing Payment"),
and (ii) to the Escrow Agent, a wire transfer of immediately available funds in
an amount ($7,740,000) equal to the sum of the Cash Escrow and the Gross Profit
Escrow, and NMHC shall deliver to the Seller a promissory note in the principal
amount of $1,860,000 (the "Note").
(b) The Purchase Price shall be allocated to the Assets as set forth on a
schedule to be mutually agreed upon by the parties in good faith as promptly as
possible following the Closing. The Seller, the Owners and the Purchaser shall
report the federal, state, local and foreign Tax consequences of the transaction
contemplated by this Agreement in a manner consistent with such allocation. The
Seller, the Owners and the Purchaser further covenant and agree not to take a
position with respect to Taxes that is inconsistent with such allocation on any
Tax Return or otherwise, except as may be required by Law; provided, however,
that if any Tax authority makes or proposes an allocation with respect to the
Purchase Price that differs materially from such allocation, each of NMHC, the
Purchaser, the Owners and the Seller shall have the right, at its or his
election and expense, to contest such Tax authority's determination. Each party
shall provide the other party with all notices and information reports filed
with Tax authorities and agencies with respect to the allocation of the Purchase
Price; provided that, nothing contained herein or in any of the Ancillary
Agreements shall obligate any Owner to provide NMHC or the Purchaser with copies
of his personal Tax Returns or records.
2.06. Closing. The Closing shall take place at the offices of Ackerman,
Levine, Cullen & ▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ or at
such other location as the parties may mutually agree, concurrently with the
execution and delivery of this Agreement (the date on which the Closing takes
place being the "Closing Date"). The Closing shall be deemed effective as of the
opening of business on the Closing Date.
2.07. Closing Deliveries by the Seller. At the Closing, the Seller shall
deliver or cause to be delivered to NMHC and the Purchaser:
(a) executed copies of the Ancillary Agreements;
(b) termination statements and instruments of release, in form and
substance satisfactory to counsel for the Purchaser, releasing and discharging
all Liens (other than Permitted Liens) against the Assets or otherwise providing
for the release and discharge of such Liens upon such terms and conditions as
are acceptable to the Purchaser;
(c) copies of (i) the State of Delaware Statement of Qualification of the
Seller, as filed with the Secretary of State of Delaware and (ii) Limited
Liability Partnership Agreement of the Seller;
(d) a certificate, dated not more than five (5) days prior to the Closing
Date, as to the organization of the Seller, executed by the appropriate
officials of the Seller's state of organization and of each other state in which
Seller is qualified as a foreign partnership;
(e) a copy of the resolutions of the managing partners and holders of Class
A Voting Units of the Seller, authorizing the execution and delivery of this
Agreement and each of the other Ancillary Agreements to which the Seller is a
party and the performance of the transactions contemplated hereby and thereby,
certified by the secretary of the Seller;
(f) a certificate from the Seller as to the incumbency and signature of the
officers of the Seller, executed by the president and secretary of the Seller;
(g) an opinion of the Seller's counsel in form and substance acceptable to
the Purchaser and its counsel;
(h) the wire transfer of all the Business Cash to an account designated by
the Purchaser; and
(i) such other certificates and documents as the Purchaser or its counsel
may reasonably request.
2.08. Closing Deliveries by the Purchaser. At the Closing, the Purchaser
and NMHC, as applicable, shall deliver or cause to be delivered:
(a) to the Seller and to each Owner executed copies of the Ancillary
Agreements to which each is a party;
(b) to the Seller (i) a wire transfer of immediately available funds in an
amount equal to the Closing Payment; and (ii) the Note;
(c) to the Escrow Agent (i) a wire transfer of immediately available funds
equal to the sum of the Cash Escrow and the Gross Profit Escrow, and (ii)
executed copies of this Agreement and the Escrow Agreement;
(d) to the Seller (i) copies of the Certificate of Incorporation of NMHC,
certified by the Secretary of State of Delaware; and (ii) the Limited
Partnership Agreement of the Purchaser and the Certificate of Limited
Partnership of the Purchaser as issued by the Secretary of State of the State of
Texas;
(e) to the Seller a certificate, dated not more than five (5) days prior to
the Closing Date, as to the good standing of each of NMHC and the Purchaser,
executed by the appropriate officials of Delaware and Texas, respectively;
(f) to the Seller a copy of the resolutions of the board of directors of
NMHC authorizing the execution and delivery of this Agreement and each of the
other Ancillary Agreements to which NMHC is a party and the performance of the
transactions contemplated hereby and thereby, certified by the secretary of
NMHC;
(g) to the Seller a copy of the resolutions of the board of directors of
the general partner of the Purchaser authorizing the execution and delivery of
this Agreement and each of the other Ancillary Agreements to which the Purchaser
is a party and the performance of the transactions contemplated hereby and
thereby, certified by the secretary of such general partner;
(h) to the Seller a certificate from the Purchaser as to the incumbency and
signature of the officers of general partner of the Purchaser, executed by the
president and secretary of such general partner;
(i) to the Seller a certificate from NMHC as to the incumbency and
signature of the officers of NMHC, executed by the president and secretary of
NMHC;
(j) to the Seller an opinion of counsel for the Purchaser and NMHC in form
and substance acceptable to the Seller and its counsel; and
(k) such other certificates and documents as the Seller or its counsel may
reasonably request.
2.09. Balance Sheet Adjustment; Interim Period Net Income.
(a) As soon as reasonably practicable following the Closing Date, and in no
event more than 45 days thereafter, the parties shall cause the accounting firm
of Whitley Penn, LLP, Dallas, TX (the "Audit Firm") to deliver to the Seller and
the Purchaser (i) a balance sheet of the Seller as of the Closing Date (as
prepared by the Purchaser and audited by the Audit Firm with an unqualified
audit opinion from the Audit Firm in connection therewith, the "Closing Balance
Sheet"), (ii) a written calculation of the Net Worth of the Seller as of the
opening of business on the Closing Date (the "Closing Date Net Worth"), prepared
by the Purchaser and reviewed by the Audit Firm on the basis of the information
set forth on the Closing Balance Sheet (provided that no Excluded Assets or
Excluded Liabilities shall be included in the calculation of the Closing Date
Net Worth), (iii) a calculation of any payment due pursuant to this Section 2.09
prepared by the Purchaser and reviewed by the Audit Firm, and (iv) a calculation
of the net income of the Seller for the period October 1, 2003 to the Closing
prepared by the Purchaser and reviewed by the Audit Firm (determined in
accordance with GAAP on a basis consistent with the preparation of the Seller
Financial Statements) (the "Net Income Amount"). All of the foregoing documents
are referred to collectively as the "Closing Adjustment Documents." In preparing
the Closing Adjustment Documents, the Net Income Amount shall not be reduced for
(i) any expenses not related to the Business, (ii) any reversals in accruals for
reserved amounts reflected on the Seller Financial Statements, or (iii) for any
increases in executive compensation, whether or not in the ordinary course of
business. For purposes of this Section 2.09, the term "Net Worth" shall mean the
book value of the Assets, less the book value of the Assumed Liabilities
reflected on the Closing Balance Sheet. The parties shall cooperate in good
faith in the prompt preparation of the Closing Adjustment Documents. The Closing
Adjustment Documents shall be prepared in accordance with GAAP on a basis
consistent with the preparation of the Seller Financial Statements.
(b) If the Agreed Net Worth Amount exceeds the Closing Date Net Worth, the
Purchaser shall retain from the Reserved Amount the amount of such excess and
shall remit the balance of the Reserved Amount, if any, to the Seller. If the
amount by which the Agreed Net Worth Amount exceeds the Closing Date Net Worth
is greater than the Reserved Amount, then the Purchaser shall retain the entire
Reserved Amount and the Seller shall pay to the Purchaser the balance of such
excess. If the Closing Date Net Worth equals or exceeds the Agreed Net Worth
Amount, the Purchaser shall remit to the Seller the full Reserved Amount. Any
payment due under this Section 2.09(b) shall be made by wire transfer of
immediately available funds within 10 days following the determination of the
amount thereof and shall include interest on such amount (including the Reserved
Amount, or any portion thereof, that is paid to the Seller), at 4% per annum.
(c) If the Closing Date Net Worth is less than the sum of (X) $1,850,000,
plus (Y) the Adjusted Net Income Amount (as defined below), then the Seller and
Owners shall pay the shortfall (without duplication of any payment pursuant to
paragraph (b) above) to the Purchaser within five (5) business days after
finalization of the Closing Adjustment Documents. The term "Adjusted Net Income
Amount" shall mean the Net Income Amount, less an amount equal to the
distributions to the Owners or other shareholders of the Seller determined by
the Audit Firm to be required to enable the Owners and such shareholders to pay
their respective income tax liabilities in respect of their respective portions
of such Net Income Amount. Any dispute between the parties with respect to the
Net Income Amount or the Adjusted Net Income Amount shall be resolved in the
same manner as a Disagreement.
(d) Within ten (10) Business Days after receipt of the Closing Adjustment
Documents, either party may dispute all or any portion thereof by giving written
notice (a "Notice of Disagreement") to the other party setting forth in
reasonable detail the basis (to the extent such information is available to such
party) for any such dispute (any such dispute being referred to as a
"Disagreement"). If neither party gives a Notice of Disagreement in accordance
with the provisions of the first sentence of this paragraph within such ten (10)
Business Day period, each of the parties shall be deemed to have irrevocably
accepted the Closing Adjustment Documents in the form delivered to the parties
by Audit Firm.
(e) If either party (the "Objecting Party") shall deliver a Notice of
Disagreement to the other party (the "Other Party"), and the Other Party shall
not dispute all or any such portion of such Notice of Disagreement by giving
notice (a "Dispute Notice") to the Objecting Party setting forth in reasonable
detail the basis for such dispute (to the extent such information is available
to the Objecting Party) within ten (10) Business Days following delivery of such
Notice of Disagreement, the Other Party shall be deemed to have irrevocably
accepted the Closing Adjustment Documents as modified in the manner described in
the Notice of Disagreement. If the Other Party timely furnishes the Objecting
Party with a Dispute Notice, the parties, within five (5) Business Days
following the receipt of such Dispute Notice, shall cause the Disagreement to be
referred to KBA Group, LLP, Dallas, Texas, or such other independent accounting
firm other than the Audit Firm as the parties may mutually agree (the
"Independent Accounting Firm"), for resolution of such Disagreement in
accordance with the terms of this Agreement. The review of the Independent
Accounting Firm shall be limited solely to the disputed item or items contained
in the Notice of Disagreement, the determinations of the Independent Accounting
Firm with respect to any Disagreement shall be final and binding upon the
parties and the amount so determined shall be used to complete the Closing
Adjustment Documents and the amounts due, if any, pursuant to this Section 2.09.
Each of the parties shall use commercially reasonable efforts to cause the
Independent Accounting Firm to render its determination as soon as practicable
after referral of the Disagreement to such Independent Accounting Firm, and each
party shall cooperate with such Independent Accounting Firm, including providing
to such Independent Accounting Firm reasonable access to the books, records,
personnel and representatives of such party and its affiliates and such other
information as such Independent Accounting Firm may require in order to render
its determination. The fees and disbursements of the Independent Accounting Firm
shall be borne by the parties in inverse proportion to the portion of the
disputed amount awarded to each (e.g., if the Objecting Party claims it is
entitled to an additional $100,000 and the Independent Accounting Firm
determines that the Objecting Party was, in fact, entitled to an additional
$35,000, then the Objecting Party shall bear 65% of the fees and disbursements
of the Independent Accounting Firm and the Other Party shall bear 35% of such
fees and disbursements).
2.10. Escrow; Setoff Against Note.
(a) At the Closing, the parties shall enter into the Escrow Agreement,
pursuant to which the Escrow Agent shall hold (i) the Cash Escrow in escrow to
secure the indemnification obligations of the Seller and the Owners pursuant to
Section 6.02, and (ii) the Gross Profit Escrow to secure the Purchaser's
obligations under Section 2.11. The Cash Escrow shall be released from escrow
and distributed in accordance with the terms of the Escrow Agreement and this
Section 2.10, and the Gross Profit Escrow shall be released and distributed in
accordance with the terms of the Escrow Agreement and Section 2.11. On the 270th
day following the Closing Date, $1,000,000, less the aggregate amount, if any,
of Applicable Losses (as defined below) for which the Purchaser has provided
notice in accordance with Section 6.03 (whether or not adjudicated or resolved),
shall be released from escrow out of the Cash Escrow. On the 360th day following
the Closing Date, $1,000,000, less the aggregate amount, if any, of Applicable
Losses for which the Purchaser has provided notice in accordance with Section
6.03 (whether or not adjudicated or resolved) and which were not withheld from a
previous distribution from escrow, shall be released from escrow out of the Cash
Escrow. On the 450th day following the Closing Date, $1,500,000, less the
aggregate amount, if any, of Applicable Losses for which the Purchaser has
provided notice in accordance with Section 6.03 (whether or not adjudicated or
resolved) and which were not withheld from a previous distribution from escrow,
shall be released from escrow out of the Cash Escrow. Such distributions shall
be made by wire transfer of immediately available funds to an account designated
by the Seller. The term "Applicable Losses" means all Losses (as defined in
Section 6.01) other than Losses that are not indemnifiable by Seller or Owners
by reason of the $250,000 exclusion set forth in Section 6.02(b)(ii).
(b) At the end of the fifteen (15) month escrow period, the entire amount
of the remaining Cash Escrow, less the aggregate amount, if any, of Applicable
Losses for which the Purchaser has provided notice in accordance with Section
6.03 (whether or not adjudicated or resolved) and which were not withheld from a
previous distribution from escrow, shall be released from escrow, and delivered
to the Seller in accordance with the terms of the Escrow Agreement; provided,
however, that the Gross Profit Escrow shall only be released and distributed in
accordance with the provisions of Section 2.11.
(c) In addition to the Cash Escrow, the Note shall be subject, for the
first 15 months after the Closing Date, to setoff in respect of any
indemnification obligations of the Seller and the Owners pursuant to Section
6.02, and shall not thereafter be subject to such setoff. For purposes of the
preceding sentence, the Purchaser shall be deemed to have exercised its right to
setoff against the Note if it delivers to the Seller, within the first 15 months
after the Closing Date, a notice of claim in accordance with the provisions of
Section 6.03(a).
2.11. Gross Profit Adjustment; Earn-out.
(a) If and to the extent that the Gross Profit (as defined below) generated
by the Business is greater than:
(i) $1,500,000 in the fiscal quarter commencing April 1, 2004 and
ending June 30, 2004, the Purchaser shall pay to the Seller out of the
Gross Profit Escrow an amount equal to 5 times the amount of such excess;
(ii) $3,000,000 on a cumulative basis in the two fiscal quarters
commencing April 1, 2004 and ending September 30, 2004, the Purchaser shall
pay to the Seller out of the Gross Profit Escrow an amount equal to 5 times
the amount of such excess, less any amount paid to the Seller under
subparagraph (i) above;
(iii) $4,500,000 on a cumulative basis in the three fiscal quarters
commencing April 1, 2004 and ending December 31, 2004, the Purchaser shall
pay to the Seller out of the Gross Profit Escrow an amount equal to 5 times
the amount of such excess, less any amounts paid to the Seller under
subparagraphs (i) and (ii) above; and
(iv) $6,000,000 on a cumulative basis in the four fiscal quarters
commencing April 1, 2004 and ending March 31, 2005, the Purchaser shall pay
to the Seller out of the Gross Profit Escrow an amount equal to 5 times the
amount of such excess, less any amounts paid to the Seller under
subparagraphs (i), (ii) and (iii) above;
provided, however, that, notwithstanding the foregoing, (1) the only
revenues to be utilized in the calculation of Gross Profit in any of the periods
described in subparagraphs (i), (ii), (iii), and (iv) above shall be revenues
generated by customers of the Business who (x) are such on the date hereof or
(y) are not currently customers of either NMHC or the Business and are listed on
Schedule 2.11 annexed hereto (collectively, "Qualified Customers"), (2) each of
the payments described in subparagraphs (i), (ii), (iii), and (iv) above shall
be payable on or before the end of the first fiscal quarter following the end of
the period described in such subparagraph, (3) the maximum amount payable by the
Purchaser to the Seller under this paragraph (a) shall in no event exceed $3
million (plus accrued interest, if any, as provided below), (4) all calculations
and determinations under this Section 2.11 shall be made by the Purchaser, and
all disputes regarding such calculations and determinations shall be resolved in
the same manner in which Disagreements are resolved, and (5) the Seller will be
provided with a copy of and the opportunity to review any calculations made
hereunder (promptly after such calculations are made by the Purchaser) to
determine whether or not it disputes such calculations or any portion thereof.
Any portion of the Gross Profit Escrow not payable to the Purchaser under
subparagraphs (i), (ii), (iii), and (iv) above shall be paid to the Seller on or
before June 30, 2005. Any interest accruing on the Gross Profit Escrow shall be
paid to the Purchaser and the Seller in the same proportion that the principal
of such Gross Profit Escrow is paid. For purposes of this Agreement, the term
"Gross Profit" with respect to any period shall mean revenue generated by the
Business from Qualified Customers during such period, less the cost of claims
attributable to such revenue, all as determined in accordance with GAAP on a
basis consistent with the preparation of the Purchaser's audited financial
statements, it being agreed that no cost savings that the Purchaser realizes
relative to the Seller's historical costs, however achieved, shall be taken into
account in calculating such cost of claims and no effect should be given to the
reversal of any accruals for reserved amounts reflected on the Closing Balance
Sheet.
(b) If, but only if, (x) the Seller is entitled to receive the entire Gross
Profit Escrow pursuant to the provisions of paragraph (a) above, and (y) the
Gross Profit generated by the Business (whether or not from Qualified Customers)
during the four fiscal quarters commencing April 1, 2004 and ending March 31,
2005 exceeds $6.6 million, then the Purchaser shall pay to the Seller, as
additional Purchase Price, an amount equal to 2.5 times the amount of such
excess, up to a maximum payment of $1.2 million. Any payment owing by the
Purchaser under this paragraph (b) shall be paid to the Seller on or before June
30, 2005.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE OWNERS
The Seller and the Owners jointly and severally represent and warrant to
NMHC and the Purchaser that the statements contained in this Article III are
correct and complete as of the date of this Agreement, and, if the Closing Date
is different from such date, will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Article III), except as set forth in the
Disclosure Schedule. For the purposes of this Article III, all representations
and warranties of the Seller shall be deemed to refer to the Seller as
constituted prior and subsequent to the Conversion, except where the context of
a specific representation or warranty requires otherwise. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. The Disclosure Schedule will be arranged in
paragraphs corresponding to the numbered sections contained in this Article III,
provided, however, that a matter disclosed and referenced to any particular
section or subsection will be deemed to be disclosed for purposes of any other
section or subsection of this Article III if the matter is disclosed in such a
way to make its relevance to such other sections or subsections reasonably
apparent and expressly identifies such other section or sections to which such
disclosure applies.
3.01. Organization, Etc. The Seller is a registered limited liability
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Seller is duly qualified or licensed to do
business, and is in good standing, as a foreign company, in each jurisdiction
where the character of the Assets or the nature of its activities in connection
with the Business makes such qualification or licensing necessary, except as
would not cause a Seller Material Adverse Change, all of which jurisdictions are
set forth on Section 3.01 of the Disclosure Schedule. The Seller has full power
and authority to conduct the Business as it is now being conducted and to own,
operate or lease the Assets. The Seller has heretofore delivered to NMHC and the
Purchaser true and correct copies of its Statement of Qualification and Limited
Liability Partnership Agreement ("Partnership Agreement") in effect on the date
hereof. The Seller has all requisite power and authority to enter into this
Agreement and each of the Ancillary Agreements to which it is a party, to carry
out its obligations under this Agreement and each of the Ancillary Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby.
3.02. Capitalization. The authorized, issued and outstanding partnership
interests of the Seller are as set forth in Section 3.02 of the Disclosure
Schedule. All of the issued and outstanding partnership interests of the Seller
are owned, of record and beneficially, as set forth on Section 3.02 of the
Disclosure Schedule. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of each class of
partnership interests of Seller are as set forth in its Partnership Agreement,
and all such designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable and in
accordance with all applicable state partnership laws. All outstanding
partnership interests of the Seller have been duly authorized and validly issued
and are fully paid and non-assessable. All of the outstanding securities of
Seller were issued in compliance with all applicable securities (federal and
state) and state partnership laws. None of the outstanding securities have been
issued in violation of any preemptive rights, rights of first refusal or similar
rights. There are no outstanding options, warrants, convertible securities,
calls, rights, commitments, preemptive rights or agreements or instruments or
understandings of any character to which the Seller is a party or by which the
Seller is bound, obligating the Seller to issue, deliver or sell, or cause to be
issued, delivered or sold, contingently or otherwise, additional partnership
interests or any securities or obligations convertible into or exchangeable for
such partnership interests or to grant, extend or enter into any such option,
warrant, convertible security, call, right, commitment, preemptive right or
agreement. There are no outstanding obligations, contingent or otherwise, of the
Seller to purchase, redeem or otherwise acquire any of its partnership
interests. There are no voting trust agreements or other contracts, agreements,
arrangements, commitments, plans or understandings restricting or otherwise
relating to voting (i) between or among Seller and any of the Owners or other
partners of the Seller or (ii) between or among any of the Owners and other
partners.
3.03. Authorization. The execution and delivery by the Seller of this
Agreement and the Ancillary Agreements to which it is a party, the performance
by the Seller of its obligations hereunder and thereunder and the consummation
by the Seller of the transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of the Seller and its partners.
This Agreement has been, and each Ancillary Agreement to which the Seller or any
Owner is a party will be, duly executed and delivered by the Seller and each of
the Owners, as applicable, and (assuming due authorization, execution and
delivery by NMHC and the Purchaser) this Agreement is, and each Ancillary
Agreement, when duly executed and delivered will be, a legal, valid and binding
obligation of the Seller and each of the Owners, as applicable, enforceable
against it or him in accordance with its terms (except as the enforceability
thereof may be limited by any applicable bankruptcy, insolvency or other Laws
affecting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in equity or at law).
3.04. No Violation. The execution and delivery of this Agreement and
Ancillary Agreements by the Seller and Owners do not, and the consummation by
the Seller and Owners of the transactions contemplated hereby and thereby, and
compliance with the terms hereof and thereof will not, (i) conflict with, or
result in any violation of or default under, any provision of the Seller's
Statement of Qualification or Partnership Agreement; (ii) conflict with, or
result in any violation of or default or loss of any benefit under, any Assumed
Contract or License, or any Law or Governmental Order to which the Seller is a
party or to which any of its property is subject; (iii) accelerate the
performance required by any Assumed Contract, or constitute a default or loss of
any right thereunder or an event which, with the lapse of time or notice or
both, will result in a default or loss of any right thereunder or the creation
of any Lien upon any of the Assets; (iv) result in any suspension, revocation,
impairment, forfeiture or non-renewal of any License or (v) result in the Seller
being required to pay any material amount or refund to any customer or licensee
of Seller in respect of amounts received by Seller in advance of the performance
of services.
3.05. Approvals. Except as disclosed in Section 3.05 of the Disclosure
Schedule, the execution and delivery of this Agreement and the Ancillary
Agreements by the Seller and each of the Owners do not, and the performance of
this Agreement and the Ancillary Agreements by the Seller and each of the Owners
will not, require any consent, approval, authorization or other action by, or
filing with or notification to, any Governmental Authority or other Person under
any Law or Contract, other than such filings or registrations with, or
authorizations, consents or approvals of Governmental Authorities as have been
obtained or made prior to the date hereof.
3.06. Financial Statements and Other Information.
(a) The Seller has delivered to NMHC and the Purchaser true, correct and
complete copies of the Seller's audited balance sheet at December 31, 2003 and
the related statements of operations and cash flows for the fiscal year then
ended, together with the notes to such financial statements (collectively, the
"Seller Financial Statements"). The audited balance sheet of Seller at December
31, 2003 is referred to as the "Seller Balance Sheet" and such date is referred
to as the "Balance Sheet Date."
(b) The Seller Financial Statements were prepared from and are in
accordance with the books and records of the Seller and have been prepared in
accordance with GAAP consistently applied throughout the periods covered
thereby, and the balance sheet included therein present fairly as of their
respective dates the financial condition of the Seller. All liabilities and
obligations, whether absolute, accrued, contingent or otherwise, whether direct
or indirect, and whether due or to become due, that existed at the date of such
Seller Financial Statements have been disclosed in the balance sheet included in
the Seller Financial Statements or in notes to the Seller Financial Statements
to the extent such liabilities were required, under GAAP, to be so disclosed.
The statement of operations and cash flows included in the Seller Financial
Statements presents fairly the results of operations and cash flows of the
Seller for the period indicated, and the notes included in the Seller Financial
Statements present fairly the information purported to be shown thereby. The
statement of operations included in the Seller Financial Statements does not
contain any material items of special or non-recurring income or other income
not earned, or omit any expenses incurred, in the ordinary course of business
except as expressly specified therein. The Business has not been conducted
through any Person other than the Seller.
(c) Except as set forth in Section 3.06(c) of the Disclosure Schedule, all
assets reflected in the Seller Balance Sheet have a fair market or realizable
value at least equal to the value thereof as reflected therein.
(d) The Accounts Receivable of the Seller arising from the Business as set
forth on the Seller Balance Sheet or arising since the date thereof are valid
and genuine; have arisen solely out of bona fide sales and deliveries of goods,
performance of services and other business transactions in the ordinary course
of business consistent with past practice; are not subject to valid defenses,
contra, set-offs or counterclaims; and, except as set forth in Section 3.06(d)
of the Disclosure Schedule, are collectible or realizable at the full recorded
amount thereof (less, in the case of Accounts Receivable appearing on the Seller
Balance Sheet, the recorded allowance for collection losses on the Seller
Balance Sheet, and less, in the case of Accounts Receivable charged back to
pharmacies, the Seller's management fee) over the period of usual trade terms
(by use of the Seller's normal collection methods (as described in Section
3.06(d) of the Disclosure Schedule) without resort to litigation or reference to
a collection agency).
(e) Except as set forth in the notes to the Seller Financial Statements,
the liabilities on the Seller Balance Sheet consist solely of accrued
obligations and liabilities incurred by the Seller in the ordinary course of
business to Persons that are not Affiliates of the Seller. There are no
liabilities of the Seller of any kind whatsoever, whether or not accrued and
whether or not contingent or absolute, determined or determinable or otherwise,
including, without limitation, documentary or standby letters of credit, bid or
performance bonds, or customer or third party guarantees, and no existing
condition, situation or set of circumstances that could reasonably result in
such a liability, other than (i) liabilities disclosed in the Seller's Financial
Statements, (ii) liabilities relating solely to the Excluded Assets, and (iii)
liabilities that have arisen after the Balance Sheet Date in the ordinary course
of business and consistent with past practice (none of which is a liability for
breach of contract, breach of warranty (other than charge-backs incurred in the
ordinary course of business and consistent with past practice), tort,
infringement claim or lawsuit).
(f) The books, records and accounts of the Seller accurately and fairly
reflect, in all material respects and in reasonable detail, the transactions and
the assets and liabilities of the Seller. The Seller has not engaged in any
transaction with respect to the Business, maintained any bank account for the
Business or used any of the funds of the Seller except for transactions, bank
accounts and funds that have been and are reflected in the normally maintained
books and records of the Seller.
(g) Section 3.06(g) of the Disclosure Schedule lists the name and address
of
every bank and other financial institution in which the Seller or its Affiliates
maintain an account (whether checking, savings or otherwise), lock box or safe
deposit box, and the account numbers and names of persons having signing
authority or other access thereto.
3.07. Absence of Certain Changes or Events.
(a) Since the Balance Sheet Date, except as contemplated by this Agreement,
the Business has been conducted in all material respects in the ordinary course
consistent with past practice. Since the Balance Sheet Date, there has been no
Seller Material Adverse Change.
(b) Without limiting the generality of the foregoing, since the Balance
Sheet Date, except as contemplated by this Agreement or as set forth in the
Disclosure Schedule, the Seller has not:
(i) except in the ordinary course of business of the Seller consistent
with past practice, granted any Lien (other than a Permitted Lien) on any
Asset;
(ii) except in the ordinary course of business consistent with past
practice, granted or agreed to grant any bonus to any Business Employee or
made any increase in the rate of salary or compensation or benefits of any
Business Employee;
(iii) except for sales of inventory in the ordinary course of business
of the Seller and consistent with past practice of the Seller, sold,
assigned, transferred, leased or otherwise disposed of any of the Assets
having a value individually or in the aggregate exceeding $10,000;
(iv) except as required by GAAP, made any material change in any
method of accounting or accounting practice;
(v) failed to pay or discharge when due any liability or obligation;
(vi) made any material change in the manner of its business or
operations;
(vii) paid or declared any dividend or other distribution with respect
to any capital stock, other than to the extent necessary to fund the
Owners' Tax liabilities arising from the operation of the Business,
including, without limitation, for Tax liabilities arising with respect to
2003 or the period from January 1, 2004 to the Closing;
(viii) issued any capital stock or other security (including, without
limitation, securities convertible into or rights to acquire capital stock
of the Seller);
(ix) borrowed any amount or incurred or become subject to any
liability (absolute, accrued or contingent), except current liabilities
incurred, liabilities under Contracts entered into, borrowings under the
banking facilities of the Seller disclosed on the Disclosure Schedule and
liabilities in respect of letters of credit issued under such banking
facilities disclosed on the Disclosure Schedule, all of which were in the
ordinary course of business;
(x) forgiven or cancelled any debts or claims (except in the ordinary
course of business of the Seller consistent with past practice), suffered
any material loss of any Asset or waived any right of substantial value
whether or not in the ordinary course of business;
(xi) suffered any Seller Material Adverse Change in its relations
with, or any loss or, to the Knowledge of the Seller, threatened loss of,
any of the suppliers or customers of the Seller disclosed pursuant to
Section 3.18;
(xii) delayed or postponed the payment of accounts payable and other
liabilities outside the ordinary course of business;
(xiii) terminated any Contract or License or entered into any
transaction or Contract affecting the Assets except in the ordinary course
of business;
(xiv) except as contemplated by this Agreement, entered into any
commitment or Contract to do any of the foregoing; and
(xv) received notice of any Action by a Governmental Authority.
3.08. Taxes.
Except as set forth in Section 3.08 of the Disclosure Schedule:
(a) all Tax returns, forms, statements and reports (herein referred to
collectively as "Tax Returns" or singularly as a "Tax Return") required to be
filed by or on behalf of the Owners or the Seller have been filed in a timely
manner with the appropriate Governmental Authorities in all jurisdictions in
which such Tax Returns are required to be filed (taking into account all
extensions) and all Taxes shown to be due and payable on such Tax Returns have
been paid in full;
(b) all such Tax Returns and the information and data contained therein
have been properly and accurately compiled and completed, fairly present the
information purported to be shown therein and reflect all liabilities for Taxes
for the periods covered by such Tax Returns;
(c) none of such Tax Returns are now under audit or examination by any
Governmental Authority, there are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment or collection
of any Tax or deficiency of any nature with respect to any such Tax Return, nor
is any Action now pending or, to the Knowledge of the Seller or any Owner,
threatened against the Seller or any Owner with respect to any Tax relating to
the Assets, and, to the Knowledge of the Seller or any Owner, there is no Basis
for such an Action;
(d) there is no Tax Lien imposed by any Governmental Authority outstanding
against any of the Assets;
(e) neither the Seller nor any of its Affiliates has made with respect to
any Assets any consent under Section 341 of the Code, (1) none of the Assets is
"tax exempt use property" within the meaning of Section 168(h) of the Code, and
(2) none of the Assets is a lease made pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954;
(f) the Seller does not have any liability for Taxes of any other taxpayer
as a transferee, successor, by Contract or otherwise; and
(g) the Seller elected "s-corporation" status effective as of June 25, 1992
and the Seller was and has remained qualified as an "s-corporation" under
Section 1361(a) of the Code through the effective date of the Conversion.
3.09. Litigation. Except as set forth in Section 3.09 of the Disclosure
Schedule, there are no Actions pending or, to the Knowledge of the Seller,
threatened against the Seller, or any Basis in fact therefor known to the
Seller, relating to the Business or to which any of the Assets are subject.
Section 3.09 of the Disclosure Schedule accurately describes each Action.
Neither the Assets nor the Seller is subject to any Governmental Order.
3.10. Compliance with Laws. The ownership, use and operation of the Assets
and operation of the Business has been conducted by the Seller in compliance in
all material respects with all Laws and Governmental Orders applicable to the
Seller, the Business or any Asset, including all Environmental Laws, but
excluding those Laws referred to specifically in Section 3.23. No investigation
or review by any Governmental Authority with respect to the Business or the
Seller is pending or, to the Knowledge of the Seller, threatened, nor has any
Governmental Authority indicated in writing or otherwise to the Seller an
intention to conduct the same. Neither the Seller nor, to the Knowledge of the
Seller, any shareholder, director, officer, consultant or employee of the Seller
(in their capacity as such), is in default with respect to any Governmental
Order known to or served upon the Seller by any Governmental Authority. To the
Knowledge of the Seller, there is no existing Law that would prohibit or
restrict or otherwise adversely affect the conduct of the Business in any
jurisdiction in which it is now being conducted. This Section 3.10 shall not
apply to any matter covered by Section 3.23 and a breach of Section 3.23 shall
not be deemed a breach of this Section 3.10, and vice versa.
3.11. Real Property.
(a) The Seller owns no real property.
(b) Section 3.11(b) of the Disclosure Schedule identifies each parcel of
real property leased or subleased by the Seller and used in the Business (the
"Leased Real Property"). No lease or sublease with respect to any such Leased
Real Property (the "Real Property Leases") is subject to any Lien except
Permitted Liens.
(c) True and complete copies, as amended to the date hereof, of the Real
Property Leases and all notices and demands thereunder have been made available
to NMHC and the Purchaser by the Seller. Subject to the terms of the respective
Real Property Leases, the Seller has a valid and subsisting leasehold or
subleasehold estate in each parcel of Leased Real Property. The Real Property
Leases are in full force and effect and neither the Seller nor, to the Knowledge
of the Seller, any other party to any Real Property Lease is in default
thereunder, nor does any condition exist which, with notice and/or the passage
of time, would constitute such a default.
3.12. Condition of the Assets and Related Matters.
The Assets and the Software License constitute all of the assets necessary
for the conduct of the Business as currently conducted and for the Purchaser to
be able to perform the Purchaser's obligations under the Assumed Liabilities
after the Closing, and none of the Excluded Assets (other than the Software) are
material to the Business.
(a) Except for (i) Permitted Liens and (ii) Liens created by or through
NMHC or the Purchaser or any of their respective Affiliates, the Seller has, and
upon payment therefor, the Purchaser will have good and indefeasible title to
the Assets (except for leased or licensed Assets, as to which the Seller has,
and the Purchaser will have, valid leaseholds or licenses), free and clear of
all Liens.
(b) The Assets and the Facility are in good operating condition, ordinary
wear and tear excepted, are usable in the ordinary course of business, are
adequate and suitable for the uses to which they are being put and conform in
all material respects to all applicable Laws relating to their construction, use
and operation. None of the Assets or the Facility is in need of maintenance or
repairs other than ordinary routine maintenance and repairs that are not
material, individually or in the aggregate, in nature or cost. The Assets do not
include any equity interests in any other Person.
3.13. Employee Plans.
(a) Section 3.13(a) of the Disclosure Schedule lists each "employee benefit
plan," as defined in Section 3(3) of ERISA, whether or not subject to ERISA, and
each other benefit plan, policy, agreement or arrangement (including, without
limitation, any collective bargaining agreement) that is, with respect to
Seller's own employees, (i) maintained, administered, contributed to or required
to be contributed to by the Seller, or any entity that, together with the
Seller, would be treated as a single employer under Section 414 of the Code (an
"ERISA Affiliate") or to which the Seller or any ERISA Affiliate is a party; and
(ii) covers any employee or former employee of the Seller or any of its ERISA
Affiliates who provides or has provided services to or in connection with the
Business (the "Business Employees"). Each such plan, policy, agreement or
arrangement is referred to herein as an "Employee Plan."
(b) Seller has delivered to NMHC and the Purchaser true, correct and
complete copies of the following documents with respect to each Employee Plan
(where applicable): (i) each contract, plan document, policy statement, summary
plan description and other written material governing or describing the Employee
Plan and/or any related funding arrangements (including, without limitation, any
related trust agreement or insurance company contract) or, if there are no such
written materials, a summary description of the Employee Plan, and (ii) where
applicable, (a) the last annual report (5500 series) filed with the Internal
Revenue Service or the Department of Labor; (b) the most recent balance sheet
and financial statement; (c) the most recent actuarial report or valuation
statement; and (d) the most recent determination letter issued by the Internal
Revenue Service, as well as any other determination letter, private letter
ruling, opinion letter or prohibited transaction exemption issued by the
Internal Revenue Service or the Department of Labor since inception and any
application therefor which is currently pending.
(c) The Seller has no funded employee pension plans within the meaning of
Section 3(2) of ERISA.
(d) Each Employee Plan has been maintained in compliance with its terms and
applicable Law. With respect to each Employee Plan that is a group health plan
within the meaning of Section 5000(b)(1) of the Code, (i) Seller has complied in
all material respects with the provisions of Section 4980B of the Code; and (ii)
no event has occurred and no circumstance exists under which Seller has incurred
or may incur, direct or indirect liability under the provisions of Section 4980B
of the Code that could become a liability of NMHC or Purchaser or that has
resulted or could result in the imposition of a Lien upon any of the Assets.
3.14. Labor Matters. Section 3.14 of the Disclosure Schedule contains a
true and complete list of all Business Employees who are employed or performing
services in the Business on the date hereof, the title and rate of compensation
of each Business Employee, and the amount of any accrued bonuses, vacation, sick
leave, maternity leave and other leave for such personnel as of the third
Business Day prior to the Closing Date. The Seller is not in default with
respect to any withholding or other employment Taxes or payments with respect to
accrued vacation or severance pay on behalf of any employee or independent
contractor for which it is obligated on the date hereof, and the Seller will
maintain and continue to make all such necessary payments or adjustments arising
through the Closing Date, including, without limitation, all salary, bonuses,
vacation pay, sick leave and other leave accrued through the Closing Date. The
Seller has not instituted any "freeze" of, or delayed or deferred the grant of,
any cost-of-living or other salary adjustment for any Business Employee. The
Seller has not engaged in any unfair labor practice or discriminated on the
basis of race, color, religion, sex, national origin, age, disability or
handicap in its employment conditions or practices. Within the last 18 months,
no employee or independent contractor has filed or, to the Knowledge of the
Seller, threatened any claims, and there is no reasonable Basis for a claim
against the Seller relating to employment or similar matters (including, without
limitation, compensation and benefits) with the Seller. There are not in
existence or, to the Knowledge of the Seller, threatened any (i) work stoppages
respecting employees or independent contractors of the Seller or (ii) unfair
labor practice complaints against the Seller. The Seller is not a party to any
collective bargaining agreement applicable to any Business Employees. No
representation question exists respecting the Business Employees and no
collective bargaining agreement is currently being negotiated by the Seller
covering its employees, nor is any grievance procedure or arbitration proceeding
pending under any collective bargaining agreement and no claim therefor has been
asserted. The Seller has not received notice from any union or the Business
Employees setting forth demands for representation, elections or for present or
future changes in wages, terms of employment or working conditions. There have
been no audits of the equal employment opportunity practices of the Seller, and,
to the Knowledge of the Seller, no Basis for such audit exists. The Seller does
not have any severance agreement or other arrangement with respect to severance
with any Business Employee. To the Knowledge of the Seller, there are no
covenants, agreements or restrictions to which the Seller is a party or bound,
including but not limited to employee non-compete agreements, prohibiting,
limiting or in any way restricting any person listed on Section 3.14 of the
Disclosure Schedule from engaging in any types of business activity in any
location. True and complete copies of the current written personnel policies,
manuals and/or handbooks of the Seller have been made available to NMHC and the
Purchaser.
3.15. Contracts. Section 2.01(i) of the Disclosure Schedule lists each
currently effective Contract relating to the Business, the Business Employees or
the Assets (except that, with respect to pharmacy agreements, only the top 100
agreements in terms of generation of revenue are listed). Except as indicated on
the Disclosure Schedule, all of such Contracts are Assumed Contracts. True and
correct copies of the written Assumed Contracts noted on Section 2.01(i) of the
Disclosure Schedule have been furnished to NMHC and the Purchaser. With respect
to each Assumed Contract (whether or not listed on the Disclosure Schedule): (i)
the agreement is legal, valid, binding, enforceable and in full force and
effect; (ii) subject to obtaining any required consents with respect to
Contracts which are not assignable, such Contract will continue to be legal,
valid, binding, enforceable and in full force and effect on identical terms
immediately following the consummation of the transactions contemplated hereby;
(iii) neither the Seller nor, to the Knowledge of the Seller, any other party
thereto, is in breach or default in any material respect, and no event has
occurred which with notice or lapse of time would constitute a breach or default
in any material respect, or permit termination, modification or acceleration,
under such Contract; and (iv) neither the Seller nor, to the Knowledge of the
Seller, any other party thereto has repudiated any provision of such Contract.
There are no material liabilities of the Seller or, to the Knowledge of the
Seller, any other party to any of the Assumed Contracts arising from any breach
of or default in any other provision thereof, nor has there occurred any breach
or default thereof by the Seller that would permit the acceleration of any
obligation of any party thereto or the creation of a Lien upon any of the
Assets. Except in the ordinary course of business, there are no negotiations
pending or in progress to revise any material terms of such Assumed Contracts.
3.16. Insurance Policies. Section 3.16 of the Disclosure Schedule (i)
contains a correct and complete summary of all insurance agreements and policies
maintained by the Seller, including any and all insurance agreements and
policies covering the Assets and the Business, and the type and amounts of
coverage thereunder, and (ii) reflects all such insurance required by any Law
applicable to the Business or by any Assumed Contract, and such insurance is
adequate, in type and amount, to protect the Business against the risks involved
in the conduct of the Business. Such agreements and policies are in full force
and effect, the Seller is not delinquent with respect to any premium payments
thereon, and the Seller has not received any notice of cancellation or
termination with respect to any such policy. There are no pending claims against
such insurance agreements and policies by or on behalf of the Seller.
3.17. Brokers. Except as set forth in Section 3.17 of the Disclosure
Schedule, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Seller, the Owners or their respective Affiliates.
3.18. Suppliers and Customers.
(a) Section 3.18 of the Disclosure Schedule lists (i) all suppliers of the
Seller to which the Seller made payments during the year ended December 31,
2003, or expects to make payments during the year ending December 31, 2004, in
excess of one percent of the Seller's cost of sales as reflected on the Seller's
statement of operations for 2003 and (ii) all customers of the Seller that paid
the Seller during the year ended December 31, 2003 or that the Seller expects
will pay to the Seller during the year ending December 31, 2004, more than one
percent of the Seller's sales revenues as reflected on the Seller's statement of
operations for 2003. Section 3.18 of the Disclosure Schedule sets forth (i) a
list of the 20 largest customers of the Seller by sales volume during each of
fiscal 2003 and 2002, together with the total amount of sales revenue generated
by each such customer during each such period, and (ii) a list of the 20 largest
suppliers of the Seller by sales volume during each of fiscal 2003 and 2002,
together with the total amount paid to each such supplier during each such
period.
(b) To the Knowledge of the Seller, none of the customers or suppliers of
the Seller listed on Section 3.18 of the Disclosure Schedule intends, or is
considering, ceasing or altering, in any material adverse respect, their
purchasing from, selling to or dealing with the Seller by reason of the
consummation of the transactions contemplated by this Agreement, or otherwise.
(c) Neither the Seller nor any Owner, nor, to the Knowledge of the Seller,
any of its officers, directors or Affiliates, nor any relative or spouse (or
relative of such spouse) of any Owner or any such officer, director or
Affiliate, nor any entity controlled by one of more of the foregoing:
(i) owns, directly or indirectly, any interest in (excepting less than
2% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee or consultant
of, any Person that is, or is engaged in business as, a competitor, lessor,
lessee, supplier, distributor, sales agent, customer or client of the
Seller;
(ii) owns, directly or indirectly, in whole or in part, any tangible
or intangible property that the Seller uses in the conduct of the Business
(other than Excluded Assets); or
(iii) has any cause of action or other claim whatsoever against, or
owes any amount to, the Seller, except for claims in the ordinary course of
business such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements existing on the date
hereof.
3.19. Intellectual Property. Section 2.01(c) of the Disclosure Schedule
contains an accurate and complete list of all Seller Intellectual Property owned
(in whole or in part), licensed to any extent or used or anticipated to be used
in the conduct of the Business as currently conducted, whether in the name of
the Seller, any employee or otherwise. The Seller owns or has the valid right to
use, in each case as and to the extent currently used in the Business, all
Seller Intellectual Property that is used in the operation of the Business as
currently operated or proposed to be operated by the Seller. Each item
constituting part of the Seller Intellectual Property in which the Seller has an
ownership or license interest has been, to the extent indicated on the
Disclosure Schedule, duly registered with, filed in or issued by, as the case
may be, the United States Patent and Trademark Office or such other Governmental
Authorities, domestic or foreign, as are indicated on the Disclosure Schedule
and such registrations, filings and issuances remain in full force and effect.
To the Knowledge of the Seller, the Seller Intellectual Property and the use
thereof in the operation of the Business as currently conducted by the Seller,
do not infringe any Copyright, Trademark or other Intellectual Property right of
any Person. No claim, written or oral, has been asserted or, to the Knowledge of
the Seller, could be asserted, that threatens or, to the Knowledge of the
Seller, could threaten, that the use of such Seller Intellectual Property in a
manner consistent with past practice does or may infringe upon the Intellectual
Property rights of any Person. To the Knowledge of the Seller, no Person is
engaging in any activity that infringes upon the Seller Intellectual Property or
the Seller's rights in or to any Seller Intellectual Property. Neither the
Seller nor any of its Affiliates is in breach of, or default under, any term of
any Contract relating to the Seller Intellectual Property, and, to the Knowledge
of the Seller, no other party to any such Contract is in breach thereof or
default thereunder. Without limiting any other provisions hereof, the Seller has
not granted any license, franchise or permit to any Person to use any of the
Seller Intellectual Property and no other Person (including, without limitation,
the Seller) has the right to use the same Trademarks used by the Seller or any
similar Trademarks likely to lead to confusion. Since January 1, 1994, the
Seller has not conducted the Business under any corporate, trade or fictitious
name.
3.20. Licenses. The Seller holds all Licenses that are material or
necessary for the operation of the Business as currently operated, all of which
Licenses are set forth on Section 2.01(j) of the Disclosure Schedule. All of
such Licenses are in full force and effect in all material respects, the Seller
is in compliance in all material respects with the terms of such Licenses, and
no Action is pending nor, to the Knowledge of the Seller, is threatened to
revoke or terminate any License or declare any License invalid in any material
respect. Except as disclosed on the Disclosure Schedule, none of the Licenses
expires prior to December 31, 2004. The Seller has taken all necessary action to
maintain such Licenses in full force and effect.
3.21. No Illegal or Improper Transactions. Neither the Seller, the Owners,
nor, to the Knowledge of the Seller, any director, officer or employee of the
Seller has, directly or indirectly, used funds or other assets of the Seller, or
made any promise or undertaking in such regards, for (i) illegal contributions,
gifts, entertainment or other expenses relating to political activity, (ii)
illegal payments to or for the benefit of governmental officials or employees,
whether domestic or foreign, (iii) illegal payments to or for the benefit of any
Person, or any director, officer, employee, agent or representative thereof, or
(iv) the establishment or maintenance of a secret or unrecorded fund, and there
have been no false or fictitious entries made in the books or records of the
Seller. Neither the Seller, the Owners, nor, to the Knowledge of the Seller, any
director, officer or employee of the Seller has, directly or indirectly,
received payments in violation of any Law applicable to the Seller.
3.22. Transactions with Affiliates. No Owner, no officer or director of the
Seller, and no person with whom any such officer or director has any direct or
indirect relation by blood, marriage or adoption, and no entity in which any
such Person owns any beneficial interest (other than a publicly held corporation
whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 5% of the stock of which is beneficially
owned by all such Persons in the aggregate) and no Affiliate of any of the
foregoing or any current or former Affiliate of the Seller or Owners has any
interest in: (a) any Contract relating to the Business, the Assets or the
Assumed Liabilities; or (b) any property (real, personal or mixed), tangible or
intangible, used or currently intended to be used by the Seller. There are no
accounts receivable, notes receivable, loans or other receivables or accounts
payable or owed to or due from any Owner or any Affiliate of the Seller or of
the Owners to the Seller.
3.23. Regulatory Compliance.
(a) The Seller is in compliance in all material respects, to the extent
applicable, with all (i) rules and regulations of the Medicare and Medicaid
programs, including any guidance interpreting such rules and regulations; (ii)
federal laws, rules, regulations and applicable guidance relating to health care
fraud and abuse, including, without limitation: (A) the Anti-Kickback Law, 42
U.S.C. ss.1320a-7b, 42 C.F.R. ss.1001.952, (B) the federal false coding statute,
42 U.S.C. ss.1320a-7a, (C) the federal physician self-referral prohibition, 42
U.S.C. ss.1395nn, 42 C.F.R. ss.411.351 et seq., and (D) the false claims act, 31
U.S.C. ss.3729 et seq.; (iii) state laws relating to health care fraud and
abuse; (iv) state laws relating to Medicaid or any other state health care or
health insurance programs; (v) federal or state laws relating to billing or
claims for reimbursement submitted to any third party payor; and (vi) other
federal or state laws relating to fraudulent, abusive or unlawful practices
connected in any way with the provision of health care items or services, or the
billing for or claims for reimbursement for such items or services provided to a
beneficiary of any state, federal or other governmental health care or health
insurance program or any private payor.
(b) Since January 1, 2001, neither the Seller nor the Owners nor, to the
Knowledge of the Seller, any director, officer, employee or agent, of the
Seller, with respect to actions taken on behalf of the Seller, (i) has been
assessed a civil money penalty under Section 1128A of the Social Security Act or
any regulations promulgated thereunder, (ii) has been excluded from
participation in any federal health care program or state health care program
(as such terms are defined by the Social Security Act), (iii) has been convicted
of any criminal offense relating to the delivery of any item or service under a
federal health care program relating to the unlawful manufacture, distribution,
prescription, or dispensing of a prescription drug or a controlled substance or
(iv) is a party to or subject to any action or proceeding concerning any of the
matters described above in clauses (i) through (iii).
(c) The Seller is in compliance in all material respects, to the extent
applicable, with the terms and provisions of all Laws relating to patient or
individual healthcare information, including, without limitation, the Health
Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191, as
amended, and any rules or regulations promulgated thereunder (collectively, the
"Healthcare Information Laws"). The Seller has (i) undertaken all necessary
surveys, audits, inventories, reviews, analyses, or assessments (including any
necessary risk assessments) on all areas required for material compliance under
all Healthcare Information Laws, (ii) developed a plan and time line for coming
into material compliance with all Healthcare Information Laws (the "Compliance
Plan") and (iii) implemented those provisions of the Compliance Plan to ensure
that the Seller is and will remain in material compliance with all Healthcare
Information Laws.
3.24. Investments. The Seller does not own or control (directly or
indirectly), or own or hold any right to acquire, any stock, partnership
interest, joint venture interest, equity participation or other security or
interest in any other entity, corporation, partnership, trust or any other
business association.
3.25. Conversion. The Seller converted its organizational form from The
Inteq Group, Inc., a Texas corporation ("Inteq"), to a Delaware registered
limited liability partnership pursuant to and in accordance with the provisions
of Article 5.17 of the Texas Business Corporation Act and Sections 901 and 1001
of the Delaware Revised Uniform Partnership Act effective as of March 26, 2004
(the "Conversion"). Following the Conversion, all of the assets and properties
owned by Inteq immediately prior to the Conversion remain fully and indefeasibly
vested in the Seller in its new organizational form and, as of the date hereof,
are the sole and exclusive property of the Seller, without reversion or
impairment and subject to no liens other than Permitted Liens, and Seller
continues to own all right, title and interest in and to the Assets to the same
extent and in the same manner as did Inteq prior to the Conversion. The
Conversion was duly authorized by all necessary corporate action or partnership
action, as the case may be, and such Conversion did not require the
authorization, consent, or approval of, notice to, or registration or filing
with, any third party except such as were obtained, given or effected prior to
such Conversion; such Conversion did not (i) conflict with, or result in any
violation of or default under, any provision of the organizational documents of
Inteq or the Seller; (ii) conflict with, or result in any violation of or
default or loss of any benefit under, any Assumed Contract or License, or any
Law or Governmental Order to which either Inteq or the Seller is a party or to
which any of its property is or was subject; (iii) accelerate the performance
required by any Assumed Contract, or constitute a default or loss of any right
thereunder or an event which, with the lapse of time or notice or both, will
result in a default or loss of any right thereunder or the creation of any Lien
upon any of the Assets; (iv) result in any suspension, revocation, impairment,
forfeiture or non-renewal of any License or (v) result in the Seller being
required to pay any material amount or refund to any customer or licensee of the
Seller in respect of amounts received by the Seller in advance of the
performance of services. The Conversion will not have any adverse effect of any
kind on the Purchaser's rights or benefits under this Agreement or its
ownership, use and enjoyment of the Assets after the date hereof.
3.26. Disclosure. None of the representations and warranties of the Seller
or Owners herein or in any Ancillary Agreement or in any certificate or document
delivered in connection herewith or therewith contains any untrue statement of
material fact or omits to state a material fact necessary to make such
representation or warranty not misleading in light of the circumstances in which
it was made.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF NMHC AND THE PURCHASER
NMHC and the Purchaser jointly and severally represent and warrant to the
Seller and the Owners that the statements contained in this Article IV are
correct and complete as of the date of this Agreement and, if the Closing Date
is different from such date, will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Article IV).
4.01. NMHC Organization, Etc. NMHC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. NMHC is
duly qualified or licensed to do business, and is in good standing, as a foreign
corporation in each jurisdiction where the character of its business or the
nature of its properties makes such qualification or licensing necessary. NMHC
has full corporate power and authority to conduct its business as it is now
being conducted and to own, operate or lease the properties and assets it
currently owns, operates or holds under lease. NMHC has heretofore delivered to
the Seller true and correct copies of its certificate of incorporation and
bylaws as in effect on the date hereof. NMHC has all requisite corporate power
and authority to enter into this Agreement and each of the Ancillary Agreements
to which it is a party, to carry out its obligations under this Agreement and
each of the Ancillary Agreements to which it is a party, and to consummate the
transactions contemplated hereby and thereby.
4.02. Purchaser Organization, Etc. The Purchaser is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Texas. Purchaser is duly qualified or licensed to do business, and is
in good standing, as a foreign limited partnership in each jurisdiction where
the character of its business or the nature of its properties makes such
qualification or licensing necessary. The Purchaser has heretofore made
available to the Seller true and correct copies of its organizational documents
as in effect on the date hereof. The Purchaser has all requisite power and
authority to enter into this Agreement and each of the Ancillary Agreements to
which it is a party, to carry out its obligations under this Agreement and each
of the Ancillary Agreements to which it is a party, and to consummate the
transactions contemplated hereby and thereby.
4.03. Authorization. The execution and delivery by NMHC and the Purchaser
of this Agreement and the Ancillary Agreements to which they are a party, the
performance by NMHC and Purchaser of their obligations hereunder and thereunder
and the consummation by NMHC and the Purchaser of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of NMHC and the Purchaser. This Agreement has been, and each
Ancillary Agreement to which NMHC and the Purchaser is a party will be, duly
executed and delivered by NMHC and the Purchaser, and (assuming due
authorization, execution, and delivery by the Seller and the Owners parties
thereto) this Agreement is, and each Ancillary Agreement, when duly executed and
delivered, will be a legal, valid and binding obligation of NMHC and the
Purchaser, enforceable against NMHC and the Purchaser in accordance with its
terms (except as the enforceability thereof may be limited by any applicable
bankruptcy, insolvency or other Laws affecting creditors' rights generally or by
general principles of equity, regardless of whether such enforceability is
considered in equity or at law).
4.04. No Violation. The execution, delivery and performance of this
Agreement and the Ancillary Agreements do not and will not (i) violate or
conflict with the certificate of incorporation or bylaws of NMHC or the
organizational documents of the Purchaser or any Subsidiary of NMHC or the
Purchaser, (ii) conflict with or violate any Law or Governmental Order
applicable to NMHC and the Purchaser or any Subsidiary of NMHC or the Purchaser,
or (iii) result in any breach of, or constitute a default (or event that with
the giving of notice or lapse of time, or both, would become a default) under,
or give to any Person any rights of termination, amendment, acceleration or
cancellation of, or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under, or result in
the creation of any Lien on any of the assets or properties of NMHC or the
Purchaser or any Subsidiary of NMHC or the Purchaser pursuant to, any Contract,
License or other instrument to which NMHC and the Purchaser or any Subsidiary of
NMHC or Purchaser is a party or by which any of the assets or properties of NMHC
or the Purchaser or any Subsidiary of NMHC or the Purchaser are bound or
affected.
4.05. Approvals. The execution and delivery of this Agreement and the
Ancillary Agreements by NMHC and the Purchaser do not, and the performance of
this Agreement and the Ancillary Agreements by NMHC and the Purchaser will not,
require any consent, approval, authorization or other action by, or filing with
or notification to, any Governmental Authority or other Person under any Law or
Contract, other than such filings or registrations with, or authorizations,
consents or approvals of Governmental Authorities necessary for the Purchaser to
conduct the Business after Closing.
4.06. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchaser or NMHC or their respective Affiliates.
4.07. Financial Statements and Other Information. NMHC has filed with the
Securities Exchange Commission ("SEC") all required periodic reports under the
Exchange Act since January 1, 2002 (the "SEC Documents"). The financial
statements of NMHC included in the SEC Documents (the "NMHC Financial
Statements") comply as to form in all material respects with the applicable
accounting requirements and the published rules and regulations of the SEC, and
have been prepared in accordance with GAAP (except in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) consistently applied (except
as may be indicated in the notes thereto) throughout the periods covered
thereby, and the balance sheets included therein present fairly as of their
respective dates the consolidated financial position of NMHC and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end adjustments). As of the date
thereof, each SEC Document was in compliance, in all material respects, with the
requirements of its form and contained no untrue statement of a material fact
and did not omit any statement of a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. NMHC's common stock is listed for trading
on The Nasdaq National Market and NMHC is in compliance in all material respects
with the rules of The Nasdaq Stock Market, Inc.
4.08. No Purchaser Material Adverse Change. Since September 30, 2003, there
has been no Purchaser Material Adverse Change.
4.09. Compliance with Laws. NMHC has conducted its business in compliance
in all material respects with all Laws and Governmental Orders applicable to
NMHC, except for any non-compliance which could not reasonably be expected to
cause a Purchaser Material Adverse Change.
4.10. Source of Funds. NMHC has available sufficient on-hand cash and/or
availability under its existing line of credit with NMHC's senior secured lender
to fund the Purchase Price.
ARTICLE V.
COVENANTS
5.01. General. Each of the parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement.
5.02. Non-Competition; Non-Solicitation.
(a) The Seller and each of the Owners (individually, a "Seller Party" and,
collectively, the "Seller Parties") acknowledge and agree that all Confidential
Information regarding the Seller, the Business or the PBM Services that such
Seller Party may have heretofore acquired or may hereafter acquire, including
all technical, marketing, financial results and other forecasts, plans, results,
designs, ideas, developments, price lists, existing and potential customer and
vendor sources and lists (including without limitation the names and contact
information for key personnel within a customer or vendor organization),
existing and potential supplier sources and lists, names, titles, duties and
compensation information with respect to officers, directors and employees, as
well as sales representatives and agents, promotional materials and other data
and information ("Business Information"), whether in tangible or intangible form
constitutes the exclusive property of the Seller. Each Seller Party further
acknowledges that (i) the Seller derives actual and potential economic value
from the Business Information not being generally known to the public or to
other persons who can obtain economic value from its disclosure or use, and (ii)
the Seller has expended and is currently expending substantial effort to acquire
Business Information, and expends substantial effort, and expects its executives
to expend substantial effort to maintain the secrecy of the Business
Information. Each Seller Party agrees and covenants that from and after the date
hereof, such Seller Party will safeguard the Business Information from exposure
to, or appropriation by, unauthorized persons, and that such Seller Party will
not, directly or indirectly, without the prior written consent of the Purchaser,
at any time divulge or make any use of the Business Information except in
connection with the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements and except for required disclosure
pursuant to applicable Law or Governmental Order; provided, however, that
Business Information shall not include information that (i) is known generally
by the public, (ii) shall otherwise have come into the public domain without a
breach by such Seller Party of any contractual or legal duty owed to the Seller
or the Purchaser, or (iii) is subsequently rightly received by such Seller Party
from a third party not in breach of any confidentiality or other legal
obligation owed to the Seller, the Purchaser or any other Person. At any time
from and after the date hereof, upon request of the Purchaser, each Seller Party
covenants to deliver to the Purchaser all information and materials, including
all memoranda, notes, records, reports, manuals, drawings, designs, computer
files in any media and other documents (and all copies thereof), relating to the
Business Information, and the Seller's or Purchaser's customers, that such
Seller Party may then possess or have under his control.
(b) Each Seller Party agrees that for a period of three years from the
Closing Date (the "Restricted Period"), such Seller Party, shall not, directly
or indirectly:
(i) engage or invest in, own, manage, operate, finance, control or
participate in the ownership, management, operation, financing, or control
of, be employed by, associated with, or in any manner connected with, lend
his credit to, or render services or advice to, any business, firm,
corporation, partnership, association, joint venture or other entity that
engages anywhere within the United States in any business that is
competitive with the Business, the PBM Services or any portion of either;
provided, however, that a Seller Party may (i) own less than 2% of the
outstanding shares of any class of securities of any enterprise (but
without otherwise participating in the activities of such enterprise) if
such securities are listed on any national or regional securities exchange
or have been registered under Section 12(g) of the Securities Exchange Act
of 1934, as amended, and (ii) engage in an Unrelated Business.
(ii) either for himself or any other Person, solicit or hire any
officer or employee of the Seller or the Purchaser or any of their
respective Affiliates at any time during the Restricted Period, without the
prior written consent of the Purchaser, such consent not to be unreasonably
withheld or delayed, or knowingly solicit or induce any of such persons to
leave the employ of the Seller or the Purchaser or any of their respective
Affiliates; or
(iii) seek to sell any products or services to any Customer (as
defined below), refer any sales of products or services from any Customer
to any enterprise or business, or be paid or receive commissions or other
consideration based upon or in consideration of sales of any products or
services to any Customer by any enterprise or business. For purposes of
this Section 5, the term "Customer" means any person, firm, corporation,
partnership, association or other entity to which Seller or Purchaser or
any of their respective Affiliates provided goods or services during the
Restricted Period or within 12 months prior to the commencement of the
Restricted Period.
(c) If any Seller Party engages in an Unrelated Business at any time within
the Restricted Period and, during such period, any customer or client of such
Unrelated Business shall require any of the PBM Services, then such Seller Party
shall refer such customer or client exclusively to the Purchaser. If such
customer or client elects to have any Person other than the Purchaser provided
such PBM Services, or any portion thereof, then the Seller Parties agree that
they shall not receive or accept, directly or indirectly, any compensation,
commissions, finder's fees or other consideration of any kind in connection with
or as a result of the referral of such customer or client to such other Person
or the Provision of such PBM Services by such other Person to such customer or
client.
(d) Each Seller Party acknowledges and agrees that the agreements and
covenants contained in this Section 5.02 are essential to protect the Assets
being acquired by NMHC and the Purchaser hereunder, that NMHC and the Purchaser
would not consummate the transactions contemplated hereby but for such
agreements and covenants, and that legally sufficient consideration will be paid
to the Seller Parties for the non-competition provisions of this Section 5.02,
and each of the Seller Parties expressly waives any right to assert inadequacy
of consideration as a defense to enforcement of the non-competition provisions
of this Section 5.02 should such enforcement ever become necessary. Each Seller
Party acknowledges that a remedy at Law for any breach or attempted breach of
this Section 5.02 will be inadequate and further agrees that any breach of this
Section 5.02 will result in irreparable harm to the Assets and the Business; and
each Seller Party covenants and agrees not to oppose any demand for specific
performance and injunctive and other equitable relief in case of any such breach
or attempted breach. Whenever possible, each provision of this Section 5.02
shall be interpreted in such manner as to be effective and valid under
applicable Law but if any provision of this Section 5.02 shall be prohibited by
or invalid under applicable Law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Section 5.02. If any
provision of this Section 5.02 shall, for any reason, be judged by any court of
competent jurisdiction to be invalid or unenforceable, such judgment shall not
affect, impair or invalidate the remainder of this Section 5.02 but shall be
confined in its operation to the provision of this Section 5.02 directly
involved in the controversy in which such judgment shall have been rendered. In
the event that the provisions of this Section 5.02 should ever be deemed to
exceed the time or geographic limitations permitted by applicable Law, then such
provision shall be reformed to the maximum time or geographic limitations
permitted by applicable Law. If a Seller Party violates any provisions of this
Section 5.02, such Seller Party agrees that the effective period of each such
covenant so violated shall be extended by a period of time equal to the period
of such violation by such Seller Party. It is the intent of this Section 5.02
that the running of the effective period of each restrictive covenant shall be
tolled during any period of violation of such covenant so that the Purchaser
shall get the full and reasonable protection for which it contracted and so that
no Seller Party may profit by such Seller Party's breach of any covenant.
5.03. Consents. To the extent not obtained prior to Closing, the Seller,
the Owners, NMHC and the Purchaser, as promptly as practicable, will use their
respective commercially reasonable efforts to obtain, or cause to be obtained,
all authorizations, approvals, consents and waivers from all persons and
Governmental Authorities required by any Law applicable to the Business or any
Assumed Contract, and will use their respective commercially reasonable efforts
to take, or cause to be taken, all other actions necessary, proper or advisable
in order for each of them to fulfill their respective obligations hereunder. The
Seller's obligation to seek consents to the assignment of any Assumed Contract
to the Purchaser shall terminate on the date which is the first anniversary of
the Closing Date. To the extent that any of the Assets are not assignable by the
terms thereof or consents to the assignment thereof cannot be obtained as
provided herein, the Assets shall be held by the Seller as agent for the
Purchaser and shall be performed by the Purchaser in the name of the Seller and
all benefits and obligations derived thereunder shall be for the account of the
Purchaser for a period of one year following the Closing Date; provided,
however, that where entitlement of the Purchaser to such Assets is not
recognized by any third party, the Seller shall, at the request of the
Purchaser, enforce in a reasonable manner, at the cost of and for the account of
the Purchaser, any and all rights of the Seller against such third party for
such one year period. The Seller, the Owners, NMHC and the Purchaser will
coordinate and cooperate with one another in exchanging information and
supplying such reasonable assistance as may be reasonably requested by each in
connection with the foregoing. The parties agree that the failure to obtain a
consent to the assignment of any Assumed Contract to the Purchaser shall not
constitute a breach of this Agreement.
5.04. Intellectual Property. The Seller has no Intellectual Property except
for the trade name and service ▇▇▇▇ "Inteq" and the logos and goodwill
associated therewith (collectively, the "Marks") and the Software (title to
which is being retained solely by the Seller and which is not subject to the
terms of this Section 5.04). All right, title and interest in and to the Marks
are the sole and exclusive property of the Seller and no Owner asserts any right
or claim thereto of any kind or nature. Forthwith upon the request of the
Purchaser and without the payment of any consideration, but at the expense of
the Seller, each Owner shall execute all such assignments and other documents
and take all such other actions as the Purchaser may reasonably request in order
to vest in the Purchaser all his right, title and interest in and to such Marks
free and clear of all liens, claims, charges, and encumbrances, and shall
cooperate with the Purchaser, in connection with the Purchaser (i) seeking
trademark protection, or other analogous protection, regarding the Marks, and
renewing and restoring the same, in the United States or any foreign country, or
(ii) defending any opposition proceedings in respect of obtaining and
maintaining such trademark protection, or other analogous protection.
To the extent that, notwithstanding the foregoing provisions, any Owner may
be deemed to have or retain any interest in any of the Marks, such Owner hereby
irrevocably assigns and transfers to the Purchaser any and all right, title and
interest, that such Owner may have in such Marks, including any rights he may
have under trademark law, in perpetuity or for the longest period otherwise
permitted by law, without the necessity for further consideration, and such
Owner retains no right, title or interest therein of any kind or nature
whatsoever.
5.05. Software License. Concurrently with the execution and delivery of
this Agreement, the Seller, the Purchaser and NMHC are entering into a software
license agreement (the "Software License") under which, inter alia, the Seller
is granting to the Purchaser and NMHC a non-exclusive, irrevocable, perpetual,
worldwide, royalty-free license to use the Software, in object code form, solely
in connection with the operation of their respective businesses. The Purchaser
and NMHC will have no right to sublicense, distribute or otherwise transfer the
Software or to use the Software to provide service bureau or similar services to
third parties but shall have the right to modify the source code (a copy of
which will be provided to the Purchaser upon request) solely for its own
internal business purposes. The Purchaser shall not acquire any interest in the
Software hereunder except as set forth in the Software License, and all patent,
copyright, trade secret and other tangible and intangible rights relating to the
Software shall remain vested in the Seller. The Seller makes no representations
or warranties regarding the use or capabilities of the Software and has no
obligation to support the Software.
5.06. Public Announcements. Unless and to the extent required by Law, each
party hereto will agree in advance prior to the issuance by any of them of any
press release or the making of any public statement with respect to this
Agreement and the transactions contemplated hereby and shall not issue any such
press release or make any such public statement without the agreement of the
other parties. In the event that any party is required to issue a press release
or make a public statement by Law, it or he will use its or his reasonable
efforts to notify the other parties of the contents thereof in advance of the
issuance or making thereof. Notwithstanding the foregoing, following the
Closing, NMHC and the Purchaser shall be permitted to issue public announcements
relating to this Agreement and the transactions contemplated hereby and shall be
permitted to file this Agreement and the Ancillary Agreements with the
Securities and Exchange Commission.
5.07. Confidentiality Obligations of the Parties. From and after the
Closing Date, each of the Owners and the Seller will, and will cause its
Affiliates to, treat and hold as confidential, and not disclose any of the
Confidential Information of the Seller or the Business to any Person. In the
event that the Seller, the Owners or their Affiliates are requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand or similar
process or as otherwise required by law) to disclose any Confidential
Information of the Seller or the Business, the Seller will notify NMHC and the
Purchaser promptly of the request or requirement so that NMHC and the Purchaser
may seek an appropriate protective order or waive compliance with the provisions
of this Section 5.07. If, in the absence of a protective order or the receipt of
a waiver hereunder, the Seller, the Owners or their Affiliates are, on the
advice of counsel, compelled to disclose any Confidential Information of the
Seller or the Business to any tribunal or else stand liable for contempt, they
may disclose such Confidential Information of the Seller or the Business to the
tribunal; provided, however, that the Seller shall use its commercially
reasonable efforts to obtain, at the request of NMHC and the Purchaser, an order
or other assurance that confidential treatment will be accorded to such portion
of the Confidential Information of the Seller or the Business required to be
disclosed as NMHC and the Purchaser shall designate. The foregoing provisions
shall not apply to any Confidential Information of the Seller or the Business
that is generally available to the public immediately prior to the time of
disclosure.
5.08. Discharge of Liabilities. Following the Closing Date, the Purchaser
agrees to discharge in accordance with their terms the Assumed Liabilities and
the Seller and Owners, jointly and severally, agree to discharge in accordance
with their terms all Excluded Liabilities. Within ten (10) business days after
the Closing Date, the Seller shall furnish the Purchaser with written evidence,
reasonably satisfactory to the Purchaser, of the Seller's discharge of (A) the
indebtedness of approximately $18,000 currently owing to Express Scripts, Inc.
for overpayments made by Express Scripts, Inc. to the Seller, and (B) the
Excluded Liabilities described in Section 2.04 (n) ("Customer Liabilities") that
are owing to those customers of the Business identified in Section 2.01(i) of
the Disclosure Schedule as either (i) having a currently effective written
contract with the Seller or (ii) having an oral contract with the Seller and
having conducted business with the Seller within the 12 month period immediately
preceding the Closing ("Current Customers") (the obligations referred to in
clauses (A) and (B) above being referred to collectively as the "Refund
Amounts"). If the Seller fails to present such written evidence with respect to
any of the Refund Amounts within such ten business day period, the Purchaser
may, at its option, pay some or all of such Refund Amounts to the appropriate
party and either recoup all of its costs and expenses in connection therewith
from any monies then being held in escrow under the Escrow Agreement, or deliver
to the Seller and Owners a written demand for payment of such costs and
expenses, in which case, the Seller and the Owners shall, immediately upon
receipt of such written demand, pay the full amount of such costs and expenses
to the Purchaser.
5.09. Employee Matters.
(a) Seller will file (with the federal government and the state, where
appropriate) all relevant W-2 forms for each employee of the Seller reporting
the wages paid by the Seller to any such employee.
(b) The Purchaser shall have no obligation to employ, and is not employing,
any of Seller's employees from and after the Closing Date. In connection with
the acquisition of the Assets hereunder, the Purchaser has developed a severance
plan, which is being implemented pursuant to a Transitional Services Agreement
(the "Transitional Services Agreement") being entered into between the Seller
and the Purchaser on the date hereof, under which agreement the Seller shall
continue to employ the Business Employees and provide the services thereof to
the Purchaser, and the Purchaser shall reimburse the Seller for the related
payroll costs of such Business Employees, all upon the terms and conditions of
the Transitional Services Agreement. Notwithstanding the foregoing, upon
termination of the Transitional Services Agreement, the Purchaser may, but shall
not be obligated to, offer employment to any employees of the Seller, in its
sole discretion and upon such terms and conditions as it may deem appropriate.
(c) The Purchaser does not and will not assume the sponsorship of, the
responsibility for contributions to, or any liability in connection with, any
Employee Plan. Without limiting the foregoing, the Seller shall be liable for
any continuation coverage (including any penalties, excise taxes or interest
resulting from the failure to provide continuation coverage) with respect to any
Business Employee (or covered dependent of such Business Employee) required by
Section 4980B of the Code due to qualifying events that occur before, on or
after the Closing Date, and the Purchaser will in no event be deemed to be a
successor employer (within the meaning of Treasury Regulation ss.54.4980B-2) of
the Seller for purposes of applying the provisions of Section 4980B of the Code.
(d) No provision of this Agreement shall create any third party beneficiary
or other rights in any employee or former employee (including any beneficiary or
dependent thereof) of the Seller in respect of employment with the Purchaser or
in respect of any benefits that may be provided, directly or indirectly, under
any employee benefit plan, agreement, policy or arrangement that may be
established by the Purchaser. No provision of this Agreement shall constitute a
limitation on rights to amend, modify or terminate after the Closing Date any
such plans, agreements, policies or arrangements of the Purchaser.
5.10. Maintenance of Books and Records; Right of Access. Each of the
Seller, the Owners, NMHC and the Purchaser shall preserve until the seventh
anniversary of the Closing Date all records possessed or to be possessed by such
party relating to the Business or any of the Assets prior to the Closing Date.
After the Closing Date, where there is a legitimate purpose, such party shall
provide the other party with access, upon prior reasonable written request
specifying the need therefor, during regular business hours, to (i) the officers
and employees of such party or the former officers and directors of such party
and (ii) the books of account and records of such party, but, in each case, only
to the extent relating to the Assets or the conduct of the Business prior to the
Closing Date, and the other party and its representatives shall have the right
to make copies of such books and records; provided, however, that the foregoing
right of access shall not be exercisable in such a manner as to interfere
unreasonably with the normal operations and business of such party; and provided
further that, as to so much of such information as constitutes Confidential
Information of such party, the requesting party and its officers, directors and
representatives will use due care to not disclose such information except (i) as
required by Law; (ii) with the prior written consent of such party, which
consent shall not be unreasonably withheld; or (iii) where such information
becomes available to the public generally, or becomes generally known to
competitors of such party, through sources other than the requesting party, its
Affiliates or its officers, directors or representatives. Such records may
nevertheless be destroyed by a party if such party sends to the other party
written notice of its intent to destroy records, specifying with particularity
the contents of the records to be destroyed. Such records may then be destroyed
after the 30th day after such notice is given unless another party objects to
the destruction in which case the party seeking to destroy the records shall
deliver such records to the objecting party. Notwithstanding the foregoing, the
Seller reserves the right to dissolve its corporate existence at any time
following the Closing.
5.11. NMHC Guarantee. NMHC hereby unconditionally guarantees the full and
timely performance of each and all of the obligations of the Purchaser owed to
the Seller under this Agreement as though each such obligation were the joint
and several obligation of Purchaser and NMHC and the Seller may enforce this
obligation directly against NMHC without having to pursue or exhaust any remedy
against Purchaser.
5.12. [Reserved.]
5.13. Audit. On or before the Closing Date, the Seller has caused to be
completed an audit of the financial statements of Seller for the fiscal year
ended December 31, 2003, by the Audit Firm. The Audit Firm shall also review the
Closing Adjustment Documents as contemplated by and in accordance with the
provisions of Section 2.09.
5.14. Collection of Accounts Receivable.
(a) The Purchaser shall use its normal collection methods in attempting to
collect the Accounts Receivable acquired by the Purchaser at Closing. At or as
soon as reasonably practicable following Closing, the Seller shall provide to
the Purchaser an Accounts Receivable aging schedule as of March 31, 2004.
Thereafter, the Purchaser's personnel (which may include leased employees under
the Transitional Services Agreement) shall be responsible for maintaining
records relating to the Accounts Receivable collected, including recording cash
receipts, offsets and adjustments in accordance with the procedures set forth in
Section 3.06(d) of the Disclosure Schedule.
(b) On or after the six month anniversary of the Closing Date, the
Purchaser shall have no further obligations with respect to collection efforts
related to the Accounts Receivable and, upon notice to the Seller, the Purchaser
may withdraw from the Cash Escrow an amount equal to the balance of any
remaining uncollected Accounts Receivable ("Uncollected Accounts") net of any
reserve for Accounts Receivable reflected on the Closing Balance Sheet;
provided, however, (i) if after such period, the Purchaser receives a payment
that by its terms has been tendered in payment of an Uncollected Account,
Purchaser shall promptly forward such payment pursuant to instructions provided
by the Seller at the end of such six month period, and (ii) if the Cash Escrow
then held in escrow is insufficient to enable the Purchaser to recover the full
amount owing to it under this Section 5.14(b), the Seller and Owners shall pay
such shortfall to the Purchaser within five business days after receipt of
written demand for such payment. Upon receipt by the Purchaser of payment in
full of all amounts owing to it under this Section 5.14(b), the Purchaser shall
assign to Seller all Uncollected Accounts. Any portion of an Account Receivable
that is not collected by the Purchaser by reason of any contra, offset or
similar claim of an account debtor that relates to a liability or obligation of
the Seller, shall be deemed an Uncollected Account for all purposes of this
Agreement.
(c) The Seller hereby authorizes and grants the Purchaser a limited power
of attorney solely to collect, receive, endorse and deposit checks received by
the Purchaser in payment of the Accounts Receivable, in accordance with the
provisions of this Section 5.14.
5.15. Consulting Services. During the 12 month period immediately following
the Closing (the "Consulting Period"), the Seller and the Owners, jointly and
severally, covenant to provide the services of each of ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, and G. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ (the "Consultants") to perform the following
consulting services in connection with the transition of the Business from the
Seller to the Purchaser (collectively, the "Services").
(a) Each Consultant shall perform, throughout the Consulting Period,
substantially the same job functions and have substantially the same job
responsibilities as he has with respect to his current employment with the
Seller as of the Closing Date, taking into account that he will not be an
officer of the Purchaser and that he will be subject to the supervision of the
management and board of directors of the Purchaser. In consideration of his
consulting services under this Section 5.15, each Consultant shall be paid a
consulting fee equal to $30,000 (the "Consulting Fee"), payable in equal monthly
installments, in arrears, commencing thirty (30) days after the Closing Date.
(b) During the initial six (6) months of the Consulting Period, at the
request of the Purchaser each Consultant shall make himself available to the
Purchaser on substantially a full time basis to perform the Services.
Consultants shall be entitled to take such vacation during the initial six (6)
months of the Consulting Period as may be mutually agreed by such Consultant and
the Purchaser provided that the Consultant shall be entitled to a minimum of two
weeks vacation during such period. During the last six (6) months of the
Consulting Period, each Consultant shall make himself available to perform the
Services on an "as needed" basis at the reasonable request of the Purchaser. A
request by the Purchaser for Services from any Consultant during the last six
(6) months of the Consulting Period shall take priority over any other matters
engaged in by any Consultant during that time period, provided that such
Consultant is given reasonable notice regarding the time and place where the
requested Services are to be performed.
(c) During the initial six (6) months of the Consulting Period, no
Consultant shall engage, directly or indirectly, in any other business,
investment or activity that, in the commercially reasonable judgment of the
Purchaser, interferes with such Consultant's performance of the Services in any
material respect.
(d) At all times during the Consulting Period, the Purchaser shall retain
ownership and control of, and operational responsibility with respect to, all of
its properties and assets, both tangible and intangible. At no time shall any
Consultant hold himself out as an officer or employee of the Purchaser. No
Consultant shall offer or agree to incur or assume any obligations or
commitments in the name of or for the Purchaser.
(e) The Purchaser shall reimburse Consultants for all reasonable
out-of-pocket expenses incurred by Consultants in their performance of the
Services. On or before the final day of each calendar month during the
Consulting Period, each Consultant shall submit to the Purchaser a monthly
statement setting forth reimbursable expenses incurred during that calendar
month, which statement shall include all records, receipts or other evidence in
substantiation of such Consultant's reimbursable expense statement as may be
requested by the Purchaser. The Purchaser shall reimburse Consultants for
reimbursable expenses within thirty (30) days of the Purchaser's receipt of such
statement (the "Expense Reimbursement"). Expenses in excess of Two Hundred and
Fifty Dollars ($250) incurred by Consultants must be pre-approved by individuals
designated by Purchaser for that purpose. Any items, or payments for items, that
Consultant may also use for personal reasons (automobile leases or payments,
mobile telephones, computers, etc.) will not be reimbursed by the Purchaser.
During the last six (6) months of the Consulting Period, the Purchaser shall
reimburse all reasonable travel expenses incurred by the Consultants or ▇▇▇▇▇
(defined below) in connection with the provision of the Services.
(f) Each Consultant agrees that (i) the payment by the Purchaser of the
Consulting Fee constitutes his complete compensation for the Services and (ii)
unless otherwise agreed in writing, Consultant will not seek or be entitled to
any compensation, commissions, finder's fees or other sums relating to any
action which the Purchaser or its affiliates may take as a result of the
Services provided by Consultant.
(g) Should any Consultant fail to perform his obligations hereunder in any
material respect, the Purchaser shall notify such Consultant in writing of such
failure. Such notice shall contain reasonable details regarding the failure
alleged. If Consultant does not remedy such failure within ten (10) Business
Days following the date of such notice, the Purchaser may (i) discharge such
Consultant by written notice, in which case, such termination shall not waive,
limit, or otherwise affect the Purchaser's remedies or actions against the
Consultant, the Owners or the Seller, including but not limited to the right of
indemnity and set off provided in this Agreement, or (ii) retain Consultant
under the terms hereof, in which case Consultant shall be required to continue
to perform the Services, but Purchaser may pursue any other remedies or action
against Consultant, Owners or Seller including but not limited to the right of
indemnity and set off provided in this Agreement and, in either of the foregoing
cases, the Consultant shall forfeit any unpaid portion of the Consulting Fee
otherwise payable hereunder.
(h) Any work product resulting from Consultants' performance of the
Services (the "Work Product") shall become the exclusive property of the
Purchaser, and no Consultant shall use any of the Work Product for any Person
(other than the Purchaser or any of its affiliates or representatives). Upon
termination of the Consulting Period, the Purchaser, upon reasonable request,
shall be provided with all copies of any written material which (a) contains any
Work Product or (b) Consultant has prepared or obtained as a result of or in
connection with performing the Services. If any of the Work Product may not, by
operation of law, be considered work made for hire by Consultant for the
Purchaser (or if ownership of all right, title and interest of the intellectual
property rights therein shall not otherwise vest exclusively in the Purchaser),
each Consultant agrees to assign, and upon creation thereof automatically
assigns, without further consideration, the ownership of all Intellectual
Property therein to the Purchaser, its successors and assigns. The Purchaser and
its successors and assigns shall have the right to obtain and hold in its or
their own name copyrights, registrations, patents, and any other protection
available in the foregoing. Each Consultant agrees to perform, upon the
reasonable request of the Purchaser during or after Consultants' provision of
the Services, such further acts as may be necessary or desirable to transfer,
perfect and defend the Purchaser's ownership of the Work Product. When
requested, each Consultant shall: (i) execute, acknowledge and deliver any
requested affidavits and documents of assignment and conveyance; (ii) obtain and
aid in the enforcement of copyrights (and, if applicable, patents) with respect
to the Work Product in any countries; (iii) provide testimony in connection with
any proceeding affecting the right, title or interest of Purchaser in any Work
Product; and (iv) perform any other acts deemed necessary or desirable to carry
out the purposes of this Agreement.
(i) No Consultant is or shall be entitled to any benefits whatsoever under
any employee benefit plan, policy or program of the Purchaser or any of its
affiliates which the Purchaser or affiliate otherwise makes available to
individuals who are classified by the Purchaser or such affiliate as employees
of the Purchaser or such affiliate (the "Benefit Plans"). Each Consultant
expressly and irrevocably waives any rights which he might have to receive any
benefits whatsoever under the Benefit Plans in the event he is characterized by
the Internal Revenue Service as an employee instead of an independent
contractor.
(j) Consultants agree that the Services rendered by them hereunder are
designed to convey to the Purchaser the good will of the Business and that the
Purchaser would not enter into this Agreement in the absence of their agreement
to render the Services as provided herein.
(k) In connection with the transition of the Business from the Seller to
the Purchaser, the Seller and the Owners shall cause ▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇") to
perform, at the sole cost and expense of the Seller, substantially the same job
functions and have substantially the same job responsibilities as he has with
respect to his current employment with the Seller as of the Closing Date upon
such terms and conditions as the Seller, the Owners and ▇▇▇▇▇ may mutually agree
in their sole discretion. The parties agree that the Purchaser shall have no
liability whatsoever for any compensation or benefits owing to ▇▇▇▇▇ in respect
of the consulting services provided by ▇▇▇▇▇ hereunder, all of which
compensation and benefits are to be paid by the Seller.
ARTICLE VI.
INDEMNIFICATION
6.01. Indemnification by NMHC and the Purchaser.
(a) Subject to Section 6.04 in the case of subclause (i) below, NMHC and
the Purchaser shall, jointly and severally, indemnify, defend and hold harmless
the Seller, its Affiliates and its employees, officers, directors and
shareholders (collectively, the "Seller Indemnified Parties") against, and
reimburse any Seller Indemnified Party for, any and all losses, damages, costs,
expenses, liabilities, assessments, obligations and claims of any kind
(including in respect of any Action brought by any Governmental Authority or any
other Person or any action between or among any of the parties hereto) including
reasonable attorneys' and consultants' fees and expenses and other legal costs
and expenses reasonably incurred in prosecution, investigation, remediation,
defense or settlement (whether incurred at the trial or appellate levels),
(collectively, "Losses"), that such Seller Indemnified Party may at any time
suffer or incur, or become subject to, as a result of or in connection with:
(i) the inaccuracy of any representations and warranties made by the
Purchaser or NMHC in this Agreement;
(ii) any failure by the Purchaser or NMHC to perform any of their
respective covenants or agreements under this Agreement or any of the
Ancillary Agreements;
(iii) any Assumed Liability; and
(iv) the ownership or use of the Assets or conduct of the Business as
of and following the time of the Closing except those arising out of an act
or omission of the Seller or Owners for which any Purchaser Indemnified
Party is entitled to indemnification (without regard to any threshold or
limitation) under this Agreement;
provided, however, that notwithstanding the foregoing, in no event may the
Seller or the Owners recover punitive damages from NMHC or the Purchaser in any
action between or among the parties.
(b) Notwithstanding any other provision in this Agreement to the contrary,
neither NMHC nor Purchaser shall be required to indemnify, defend or hold
harmless any Seller Indemnified Party against or reimburse any Seller
Indemnified Party for any Losses pursuant to Section 6.01(a)(i) unless:
(i) such Seller Indemnified Party has notified NMHC and Purchaser in
writing in accordance with Section 6.03(a) of a claim with respect to such
matters within the applicable survival period set forth in Section 6.04;
(ii) the aggregate Losses resulting from, arising out of, relating to
or in the nature of or caused by breaches of any representation or warranty
of NMHC or Purchaser exceeds $250,000 (calculated without regard to any
materiality qualifier contained in such representation or warranty), at
which point NMHC and the Purchaser will be obligated to indemnify the
Seller Indemnified Party from and against all Losses in excess of such
threshold; and
(iii) the maximum aggregate liability of the Purchaser and NMHC under
Section 6.01(a)(i) shall not exceed an amount that is equal to the Maximum
Liability Amount.
6.02. Indemnification by the Seller and the Owners.
(a) Subject to Section 6.04 hereof in the case of subclause (i) below, the
Seller and each of the Owners, jointly and severally, shall indemnify, defend
and hold harmless NMHC and the Purchaser, their Affiliates and their respective
employees, officers, directors and stockholders (collectively, the "Purchaser
Indemnified Parties") against, and reimburse any Purchaser Indemnified Party
for, any and all Losses (as defined in Section 6.01(a) above) that such
Purchaser Indemnified Party may at any time suffer or incur, or become subject
to, as a result of or in connection with:
(i) the inaccuracy of any representations and warranties made by the
Seller or the Owners in this Agreement;
(ii) any failure by the Seller or the Owners to perform any of their
respective covenants or agreements under this Agreement or any of the
Ancillary Agreements (other than the failure, despite the parties'
commercially reasonable efforts pursuant to Section 5.03, to obtain any
consent required in connection with the assignment to the Purchaser of any
Assumed Contract);
(iii) any Excluded Liability; and
(iv) the ownership or use of the Assets or conduct of the business
prior to the Closing;
provided, however, that notwithstanding the foregoing, in no event may NMHC
or the Purchaser recover punitive damages from the Seller or the Owners in any
action between or among the parties.
(b) Notwithstanding any other provision in this Agreement to the contrary,
the Seller and the Owners shall not be required to indemnify, defend or hold
harmless any Purchaser Indemnified Party against or reimburse any Purchaser
Indemnified Party for any Losses pursuant to Section 6.02(a)(i) unless:
(i) such Purchaser Indemnified Party has notified the Seller and the
Owners in writing in accordance with Section 6.03(a) of a claim with
respect to such matters within the applicable survival period set forth in
Section 6.04;
(ii) the aggregate Losses resulting from, arising out of, relating to
or in the nature of or caused by breaches of any representation or warranty
of the Seller or any Owner exceeds $250,000 (calculated without regard to
any materiality qualifier contained in such representation or warranty)
(the "Basket Amount"), at which point the Seller and the Owners will be
obligated to indemnify the Purchaser Indemnified Party from and against all
Losses in excess of the Basket Amount; provided that the Basket Amount
shall not apply to or limit (X) the Purchaser's right to recover any amount
owing under Section 5.14(b) hereof, or (Y) a Purchaser Indemnified Party's
right to recover any Losses resulting from a breach of Sections 3.03,
3.06(d), 3.08, 3.12(a), 3.13, 3.21, 3.22 or 3.25; provided further,
however, that, in the case of Section 3.12(a), unless and until the
aggregate amount of all Losses incurred by all Purchaser Indemnified
Parties by reason of all breaches of Section 3.12(a) equals or exceeds
$25,000, such Losses shall be subject to the Basket Amount but, if the
aggregate of all Losses incurred by the all Purchaser Indemnified Parties
by reason of all breaches of Section 3.12(a) exceeds $25,000, then all of
such Losses shall be excluded from the Basket Amount and all of such Losses
shall be recoverable by the Purchaser Indemnified Parties hereunder without
regard to such Basket Amount; and
(iii) the maximum aggregate liability of the Seller and the Owners
under Section 6.02(a)(i) shall not exceed the Maximum Liability Amount.
6.03. Notification of Claims.
(a) A party that may be entitled to be indemnified pursuant to Section 6.01
or Section 6.02 (the "Indemnified Party") shall as soon as practicable notify
the party liable for such indemnification (the "Indemnifying Party") in writing
of any pending or threatened claim or demand that the Indemnified Party has
determined has given or could give rise to a right of indemnification under this
Agreement (including a pending or threatened claim or demand asserted by a third
party against the Indemnified Party), describing in reasonable detail, to the
extent known by the Indemnified Party, the facts and circumstances with respect
to the subject matter of such claim or demand; provided, however, that the
failure to provide such notice shall not release the Indemnifying Party from any
of its obligations under this Article VI except and only to the extent the
Indemnifying Party is prejudiced by such failure.
(b) If the Indemnified Party shall notify the Indemnifying Party of any
claim or demand pursuant to Section 6.03(a), and if (i) such claim or demand
relates to a pending or threatened claim or demand asserted by a third party (a
"Third Party Claim") against the Indemnified Party that the Indemnifying Party
acknowledges is a claim or demand as to which it must indemnify, defend and hold
harmless the Indemnified Party against or reimburse the Indemnified Party for
under Section 6.01(a) or Section 6.02(a), (ii) the Indemnifying Party provides
the Indemnified Party with evidence reasonably acceptable to the Indemnified
Party that the Indemnifying Party will have the financial resources to defend
against the Third Party Claim and fulfill its indemnification obligations
hereunder, (iii) the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief, (iv) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom or
practice adverse to the continuing business interests of the Indemnified Party
or impose a significant limitation on the Indemnified Party's ability to do
business in the future, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently, then the Indemnifying Party shall
have the right to defend such claim or demand and if it elects to defend such
claim or demand, it shall employ counsel reasonably acceptable to the
Indemnified Party to defend such claim or demand asserted against the
Indemnified Party. The Indemnified Party and the Indemnifying Party shall each
have the right to participate in the defense of any claim or demand for which it
is not controlling the defense, at its own expense; provided, that the
reasonable fees and expenses of counsel for the Indemnified Party shall be borne
by the Indemnifying Party if (i) the Indemnified Party and the Indemnifying
Party have been advised by counsel of their respective choosing that there may
be one or more legal defenses available to the Indemnified Party that are
different from or in addition to those available to any other party defending
such claim or demand or (ii) said counsel have advised that a conflict of
interest exists between the Indemnifying Party and the Indemnified Party.
Counsel chosen by the Indemnified Party shall have the approval of the
Indemnifying Party, such approval not to be unreasonably withheld. The
Indemnifying Party shall notify the Indemnified Party in writing, as promptly as
possible (but in any case at a time sufficiently before the due date for the
answer or response to a claim so as to allow the Indemnified Party reasonable
time to answer or respond in the event the Indemnifying Party fails to assume
the defense of such action) after the date of the notice of claim given by the
Indemnified Party to the Indemnifying Party under Section 6.03(a), of its
election to defend in good faith any such third party claim or demand. So long
as the Indemnifying Party is actively and diligently defending in good faith any
such claim or demand asserted by a third party against the Indemnified Party,
the Indemnified Party shall not settle or compromise such claim or demand
without the written consent of the Indemnifying Party, such consent not to be
unreasonably withheld. The Indemnified Party shall make available to the
Indemnifying Party or its agents all records and other materials in the
Indemnified Party's possession reasonably required by the Indemnifying Party for
its use in defending any third party claim or demand. The Indemnifying Party
shall not settle or compromise any such claim or demand without the written
consent of the Indemnified Party, such consent not to be unreasonably withheld.
If the Indemnifying Party does not have the right to control the defense of a
Third Party Claim, or fails or refuses to exercise such right, then the cost of
indemnifying such Third Party Claim, including the fees and expenses of counsel,
shall be borne by the Indemnifying Party and shall be paid on a current basis at
the demand of the Indemnified Party.
(c) Within 30 days after a party obtains knowledge that it has sustained
any Losses not involving a Third Party Claim that such party reasonably believes
may give rise to a claim for indemnification from another party hereunder, such
Indemnified Party shall deliver notice of such claim to the Indemnifying Party,
together with a brief description of the facts and data that support the claim
for indemnification; provided, however, that failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of its
indemnification obligations hereunder, except to the extent that the
Indemnifying Party is actually prejudiced thereby. Any such notice must be made
to the Indemnifying Party not later than the expiration of the applicable
survival period specified in Section 6.04 below. If the Indemnifying Party does
not notify the Indemnified Party within 45 days following its receipt of such
notice that the Indemnifying Party disputes its liability to the Indemnified
Party under this Article VI, such claim specified by the Indemnified Party in
such notice shall be conclusively deemed a liability of the Indemnifying Party
under this Article VI and the Indemnifying Party shall pay the amount of such
claim to the Indemnified Party on demand or, in the case of any notice in which
the amount of the claim (or any portion thereof) is estimated, on such later
date when the amount of such claim (or such portion thereof) becomes finally
determined. If the Indemnifying Party has timely disputed its liability with
respect to such claim, as provided above, the Indemnifying Party and the
Indemnified Party shall proceed in good faith to negotiate a resolution of such
dispute.
6.04. Survival of Covenants, Representations and Warranties. All of the
covenants contained in this Agreement shall survive the Closing hereunder and
continue in full force and effect for such time periods as are stated therein.
All of the representations and warranties contained in this Agreement shall
survive the Closing hereunder and continue in full force and effect for a period
of fifteen (15) months thereafter, regardless of any investigation made by the
Purchaser or the Seller or on their behalf, except (i) as to any matters with
respect to which a bona fide written claim shall have been made or an action at
law or in equity shall have commenced before such date, in which event survival
shall continue until the final resolution of such claim or action, including all
applicable periods for appeal, and (ii) the representations and warranties set
forth in Sections 3.03, 3.08, 3.12(a), 3.13 and 3.25 shall survive until 30 days
following the expiration of any applicable statute of limitations.
6.05. Other Indemnification Provisions. The remedies provided herein shall
be the exclusive remedies of each of the parties hereto with respect to any
Losses arising out of the breach of any representation, warranty, covenant or
agreement contained herein; provided, however, that (i) the parties hereto shall
be entitled to an injunction or other equitable relief to prevent breaches in
this Agreement or any of the Ancillary Agreements, to enforce specifically the
terms and provisions of this Agreement or the Ancillary Agreements, or to seek
any other remedy to which they are entitled in equity; and (ii) nothing herein
shall preclude a party from bringing an action for fraud.
ARTICLE VII.
GENERAL PROVISIONS
7.01. Expenses. Except as may be otherwise specified herein, all costs and
expenses, including fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
7.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service, by facsimile (followed by delivery of a
copy via overnight courier service) or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 7.03:
(a) if to the Seller or the Owners:
The Inteq-Rx Group, LLP
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (facsimile)
with a copy to (which shall not constitute notice):
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
5400 Renaissance Tower
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (facsimile)
(b) if to NMHC and the Purchaser:
National Medical Health Card Systems, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (facsimile)
with a copy to (which shall not constitute notice):
Ackerman, Levine, Cullen & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (facsimile)
7.03. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
7.04. Severability. If any term or provision of this Agreement is held
invalid, illegal or incapable of being enforced by reason of any Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. The parties acknowledge that if any provision of this Agreement is
determined to be illegal, invalid or unenforceable, such provision shall
automatically be deemed reformed and construed in such manner that it will, to
the maximum extent practicable, be deemed to be legal, valid and enforceable.
7.05. Entire Agreement. This Agreement and the Ancillary Agreements
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof, and supersede all prior agreements and
undertakings, both written and oral, between the parties with respect to the
subject matter hereof, including, without limitation, any purported or actual
summary of terms that may have been provided by one party to another.
7.06. Assignment. This Agreement shall not be assigned by operation of Law
or otherwise, provided that the Purchaser may assign, pledge or transfer it
rights hereunder (i) to one or more of its direct or indirect wholly-owned
subsidiaries, (ii) in connection with any sale of all or substantially all of
the Assets, or (iii) pursuant to a bona fide loan transaction. No such
assignment shall affect NMHC's guarantee under Section 5.11.
7.07. No Third-Party Beneficiaries. Except as otherwise expressly provided
herein, this Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
7.08. Amendment. This Agreement may not be amended or modified except by an
instrument in writing signed by the Seller, the Owners holding at least
two-thirds (2/3) in voting power of the outstanding shares of capital stock of
the Seller, NMHC and the Purchaser.
7.09. Governing Law; Jurisdiction, Etc. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware, without
regard to principles of conflict of laws. The Purchaser, NMHC, the Owners and
the Seller irrevocably and unconditionally submit to the jurisdiction of (i) the
Federal courts located in New York County, State of New York, if and to the
extent such courts are able to assume jurisdiction with respect to the relevant
action or proceeding, and (ii) in any other case, the State courts located in
Wilmington, Delaware, and, in either of the foregoing cases, the parties agree
to take any and all future action necessary to submit to the personal
jurisdiction of such courts. The Purchaser, NMHC, the Owners and the Seller
irrevocably waive any objection they may now have or hereafter may have to the
lane of venue of any suit, action or proceeding brought in any such court and
further irrevocably waive any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. Final
judgment in any such suit shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment, a certified or true copy of which shall
be conclusive evidence of the fact and the amount of any indebtedness or
liability of any of the parties therein described, or by appropriate proceedings
under any applicable treaty or otherwise.
7.10. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this Agreement.
7.11. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
parties intend that each representation, warranty and covenant contained herein
shall have independent significance. If any party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) that the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty or covenant.
7.12. Specific Performance. Each party acknowledges and agrees that the
other party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each party agrees that the other party
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the parties and the matter,
in addition to any other remedy to which they may be entitled, at law or in
equity.
7.13. Interest. Unless otherwise expressly provided herein, any payment
owing hereunder that is not paid when due shall bear interest from the due date
until paid in full at the rate of twelve percent (12%) per annum.
IN WITNESS WHEREOF, the Seller, the Owners, NMHC and the Purchaser have
caused this Agreement to be executed by their respective officers thereunto duly
authorized, and the Owners have executed this agreement, as of the date first
written above.
NATIONAL MEDICAL HEALTH
CARD SYSTEMS, INC.
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
INTEQ PBM, LP
By: Inteq Acquisition Corp.,
General Partner
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
THE INTEQ-RX GROUP, LLP
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
Owners:
/s/▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/G. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
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G. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
