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Exhibit 2(a)
STOCK PURCHASE AGREEMENT
By and Among
NovaCare, Inc.,
NC Resources, Inc.,
Hanger Orthopedic Group, Inc.
and
HPO Acquisition Corp.
As of April 2, 1999
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TABLE OF CONTENTS
Page
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I. PURCHASE AND SALE OF THE SHARES................................ 1
1.01 Purchase and Sale of the Shares.......................... 1
1.02 Purchase Price, Payment and Adjustments.................. 1
1.03 Delivery of the Shares................................... 4
1.04 Intercompany Account Obligations......................... 4
1.05 Guaranties............................................... 4
II. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SELLER.... 4
2.01 Organization and Qualification; Subsidiaries............. 4
2.02 Conflicts................................................ 5
2.03 Capitalization........................................... 5
2.04 Financial Statements; No Undisclosed Liabilities......... 5
2.05 Accounts Receivable; Inventories......................... 6
2.06 Absence of Certain Changes............................... 6
2.07 Taxes.................................................... 7
2.08 Real Property Owned or Leased............................ 8
2.09 Title to Assets.......................................... 8
2.10 Contractual and Other Obligations........................ 8
2.11 Compensation and Employment Agreements................... 9
2.12 Employee Benefit Plans................................... 9
2.13 Labor Relations.......................................... 10
2.14 Insurance................................................ 10
2.15 Litigation............................................... 11
2.16 Permits; Compliance with Applicable Law.................. 11
2.17 Bank Accounts............................................ 12
2.18 Trademarks, Patents and Copyrights....................... 12
2.19 Transactions with Certain Persons........................ 13
2.20 Authority................................................ 13
2.21 Ownership of Shares...................................... 13
2.22 Consents................................................. 13
2.23 Foreign Person........................................... 13
2.24 Medicare, Medicaid and Third-Party Payors................ 14
2.25 Disclosure; Year 2000.................................... 14
III. REPRESENTATIONS AND WARRANTIES OF HANGER AND THE PURCHASER..... 15
3.01 Organization............................................. 15
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3.02 Authority................................................ 15
3.03 Conflicts................................................ 15
3.04 Litigation; Disputes..................................... 15
3.05 Consents................................................. 15
3.06 Investment Purpose....................................... 16
3.07 Financing................................................ 16
IV. THE CLOSING.................................................... 16
4.01 Time and Place of the Closing............................ 16
4.02 Termination.............................................. 16
4.03 Effect on Obligations.................................... 17
4.04 Return of Documentation.................................. 17
4.05 Sole and Exclusive Remedy................................ 18
V. CONDITIONS TO THE SELLER'S OBLIGATIONS TO CLOSE................ 18
5.01 Certificates............................................. 18
5.02 Opinion of the Purchaser's Counsel....................... 18
5.03 Representations, Warranties and Covenants................ 18
5.04 No Litigation............................................ 19
5.05 Approvals................................................ 19
5.06 Third Party Consents..................................... 19
5.07 HSR Act Approval......................................... 19
5.08 Releases................................................. 19
VI. CONDITIONS TO THE PURCHASER'S OBLIGATION TO CLOSE.............. 19
6.01 Certificates............................................. 19
6.02 Opinion of the Parent's Counsel.......................... 20
6.03 Representations, Warranties and Covenants................ 20
6.04 No Litigation............................................ 21
6.05 Approvals................................................ 21
6.06 Third Party Consents..................................... 21
6.07 HSR Act Approval......................................... 21
6.08 Resignations............................................. 22
6.09 Discharge of Indebtedness; Release of Liens.............. 22
6.10 Temporary Use of Supplier Reimbursement Numbers.......... 22
6.11 Transition Services Agreement............................ 22
6.12 Subscriber Services Agreement............................ 22
6.13 Escrow Agreement......................................... 22
VII. CONDUCT OF THE BUSINESS........................................ 22
7.01 Operation of the Business................................ 23
7.02 No Loans, Advances, Etc.................................. 23
7.03 Capital Expenditures..................................... 23
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7.04 Preservation of Organization and Business
Relationships............................................ 23
7.05 Employee Plans........................................... 23
7.06 Maintenance of Insurance................................. 23
7.07 Claims................................................... 23
7.08 Sale of Assets........................................... 23
VIII. OTHER AGREEMENTS OF THE PARTIES............................... 23
8.01 Announcements............................................ 23
8.02 Employee Obligations..................................... 24
8.03 Labor Relations.......................................... 24
8.04 Access to Information.................................... 24
8.05 Tax Matters.............................................. 26
8.06 Insurance Matters........................................ 28
8.07 Agreement by the Purchaser Regarding No Other
Representations or Warranties by the Parent or the
Seller................................................... 29
8.08 Name Change.............................................. 30
8.09 Release of Liens......................................... 30
8.10 Consents and Approvals................................... 30
8.11 Further Assurances....................................... 30
8.12 Best Efforts............................................. 31
8.08 Notice of Breach......................................... 31
8.14 Confidentiality.......................................... 31
8.15 Access to Properties and Records......................... 31
8.17 Acquisition of Rights to Confidentiality................. 31
8.17 Financing................................................ 32
IX. INDEMNIFICATION................................................ 32
9.01 Indemnification by the Parent and the Seller............. 32
9.02 Indemnification by the Purchaser......................... 33
9.03 Procedure for Indemnification............................ 33
9.04 Limits on the Liability of the Seller.................... 36
9.05 Other Limits on Indemnification.......................... 36
9.06 Losses Net............................................... 37
9.07 Sole and Exclusive Remedy................................ 37
9.08 Limitations on Materiality............................... 37
X. BROKERS AND FINDERS............................................ 37
10.01 The Parent's and the Seller's Obligations................ 37
10.02 The Purchaser's Obligations.............................. 37
XI. MISCELLANEOUS.................................................. 38
11.01 Notices.................................................. 38
11.02 Entire Agreement......................................... 39
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11.03 Assignment............................................... 39
11.04 Further Action........................................... 39
11.05 Binding Effect........................................... 39
11.06 Expenses................................................. 39
11.07 Arbitration.............................................. 39
11.08 Schedules and Exhibits................................... 39
11.09 Invalidity, Etc.......................................... 40
11.10 Headings................................................. 40
11.11 Governing Law............................................ 40
11.12 Counterparts............................................. 40
11.13 Construction............................................. 40
11.14 Hanger's Guaranty of Purchaser's Obligations............. 40
11.15 Assignment of Parent Agreements.......................... 40
XII. DEFINITIONS.................................................... 41
12.01 Certain Definitions...................................... 41
SCHEDULES
Schedule 1.02(a)(1) Principal Amounts of Acquired Company Notes
Schedule 1.02(a)(2) Acquired-company Notes
Schedule 1.02(a)(3) Assumed Severance Obligations
Schedule 1.02(b) Trial Balance
Schedule 2.01 Subsidiaries, Capital Stock
Schedule 2.02 Group Member Conflicts
Schedule 2.03 Capitalization
Schedule 2.04(a) Financial Statements
Schedule 2.04(b) Liabilities
Schedule 2.05(a) Accounts Receivable Exceptions
Schedule 2.05(b) Inventory Exceptions
Schedule 2.06 Certain Changes
Schedule 2.07(a) Taxes
Schedule 2.07(b) Tax Attributes
Schedule 2.08 Real Property
Schedule 2.09 Title; Liens
Schedule 2.10 Contracts
Schedule 2.11 Compensation
Schedule 2.12 Benefit Plans
Schedule 2.13 Labor Relations
Schedule 2.14 Insurance
Schedule 2.15 Litigation
Schedule 2.16 Permits; Environmental
Schedule 2.18 Intellectual Property
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Schedule 2.19 Transactions with Certain Persons
Schedule 2.22 Consents
Schedule 2.25 Y2K Compliance
Schedule 9.01 Assumed Litigation
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), made as of the 2nd
day of April 1999, by and among NovaCare, Inc., a Delaware corporation (the
"Parent"), NC Resources, Inc., a Delaware corporation (the "Seller"), Hanger
Orthopedic Group, Inc., a Delaware corporation ("Hanger"), and HPO Acquisition
Corp., a Delaware corporation (the "Purchaser"). Capitalized terms used herein
and not defined in the specific Section in which they are used, shall have the
meanings assigned to such terms in Section XII hereof.
W I T N E S S E T H:
WHEREAS, the Seller is the holder of all of the issued and
outstanding shares of common stock, $.01 par value per share (the "Common
Stock"), of NovaCare Orthotics and Prosthetics, Inc., a Delaware corporation
(the "Company");
WHEREAS, the Parent is the holder of all of the outstanding
capital stock of the Seller; and
WHEREAS, the Purchaser desires to acquire from the Seller, and the
Seller desires to sell to the Purchaser, for the consideration hereinafter
provided, all of the outstanding shares of the Common Stock (collectively, the
"Shares").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto, intending to
be legally bound, hereby agree as follows:
SECTION I.
PURCHASE AND SALE OF THE SHARES
1.01 Purchase and Sale of the Shares. Subject to the terms and
conditions of this Agreement and on the basis of the representations,
warranties, covenants and agreements herein contained, at the Closing, the
Seller agrees to sell, assign and convey the Shares to the Purchaser, and the
Purchaser agrees to purchase, acquire and accept the Shares from the Seller.
1.02 Purchase Price, Payment and Adjustments.
(a) Purchase Price and Payment. The Purchaser agrees to
provide the Seller with an aggregate value of Four Hundred Fifty-Five Million
Dollars ($455,000,000.00) ("Purchase Price") for the Shares by: (i) the
assumption of the promissory notes payable by the Company to the sellers of
acquired businesses in a principal amount not to exceed the amount (the
"Relevant Amount") set forth on Schedule 1.02(a)(1) hereto with respect to the
relevant Closing Date (the "Acquired-company Notes") as specifically listed on
Schedule 1.02(a)(2) hereto; (ii) the
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escrow of Ten Million Dollars ($10,000,000.00) (the "Escrowed Funds") until the
determination of any Purchase Price adjustments as provided in Section 1.02(b)
hereof; (iii) the assumption of the liability of the Parent with respect to the
severance amounts calculated as set forth on Schedule 1.02(a)(3); and (iv) the
payment of the balance of the Purchase Price in cash by wire transfer or
delivery of other immediately available funds at the Closing. In the event that
the Closing hereunder shall occur prior to July 1, 1999, at the request of the
Seller, the Purchaser agrees to use commercially reasonable efforts to deliver,
in lieu of the cash portion of the Purchase Price, a promissory note secured by
a letter of credit (the "Note"), due and payable to the Seller on July 1, 1999
and on terms otherwise acceptable to the parties; provided, however, that the
issuance of the Note (and the maintenance of the letter of credit with respect
thereto) shall not result in any incremental cost to the Purchaser incurred due
to the delivery of the Note in lieu of cash or provided, further, that the
Seller agrees to bear such incremental costs.
(b) Purchase Price Adjustments. (i) Notwithstanding anything
contained in this Agreement to the contrary, the Seller and Parent guarantee
that the principal amount of the Company's Acquired-company Notes shall not
exceed a maximum of the Relevant Amount measured as of the close of business on
the Closing Date. In the event that the principal amount of the Acquired-company
Notes exceeds the Relevant Amount, then the cash portion of the Purchase Price
payable pursuant to Section 1.02(a) shall be reduced by the amount, if any, by
which the Acquired-company Notes exceed the maximum amount of the Relevant
Amount.
(ii) If, on the Closing Date, Adjusted Working Capital is less
than Ninety-Five Million Five Hundred Seventy-Two Thousand Dollars
($95,572,000.00), then the cash portion of the Purchase Price
payable pursuant to Section 1.02(a) shall be reduced by the amount
of such deficiency (the "Working Capital Deficiency") in Adjusted
Working Capital. If, on the Closing Date, Adjusted Working Capital
is greater than $95,572,000.00, then the cash portion of the
Purchase Price payable pursuant to Section 1.02(a) shall be
increased by the amount by which Adjusted Working Capital exceeds
$95,572,000.00 (the "Working Capital Excess"). Adjusted Working
Capital shall be comprised of cash in an amount of not less than Two
Million Dollars ($2,000,000.00), accounts receivable, inventory,
other current assets, accounts payable, and accrued expenses to
third-parties (excluding all inter-company obligations, accrued but
unpaid Taxes and the current portion of the Acquired-company Notes)
of the Company calculated in accordance with this Agreement and GAAP
applied on a basis consistent with the Company's prior practice. The
Adjusted Working Capital shall be initially based upon an estimated
trial balance to be prepared by the Company and presented to the
Purchaser as of the end of the last full month immediately prior to
the month in which the Closing Date occurs. This trial balance shall
be attached hereto as Schedule 1.02(b). At the Closing, the Company
shall present to the Purchaser the Company's initial calculation of
its Adjusted Working Capital as of the Closing Date.
(iii) The actual Adjusted Working Capital of the Company as of
the Closing Date and the actual amount of Acquired-company Notes
shall be based upon a final Balance Sheet dated as of the Closing
Date. The Purchaser shall have such final Balance Sheet compiled by
PricewaterhouseCoopers LLP
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("PWC"). The Purchaser shall deliver to the Seller the calculation
and determination of the actual Adjusted Working Capital of the
Company and Acquired-company Notes as of the Closing Date as
determined by PWC within ninety (90) days after the Closing Date.
Such calculation shall be deemed conclusive and binding on the
parties for purposes of computing the actual Adjusted Working
Capital of the Company and Acquired-company Notes as of the Closing
Date unless the Seller objects by delivering a detailed statement
describing the Seller's objections to the Purchaser within thirty
(30) days after receiving from the Purchaser the determination by
PWC of the Adjusted Working Capital of the Company and
Acquired-company Notes as of the Closing Date. The Purchaser and the
Seller will use reasonable efforts to resolve any such objections
themselves. Any dispute regarding the PWC determination of the
Adjusted Working Capital of the Company and Acquired-company Notes
as of the Closing Date shall be resolved in the manner set forth in
Section 1.02(d) hereof. If the Seller does not provide such written
notice to the Purchaser within such 30-day period, then the
Purchaser shall make the appropriate adjustment to the Purchase
Price in accordance with Section 1.02(c) within ten (10) days after
the date by which the Seller was required to provide such written
notice under this Section 1.02(b)(iii).
(c) The amount of any Working Capital Deficiency and the
amount by which the principal amount of the Acquired-company Notes exceeds the
Relevant Amount shall be promptly deducted from the Escrowed Funds and returned
to the Purchaser, with the remaining balance, if any, of the Escrowed Funds
being promptly thereafter released to the Seller. In the event the Escrowed
Funds are less than the subject Working Capital Deficiency and excess
Acquired-company Notes, then all of the Escrowed Funds shall be returned to the
Purchaser and the remaining amount of such Working Capital Deficiency and excess
Acquired-company Notes which is greater than the amount of the Escrowed Funds
shall be paid by the Parent and the Seller to the Purchaser in cash by wire
transfer within thirty (30) days of the final determination of such amounts as
provided under this Section 1.02. If there is no Working Capital Deficiency and
the amount of the Acquired-company Notes does not exceed the Relevant Amount,
then the entire amount of the Escrowed Funds shall be released to the Seller.
The amount of any Working Capital Excess shall be paid by the Purchaser to the
Seller in cash by wire transfer within thirty (30) days of the final
determination of such Working Capital Excess as provided under this Section
1.02.
(d) Dispute Resolution Mechanism. If the parties do not obtain
a final resolution of a dispute regarding the determination by PWC of the actual
Adjusted Working Capital of the Company and the amount of Acquired-company Notes
as of the Closing Date as provided under Section 1.02(b) hereof within thirty
(30) days after the Purchaser has received the statement of objections from the
Seller, then PWC shall select another nationally-recognized, independent
certified public accounting firm, reasonably satisfactory to the parties, to
resolve any remaining objections. The determination of such second accounting
firm so selected by PWC will be set forth in writing and will be conclusive and
binding upon the parties. The Purchaser will revise the determination of the
actual Adjusted Working Capital of the Company and the amount of the
Acquired-company Notes as of the Closing Date to reflect such resolution of any
objections thereto. The fees and expenses of such second accounting firm shall
be borne 50% by the Purchaser and 50% by the Parent and Seller.
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1.03 Delivery of the Shares. At the Closing, the Seller shall
deliver the Shares to the Purchaser by delivering certificates duly endorsed in
blank representing the Shares, each certificate to be accompanied by any
requisite stock transfer tax stamps.
1.04 Intercompany Account Obligations. As of the Effective Time, all
then outstanding intercompany obligations, agreements and contracts between any
Group Member and the Parent, the Seller or any of their Affiliates (other than
any Group Member) shall be cancelled or otherwise eliminated, at no cost to the
Purchaser, and in all cases none of the Parent, the Seller, any of their
Affiliates or any Group Member shall have any further liability or obligation in
respect of any such intercompany obligation, agreement or contract; provided
that nothing in this Section 1.04 shall affect any of the covenants, agreements,
obligations or liabilities of the Parent, the Seller or the Purchaser as set
forth in this Agreement.
1.05 Guaranties. In the event that the Seller, the Parent or any of
their Affiliates (other than any Group Member) has guaranteed (the entity
obligated under any such guaranty being hereinafter referred to as the
"Guarantor") any obligations (the "Guaranteed Obligations") of any Group Member
outstanding as of the Closing Date, the Purchaser shall use its commercially
reasonable efforts to obtain the release of each Guarantor from any liability
with respect to the Guaranteed Obligations and shall indemnify and hold harmless
each Guarantor harmless from and against any such liability.
SECTION II.
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SELLER
In connection with the purchase and sale of the Shares hereunder,
the Parent and the Seller, jointly and severally, hereby represent and warrant
to Hanger and the Purchaser, as of the date hereof and as of the Closing Date,
that:
2.01 Organization and Qualification; Subsidiaries. The Company and
each of its subsidiaries is listed on Schedule 2.01 hereto (each a "Subsidiary"
and collectively, the "Subsidiaries") and is validly existing and in good
standing under the laws of the jurisdiction of its organization, and has all
requisite corporate or partnership (as applicable) power, authority and legal
right to own, operate and lease its assets and properties and to conduct the
businesses in which it is now engaged. Each Group Member is duly qualified to
transact business as a foreign corporation or partnership (as applicable) in all
jurisdictions wherein it is required to be so qualified, except where the
failure to be so qualified would not have a Material Adverse Effect. The Company
does not have any Subsidiaries other than the Subsidiaries. Other than the
Subsidiaries and other than as set forth on Schedule 2.01 hereto, the Company
does not own any capital stock or other proprietary interest, directly or
indirectly, in any corporation, association, trust, partnership, joint venture,
limited liability company or other entity nor is the Company bound by any
agreement to acquire any such capital stock or other proprietary interest.
Copies of the certificate of incorporation and by-laws, or other organizational
documents, of the Company and each Subsidiary have been made available to the
Purchaser on or prior to the Closing Date, which copies are complete and correct
and include all amendments, modifications or supplements thereto.
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2.02 Conflicts. Neither the execution and delivery of this Agreement
by the Parent and the Seller, nor the consummation of the transactions
contemplated hereby to be consummated by the Parent or the Seller, (a) violates
any provision of the certificate of incorporation or by-laws or other
organizational documents of the Parent, the Seller or any Group Member or (b)
constitutes a violation of any Applicable Law. Except as set forth on Schedule
2.02 hereto, neither the execution and delivery of this Agreement by the Parent
and the Seller nor the consummation of the transactions contemplated hereby to
be consummated by the Parent or the Seller violates, conflicts with, results in
any breach of any of the terms of, or results in the termination of, or the
creation of any material Lien pursuant to the terms of, any Contract or any
material contract or other obligation to which the Parent or the Seller is
subject except where such violation, conflict, breach, termination or Lien would
not have a Material Adverse Effect.
2.03 Capitalization. The authorized, issued and outstanding capital
stock or other equity interests of the Company and each Subsidiary is as set
forth on Schedule 2.03 hereto. All of the outstanding shares of the Common Stock
and all of the outstanding shares of capital stock of each corporate Subsidiary
have been duly and validly authorized and issued and are fully paid and
non-assessable and are owned of record by the Seller, the Company or a
Subsidiary, as the case may be. Except as set forth on Schedule 2.03 hereto, as
of the Closing Date, there are no outstanding subscriptions, warrants, options,
calls, commitments, convertible or exchangeable securities, or other rights or
agreements to purchase or acquire shares of capital stock or other equity
interests of any Group Member to which any Group Member, the Parent or the
Seller is a party. Except as set forth on Schedule 2.03 hereto, as of the
Closing Date, there are no agreements concerning the issuance, voting, transfer,
acquisition or disposition of shares of capital stock or other equity interests
of any Group Member to which any Group Member, the Parent or the Seller is a
party.
2.04 Financial Statements; No Undisclosed Liabilities. (a) The
Company's audited consolidated balance sheets as of June 30, 1997 and 1998 and
related consolidated statements of income and cash flows for each of the years
ended June 30, 1996, 1997 and 1998, and the unaudited consolidated balance sheet
as at December 31, 1998 and the related unaudited consolidated statements of
income and cash flows for the six months then ended (collectively, the
"Financial Statements") are attached hereto as Schedule 2.04(a). The Financial
Statements have been prepared in accordance with GAAP, consistently applied, in
all material respects, except that the Financial Statements as of December 31,
1998 do not contain footnotes. The balance sheets constituting a part of the
Financial Statements fairly present in all material respects the consolidated
financial condition of the Group as at the date of such balance sheets and the
other related statements included in the Financial Statements fairly present in
all material respects the consolidated results of operations and cash flows of
the Group for the periods then ended.
(b) Except as set forth in Schedule 2.04(b) hereto, no Group
Member has any material liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, except for:
(i) liabilities and obligations set forth or adequately
reserved against in the Financial Statements;
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(ii) liabilities and obligations incurred in the ordinary
course of business subsequent to the date of the Financial
Statements; and
(iii) liabilities and obligations described or otherwise
disclosed on the Schedules to this Agreement.
(c) Except for indebtedness for borrowed money to be cancelled
or otherwise eliminated as set forth in Section 1.04 hereof and except for
indebtedness for borrowed money among Group Members, no Group Member has any
indebtedness for borrowed money.
2.05 Accounts Receivable; Inventories.
(a) All accounts receivable of the Group Members reflected on
the balance sheet included in the Financial Statements as of December 31, 1998,
and all accounts receivable which have arisen since December 31, 1998, are valid
accounts receivable subject to no known setoff or counterclaim and have arisen
only from bona fide arm's-length transactions in the ordinary course of the
business of the Group Members, consistent with past practices and recorded in
accordance with GAAP, consistently applied, and subject only to the reserves
reflected on the Financial Statements, except only as provided in Schedule
2.05(a).
(b) The inventories reflected on the balance sheet included in
the Financial Statements, or thereafter acquired by the Group Members (and not
subsequently disposed of in the ordinary course of business), consist of items
that are saleable in all material respects in the ordinary course of business
for the purpose for which they were procured or manufactured, and none of which
is damaged or defective, nor subject to any security interest, except as
otherwise provided in Schedule 2.05(b). The values at which inventories are
carried on the balance sheet included in the Financial Statements, or in the
case of inventories acquired following December 31, 1998 on the books and
records of the applicable Group Member, reflect the normal inventory valuation
policy of the Group Members of stating inventories at the lower of cost or
market (on a first-in, first-out method) in accordance with GAAP.
2.06 Absence of Certain Changes. Except as set forth in Schedule
2.06, since December 31, 1998 there has not been any (a) adverse change in the
assets, properties, results of operations or financial condition of the Group
which has resulted or is likely to result in a Material Adverse Effect; (b)
material damage to or destruction of the assets or properties of the Group,
whether or not insured; (c) material changes in the Group's customary methods of
operations or the manner in which their business is conducted; or (d) except in
the ordinary course of business, sale or transfer of material tangible or
intangible assets of the Group, or mortgage, pledge or imposition of any Lien on
such assets except for Permitted Liens.
2.07 Taxes. Except as set forth in Schedule 2.07(a) hereto:
(a) Each Group Member has filed or caused to be filed on a
timely basis all returns, reports or other declarations relating to Taxes
required to be filed by it (the "Tax Returns"), except for any such Tax Returns
which the Company or the Seller are not aware were required to be filed and the
failure to file which would not have, in the aggregate, a Material Adverse
Effect, and each of the Group Members has timely paid or caused to be paid all
Federal, state, local and foreign taxes (including, but not limited to, income,
franchise, property (real,
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tangible and intangible), sales, use, unemployment, withholding, gross receipts,
business license, transfer, capital, net worth, gains, excise, social security
and workers' compensation taxes and estimated income and franchise tax payments,
and penalties, interest and fines with respect to any thereof) (collectively,
"Taxes") set forth on such Tax Returns as due and payable by it with respect to
the periods covered by such Tax Returns. All of such Tax Returns are true and
correct in all material respects, except where the failure to be so would not
have, individually or in the aggregate, a Material Adverse Effect. Since their
respective dates of acquisition, the taxable income of each of the Group Members
has been included in the consolidated Federal income Tax Returns of the Parent
to the extent required to be included under the Code and in the consolidated,
combined or unitary state income Tax Returns of the Parent to the extent
required to be included under applicable state income Tax rules.
(b) With respect to any Taxes of any Group Member not yet due
and payable, adequate reserves and accruals in all material respects for such
Taxes have been made in the Financial Statements or in the books and records of
the applicable Group Member.
(c) Neither the Seller, nor the Parent, nor any Group Member
has received written notice from any taxing authority of any material
deficiency, claim or other dispute relating to the payment or assessment of any
Taxes for any period which remains unsettled at the date hereof, and to the
Knowledge of the Parent no such deficiency exists materially in excess of
reserves and accruals set forth in the Financial Statements.
(d) Neither the Seller, nor the Parent, nor any Group Member
has executed any waiver of any statute of limitations on the assessment or
collection of Taxes with respect to any Group Member or executed any agreement
now in effect extending the period of time to assess or collect any Taxes with
respect to any Group Member.
(e) There are no Liens for Taxes (other than Permitted Liens)
upon or, to the Knowledge of the Parent, threatened against any assets of the
Group, other than Liens which would not have a Material Adverse Effect.
(f) None of the Seller, the Parent or any Group Member is a
party to any pending or, to the Knowledge of the Parent, threatened action,
proceeding or assessment by any taxing authority, foreign or domestic, relating
to any Group Member.
(g) Except for the Tax Sharing Agreement which shall be
cancelled as of the Closing Date without any effect whatsoever on any Group
Member for any taxable year, no Group Member is a party to any tax sharing
agreement.
(h) No election under Section 341(f) of the Code has been or
will be made to treat any Group Member as a "consenting corporation" as defined
in such Section 341(f).
(i) No Group Member is or has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code.
(j) Schedule 2.07(b) hereto sets forth a summary of the
Federal and state tax attributes (net operating losses, etc.) available to each
Group Member and not less than
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five (5) days prior to the Closing Date, the Seller shall deliver to the
Purchaser a schedule of the subsidiary stock basis for each Group Member.
2.08 Real Property Owned or Leased. A list of all real property
owned or leased by each Group Member is set forth in Schedule 2.08 hereto.
Except as set forth in Schedule 2.08 hereto, all such leased real property is
held subject to written leases under which the applicable Group Member has not
received a written notice of any existing defaults or events of default or
events which with notice or lapse of time or both would constitute defaults on
the part of the applicable Group Member, nor has the applicable Group Member
done any act or omitted to do any required act which would result in a default,
except for any such default which would not have a Material Adverse Effect.
Furthermore, except as set forth in Schedule 2.08 hereto, no lease agreement
relating to real property to which a Group Member is a party contains a
provision requiring approval by or consent of the lessor to a change in control
or ownership of the lessee or an increase in rental, fee payable or other
modification of the terms of such agreement as a result thereof, which provision
would be applicable to the transactions contemplated by this Agreement.
2.09 Title to Assets. Except as set forth in Schedule 2.09 hereto,
each Group Member has good and valid title to all of the properties and assets
owned by it, free and clear of all Liens except for Permitted Liens. Each Group
Member leases, owns or has the right to use all properties and assets used in
the operation of its business as currently conducted. Except as set forth on
Schedule 2.09, the assets of the Company and its Subsidiaries are sufficient and
adequate in all material respects to carry on their respective businesses as
presently conducted.
2.10 Contractual and Other Obligations. Set forth in Schedule 2.10
hereto is a list as of December 31, 1998 of all (a) contracts, agreements,
leases and guarantees to which any Group Member is a party or by which any Group
Member or any of their respective assets is bound, in any case with respect to
which the unperformed obligation of the applicable Group Member is in excess of
$100,000 in the aggregate (excluding contracts and agreements referred to in
Section 2.11 or 2.12 hereof) and (b) uncompleted orders for the purchase by any
Group Member of materials, supplies, equipment and services for the requirements
of its business, and all work-in-progress and open customer orders, in any case
with respect to which the unperformed obligation of the applicable Group Member
is in excess of $100,000 in the aggregate; all of the foregoing required to be
listed on Schedule 2.10 hereto being hereinafter collectively referred to as the
"Contracts". To the Knowledge of the Parent, neither any Group Member nor any
other party to a Contract is in default in the performance of any Contract nor
done any act or failed to do any required act which would result in a default,
no written notice of such a default has been received by any Group Member, the
Seller or the Parent and none of the Seller, the Parent or any Group Member has
received written notice of an event the occurrence of which with the giving of
notice or the lapse of time would constitute a default under any covenant or
condition under any Contract, except in each case for any default which would
not have a Material Adverse Effect. Except as set forth on Schedule 2.10 or
Schedule 2.22 hereto, no consents are required (except for any such consents as
shall have been obtained prior to the Closing Date), and no event of default
will occur, under any Contract as a result of the sale and transfer of the
Shares from the Seller to the Purchaser, and the change in control of the
Company and the Group Members as a result of the sale and transfer of the Shares
from the Seller to the Purchaser will not give any person or entity the right to
renegotiate, change or void any terms of, or accelerate
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any amounts under, any Contract, any Acquired-company Notes or any
non-competition agreement or clause to which the Company and/or any Group Member
is a party.
2.11 Compensation and Employment Agreements. Set forth in Schedule
2.11 hereto is (a) a list as of the date hereof of all written agreements, plans
or arrangements by which any Group Member is bound with regard to compensation,
bonus, incentive, stock option, stock purchase, severance pay or other benefits
or perquisites, other than any agreements, plans or arrangements listed in
Schedule 2.12 hereto and (b) a list as of the date hereof of all employees of
each Group Member who received compensation (excluding compensation deemed to be
received upon the exercise of stock options) in excess of $50,000 during the
most recently completed fiscal year and their respective current positions and
annual salaries and any other compensation which is reasonably expected to be
paid this year. Schedule 2.11 hereto also sets forth the names of all employees
of the Company and each Group Member who is a party to an employment,
confidentiality or other agreement with the Company or any Group Member,
together with the terms of such agreement, including non-competition scope and
duration, and not less than five (5) days prior to the Closing Date, the Seller
shall deliver to the Purchaser a list of the governing law, confidentiality
and/or restrictive covenant provisions with respect to such employment,
confidentiality or other agreements. Except as set forth in Schedule 2.11
hereto, no employment agreement, severance agreement or other agreement of any
type to which any officer or employee of the Company or any Group Member is a
party contains any provision terminating or otherwise calling for renegotiation,
modification or payments under the terms of any such agreement in the event of a
change in control or ownership of the Company or the subject Group Member.
Except as set forth in Schedule 2.11 hereto, there are no contracts, agreements,
plans or arrangements covering any employee or former employee of the Company or
any Group Member with "change of control" or similar provisions. There is no
contract, agreement, plan or arrangement covering any employee or former
employee of the Company that individually or collectively could give rise to the
payment of any amount that would not be deductible pursuant to the terms of
Section 280G of the Code. Neither the Company nor any trade or business (whether
or not incorporated) under common control with the Company within the meaning of
Section 4001 of ERISA has incurred any liability under the Worker Adjustment and
Retraining Act or any similar state law relating to employment termination in
connection with a mass layoff, plant closing or similar event.
2.12 Employee Benefit Plans.
Except as set forth in Schedule 2.12 hereto:
(a) No Group Member maintains or sponsors, nor is it required to
make contributions to, any pension, profit-sharing, bonus, incentive, welfare or
other employee benefit plan within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (such plans and
related trusts, insurance and annuity contracts, funding media and related
agreements and arrangements, other than any "multiemployer plan" (within the
meaning of Section 3(37) or Section 4001(a)(3) of ERISA), being hereinafter
referred to as the "Benefit Plans" and such multiemployer plans being
hereinafter referred to as the "Multiemployer Plans");
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(b) Each Benefit Plan complies in all respects with all requirements
of ERISA and the Code except where the failure to so comply would not have a
Material Adverse Effect;
(c) Each Benefit Plan that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service as to such qualification within the period of time
prescribed by law;
(d) No Group Member maintains, sponsors or contributes to (nor is
required to contribute to) any Multiemployer Plan;
(e) No Benefit Plan is a "defined benefit plan" (within the meaning
of Section 3(35) of ERISA);
(f) None of the Parent, the Seller or any Group Member has engaged
in, and the Parent has no knowledge of any fiduciary or other "disqualified
person or party in interest" of any Benefit Plan of any Group Member that has
engaged in, any "prohibited transaction" (within the meaning of Section 406 of
ERISA or Section 4975(c) of the Code);
(g) Each Benefit Plan that is intended to be qualified under Section
501(a) of the Code as an organization described in Code Section 501(c)(9) has
received a favorable determination letter from the Internal Revenue Service as
to the tax-exempt status of the organization, within the period of time
prescribed by law; and
(h) The account balance of the VEBA Trust as of March 31, 1999 is
$-0-. To the extent that the portion of the assets held by the VEBA Trust
attributable to Employees, Former Employees and Beneficiaries exceeds the amount
required to fund run-out claims of Employees, Former Employees and Beneficiaries
from the Health Plan, that portion of the assets will be spun-off to fund a
separate VEBA to benefit Employees, Former Employees and Beneficiaries.
2.13 Labor Relations. Except as set forth on Schedule 2.13 hereto,
no Group Member is subject to any labor strikes, stoppages or lockouts and none
of them is a party to any contract or agreement with any labor organization or
other representative of its employees.
2.14 Insurance. Set forth on Schedule 2.14 hereto is a list as of
the date hereof of the property and casualty insurance policies maintained by
each of the Group Members, the coverages of such policies, the annual premium
amounts, any unpaid premium amounts, the dates of renewal and expiration, and
the dates, if any, of any gaps or lapses in such insurance coverage. Schedule
2.14 also sets forth all insurance policies covering any Group Member that will
not continue to remain in effect after the Closing Date.
2.15 Litigation. Except as set forth in Schedule 2.15 hereto, there
is no litigation, arbitration or other legal proceeding (collectively,
"Actions") pending or, to the Knowledge of the Parent, threatened against any
Group Member or any material portion of the assets or properties of the Group,
except for Actions covered by insurance policies maintained by or for the
benefit of the Group Members (including insurance policies which are subject to
applicable deductibles, liability retentions or other reimbursement
obligations).
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2.16 Permits; Compliance with Applicable Law.
(a) General. Except as set forth in Schedule 2.15 hereto, each
Group Member is in compliance with all Applicable Law relating to such Group
Member and its respective assets and properties, except where the failure to be
in compliance would not have a Material Adverse Effect.
(b) Permits. The permits, licenses, approvals, franchises and
authorizations (collectively, but excluding Environmental Permits, the
"Permits") issued to the Group Members are all the Permits required for the
ownership, operation and use by the Group Members of their properties and assets
and for the conduct of the business in which the Group Members are presently
engaged, except for such Permits which the failure to have would not have a
Material Adverse Effect. All the Permits are in full force and effect, except
where the failure to be in effect would not have a Material Adverse Effect.
(c) Environmental. Except as set forth in Schedule 2.16
hereto:
(i) Each Group Member is in compliance with the provisions of
all Federal, state and local environmental laws, codes and
ordinances and all rules and regulations promulgated thereunder (the
"Environmental Laws"), including with respect to the real property
leased by Group Members listed on Schedule 2.08 hereto and the
improvements thereon (all such leased real property and improvements
thereon hereinafter referred to collectively as the "Premises"),
except where the failure to be in compliance would not have a
Material Adverse Effect.
(ii) Each Group Member has obtained all required Federal,
state and local permits, licenses, certificates and approvals (the
"Environmental Permits") relating to (A) air emissions, (B)
discharges to surface water or ground water, (C) noise emissions,
(D) solid or liquid waste disposal, and (E) the use, generation,
storage, transportation or disposal of toxic or hazardous substances
or wastes (intended hereby and hereafter to include any and all such
materials listed in any Environmental Law, as hazardous or
potentially hazardous (including, without limitation, (1) any
chemical, compound, material or substance that is defined, listed
in, or otherwise classified pursuant to, any of the Environmental
Laws as a "hazardous substance", "hazardous material", "hazardous
waste", "toxic substance" or "toxic pollutant" and (2) petroleum,
natural gas, natural gas liquids, liquified natural gas, and
synthetic gas) (collectively, "Hazardous Substances")), except where
the failure to have obtained or maintained any such Environmental
Permit would not have a Material Adverse Effect.
(iii) To the Knowledge of the Parent, no violation of any
Environmental Law exists, and no Group Member has received any
written notice of violations of any Environmental Law which have not
been cured, relating to the use, ownership or occupancy of any of
the Premises, except for any violations which would not have a
Material Adverse Effect.
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(iv) No Group Member has engaged in the generation, storage,
treatment, recycling, transportation or disposal of any Hazardous
Substance, except in compliance with applicable Environmental Laws,
except where the failure to be in compliance would not have a
Material Adverse Effect.
(v) None of the Premises, nor, to the Knowledge of the Parent,
any real property to which any Group Member has, directly or
indirectly, transported or arranged for the transportation of any
Hazardous Substances, is listed on the National Priorities List
promulgated pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), on
CERCLIS (as defined in CERCLA) or on any similar Federal, state or
foreign list of sites requiring investigation or clean-up.
2.17 Bank Accounts. Not less than five (5) days prior to the Closing
Date, the Seller shall deliver to the Purchaser a list as of such date of all
bank and securities accounts and lockboxes maintained by any Group Member, a
list of persons authorized to sign on behalf of each Group Member with respect
to each such account, a list of persons with authorized access to each such
lockbox and a list of the balances in such accounts and lockboxes as of the most
recent reasonably practicable dates (the Seller may comply with the foregoing
requirement as to balances by attaching a copy of the most recent bank
statements for such accounts and lockboxes).
2.18 Trademarks, Patents and Copyrights. Schedule 2.18 hereto sets
forth a list as of the date hereof of all registrations of patents and pending
applications therefor, all registrations of trademarks, tradenames and service
marks and all pending applications therefor, all registrations of copyrights and
all pending applications therefor (collectively, "Intellectual Property"), all
to the extent that the foregoing items are used in the business of the Group
Members and are owned in whole or in part by any Group Member. To the Knowledge
of the Parent, all of the patents, trademarks, tradenames, service marks,
copyrights and licenses or other agreements listed in Schedule 2.18 hereto are
valid and in full force and effect, except as otherwise noted on Schedule 2.18
hereto. To the Knowledge of the Parent, no Group Member is infringing upon, or
otherwise violating, the rights of any third party with respect to any
Intellectual Property and no third party is infringing on the rights of any
Group Member.
2.19 Transactions with Certain Persons. Except with respect to
insurance arrangements set forth on Schedule 2.14 hereto or referred to in
Section 8.06 hereof and the Tax Sharing Agreement, and except as set forth on
Schedule 2.19 hereto, no executive officer, director or Affiliate of the Parent,
the Seller or any Group Member is presently a party to any agreement with any
Group Member regarding the payment of money or the transfer of property by any
Group Member to such person which will survive the Closing, other than
employment agreements all of which shall survive Closing without change, except
as otherwise provided on Schedule 2.11.
2.20 Authority. Each of the Parent and the Seller has the corporate
power and authority to execute and deliver this Agreement and to perform its
covenants and agreements hereunder. The execution and delivery of this Agreement
by each of the Parent and the Seller, the performance by each of the Parent and
the Seller of its covenants and agreements hereunder
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and the consummation by each of the Parent and the Seller of the transactions
contemplated hereby have been duly authorized by all necessary corporate action.
This Agreement constitutes a valid and legally binding obligation of the Parent
and the Seller, enforceable against the Parent and the Seller in accordance with
its terms.
2.21 Ownership of Shares. As of the Effective Time, the Seller will
own all of the issued and outstanding shares of Common Stock, free and clear of
any Lien, and the Seller will have the unrestricted right and power to sell and
transfer such shares of Common Stock to the Purchaser. Upon transfer of such
Shares to the Purchaser in accordance with the terms hereof, the Purchaser will
acquire good and valid title to such Shares, free and clear of any Lien, except
those Liens created by the Purchaser or its Affiliates. As of the Closing Date,
the Seller will not own any shares of capital stock of the Company other than
the shares of Common Stock and will not have any option or other right to
acquire from any person or obligation or commitment to sell or otherwise
transfer to any person any shares of capital stock of the Company owned by the
Seller. As of the Effective Time, the Company, or one of its direct or indirect
wholly owned Subsidiaries, will own all of the issued and outstanding shares of
capital stock or other equity interests of each Subsidiary, free and clear of
any Lien, except that the Company only owns (indirectly through its
Subsidiaries) 50% of the equity interests in each of Orthomedics-▇▇▇▇▇ (Rancho)
and Orthomedics-▇▇▇▇▇ (Whittier), each California general partnerships.
2.22 Consents. Except as may be required under The ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended ("HSR"), and except as set forth
on Schedule 2.22 hereto, no consents, approvals or authorizations of, or filings
with, any Governmental Authority or any other person or entity are required in
connection with the execution and delivery of this Agreement by the Parent and
the Seller and the consummation of the transactions contemplated hereby to be
consummated by the Parent or the Seller, except where the failure to obtain such
consents, approvals, or authorizations, or make such filings, would not have a
Material Adverse Effect.
2.23 Foreign Person. Neither the Parent nor the Seller is a foreign
person within the meaning of Section 1445(f)(3) of the Code.
2.24 Medicare, Medicaid and Third-Party Payors. Each Group Member
has complied with all laws, rules and regulations of Medicaid and Medicare and
all applicable policies and procedures of third-party payors with which any
Group Member has conducted business and/or issued an invoice for services or
products, and has filed all returns, cost reports and other filings in the
manner prescribed, except where the failure to do so would not have,
individually or in the aggregate, a Material Adverse Effect. All returns, cost
reports and other filings made by each Group Member to Medicare, Medicaid, any
other governmental health or welfare related entity or any third-party payor are
true and complete, except where the failure to be so would not have,
individually or in the aggregate, a Material Adverse Effect. No deficiency in
any such returns, cost reports and other filings, including deficiencies for
late filings, has been asserted or, to the best Knowledge of the Parent,
threatened by any Federal or state agency or instrumentality or other provider
reimbursement entities relating to Medicare, Medicaid or any third-party payor
claims, and, to the best Knowledge of the Parent, there is no basis for any
claims or requests for reimbursement from any such agency, instrumentality or
entity except for
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any deficiencies which would not have, individually or in the aggregate, a
Material Adverse Effect. No Group Member has been subject to any investigation
of any type or any audit relating to fraudulent Medicare, Medicaid or any
third-party payor procedures or practices, except for audits which would not
have, individually or in the aggregate, a Material Adverse Effect.
2.25 Disclosure; Year 2000. (a) No representation or warranty made
by the Parent or the Seller herein, nor any certificate, Schedule or exhibit
prepared and furnished by the Parent, the Seller, the Company or any Group
Member or its respective representatives pursuant hereto, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements of fact contained herein or therein not misleading in light
of the circumstances under which they were furnished.
(b) All items, products, software, components and systems used in
the operation of the business of the Company, which incorporate the processing
of dates or date-related data (including, but not limited to, representing,
calculating, comparing and sequencing), including, but not limited to, computer
systems, infrastructure items, software applications, hardware and related
equipment and utilities ("Components"), developed, in whole or part, by the
Company and its Subsidiaries are currently Y2K-compliant, except as set forth in
Schedule 2.25 and except for such non-compliance as would not have a Material
Adverse Effect. The Company has used commercially reasonable efforts to obtain
(i) commitments that all its vendors are or will be Y2K-compliant by June 30,
1999, and (ii) enforceable agreements with each such vendor setting forth
details of plans and schedules to achieve Y2K-compliance and agreed-upon
penalties for failure to achieve full compliance pursuant to such schedules. The
Seller agrees to cause the TOPS hardware and software to become Y2K-compliant on
or before the Closing Date or, to the extent such software and hardware programs
are not so compliant by such time, notwithstanding the provisions of Section
9.05 hereof, the Seller agrees to indemnify the Purchaser for the reasonable
cost of making such programs so compliant.
SECTION III.
REPRESENTATIONS AND WARRANTIES OF HANGER AND THE PURCHASER
In connection with the purchase and sale of the Shares hereunder,
each of Hanger and the Purchaser, jointly and severally, hereby represents and
warrants to the Parent and the Seller, as of the date hereof and as of the
Closing Date, that:
3.01 Organization. Each of Hanger and the Purchaser is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
3.02 Authority. Each of Hanger and the Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement and to
perform its covenants and agreements hereunder. The execution and delivery of
this Agreement by each of Hanger and the Purchaser, the performance by each of
Hanger and the Purchaser of its covenants and agreements hereunder and the
consummation by each of Hanger and the Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary corporate action.
This Agreement constitutes a valid and legally binding obligation of each of
Hanger and the Purchaser, enforceable against each of Hanger and the Purchaser
in accordance with its terms.
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3.03 Conflicts. Neither the execution and delivery of this Agreement
by Hanger and the Purchaser, nor the consummation of the transactions
contemplated hereby to be consummated by Hanger and the Purchaser, (a) violates
any provision of the certificate of incorporation or by-laws of either of Hanger
or the Purchaser or (b) constitutes a violation of any Applicable Law. Neither
the execution and delivery of this Agreement by Hanger and the Purchaser nor the
consummation of the transactions contemplated hereby to be consummated by Hanger
and the Purchaser violates, conflicts with, results in any breach of any of the
terms of or results in the termination of or the creation of any material Lien
pursuant to the terms of any material contract, commitment, agreement, or lease
of any kind to which Hanger or the Purchaser is a party or by which Hanger or
the Purchaser or any of their respective assets are bound.
3.04 Litigation; Disputes. There are no Actions pending or, to the
knowledge of Hanger or the Purchaser, threatened, against or affecting Hanger or
the Purchaser which challenge the validity of this Agreement, or which if
adversely determined, would materially adversely affect their ability to
consummate the transactions contemplated by this Agreement or to perform their
respective covenants and agreements under this Agreement.
3.05 Consents. Except as may be required under HSR, no consents,
approvals or authorizations of, or filings with, any Governmental Authority or
any other person or entity are required in connection with the execution and
delivery of this Agreement by Hanger and the Purchaser and the consummation of
the transactions contemplated hereby to be consummated by them.
3.06 Investment Purpose. The Purchaser is purchasing the Shares
pursuant to this Agreement for investment for its own account and not with a
view to the distribution of all or any part thereof as such term is used in
Section 2(11) of the Securities Act of 1933, as amended (the "Securities Act").
The Purchaser is a sophisticated investor and capable of evaluating the merits
and the risks of acquiring the Shares. The Purchaser acknowledges that: the
Shares are "restricted securities" (as defined under the rules and regulations
promulgated under the Securities Act); that the Shares have not been issued or
sold pursuant to any registration or similar filing, listing, prospectus or
document, or pursuant to any delivery requirements under the laws of any
Governmental Authority or the rules, regulations or guidelines of any stock
exchange or quotation system; and that it and its Affiliates and representatives
has each had access to information which it considers necessary or advisable to
enable it to make a decision concerning the purchase of the Shares provided,
however, such access shall in no way affect or diminish the representations,
warranties and covenants of the Parent and the Seller in this Agreement.
3.07 Financing. The Purchaser and/or Hanger has available all funds,
or has written binding commitments from financial institutions or other sources
to obtain all funds on or prior to the Closing Date, necessary to pay the
Purchase Price as provided herein and otherwise to consummate the transactions
contemplated hereby in accordance with the terms and conditions hereof.
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SECTION IV.
THE CLOSING
4.01 Time and Place of the Closing. The closing of the purchase and
sale of the Shares as set forth herein (herein referred to as the "Closing")
shall be held at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., local time, on the later of (i) June 15, 1999
(provided, that the Purchaser may require the Closing to be held on an earlier
date upon giving three (3) business days' notice to the Seller at any time after
the conditions precedent to the Closing have been satisfied) or (ii) the date
which is three (3) business days after the conditions precedent to the Closing
have been satisfied, or such other time, place and date as the Purchaser and the
Seller may agree (such date upon which the Closing occurs is herein referred to
as the "Closing Date") and, for accounting purposes, the Closing shall be
effective as of a mutually agreeable date.
4.02 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by written agreement of
the Seller and the Purchaser;
(b) unless extended by written agreement of the Seller and the
Purchaser, at any time after December 31, 1999 (the "Termination Date"), by
either the Seller or the Purchaser in writing, if the transactions contemplated
by this Agreement have not been consummated on or before such date and such
terminating party is not then in material breach of this Agreement;
(c) at any time before the Closing, by the Purchaser or the
Seller in writing, in the event that any Governmental Authority shall have
issued an order, decree, ruling or taken any other action restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
nonappealable;
(d) at any time before the Closing, by the Purchaser in
writing pursuant to Section 6.03 hereof; and
(e) at any time before the Closing, by either the Purchaser or
the Seller in writing, without liability to the terminating party on account of
such termination, if such terminating party is not then in material breach of
this Agreement and the nonterminating party shall (i) fail to perform in any
material respect its agreements contained herein required to be performed on or
prior to the Closing Date and such nonterminating party has not cured in all
material respects such breach on or prior to the date which is 30 days after
such nonterminating party has received written notice from the terminating party
of such failure to perform or such longer period in the event that such breach
cannot reasonably be expected to be cured within such 30-day period and such
nonterminating party is diligently pursuing such cure, but in no event later
than the Termination Date or (ii) subject to Section 6.03 hereof, breach in any
material respect any of its representations or warranties contained herein and
such
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nonterminating party has not cured in all material respects such breach on or
prior to the date which is 30 days after such nonterminating party has received
written notice from the terminating party of such breach or such longer period
in the event that such breach cannot reasonably be expected to be cured within
such 30-day period and such nonterminating party is diligently pursuing such
cure, but in no event later than the Termination Date.
4.03 Effect on Obligations. Termination of this Agreement pursuant
to Section 4.02 shall terminate all obligations and liabilities of the parties
to each other hereunder, except for the obligations under Sections 4.04, 8.01,
X, XI and XII, provided that in the event of a termination of this Agreement
pursuant to subsection 4.02(e) above under circumstances where the
nonterminating party has breached its obligation to close the transactions
contemplated hereby (notwithstanding that the nonterminating party's conditions
to such obligation to close contained in Section V or VI, as the case may be,
have been satisfied or that the terminating party stands ready, willing and able
to satisfy such conditions but for such breach), the terminating party may
exercise all available rights and remedies at law.
4.04 Return of Documentation. Following a termination in accordance
with Section 4.02, the Purchaser shall return, and shall cause all of its
representatives and Affiliates to return, all agreements, documents, contracts,
instruments, books, records, materials and all other information of the Group,
any Group Member, the Seller, the Parent or any of their Affiliates provided by
any Group Member, the Seller, the Parent or by any representative of any Group
Member, the Parent or the Seller to the Purchaser or any representative or
Affiliate of the Purchaser in connection with the transactions contemplated by
this Agreement, and the Seller and the Parent shall return, and shall cause all
of its representatives and Affiliates to return, all agreements, documents,
contracts, instruments, books, records, materials and all other information of
the Purchaser provided by the Purchaser or any representative of the Purchaser
to the Seller or the Parent in connection with the transactions contemplated by
this Agreement.
4.05 Sole and Exclusive Remedy. Prior to the Closing, each party
hereto acknowledges and agrees that such party's sole and exclusive remedy with
respect to Damages and any and all claims for any breach or liability under this
Agreement or otherwise relating to the subject matter of this Agreement and the
transactions contemplated hereby shall be solely in accordance with, and limited
by, Sections 4.02 and 4.03 hereof.
SECTION V.
CONDITIONS TO THE SELLER'S OBLIGATIONS TO CLOSE
The obligation of the Seller to sell the Shares and otherwise to
consummate the transactions contemplated by this Agreement at the Closing is
subject to the following conditions precedent, any or all of which may be waived
by the Seller in the Seller's sole discretion, and each of which the Purchaser
hereby agrees to use its best efforts to satisfy at or prior to the Closing:
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5.01 Certificates. The Seller shall have received:
(a) Certificates of incumbency executed by the Secretary of
the Purchaser in form and substance reasonably acceptable to the Seller;
(b) Certificate of the Secretary of the Purchaser certifying
as to a true and correct copy of the duly adopted resolutions of the board of
directors of the Purchaser, in form and substance reasonably acceptable to the
Seller, with respect to the consummation of the transactions contemplated by
this Agreement and that such resolutions continue in full force and effect,
without amendment, as of the Closing Date; and
(c) Such other certificates, instruments and other documents,
in form and substance reasonably satisfactory to the Seller and counsel for the
Seller, as the Seller shall have reasonably requested in connection with the
transactions contemplated hereby.
5.02 Opinion of the Purchaser's Counsel. The Seller shall have
received an opinion of Freedman, Levy, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel for Hanger and
the Purchaser, dated the Closing Date and covering the matters set forth in
Sections 3.01, 3.02 and 3.03 hereof.
5.03 Representations, Warranties and Covenants. The representations
and warranties of the Purchaser contained herein shall be true and correct in
all material respects at and as of the Closing Date with the same effect as
though all such representations and warranties were made at and as of the
Closing Date, except to the extent that any of such representations and
warranties are, by their terms, made expressly as of the date of this Agreement
or another date, in which case such representations and warranties shall have
been true and correct in all material respects as of the date hereof or such
other date, as applicable, and the Purchaser shall have complied in all material
respects with all of its covenants and agreements contained herein required to
be complied with on or prior to the Closing Date, and on the Closing Date, the
Purchaser shall deliver to the Seller a certificate dated the Closing Date to
such effect.
5.04 No Litigation. No action, suit, proceeding, writ, judgment,
injunction, decree or similar order of any Governmental Authority restraining,
enjoining or otherwise preventing the consummation of any of the transactions
contemplated by this Agreement, or seeking any Damages or any other relief as a
result of this Agreement or any of the transactions contemplated hereby shall be
pending.
5.05 Approvals. All governmental filings, authorizations and
approvals (if any) that are required for the consummation of the transactions
contemplated hereby shall have been duly made and obtained in form and substance
reasonably satisfactory to the Seller and the Seller's counsel.
5.06 Third Party Consents. All consents of third parties set forth
on Schedules 2.02 and 2.22 hereto which are indicated by an asterisk shall have
been obtained.
5.07 HSR Act Approval. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under HSR shall have expired
or been waived.
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5.08 Releases. The Seller shall have received general releases
executed by the Group Members and the Purchaser, in form and substance
satisfactory to the Seller, of all officers and directors of each Group Member
who do not remain in the employ of any Group Member immediately subsequent to
the Closing, with respect to acts or omissions occurring on or prior to the
Closing Date.
SECTION VI.
CONDITIONS TO THE PURCHASER'S OBLIGATION TO CLOSE
The obligation of the Purchaser to purchase the Shares and otherwise
to consummate the transactions contemplated by this Agreement at the Closing is
subject to the following conditions precedent, any or all of which may be waived
by the Purchaser in its sole discretion, and each of which the Seller and the
Parent hereby agree to use their respective best efforts to satisfy at or prior
to the Closing:
6.01 Certificates. The Purchaser shall have received:
(a) A true and correct copy of the certificate of
incorporation of the Company and each Subsidiary, certified as true and correct
by the Secretary of State or other appropriate governmental official of its
jurisdiction of organization, and a copy of the applicable by-laws as certified
as true and correct by its Secretary;
(b) Certificate of incumbency executed by the Secretary of the
Seller in form and substance reasonably acceptable to the Purchaser;
(c) Certificate of incumbency executed by the Secretary of the
Parent in form and substance reasonably acceptable to the Purchaser;
(d) Certificate of the Secretary of the Seller certifying as
to a true and correct copy of the duly adopted resolutions of the board of
directors and the duly adopted resolutions of the sole stockholder of the Seller
and a certificate of the Secretary of the Parent certifying as to a true and
correct copy of the duly adopted resolutions of the board of directors of the
Parent, each in form and substance reasonably acceptable to the Purchaser, with
respect to the consummation of the transactions contemplated by this Agreement
and that such resolutions continue in full force and effect, without amendment,
as of the Closing Date; and
(e) Such other certificates, instruments and other documents,
in form and substance reasonably satisfactory to the Purchaser and counsel for
the Purchaser, as the Purchaser shall have reasonably requested in connection
with the transactions contemplated hereby.
6.02 Opinion of the Parent's Counsel. The Purchaser shall have
received an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, special counsel for the Parent and the
Seller, reasonably satisfactory to Purchaser's counsel and dated the Closing
Date and covering the matters set forth in the first two sentences of Section
2.01, Section 2.02, the first two sentences of Section 2.03, Section 2.15,
Section 2.20 and the second sentence of 2.21 hereof.
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6.03 Representations, Warranties and Covenants. Subject to the next
succeeding sentence, the representations and warranties of the Parent and the
Seller contained herein shall be true and correct in all material respects at
and as of the Closing Date, except to the extent that any of such
representations and warranties are, by their terms, made expressly as of the
date of this Agreement or another date, in which case such representations and
warranties shall have been true and correct in all material respects as of the
date hereof or such other date, as applicable, and the Parent and the Seller
shall have complied in all material respects with all their respective covenants
and agreements contained herein required to be complied with on or prior to the
Closing Date, and on the Closing Date, the Parent and the Seller shall each
deliver to the Purchaser a certificate dated the Closing Date to such effect.
The Parent and the Seller shall deliver to the Purchaser a notification, from
time to time, on or before the date which is three business days prior to the
Closing Date, which notification (each, an "Update Notice") shall (i) disclose
information the existence of which does or may result in a breach of the
Parent's and the Seller's representations and warranties contained in Section II
hereof and (ii) update, modify or supplement the Schedules and, upon delivery of
such Update Notice, the applicable representations and warranties (and the
applicable Schedules), for all purposes of this Agreement, shall be deemed to be
amended to be consistent with each such Update Notice; provided, however, that
the delivery of any such Update Notice shall not relieve the Parent and/or the
Seller from any breach of their respective representations and warranties
contained in this Agreement or the Schedules attached hereto. In the event that
the Purchaser receives an Update Notice which sets forth the occurrence or
existence of events or circumstances which, but for the delivery of an Update
Notice, would have resulted in a breach of any of the Parent's and the Seller's
representations and warranties set forth in Section II hereof which is
reasonably likely to or does result in a Material Adverse Effect the Purchaser
shall (after providing the Parent and the Seller with written notice and an
opportunity to modify the Update Notice or to cure any such breach and the
Parent and the Seller shall not have modified the Update Notice or cured such
breach on or prior to the date which is 60 days after the Parent and the Seller
have received such written notice or such longer period in the event that such
breach cannot reasonably be expected to be cured within such 60-day period and
the Parent and the Seller are diligently pursuing such cure, but in no event
later than the Termination Date) have no obligation to complete the Closing of
the transactions contemplated by this Agreement; the Purchaser's sole and
exclusive remedy in such event shall be to terminate this Agreement pursuant to
Section 4.02(d) above; provided, however, that notwithstanding the foregoing, in
the event an Update Notice sets forth the occurrence or existence of events or
circumstances which relate to a time period prior to the date of this Agreement
and which are a breach of any of the Parent's and/or the Seller's
representations and warranties contained in this Agreement or the Schedules
attached hereto prior to the delivery of such Update Notice which is reasonably
likely to or does result in a Material Adverse Effect, then the Purchaser shall
have no obligation to complete the Closing of the transactions contemplated by
this Agreement and the Parent and the Seller shall be liable to the Purchaser
for all damages incurred by the Purchaser as a result thereof, including but not
limited to the fees and costs incurred by the Purchaser up to that time in its
pursuit of the transactions contemplated by this Agreement.
6.04 No Litigation. No action, suit, proceeding, writ, judgment,
injunction, decree or similar order of any Governmental Authority restraining,
enjoining or otherwise preventing the consummation of any of the transactions
contemplated by this Agreement, or
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seeking any Damages or any other relief as a result of this Agreement or any of
the transactions contemplated hereby shall be pending.
6.05 Approvals. All governmental filings, authorizations and
approvals (if any) that are required for the consummation of the transactions
contemplated hereby will have been duly made and obtained in form and substance
reasonably satisfactory to the Purchaser and the Purchaser's counsel.
6.06 Third Party Consents. All consents of third parties set forth
on Schedules 2.02 and 2.22 hereto which are indicated by an asterisk shall have
been obtained.
6.07 HSR Act Approval. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under HSR shall have expired
or been waived.
6.08 Resignations. At the request of the Purchaser, all officers and
all directors of each Group Member shall have executed and delivered to each
Group Member, as applicable, resignations effective as of the Effective Time.
6.09 Discharge of Indebtedness; Release of Liens. The Parent shall
have performed, or caused the Company to perform, all acts necessary to
discharge all of the Company's obligations under all loan agreements, guarantees
relating to borrowed funds, pledge agreements relating to borrowed funds,
promissory notes and other agreements relating to borrowed funds, other than the
Acquired-company Notes listed on Schedule 1.02(a)(2) hereto, and the Parent and
the Seller shall have terminated and released all Liens, security interests,
charges, interests or other encumbrances on the Shares or any asset, real or
personal, tangible or intangible, of the Company arising therefrom, and shall
have provided the Purchaser with evidence reasonably satisfactory to the
Purchaser to such effect.
6.10 Temporary Use of Supplier Reimbursement Numbers. The Parent and
the Seller shall have executed the letter attached hereto as Exhibit 6.10 with
Hanger with respect to the temporary use by Hanger and its subsidiaries of
supplier reimbursement numbers, if any, of the Parent or any of its Affiliates
(other than any Group Member) used by the Company and any Group Member prior to
the Closing Date.
6.11 Transition Services Agreement. The Parent, the Seller, Hanger
and the Purchaser agree to execute the Transition Services Agreement
substantially in the form attached hereto as Exhibit 6.11 and containing such
other terms and provisions as are mutually acceptable to the parties thereto.
6.12 Subscriber Services Agreement. The Parent agrees to cause
NovaCare Employee Services, Inc., a Delaware corporation ("NCES") and a
subsidiary of the Parent, and the Company to execute a Subscriber Services
Agreement containing substantially the terms in the term sheet attached hereto
as Exhibit 6.12 to provide for their agreement for NCES to provide certain
services to the Company and containing such other terms and provisions as are
mutually acceptable to the parties thereto.
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6.13 Escrow Agreement. The Purchaser and the Seller shall have
executed an Escrow Agreement with respect to the Escrowed Funds on mutually
agreeable terms, with a mutually agreeable escrow agent that is a commercial
bank or trust company.
SECTION VII.
CONDUCT OF THE BUSINESS
The Seller and the Parent, jointly and severally, hereby covenant
and agree with the Purchaser that, except as hereafter consented to in writing
by the Purchaser (which consent shall not be unreasonably withheld or delayed),
from and after the date of this Agreement and until the Effective Time, the
Seller and the Parent shall cause each Group Member not to:
7.01 Operation of the Business. Subject to the further limitations
contained in this Section VII, conduct any business other than in the ordinary
course of business.
7.02 No Loans, Advances, Etc. Make or incur any lease, loan, Lien or
other obligation to or from a third party, or make loans or advances or grant
any pay raises, bonuses or awards, or make any other material payments,
whatsoever directly or indirectly, to any officer, employee or director of any
Group Member other than paying existing compensation amounts as set forth in
Schedule 2.11 hereof and other than routine increases in any such person's
compensation in the ordinary course of business not in excess of 4%.
7.03 Capital Expenditures. Make any commitments for capital
expenditures for additions to property, plant or equipment in excess of $50,000.
7.04 Preservation of Organization and Business Relationships. Fail
to use its reasonable efforts to (a) preserve its present business organization
intact, and (b) preserve present relationships with entities or persons having
business dealings with it except, in either case, where such failure would not
have a Material Adverse Effect.
7.05 Employee Plans. Enter into any material plan, arrangement or
commitment whatsoever with any of its employees, officers or consultants with
regard to compensation, benefits or perquisites.
7.06 Maintenance of Insurance. Fail to maintain through, but not
after, the Effective Time, insurance of the type and with such coverage amounts
as is maintained as of the date hereof.
7.07 Claims. Waive, cancel, sell or otherwise dispose of for less
than the face value thereof any material claim or right it has against third
parties.
7.08 Sale of Assets. Sell, buy, merge or dispose of all or any
material portion of the assets of any Group Member other than in the ordinary
course of business; nor amend the charter or by-laws of any Group Member or
permit any dividends or other distributions by any Group Member (except to
another Group Member).
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SECTION VIII.
OTHER AGREEMENTS OF THE PARTIES
8.01 Announcements. The Parent and the Purchaser will consult with
each other before any issuance by them or any of their Affiliates of, and will
provide each other the opportunity to review, comment upon and concur with, any
press release or other public statements with respect to the transactions
contemplated by this Agreement, and shall not issue any such press release or
make any such public statement prior to such consultation, except as either
party may determine is required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties. In addition, the Purchaser shall comply
with the Confidentiality Agreement.
8.02 Employee Obligations. Except as specifically provided herein
(including in Section 8.06 hereof) and except in respect of the Parent's 401(k)
plan covering a portion of the employees of the Group, and without limiting the
obligations and liabilities of any Group Member arising by operation of law or
under the terms of this Agreement, after the Closing, each of the Group Members
is and shall remain liable for and the Group Members and the Purchaser shall be
responsible only to the extent set forth in the Schedules attached to this
Agreement for and shall promptly discharge all liabilities, duties and claims
(by or to an Employee, Former Employee, Beneficiary, Governmental Authority or
otherwise) arising out of or relating to the employment relationship between any
Group Member and an Employee or Former Employee, whether made to or imposed upon
any Group Member, the Seller or the Parent (or any Affiliate thereof),
including, without limitation, liabilities, duties and claims: (i) for deferred
compensation, incentive compensation, retirement benefits, health and life
benefits, severance arrangements and benefits, disability benefits and other
fringe benefits under any employee benefit plan, fund, program, arrangement,
policy or practice; (ii) relating to continuation health coverage pursuant to
Section 4980B of the Code and Title I, Subtitle B, Part 6 of ERISA; (iii) for
unemployment and workers' compensation or similar benefits; and (iv) to file any
and all annual reports, filings or notices that may be required to be filed with
Governmental Authorities or provided to participants and beneficiaries after the
Closing Date.
8.03 Labor Relations. The Purchaser hereby agrees to defend and
indemnify the Seller Indemnified Parties, and to hold each Seller Indemnified
Party harmless, from and against all Damages that are sustained or incurred by
any Seller Indemnified Parties by reason of or in connection with any claim,
proceeding or suit brought against any Seller Indemnified Parties under the
Worker Adjustment Retraining and Notification Act, or any other local, state,
Federal or foreign law, which relates to actions taken by the Purchaser or any
Group Member at any time after the Effective Time with regard to any site of
employment or one or more facilities or operating units within any site of
employment of any Group Member.
8.04 Access to Information. (a) For a period of six years from the
Closing Date, the Purchaser shall (and shall cause each of the Group Members
to), during normal business hours and upon reasonable notice, make available and
provide the Parent and its representatives (including, without limitation,
counsel and independent auditors) with access to
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the facilities and properties of each of the Group Members and to all
information, files, documents and records (written and computer) relating to any
Group Member or any of its businesses or operations for any and all periods
prior to or including the Closing Date which the Parent (or any Affiliate of the
Parent) requires with respect to any reasonable business purpose, and shall (and
shall cause each of the Group Members to) cooperate fully with the Parent and
its representatives (including, without limitation, its counsel and independent
auditors) in connection with the foregoing, including, without limitation, by
making tax, accounting and financial personnel and other appropriate employees
and officers of each Group Member available to the Parent and its
representatives (including, without limitation, counsel and independent
auditors), with regard to any reasonable business purpose.
(b) Without limiting the generality of Section 8.04(a), from and
after the Closing Date, the Purchaser shall (and shall cause each of the Group
Members to) cooperate fully with and assist, and shall cause its officers and
employees (and the officers and employees of the Group Members) to cooperate
fully with and assist, the Parent and its representatives (including, without
limitation, its counsel and independent auditors), in connection with:
(i) the preparation by the Parent at its sole cost of the
Group Members' (or any Group Member's) portion of any Federal
consolidated income Tax Return, report or declaration, and of any
state consolidated, combined or unitary income Tax Return, report or
declaration, for any Seller Tax Period;
(ii) any Tax audit, examination or proposed or final
assessment or the like (including without limitation any Tax Claim)
relating to the Seller, the Parent, the Group or any Group Member,
and to any Seller Tax Period;
(iii) the preparation of any financial statements of the Group
Members (or any Group Member) for (or including) any period (or
portion thereof) ending on or before the Effective Time, and to that
end the Purchaser shall cause each Group Member to prepare for and
to deliver to the Parent any financial information of the type
historically prepared by any Group Member for all periods (or
portions thereof) ending on or before the Effective Time and to
cause the officers and employees of any Group Member to cooperate
fully and assist the Parent in its review and verification of the
same;
(iv) the preparation of any statement, report, notice,
response or other document for filing with the Securities and
Exchange Commission, any state or foreign securities commission or
authority, any other Governmental Authority or any securities
exchange or market, domestic or foreign, including, without
limitation, in connection with any comments, requests for
information, inquiries, investigations or proceedings, formal or
informal, by any of the foregoing; or
(v) the investigation, prosecution or defense of or response
to any Actions, claims or inquiries commenced by any Governmental
Authority or any other person or entity, against the Parent or the
Seller (or any other Seller Indemnified Party or any Affiliate
thereof).
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(c) The cooperation and assistance of the Purchaser and the Group
Members and their respective officers and employees under this Section 8.04
shall be rendered during normal business hours and in a manner which does not
materially disrupt the business and operations of the applicable Group Member,
and the Purchaser shall use its best efforts in the case of the preparation of
any Tax Return, report or declaration and any financial statements, to cause
such cooperation and assistance to be rendered without adverse consequences to
the Seller or the Parent during the period that each of the Group Members has
normally assisted the Seller or the Parent in the preparation by the Parent of
Tax Returns, reports or declarations and financial statements. The Parent shall
reimburse the Group Members for any out-of-pocket expenses paid by them,
including reasonable accounting and attorney's fees and costs, in the
cooperation and assistance by the Purchaser and the Group Members with the
Parent's preparation of any such Tax Returns, reports or declarations and any
such financial statements.
(d) Without limiting the generality of subsection (a) of this
Section 8.04, following the Closing, the Purchaser shall not (and shall cause
the Group Members not to) destroy any information, files, documents or records
(written and computer) relating to any Group Member or any of its businesses or
operations without giving at least 30 days' prior written notice to the Parent
and shall (and shall cause the Group Members to) permit the Parent to examine,
duplicate (at the Parent's expense) and/or transfer (at the Parent's expense) to
the Parent or its representatives any of such information, files, documents or
records (written and computer).
8.05 Tax Matters. (a) The Seller, the Parent and the Purchaser
acknowledge and agree that, for Federal income tax purposes, the taxable year of
each Group Member will close on the Closing Date and that, for certain state
income tax purposes, the taxable year of some or all of the Group Members may
also close on the Closing Date. The Parent shall be responsible for preparing
and filing any and all of the foregoing income Tax Returns, reports and
declarations that include the Group Members for the periods ending on or before
the Closing Date, and shall be responsible for and shall pay all Taxes payable
by the Group Members with respect to such returns, the determination of which
taxes shall be solely within the Parent's control; provided, however, that all
such returns shall be prepared, and all Taxes shall be calculated, lawfully and
in a manner consistent with past practice and the Seller shall not make any Tax
elections or change any Tax accounting methods (to the extent such changes would
be binding on the Purchaser) without the express written consent of the
Purchaser. Without limiting the generality of Section 8.04 hereof, the Purchaser
shall fully cooperate with and assist the Parent (including, without limitation,
allowing access by the Parent and its representatives (including its counsel and
independent auditors) to the books and records (written and computer) of the
Group Members and allowing the Parent at its sole cost to make copies thereof)
in connection with the preparation by the Parent of any income Tax Returns,
reports and declarations required to be prepared by the Parent or the Seller
hereunder; and except as provided in Section 8.04(c), neither the Parent nor the
Seller shall be charged with any cost or expense for the assistance rendered by
the Purchaser or any of the Group Members in connection therewith.
(b) Except as provided in clause (a) of this Section 8.05, the
Purchaser agrees to cause the Group Members to file all Tax Returns, reports and
declarations not related to income taxes required to be filed by any of them
after the Closing Date and to pay all such Taxes due and payable by any of them
after the Closing Date, including any such Taxes that accrued
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prior to the Closing Date or that are otherwise allocable to any Seller Tax
Period that does not end on or before the Closing Date. Without limiting the
generality of Section 8.04 or this Section 8.05, the Parent shall be given the
opportunity to review, comment upon and suggest changes or corrections to, any
Tax Returns, reports and declarations covered by this Section 8.05(b) which
include any Seller Tax Period (and the work papers of the Group Members and
their accountants used in the preparation thereof), in each case prior to the
filing thereof (but in no event less than 30 days prior to such filing). In the
event of any dispute regarding the matters set forth in the immediately
preceding sentence, then PWC (or if PWC shall decline to arbitrate such dispute,
then another nationally recognized accounting firm selected by the Parent) shall
be requested to make a determination resolving any such dispute; and the
determination by PWC (or such other accounting firm) of any such dispute shall
be final and binding on the parties hereto. The fees and expenses of PWC (or
such other accounting firm) in resolving such dispute shall be borne by the
non-prevailing party.
(c) Any refunds or credits of Taxes of any Group Member for any
Seller Tax Period shall be for the account of the Parent. Applications for
refunds of Taxes, and the filing of amended Tax Returns with respect to any
Seller Tax Period shall be made and prosecuted only by the Parent or the Seller.
Without limiting the provisions of Section 8.04, the Purchaser shall provide and
shall cause each Group Member to provide to the Parent full cooperation and
assistance in connection with any application for refund or amendment made or
proposed to be made by the Parent or the Seller as shall be requested by the
Parent, including by causing each Group Member to authorize by appropriate
powers of attorney such person as the Parent shall designate to represent such
Group Member with respect to such refund claim, without charge for any cost or
expense for assistance rendered by officers and employees of the Group Members
in connection therewith. Neither the Parent nor the Seller shall seek any Tax
refund, or amend any Tax Return, which would have the effect of increasing the
Taxes of any Group Member for any taxable period (or portion thereof) beginning
after the Closing Date; however, the foregoing shall not apply to any amended
Tax Return which may be required by law following resolution of a Tax dispute.
Neither the Purchaser nor any Group Member shall amend, or take any similar
action with respect to, any Tax Return filed by the Parent, the Seller or by any
Group Member with respect to any Seller Tax Period without the prior written
consent of the Parent; provided that the foregoing shall not apply to any
amended Tax Return which may be required by law following resolution of a Tax
dispute conducted in accordance with this Agreement. The Purchaser shall or
shall cause each Group Member to forward to the Parent any refund of Taxes of
any Group Member allocable to any Seller Tax Period within five days after such
refund is received (or reimburse the Parent for any credit within five days
after the credit is allowed or applied against other Tax liability).
Notwithstanding the foregoing, the control of the prosecution of a claim for
refund of Taxes paid pursuant to a deficiency assessed subsequent to the Closing
Date as a result of an audit shall be governed by the provisions of Section
9.03(d) hereof. Notwithstanding anything contained herein to the contrary,
nothing herein shall preclude the Purchaser from carrying back losses to
pre-Closing Tax periods to the extent that such action does not reduce any
attributes or Tax benefits of the Seller.
(d) The Purchaser shall not file an election (or cause a deemed
election) under Section 338 of the Code with respect to its acquisition of the
Group Members or any Group Member hereunder. The Purchaser shall not take any
action, and shall cause the Group Members not to take any action, outside the
ordinary course of the Group Members' business, which
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would increase the amounts included in the gross income of the Parent under
Section 551 or Section 951 of the Code for any Seller Tax Period. Only after the
payment of compensation by the Parent or the Seller to the Purchaser in an
amount which is mutually acceptable to the Purchaser and the Parent, the
Purchaser shall consent to the election under Treasury Regulation Section
1.1502-20(g)(1) to re-attribute any net operating losses and/or net capital
losses of any Group Member to the Seller or the Parent, and shall cause the
Group Members to execute and file such statements as may be necessary or
appropriate to effect such election.
(e) Except as required by law, without the Parent's prior written
consent, neither the Purchaser nor any Group Member shall take any position on
any Tax Return, report or other declaration for any taxable period which might
result in any:
(1) increase in Tax (over accruals therefor on the books and
records of the Group Members as of the Effective Time) for any
Seller Tax Period in:
(A) the liability of the Parent, the Seller or any Group
Member in respect of the consolidated Federal income Tax
liabilities, or any state consolidated, combined or unitary income
Tax liabilities, of the Parent's or the Seller's tax group, as
applicable, for periods while any Group Member was part thereof; or
(B) the liability of the Parent, the Seller or any Group
Member in respect of any separate state, local or foreign Tax of any
Group Member; or
(2) reduction in any Tax attributes to which the Parent, the
Seller or any Group Member may be entitled with respect to any
Seller Tax Period.
(f) All Taxes with respect to the income, property or operations of
the Group Members that relate to any taxable year or period beginning before and
ending after the Closing Date shall be apportioned between the Seller Tax Period
and the period beginning the day after the Closing Date as follows: (A) in the
case of Taxes other than income and sales or use Taxes, on a per diem basis, and
(B) in the case of income Taxes (including income Taxes based on capital or
other alternative bases) and sales or use Taxes, as determined from the books
and records of the Parent and the Group Member in question, as though the
taxable year of the Group Member terminated on the Closing Date, and based on
the accounting methods, elections and conventions used by the Parent and/or the
relevant Group Member in prior years.
8.06 Insurance Matters.
(a) The Purchaser and each Group Member acknowledge and agree
that, effective as of the Effective Time, coverage under all health and medical
insurance plans or programs sponsored or maintained by the Seller or the Parent
for all Employees, Former Employees and their Beneficiaries as applied to any
and all of the Group Members (collectively, the "Seller's Health Plan") shall
terminate and be of no further force or effect. Notwithstanding the preceding
sentence, any expense incurred by an Employee, Former Employee or Beneficiary
prior to the Effective Time that would have been covered under the Seller's
Health Plan shall continue to be the responsibility of the Seller or the Parent,
as applicable. From and after the Effective Time, the Purchaser shall cause the
Group Members to pay to the Parent any premium
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or other charges due in respect of coverage of Employees, Former Employees or
Beneficiaries under the Seller's Health Plan through the Effective Time within
30 days after receipt of an invoice or statement relating to the same. The
amount of such premiums and charges shall be calculated in accordance with the
Parent's and the Group Member's prior practices regarding such premiums and
charges. The Purchaser agrees to notify all Employees, Former Employees and
their Beneficiaries of the manner in which pre-Effective Time expenses under the
Seller's Health Plan are to be submitted for reimbursement and to request that
all such expenses be submitted within 60 days after the Closing Date. The
Purchaser and each Group Member acknowledge and agree that, effective as of the
Effective Time, coverage for all Employees, Former Employees and their
Beneficiaries under all life insurance, disability, or any other welfare or
benefit plans or programs sponsored or maintained by the Seller or the Parent as
applied to any and all of the Group Members shall terminate and be of no further
force or effect.
(b) From and after the Effective Time, (i) the Group Members
shall cease to be covered with respect to any event or occurrence after the
Effective Time under all insurance policies covering any Group Member (other
than insurance policies described in the first sentence of subsection (a) above,
which shall be subject to the provisions of such subsection) and (ii) with
respect to any event or occurrence prior to the Effective Time, the Group
Members shall, subject to the terms and conditions of such policies, continue to
be entitled to the benefits thereof.
(c) The Purchaser shall cause the Group Members promptly to
notify the Parent of any claims which would be subject to any insurance coverage
maintained by the Parent, the Seller or any of their Affiliates (other than any
Group Member) for the benefit of any Group Member and based on events or
occurrences on or prior to the Closing Date, and shall cause the Group Members
to keep the Parent advised of the status of (and any developments regarding) any
such claims, and to cooperate with the Parent and any insurance carrier in
connection with the investigation and defense of any such claims, all in
accordance and consistent with the standard practices and procedures established
from time to time by the Parent or any such insurance carrier.
(d) No covenant or agreement by any party hereto to indemnify
any other party hereto shall release, or be deemed to release, any insurer or
indemnitor of any Damages which might be the basis for any Indemnification
Matter.
8.07 Agreement by the Purchaser Regarding No Other Representations
or Warranties by the Parent or the Seller. The Purchaser agrees that except for
the representations and warranties (including the Schedules with respect
thereto) made by the Parent and the Seller and expressly set forth in Section II
of this Agreement (as such representations and warranties are modified pursuant
to the provisions of Section 6.03 hereof), neither the Parent nor the Seller nor
any Affiliate or representative of either has made and shall not be construed as
having made to the Purchaser or to any representative or Affiliate thereof, and
neither the Purchaser nor any Affiliate nor any representative thereof has
relied upon, any representation or warranty of any kind. Without limiting the
generality of the foregoing, and notwithstanding any otherwise express
representations and warranties made by the Parent and the Seller in Section II
hereof, the Purchaser agrees that neither the Parent nor the Seller nor any
Affiliate or representative of either
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makes or has made any representation or warranty to the Purchaser or to any
representative or Affiliate thereof with respect to:
(i) any projections, estimates or budgets contained in that
certain Confidential Information Memorandum relating to the Group
Members or otherwise heretofore or hereafter delivered to or made
available to the Purchaser or its counsel, accountants, advisors,
lenders, representatives or Affiliates of future revenues, expenses
or expenditures, future results of operations (or any component
thereof), future cash flows (or any component thereof) or future
financial condition (or any component thereof) of the Group or any
Group Member or the future business, operations or affairs of the
Group or any Group Member; and
(ii) any other information, statements or documents heretofore
or hereafter delivered to or made available to the Purchaser or its
counsel, accountants, advisors, lenders, representatives or
Affiliates (including, without limitation, the Confidential
Information Memorandum relating to the Group Members) with respect
to the Group or any Group Member or the business, operations or
affairs of the Group or any Group Member.
8.08 Name Change. The Purchaser shall take all steps necessary or
appropriate to cause the Company and each other Group Member, as applicable, to
change its name at or immediately after the Closing Date to another corporate
name not containing the name "NovaCare" or any variation thereof and to cease
conduct of business from and after the Closing Date under any assumed or trade
name containing the name "NovaCare" or any variation thereof. Notwithstanding
the foregoing, the Purchaser, the Company and the Group Members may continue to
utilize all boxes, labels, products and other assets bearing the "NovaCare" name
(the "Supplies") until depleted. The Purchaser agrees to use its best efforts to
utilize the Supplies as expeditiously as possible and will indemnify the Parent
from any and all liabilities arising out of such use except to the extent that
such liability arises from a product liability claim which would constitute a
breach of a representation or warranty of the Parent or the Seller hereunder.
8.09 Release of Liens. From and after the Closing Date, the Parent
agrees to do all acts necessary to continue to extinguish and pay-off all Liens
(other than Permitted Liens) against all assets of the Company and all assets of
each Group Member which existed as of the Closing Date, and the Parent agrees to
indemnify the Purchaser from any liability or Damages due to such Liens.
8.10 Consents and Approvals. The Parent shall use its best efforts
to obtain all necessary consents, waivers, authorizations and approvals of all
governmental and regulatory authorities, domestic and foreign, and of all other
persons, firms or corporations required in connection with the execution,
delivery and performance by it of this Agreement.
8.11 Further Assurances. Upon the request of a party or parties
hereto at any time after the Closing Date, the other party or parties will
forthwith execute and deliver such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other documents as the
requesting party or parties or its or their counsel may request in order to
perfect
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title of the Purchaser and its successors and assigns to the Shares or otherwise
to effectuate the purposes of this Agreement.
8.12 Best Efforts. Upon the terms and subject to the conditions of
this Agreement, each of the parties hereto will use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with applicable law to consummate and
make effective in the most expeditious manner practicable the transactions
contemplated hereby.
8.13 Notice of Breach. Through the Closing Date, each of the parties
hereto shall promptly give to the other parties written notice with
particularity upon having knowledge of any matter that may constitute a breach
of any representation, warranty, agreement or covenant contained in this
Agreement.
8.14 Confidentiality. Except as required by law, each party hereto
shall not, directly or indirectly, disclose to any person or entity or use any
information not in the public domain or generally known in the industry, in any
form, whether acquired prior to or after the Closing Date, received from another
party hereto relating to the business and operations of the Company, the Parent,
their respective subsidiaries or affiliates, including but not limited to
information regarding customers, vendors, suppliers, trade secrets, training
programs, manuals or materials, technical information, contracts, systems,
procedures, mailing lists, know-how, trade names, financial or other data
(including the revenues, costs or profits associated with any of the Company's
products or services), business plans, code books, invoices and other financial
statements, computer programs, software systems, databases, discs and printouts,
plans (business, technical or otherwise), customer and industry lists,
correspondence, internal reports, personnel files, sales and advertising
material, telephone numbers, names, addresses or any other compilation of
information, written or unwritten, which is or was used in the business of the
Company or any of its Subsidiaries.
8.15 Access to Properties and Records. The Parent shall afford to
the Purchaser, and to the accountants, counsel and representatives of the
Purchaser, reasonable access during normal business hours upon reasonable notice
throughout the period prior to the Closing Date to all properties, books,
contracts, commitments, and records of the Company and its Subsidiaries and,
during such period, shall furnish promptly to the Purchaser all other
information concerning the business, its properties and its personnel as the
Purchaser may reasonably request, including but not limited to monthly financial
statements consisting of balance sheets, income statements and cash flow
statements for each month subsequent to the period covered by the Financial
Statements attached hereto as Schedule 2.04(a) and continuing for each month
thereafter up to the last full month prior to the Closing Date; provided that no
investigation or receipt of information pursuant to this Section 8.15 shall
qualify any representation or warranty of the Parent or the Seller or the
conditions to the obligations of the Purchaser.
8.16 Acquisition of Rights to Confidentiality. At the Closing, the
Parent shall assign, grant and convey to the Purchaser all its rights under
confidentiality agreements between it and persons other than the Purchaser that
were entered into in connection with or relating to a possible sale of the
Shares or any part thereof (collectively, "Other Confidentiality Letters"),
including the right to enforce all terms of the Other Confidentiality Letters.
At the Closing, the
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Parent shall deliver to the Purchaser copies of the Other Confidentiality
Letters to the extent permitted by the terms thereof; provided that if any Other
Confidentiality Letter shall not be assignable, the Parent shall disclose to the
Purchaser the parties to such letter agreement.
8.17 Financing. The Parent shall cooperate with Hanger in all
reasonable respects to enable Hanger to obtain the financing contemplated by
Section 3.07 (the "Financing"), including using its best efforts to (i) prepare
interim financial statements for the Company and its Subsidiaries ("Interim
Financials"), if required in connection with the Financing, (ii) obtain consents
of its independent public accountants and comfort letters, when required, with
respect to the Financial Statements and any Interim Financials, at Hanger's
cost, so that such financial statements can be used in Rule 144A offering
memoranda and registration statements filed under the Securities Act of 1933, as
amended, and reports under the Securities Exchange Act of 1934, as amended
("Public Filings"), issued or filed by Hanger, (iii) cooperate with Hanger so
Hanger can obtain information sufficient for Hanger to comply with the
requirements of the Management's Discussion and Analysis portion of the Public
Filings, as it may relate to the Company and its Subsidiaries, (iv) compile the
requisite financial information, including supplying financial information for
purposes of comfort letters to be issued in connection with the Public Filings,
(vi) request the independent public accountants of the Company to give full and
complete access to Hanger and its agents and representatives to its work papers
and any other supporting information relating to the Financial Statements or the
Interim Financials, subject to customary agreements sought by independent public
accountants in connection with giving such access, (vii) sign customary
management representation letters relating to the Financial Statements and the
Interim Financials, (viii) cooperate in the preparation of financial statements
for the Company and its Subsidiaries that are suitable for inclusion by Hanger
in the Public Filings, including compliance with the applicable provisions of
Regulation S-X, and (ix) provide reasonable assistance to Hanger in connection
with any roadshow, rating agency or lender presentations and meetings relating
to the Financing.
SECTION IX.
INDEMNIFICATION
9.01 Indemnification by the Parent and the Seller. After the Closing
Date, the Parent and the Seller, jointly and severally, shall indemnify and hold
harmless the Purchaser (and its employees, officers, partners, directors,
shareholders, agents and representatives) and the Group Members (collectively,
the "Purchaser Indemnified Parties") from and against all Damages which are
sustained or incurred by any of the Purchaser Indemnified Parties, to the extent
that the Damages are sustained or incurred by reason of (a) the breach by the
Parent or the Seller of any of its covenants or agreements hereunder to be
performed after the Closing Date, or, subject to the limitations of Section
9.05(c), the breach by the Parent or the Seller of any of its Pre-Closing
Covenants, (b) the breach of any of the representations or warranties made by
the Parent and the Seller in Section II hereof (as modified by Section 6.03
hereof), (c) any liability (as a result of Treasury Regulation Section
1.1502-6(a) or otherwise) for Taxes of the Parent or the Seller or any other
corporation which is or has been affiliated with the Parent or the Seller (other
than any of the Group Members) or (d) the litigation set forth on Schedule 9.01.
9.02 Indemnification by the Purchaser. After the Closing Date,
Hanger and the Purchaser, jointly and severally, shall indemnify and hold
harmless the Parent, the Seller and
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their respective employees, officers, partners, directors, shareholders, agents
and representatives (collectively, the "Seller Indemnified Parties") from and
against all Damages which are sustained or incurred by any of the Seller
Indemnified Parties, to the extent that such Damages are sustained or incurred
by reason of (a) the breach by either of Hanger or the Purchaser of any of its
covenants or agreements hereunder to be performed after the Closing Date, or,
subject to the limitations of Section 9.05(c), the breach by either of Hanger or
the Purchaser of any of its Pre-Closing Covenants, (b) the breach of any of the
representations or warranties made by either of Hanger or the Purchaser in
Section III hereof or (c) any liability of the Parent or any of its Affiliates
(other than any Group Member) arising out of (i) those certain agreements (the
"Parent Agreements"), none of which are material, to which the Parent or any of
its Affiliates (other than any Group Member) is a party and which relate solely
to the business of the Company (or any other Group Member), it being understood
and agreed that the Parent shall deliver to the Purchaser a schedule of the
Parent Agreements (which the Parent shall use its reasonable best efforts to
ensure is complete) not less than five (5) days prior to the Closing Date, (ii)
severance payments due to employees performing all or substantially all their
services on behalf of the Company or any other Group Member, more particularly
set forth on Schedule 2.11, who are terminated at any time subsequent to the
Closing Date, (iii) any litigation set forth in Schedule 2.15 (other than any
litigation set forth on Schedule 9.01) to which the Parent or any of its
Affiliates (other than any Group Member) is or becomes a party, (iv) obligations
under the employment agreements set forth on Schedule 1.02(a)(3) assumed by the
Purchaser pursuant to Section 1.02(a), or (v) the operations of the business of
the Company or any Group Member subsequent to the Closing Date.
9.03 Procedure for Indemnification. (a) Except as provided in clause
(d) of this Section 9.03, in the event that any party hereto or other Purchaser
Indemnified Party or Seller Indemnified Party reasonably believes that such
party has a claim for Damages in respect of which indemnity may be sought by
such party pursuant to Section 8.03, this Section IX or Section X (each, an
"Indemnification Matter"), the party indemnified hereunder (the "Indemnitee")
shall notify the party(s) providing indemnification (collectively, the
"Indemnitor") by sending written notice to the Indemnitor (an "Indemnity
Notice"). In the case of third party claims, which, if successful, could result
in an indemnity payment hereunder, an Indemnity Notice shall be given within 30
days after the discovery by the Indemnitee of the filing or assertion of any
claim against the Indemnitee stating the nature and basis of such claim;
provided, however, that any delay or failure to notify any Indemnitor of any
claim shall not relieve it from any liability except to the extent that the
Indemnitor demonstrates that the defense of such action is prejudiced by such
delay or failure to notify. Any Indemnity Notice (i) shall state (with
reasonable specificity) the basis on which indemnification is being asserted,
(ii) shall set forth the amount of Damages for which indemnification is being
asserted and (iii) in the case of third party claims, shall be accompanied by
copies of all relevant pleadings, demands and other papers served on the
Indemnitee.
(b) Except as provided in clause (d) of this Section 9.03, in the
case of third party claims the Indemnitee shall give the Indemnitor the right
(i) to control and conduct any proceedings or negotiations in connection
therewith and necessary or appropriate to defend the Indemnitee (provided such
are pursued in a professional manner), (ii) to take all other reasonable steps
or proceedings to settle or defend any such claims, provided that the Indemnitor
shall not settle any such claim without the prior written consent of the
Indemnitee, which consent will not
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be unreasonably withheld or delayed, unless, in the case that the Parent or the
Seller is the Indemnitor, such settlement only involves the payment of money
(all of which shall be payable by the Parent or the Seller), in which event the
Parent and the Seller shall have the right to settle any such claim without the
consent of the Indemnitee, and (iii) to employ counsel selected by the
Indemnitor, after reasonable consultation with the Indemnitee, to contest any
such claim or liability in the name of the Indemnitee or otherwise.
Notwithstanding the Indemnitor's election to appoint counsel to represent the
Indemnitee in an action, the Indemnitee shall have the right to employ separate
counsel and the Indemnitor shall bear the reasonable fees, costs and expenses of
such separate counsel, if the Indemnitee determines, based upon the advice of
counsel, that a conflict or potential conflict of interest exists between the
Indemnitor and the Indemnitee in such action. The Indemnitor shall, within 30
days of receipt of an Indemnity Notice in respect of such claim (the "Indemnity
Notice Period"), notify the Indemnitee in writing of its intention to assume the
defense of such claim. In the event that the Indemnitor does assume the defense
as provided above, the Indemnitee shall have the right to participate fully in
such defense (including, without limitation, with counsel of its choice), at its
sole expense, and the Indemnitor shall cooperate fully with the Indemnitee in
connection with such participation. If the Indemnitor does not deliver to the
Indemnitee within the Indemnity Notice Period written notice that the Indemnitor
will assume the defense of any such claim or litigation resulting therefrom, the
Indemnitee may defend against any such claim or litigation in such manner as it
may deem appropriate and the Indemnitee may settle such claim or litigation,
provided that the Indemnitee shall not settle any such claim without the prior
written consent of the Indemnitor, which consent will not be unreasonably
withheld or delayed. In the event that the Indemnitor does not assume the
defense as provided above, the Indemnitor shall have the right to participate
fully in such defense (including, without limitation, with counsel of its
choice), at its sole expense, and the Indemnitee shall cooperate fully with the
Indemnitor in connection with such participation, and in all cases the
Indemnitee shall keep the Indemnitor fully informed as to all matters concerning
such third party claim and shall promptly notify the Indemnitor in writing of
any and all significant developments relating thereto. Within 30 days after the
Determination Date with respect to a third party claim, the Indemnitor shall pay
the Indemnitee the amount of Damages sustained or incurred by the Indemnitee.
(c) In the event that liability hereunder does not involve a third
party claim, the Indemnitor shall within 30 days after the date of receipt of an
Indemnity Notice respond in writing to the Indemnitee (the "Indemnity Response")
and set forth with reasonable specificity those items in the Indemnity Notice to
which the Indemnitor does not agree as well as the summary basis upon which such
disagreement is founded. Within 30 days following the receipt of the Indemnity
Response by the Indemnitee, representatives of the Indemnitor and the Indemnitee
shall meet to attempt to resolve through good faith negotiations the applicable
Indemnification Matters. The parties shall negotiate in good faith for up to 60
days in an attempt to reach a settlement of any disputed matter. In the event
that such good faith negotiations are unsuccessful or in the event of any other
dispute under this Section IX, the parties shall proceed in accordance with
Section 11.07 of this Agreement.
(d) (i) If a claim shall be made by any taxing authority, which, if
successful, might result in an indemnity payment to any Purchaser Indemnified
Party, the Purchaser shall promptly notify the Parent in writing (a "Tax
Notice") of such claim (a "Tax Claim"). If a Tax Notice is not given to the
Parent within a sufficient period of time to allow the Parent or the
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Seller effectively to contest such Tax Claim, or in reasonable detail to apprise
the Parent of the nature of the Tax Claim, in each case taking into account the
facts and circumstances with respect to such Tax Claim, neither the Parent nor
the Seller shall be liable to any Purchaser Indemnified Party to the extent that
the Parent's or the Seller's position is prejudiced as a result thereof.
(ii) With respect to any Tax Claim, the Parent and the Seller
shall have the right to control and conduct all proceedings and negotiations in
connection with such Tax Claim (including, without limitation, selection of
counsel) and, without limiting the foregoing, may in the Parent's sole
discretion pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with any taxing authority with respect thereto, and
may, in the Parent's sole discretion, either pay the Tax claimed and ▇▇▇ for a
refund where applicable law permits such refund suits or contest the Tax Claim
in any permissible manner. The Parent shall, within 30 days of receipt of a Tax
Notice with respect to a Tax Claim (the "Tax Notice Period"), notify the
Purchaser in writing of its intention to control and conduct the proceedings and
negotiations in connection with such Tax Claim. In the event that the Parent
does notify the Purchaser of its intention to control and conduct the
proceedings and negotiations in connection with any Tax Claim as provided above,
the Purchaser shall have the right to participate fully in such proceedings and
negotiations (including, without limitation, with counsel of its choice), at its
sole expense, and the Parent and the Seller shall cooperate fully with the
Purchaser in connection with such participation. If the Parent does not deliver
to the Purchaser within the Tax Notice Period written notice that it will
control and conduct the proceedings and negotiations in connection with a Tax
Claim, the Purchaser may control, or cause the applicable Group Member to
control, and conduct such proceedings and negotiations in such manner as it may
deem appropriate. In the event that the Parent or the Seller do not exercise
their right to control and conduct the proceedings and negotiations in
connection with any Tax Claim as provided above, the Parent and the Seller shall
have the right to participate fully in such proceedings and negotiations
(including, without limitation, with counsel of its choice), at their sole
expense, and the Purchaser shall, and shall cause each Group Member to,
cooperate fully with Parent and the Seller and their accountants and other
representatives in connection with such participation, and in all cases the
Purchaser shall keep the Parent fully informed as to all matters concerning such
Tax Claim and shall promptly notify the Parent in writing of any and all
significant developments relating thereto. Without limiting Sections 8.04 and
8.05, the Purchaser and each of its Affiliates shall (and the Purchaser shall
cause the Group Members to) cooperate fully with the Parent and the Seller in
contesting any Tax Claim, which cooperation shall include, without limitation,
the retention and (upon the Parent's request) the provision to the Parent of
records and information which are relevant to such Tax Claim, and making
officers and employees available on a timely and mutually convenient basis to
provide additional information or explanation of any material provided hereunder
or to testify at proceedings relating to such Tax Claim.
(iii) Notwithstanding anything to the contrary contained herein,
in no event shall the Purchaser or any Group Member settle or otherwise
compromise any Tax Claim without the Parent's prior written consent which shall
not be unreasonably withheld. The Parent agrees to either give its consent or
the reasonable basis for withholding its consent within 15 days of the receipt
of any notice by the Parent from the Purchaser, the Company or any Group Member.
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9.04 Limits on the Liability of the Seller. Subject to the terms
hereof (including Sections 4.05 and 9.07 hereof), the aggregate liability of the
Parent and the Seller for Damages or otherwise with respect to the subject
matter of this Agreement and the transactions contemplated hereby is, and shall
be, limited to an aggregate amount (the "Seller's Liability Amount") equal to
$100,000,000, and the Purchaser, on behalf of itself, its Affiliates and all
Purchaser Indemnified Parties, agrees not to seek any Damages in excess of the
Seller's Liability Amount for any and all Damages sustained or incurred by any
Purchaser Indemnified Party for any breach or liability under this Agreement or
otherwise with respect to the subject matter of this Agreement and the
transactions contemplated hereby or otherwise.
9.05 Other Limits on Indemnification.
(a) Notwithstanding anything in Section 8.03, this Section IX
or Section X to the contrary and subject to the final sentence of this Section
9.05(a), no Purchaser Indemnified Party shall be entitled to indemnification
pursuant to Section 9.01 hereof unless and until the aggregate amount of all
Damages to which the indemnity set forth in Section 9.01(b) relates sustained or
incurred by all Purchaser Indemnified Parties exceeds an aggregate amount (the
"Basket Amount") equal to $1,500,000. Subject to Section 9.04 above, if such
Damages exceed the Basket Amount, then the Seller's liability for
indemnification under Section 9.01(b) shall be limited to the amount of such
Damages sustained or incurred which exceeds the Basket Amount. Notwithstanding
anything contained herein to the contrary, there shall be no limitation on the
liability of the Seller and the Parent under either Section 9.04 or this Section
9.05 for Damages of the Purchaser which relate to Section 9.01(a) [breaches of
covenants], Section 9.01(c) [Tax liabilities], Section 9.01(b) (insofar as it
relates to breaches of Sections 2.01, 2.02, 2.03, 2.04 or 2.21) and/or the last
sentence of Section 6.03 hereof as therein provided.
(b) The representations and warranties contained in or made
pursuant to this Agreement shall expire 15 months from the Closing Date, or if
at the end of such 15 month period the Parent shall be continuing to operate one
or more businesses for profit, such period shall be extended during the
operation thereof for up to an additional three months, provided that the
representations and warranties contained in Sections 2.07, 2.16(c), 2.21 and
2.24 shall survive for the applicable statute of limitations, and provided
further that if written notice is properly given under this Section IX with
respect to any alleged breach of a representation or warranty to which such
party is entitled to be indemnified hereunder prior to the applicable expiration
date, such representation or warranty with respect to such specified matter only
shall continue indefinitely until the applicable claim is finally resolved.
(c) With respect to any claim by the Parent or the Seller, on
the one hand, or the Purchaser, on the other hand, against the other based upon
a breach of any covenant or agreement of the other herein which is required to
be performed on or prior to the Closing Date (the "Pre-Closing Covenants"), such
Pre-Closing Covenant shall not survive the Closing and the breach thereof shall
be deemed to have been waived by the party for whose benefit such Pre-Closing
Covenant exists; provided that in the event that such breach has had a Material
Adverse Effect and the party who has breached such Pre-Closing Covenant has
taken actions to intentionally conceal the existence of such breach from the
party for whose benefit such Pre-Closing Covenant exists, and provided further
that the party for whose benefit such Pre-Closing Covenant exists has sustained
or incurred Damages that would otherwise constitute an
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Indemnification Matter covered by the provisions of Section 9.01 or 9.02, as the
case may be, then the applicable Pre-Closing Covenant shall be deemed to have
survived the Closing.
9.06 Losses Net. The amount of any Damages for which indemnification
is provided under Section 8.03, this Section IX or Section X shall be net of Tax
benefits to be received by the Indemnitee, and net of any amounts recoverable by
the Indemnitee under insurance policies with respect to such Damages.
9.07 Sole and Exclusive Remedy. After the Closing Date, each party
hereto acknowledges and agrees that such party's sole and exclusive remedy with
respect to Damages and any and all other claims relating to the subject matter
of this Agreement and the transactions contemplated hereby (other than disputes
arising under the second sentence of Section 8.05(b) hereof which disputes shall
be resolved as set forth in such Section) shall be in accordance with, and
limited by, the indemnification provisions set forth in Section 8.03, this
Section IX and Section X.
9.08 Limitations on Materiality. For purposes of the indemnification
provided in this Article 9, in determining whether the representations and
warranties of the Parent or the Seller have been breached or are inaccurate or
the amount of any Damages, no effect will be given to any materiality (including
Material Adverse Effect) qualification set forth in such representations and
warranties.
SECTION X.
BROKERS AND FINDERS
10.01 The Parent's and the Seller's Obligations. Neither the
Purchaser nor any Group Member shall have any obligation to pay any financial
advisory, finder's fee or other compensation to any person, firm or corporation
claiming by, through or under the Parent, the Seller or any Group Member in
connection with the sale of the Shares contemplated by this Agreement and the
transactions contemplated herein, and the Parent and the Seller, jointly and
severally, hereby agree to defend, indemnify and hold the Purchaser and each
Group Member harmless from any Damages sustained or incurred by the Purchaser or
such Group Member by reason of any such claim for any such fee or other
compensation. It is understood and agreed that the Parent shall be solely
responsible for the fees and the expenses of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, Inc., ▇▇▇▇▇▇
Brothers, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., Inc. and Warburg ▇▇▇▇▇▇ ▇▇▇▇ LLC in
connection with this Agreement and the transactions contemplated hereby.
10.02 The Purchaser's Obligations. Neither the Parent nor the Seller
shall have any obligation to pay any financial advisory, finder's fee or other
compensation to any person, firm or corporation claiming by, through or under
the Purchaser (or any Affiliate thereof) in connection with this Agreement and
the transactions contemplated herein, and the Purchaser hereby agrees to defend,
indemnify and hold the Parent and the Seller harmless from any Damages sustained
or incurred by the Seller by reason of any such claim for any such fee or other
compensation.
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SECTION XI.
MISCELLANEOUS
11.01 Notices. All notices, requests or instructions hereunder shall
be in writing and delivered personally or sent by telecopy or registered or
certified mail, postage prepaid, return receipt requested, or by FedEx or other
recognized overnight courier as follows:
(a) if to the Seller or the Parent:
NovaCare, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Purchaser:
Hanger Orthopedic Group, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Freedman, Levy, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, on the date of receipt, if telecopied, three business days
after the date of mailing, if mailed by registered or certified mail, return
receipt requested, and one business day after the date of sending, if sent by
FedEx or other recognized overnight courier.
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11.02 Entire Agreement. This Agreement, the Schedules and the
Exhibits hereto contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby, and, except for that certain
Confidentiality Agreement dated December 15, 1998 between ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
Inc., on behalf of the Parent, and Hanger, which shall remain in full force and
effect, supersede all prior agreements, understandings, negotiations and
discussions, whether written or oral, of the parties, and, except as otherwise
provided in Section 6.03 hereof, no modification hereof shall be effective
unless in writing and signed by the party against which it is sought to be
enforced.
11.03 Assignment. This Agreement shall not be assignable by any of
the parties hereto except pursuant to a writing executed by all of the parties
hereto, provided that the Purchaser may without such prior consent, for
collateral security purposes, assign its rights (but not its obligations) to
providers of financing in connection with the purchase of the Shares.
11.04 Further Action. Each of the parties hereto shall use such
party's best efforts to take such actions as may be necessary or reasonably
requested by the other parties hereto to carry out and consummate the
transactions contemplated by this Agreement.
11.05 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
11.06 Expenses. Each of the parties hereto shall bear such party's
own expenses in connection with this Agreement and the transactions contemplated
hereby whether or not the Closing occurs. In the event that there are any direct
or indirect real property transfer, personal property transfer or other similar
transfer taxes payable in connection with the transactions contemplated hereby,
such taxes shall be paid by the Seller.
11.07 Arbitration. Subject to Sections 8.05(b) and 9.03(c) hereof,
the parties agree that they shall submit any dispute arising out of or relating
to this Agreement, or any breach hereof, to arbitration in accordance with the
rules of the American Arbitration Association then in effect. The parties
further agree that judgment upon an award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. The arbitration shall be held
in the District of Columbia.
11.08 Schedules and Exhibits. All Schedules and Exhibits to this
Agreement are integral parts of this Agreement.
11.09 Invalidity, Etc. Should any provision of this Agreement be
held by a court or arbitration panel of competent jurisdiction to be enforceable
only if modified, such holding shall not affect the validity of the remainder of
this Agreement, the balance of which shall continue to be binding upon the
parties hereto with any such modification to become a part hereof and treated as
though originally set forth in this Agreement. The parties further agree that
any such court or arbitration panel is expressly authorized to modify any such
unenforceable provision of this Agreement in lieu of severing such unenforceable
provision from this Agreement in its entirety, whether by rewriting the
offending provision, deleting any or all of the offending provision, adding
additional language to this Agreement, or by making such other modifications as
it deems warranted to carry out the intent and agreement of the parties as
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embodied herein to the maximum extent permitted by law. The parties expressly
agree that this Agreement as so modified by a court or arbitration panel shall
be binding upon and enforceable against each of them. In any event, should one
or more of the provisions of this Agreement be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, and if such provision or
provisions are not modified as provided above, this Agreement shall be construed
as if such invalid, illegal or unenforceable provisions had never been set forth
herein.
11.10 Headings. The headings of this Agreement are for convenience
of reference only and are not part of the substance of this Agreement.
11.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the conflicts of laws provisions and principles thereof that would
apply the laws of any other jurisdiction.
11.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
11.13 Construction. The parties hereto agree that this Agreement is
the product of negotiations among sophisticated parties, each of whom was
represented by counsel, and each of whom had an opportunity to participate in,
and did participate in, the drafting of each provision hereof. Accordingly,
ambiguities in this Agreement, if any, shall not be construed strictly or in
favor of or against any party hereto but rather shall be given a fair and
reasonable construction without regard to the rule of contra proferentem.
11.14 Hanger's Guaranty of Purchaser's Obligations. Hanger hereby
unconditionally guaranties to the Parent and the Seller the due and timely
performance by the Purchaser of all of the Purchaser's obligations under this
Agreement.
11.15 Assignment of Parent Agreements. The Parent hereby assigns to
the Company, and the Company hereby accepts and assumes, all the Parent's rights
and obligations pursuant to the Parent Agreements. To the extent that any Parent
Agreement to be assigned to the Company hereunder requires the consent to such
assignment by any third party thereto, the Parent shall cooperate fully with the
Company in attempting to procure any such consent and in any reasonable
arrangement designed to provide the Company with the benefits under any such
Parent Agreement. The failure of the Company or the Parent to obtain any such
consent shall in no way relieve the Company from its obligation to assume such
Parent Agreement and the Company shall fully and faithfully perform, observe and
fulfill all the unfulfilled obligations of the Parent under such Parent
Agreements. From and after the Closing Date, the Company shall use commercially
reasonable efforts to obtain promptly and deliver to the Parent, written
releases in favor of the Parent with respect to any such obligations and
liabilities under all Parent Agreements.
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SECTION XII.
DEFINITIONS
12.01 Certain Definitions. The following terms when used herein
shall have the meanings assigned to them below (certain other terms are defined
elsewhere herein):
"Actions" shall have the meaning set forth in Section 2.15 hereof.
"Affiliate" means a person or entity who directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, another person.
"Applicable Law" shall mean the collective reference to any law,
rule, regulation, ordinance, writ, judgment, injunction, decree, determination,
award or other order of any Governmental Authority, in each case excluding any
and all Environmental Laws.
"Beneficiary" shall mean the person(s) or entity(ies) designated by
an Employee or Former Employee, by operation of law or otherwise, as the party
entitled to compensation, benefits, damages, insurance coverage, payments,
indemnification or any other goods or services as a result of any liability or
claim under any applicable welfare or benefit plan or program.
"Benefit Plan" shall have the meaning set forth in Section 2.12
hereof.
"Best Efforts" or "best efforts" shall mean diligently, promptly and
in good faith taking all actions which are reasonable, necessary and appropriate
to accomplish the objective requiring the use of best efforts, but shall not
include any obligation (a) to make any payment, incur any costs, commit
available resources, or forego the receipt of any payment, which in any case is
material in amount in light of the required objective, (b) to initiate any
lawsuit or other proceeding to achieve the required objective, or (c) to take
any action which is unlawful.
"Closing" and "Closing Date" shall have the meanings set forth in
Section 4.01 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall have the meaning set forth in the recitals
hereof.
"Confidentiality Agreement" shall have the meaning set forth in
Section 11.02 hereof.
"Contracts" shall have the meaning set forth in Section 2.10 hereof.
"Control" (including the terms "controlling", "controlled by" and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of the
person, whether through stock ownership, voting rights, governing boards or
otherwise.
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"Damages" shall mean any and all losses, claims, demands, damages,
liabilities, obligations, costs and expenses, including without limitation,
reasonable fees and disbursements of counsel (however sustained or incurred,
including, without limitation, in any action or proceeding involving any third
party or involving any other party to this Agreement) sustained or incurred by
or claimed against the Purchaser Indemnified Parties (or any of them) or the
Seller Indemnified Parties (or any of them), as the case may be, and other
reasonable out-of-pocket costs and expenses incurred in connection with
investigating or defending any action, suit or proceeding, commenced or
threatened, but excluding punitive or consequential losses or damages.
"Determination" shall mean (a) the final non-appealable judgment by
a court of competent jurisdiction or arbitrator with respect to any claim
covered by Section IX hereof or (b) a compromise and settlement agreement
executed and delivered by both the Indemnitor and the Indemnitee with respect to
any claim covered by Section IX.
"Determination Date" shall mean the date the Determination is final,
legally binding, and non-appealable.
"Effective Time" shall mean the close of business Eastern Standard
Time on the Closing Date.
"Employees" shall mean all individuals with whom a Group Member
maintains, on the Closing Date, an employer-employee relationship, including any
individuals on lay-off, disability or leave of absence, whether paid or unpaid.
"Environmental Laws" shall have the meaning set forth in Section
2.16(c) hereof.
"Environmental Permits" shall have the meaning set forth in Section
2.16(c) hereof.
"ERISA" shall have the meaning set forth in Section 2.12(a) hereof.
"Financial Statements" shall have the meaning set forth in Section
2.04 hereof.
"Former Employees" shall mean all individuals as to whom an
employer-employee relationship with any Group Member existed prior to the
Closing Date, but does not exist on the Closing Date, who remain entitled to
benefits under any applicable welfare or benefit plan or program.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Authority" shall mean the collective reference to any
court, tribunal, government, or governmental agency, authority or
instrumentality, domestic or foreign.
"Group" shall mean the Company and its Subsidiaries, taken as a
whole.
"Group Member" shall mean, individually, the Company and each of its
Subsidiaries.
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"Indemnification Matter" shall have the meaning set forth in Section
9.03 hereof.
"Knowledge of the Parent" shall mean, with respect to a particular
fact or other matter, that (i) an individual who is a director or executive
officer of the Parent, the Seller, the Company or any Group Member is actually
aware of such fact or other matter or (ii) a reasonably prudent individual in
the satisfaction of his or her duties as a director or executive officer of the
Parent, the Seller, the Company or any Group Member would be reasonably expected
to discover or otherwise become aware of such fact or other matter in the course
of conducting a reasonable investigation.
"Lien" shall mean any mortgage, pledge, encumbrance, charge or other
security interest of any kind or nature whatsoever.
"Material Adverse Effect" shall mean a material adverse effect on
the assets, properties, businesses, results of operations or financial condition
of the Group, taken as a whole, and in any case after application of the
proceeds of any insurance or indemnity under any contract or agreement to which
any Group Member, the Parent or the Seller (or any Affiliate thereof) is a party
or, for purposes of Section 6.03, a material adverse effect on the ability of
the Parent or the Seller to consummate the sale of the Shares as provided in
this Agreement; provided that the term "Material Adverse Effect" as used herein
shall not include any effect attributable to changes in the economy (of the
United States or any other country) generally, changes in the industries in
which any Group Member engages, or seasonality of the businesses of any Group
Member.
"Permits" shall have the meaning set forth in Section 2.16(b)
hereof.
"Permitted Liens" shall mean:
(a) Liens for Taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate reserves with
respect to contested taxes are maintained on the books of any Group Member;
(b) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other social security legislation;
(c) easements, rights-of-way, restrictions and other similar
encumbrances previously incurred in the ordinary course of business which, in
respect of properties or assets of the Group are not material, and which, in the
case of such encumbrances on the assets or properties of any Group Member, do
not materially detract from the value of any such properties or assets or
materially interfere with any present use of such properties or assets;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are not overdue for a period of more than 90 days or which are being contested
in good faith by appropriate proceedings;
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(e) deposits to secure the performance of bids, contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(f) statutory and contractual Liens on the property of any
Group Member in favor of landlords securing leases; and
(g) Liens in existence on the Closing Date listed on Schedule
2.09 hereto.
"Pre-Closing Covenants" shall have the meaning set forth in Section
9.05(c) hereof.
"Purchaser Indemnified Parties" shall have the meaning set forth in
Section 9.01 hereof.
"Retro-Premium Insurance Amounts" shall mean any liability or other
obligation paid by the Parent or the Seller (or any Affiliate of the Parent or
the Seller) (whether by reimbursement to any claims security or escrow funds,
any additional premiums on retrospective adjustment or otherwise) under any
policies of insurance maintained by the Parent or the Seller (or any Affiliate
of the Parent or the Seller) for the benefit of any Group Member attributable to
events or occurrences on or prior to the Closing Date.
"Schedules" shall mean the Schedules attached hereto and made a part
of this Agreement.
"Seller Indemnified Parties" shall have the meaning set forth in
Section 9.02 hereof.
"Seller's Health Plan" shall have the meaning set forth in Section
8.07 hereof.
"Seller Tax Periods" shall mean and include any and all periods
ending on or before the Closing Date, and in addition, the portion of any
taxable period that includes, but does not end on or before, the Closing Date
that consists of a partial period deemed to end on the Closing Date; provided
that in the case of any Seller Tax Period that does not end on or before the
Closing Date, for purposes hereof the books and records of the relevant Group
Member(s) shall be deemed to have been closed at and as of the Closing Date.
"Shares" shall have the meaning set forth in the recitals hereof.
"Subsidiary" and "Subsidiaries" shall have the meanings set forth in
Section 2.01 hereof.
"Taxes" shall have the meaning set forth in Section 2.07 hereof.
"Tax Claim" shall have the meaning set forth in Section 9.03 hereof.
"Tax Returns" shall have the meaning set forth in Section 2.07
hereof.
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"Tax Sharing Agreement" shall mean the practice employed by the
Parent in causing the Seller and each of the Group Members to pay to the Parent
or to the Seller the separate company liability of each Group Member in respect
of the consolidated Federal income Tax and state income Tax liabilities of the
Parent's or the Seller's tax group, as applicable.
"Y2K-compliant" shall mean able to provide specific dates and
calculate spans of dates, and to record, store, process and provide true and
accurate dates and calculations for dates and spans of dates within and between
the twentieth and twenty-first centuries prior to, including and following
January 1, 2000, including by: (i) correctly processing day and date
calculations; (ii) recognizing September 9, 1999 and January 1, 2001 as valid
dates; (iii) recognizing the year 2000 as a leap year having 366 days, and
correctly processing February 29, 2000 as a valid leap year date; (iv) employing
only four-digit year representations in software, components and systems owned
or operated in connection with the Company and its Subsidiaries; and (v)
incorporating interface programs sufficient to translate accurately to
four-digit format (without any burden of interpretation) any two-digit year
representations included in software, components or systems, including but not
limited to external databases, data warehouses, software systems and user
interfaces that send data to or receive data from software, components or
systems used in the Business.
* * *
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
SELLER:
NC RESOURCES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
PARENT:
NOVACARE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
HANGER ORTHOPEDIC GROUP, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
PURCHASER:
HPO ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
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