Ex. 10.63
PURCHASE AGREEMENT
among
FOUNDATION HEALTH SYSTEMS, INC.,
FOUNDATION HEALTH CORPORATION,
FOUNDATION HEALTH PHARMACEUTICAL SERVICES, INC.,
INTEGRATED PHARMACEUTICAL SERVICES, INC.
and
ADVANCE PARADIGM, INC.
Dated: February 26, 1999
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "AGREEMENT") is made as of the 26th day of
February 1999, by and among Advance Paradigm, Inc., a Delaware corporation
("BUYER"), Foundation Health Systems, Inc., a Delaware corporation (the
"COMPANY"), Foundation Health Corporation ("FHC"), a California corporation,
Foundation Health Pharmaceutical Services, Inc., a California corporation
("FHPS"), and Integrated Pharmaceutical Services, Inc., a California
corporation ("IPS", and together with FHC and FHPS, the "SUBSIDIARIES"). The
Company is the ultimate parent of the Subsidiaries.
RECITALS:
WHEREAS, the Company owns (directly or indirectly) all of the
outstanding capital stock of the Subsidiaries; and
WHEREAS, Buyer desires to purchase from the Company all of the
outstanding capital stock of FHPS, and the Company desires to sell to Buyer
all of the outstanding capital stock of FHPS, in accordance with the terms
and conditions of this Agreement; and
WHEREAS, Buyer desires to purchase from IPS certain assets of IPS, and
IPS desires to sell to Buyer certain assets of IPS, in accordance with the
terms and conditions of this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, Buyer, the Company and the Subsidiaries
(collectively, the "PARTIES") agree as follows:
ARTICLE 1
DEFINITIONS
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts
paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses,
and fees, including, but not limited to, court costs and reasonable
attorneys' fees and expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED BUSINESS" means the pharmacy benefit requirements of the
Company and its Affiliates, and employer groups, administrative services
organizations and other third party clients of the Company and its Affiliates.
"BUYER" has the meaning set forth in the preface to this Agreement.
"BUYER PERMITS" shall have the meaning set forth in SECTION 3.6.
"CHANGE OF CONTROL" of a company shall occur when: (i) a third party
acquires fifty percent (50%) or more of the outstanding voting stock of such
company; (ii) the company sells all or substantially all of its assets to a
third party; or (iii) the company merges into or consolidates with another
party such that (a) the company is not the surviving company, (b) if the
surviving company, a majority of the Board of Directors of the company
comprising the board immediately prior to such transaction does not also
constitute a majority following such transaction, or (c) if the surviving
company, a majority of the outstanding shares of the company's stock is not
held by holders who held a majority of the shares of stock of the company
immediately prior to such transaction.
"CLAIM NOTICE" has the meaning set forth in SECTION 8.5.
"CLOSING" has the meaning set forth in SECTION 2.5.
"CLOSING DATE" has the meaning set forth in SECTION 2.5.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"COMPANY" has the meaning set forth in the preface to this Agreement.
"CONTRACT" means any agreement, contract, lease, note, mortgage,
indenture, loan agreement, franchise agreement, covenant, employment
agreement, license, instrument, purchase and sales order, commitment,
undertaking or obligation.
"CURRENT BALANCE SHEET" has the meaning set forth in SECTION 4.9.
"CURRENT FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4.8.
"DEFAULT IN PHARMACY PAYMENT" has the meaning set forth in SECTION
5.12(d).
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Section 3(1).
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all federal,
state, and local statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning
public health and safety, worker health and safety, and pollution or
protection of
the environment, including without limitation all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous materials,
substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation, each as amended and
as now in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4.8.
"FHPS PERMITS" shall have the meaning set forth in SECTION 4.19.
"FHS SUCCESSOR" means any third party that acquires the Company or the
Affiliated Business in a Change of Control transaction.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state,
regional, local or other political subdivision thereof, and any entity or
official exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 8.4.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 8.4.
"INTELLECTUAL PROPERTY" has the meaning set forth in SECTION 4.21.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LIENS" means liens, claims, charges, options, pledges, security
interests or other encumbrances.
"MATERIAL ADVERSE CHANGE (OR EFFECT)" means a change (or effect) in the
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities (including contingent liabilities), rights, obligations,
operations, or business, which change (or effect), individually or in the
aggregate, is materially adverse to the operations or business of FHPS, the
Purchased Assets or Buyer, each taken as a whole.
"MATERIAL CONTRACT" means each Contract to which the respective Person
is a party, or by which it or its properties or assets are bound, and which
is material to any of its businesses, assets, properties or prospects.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37).
"NON-AFFILIATED BUSINESS" means the pharmacy benefit services offered to
third party health plan customers by the Company, FHPS, IPS or their
Affiliates prior to the Closing.
"PARTIES" has the meaning set forth in the preface to this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"PRIOR FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4.8.
"PURCHASED ASSETS" means all of the assets of IPS identified on EXHIBIT
A hereto.
"PURCHASE PRICE" has the meaning set forth in SECTION 2.2.
"PURCHASED MATERIAL CONTRACTS" has the meaning set forth in SECTION 4.22.
"Section 338 ELECTION" has the meaning set forth in SECTION 5.5.
"SECTION 338 FORMS" has the meaning set forth in SECTION 5.5.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SERVICE AGREEMENT" has the meaning set forth in SECTION 5.11.
"SHARES" means all of the outstanding shares of the Common Stock, no par
value, of FHPS.
"STRADDLE PERIOD" means any taxable period which includes but does not
end on the Closing Date.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"THIRD PARTY CLAIM" has the meaning set forth in SECTION 8.4.
ARTICLE 2
PURCHASE AND SALE
2.1 BASIC TRANSACTION.
(a) On and subject to the terms and conditions of this Agreement,
Buyer agrees to purchase from FHC, and FHC agrees to sell to Buyer, all of
the Shares and IPS agrees to sell to Buyer and Buyer agrees to purchase all
of the Purchased Assets, for the consideration specified in SECTION 2.2.
(b) Prior to the Closing, the Company shall, and shall cause each
of the Subsidiaries to, take any and all action necessary to contribute the
Purchased Assets from IPS to FHPS as mutually agreed upon by the parties, so
that the agreed upon Purchase Assets shall be assets of FHPS at the Closing.
(c) Prior to the Closing, all of the outstanding shares of stock
of IPS held by FHPS shall have been transferred to FHS or an Affiliate of FHS.
2.2 PURCHASE PRICE. Buyer agrees to pay to the Company, at the Closing,
Seventy Million Dollars ($70,000,000.00) (the "PURCHASE PRICE") by wire
transfer of federal or other immediately available funds to an account
designated by Buyer. The allocation of the purchase price among the Purchased
Assets and the Shares shall be as set forth in SCHEDULE 2.2.
2.3 ASSUMPTION OF LIABILITIES. On or subject to the terms and
conditions of this Agreement, at the Closing, Buyer shall assume and agree to
pay, perform and discharge all of the liabilities and obligations of FHPS
identified on EXHIBIT B hereto, and the liabilities of the Company and IPS
set forth in SCHEDULE 2.3 hereto related to the Purchased Assets purchased at
the Closing. No other obligations of the Company or IPS shall be assumed by
Buyer.
2.4 WARRANT FOR SHARES. Upon execution of this Agreement, Buyer shall
issue to FHS a warrant to purchase 200,000 shares of the common stock of
Buyer, subject to and in form and substance as set forth in the warrant
agreement attached hereto as EXHIBIT E.
2.5 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ &
Green, P.C., ▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, commencing at 9:00
a.m., local time, on the later of March 31, 1999 or the second business day
following the satisfaction or waiver of all conditions to the obligations of
the Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as Buyer and the Company may mutually
determine (the "CLOSING DATE").
2.6 DELIVERIES AT THE CLOSING. At the Closing, (a) the Company shall
deliver to Buyer the various certificates, instruments, and documents
referred to in ARTICLE 6, (b) Buyer shall deliver to the Company the various
certificates, instruments, and documents referred to in ARTICLE 7, (c) the
Company shall deliver to Buyer the various certificates and transfer
documents set forth on EXHIBIT C hereto, and (d) Buyer shall deliver to the
Company the consideration specified in SECTION 2.2.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to the Company:
3.1 CORPORATE STATUS. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
has the requisite power and authority to own or lease its properties and to
carry on its business as presently conducted. There is no pending or
threatened proceeding for the dissolution, liquidation, insolvency or
rehabilitation of Buyer.
3.2 CORPORATE POWER AND AUTHORITY. Buyer has the corporate power and
authority to execute and deliver this Agreement and the Service Agreement, to
perform its obligations hereunder and under the Service Agreement and to
consummate the transactions contemplated hereby and by the Service Agreement.
Buyer has taken all corporate action necessary to authorize its execution and
delivery of this Agreement, the performance of its obligations hereunder and
the consummation of the transactions contemplated hereby.
3.3 ENFORCEABILITY. This Agreement has been duly executed and
delivered by Buyer and constitutes its legal, valid and binding obligation
enforceable against Buyer in accordance with its terms, except as the same
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
3.4 NO VIOLATION. The execution and delivery of this Agreement and the
Service Agreement by Buyer, the performance by Buyer of its obligations
hereunder and under the Service Agreement and the consummation by Buyer of
the transactions contemplated by this Agreement and the Service Agreement
will not (a) contravene any provision of the Certificate of Incorporation or
Bylaws of Buyer, (b) violate or conflict with any law, statute, ordinance,
rule, regulation, decree, writ, injunction, judgment, ruling or order of any
Governmental Authority or of any arbitration award which is either applicable
to, binding upon, or enforceable against Buyer, the occurrence of any of
which would have a Material Adverse Effect on Buyer, (c) conflict with,
result in any breach of, or constitute a default (or an event which would,
with the passage of time or the giving of notice or both, constitute a
default) under, or give rise to a right to terminate, amend, modify, abandon
or accelerate, any Material Contract which is applicable to, binding upon or
enforceable against Buyer, the occurrence of which would have a Material
Adverse Effect on Buyer, (d) result in or require the creation or imposition
of any Lien upon or with respect to any of the property or assets of Buyer,
(e) give to any individual or entity a right or claim against the Buyer,
which would have a Material Adverse Effect on Buyer or (f) require the
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, any court or tribunal or any other Person,
except (i) pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, the Exchange Act and the
Securities Act and applicable inclusion requirements of Nasdaq, (ii) filings
required under the securities or blue sky laws of the various states, (iii)
any filings required to be made by the Subsidiaries, or (iv) any governmental
permits or licenses required to operate the businesses of the Subsidiaries.
3.5 NO COMMISSIONS. Other than ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, no broker, finder,
investment banker or other Person is or will be, in connection with the
transactions contemplated by this Agreement, entitled to any brokerage,
finder's or other fee or compensation based on any arrangement or agreement
made by or on behalf of Buyer and for which Buyer or the Company will have
any obligation or liability.
3.6 COMPLIANCE WITH LAW. Buyer has substantially complied with and is
substantially complying with all applicable laws, rules, regulations and
ordinances, and has the lawful authority and has obtained and now holds all
material state, federal, special or local governmental authorizations,
licenses, certificates (including Certificates of Need) and permits
(collectively "BUYER PERMITS") needed or required to conduct its businesses,
as such businesses are presently being conducted, the absence of which would
have a Material Adverse Effect on Buyer, and has made all material filings
required by applicable law and regulations.
3.7 OTHER APPROVALS. SCHEDULE 3.7 sets forth a list of all consents,
approvals, qualifications, orders or authorizations of, or filings with, any
governmental authority, including any court or other governmental third
party, required in connection with Buyer's valid execution, delivery or
performance of this Agreement and the Service Agreement, or the consummation
of any transaction contemplated by this Agreement and the Service Agreement.
3.8 INVESTIGATION BY BUYER. In entering into this Agreement:
(a) Buyer acknowledges that, except for the specific
representations and warranties of the Company and the Subsidiaries contained
in ARTICLE 4 hereof, none of the Company, the Subsidiaries, any Affiliate of
the Company, or any of their respective directors, officers, employees,
Affiliates, controlling persons, agents, advisors or representatives, makes
or shall be deemed to have made any representation or warranty, either
express or implied, as to the accuracy or completeness of any financial
projections, forecasts or budgets provided or otherwise made available to
Buyer or any of its directors, officers, employees, Affiliates, controlling
persons, agents, advisors or representatives (including, without limitation,
in any management presentations, supplemental information or other materials
or information with respect to any of the above). With respect to any such
projection or forecast delivered by or on behalf of the Company or the
Subsidiaries to Buyer, Buyer acknowledges that: (i) there are uncertainties
inherent in attempting to make such projections and forecasts; (ii) it is
familiar with such uncertainties; (iii) it is taking full responsibility for
making its own evaluation of the adequacy and accuracy of all such
projections and forecasts so furnished to it; (iv) it is not acting in
reliance on any such projection or forecast so furnished to it; and (v) it
shall have no claim against any such person with respect to any such
projection or forecast; and
(b) Buyer agrees, to the fullest extent permitted by law, that the
Company and the Subsidiaries and their respective directors, officers,
employees, Affiliates, controlling persons, agents, advisors or
representatives shall not have any liability or responsibility whatsoever to
Buyer or any of its directors, officers, employees, Affiliates, controlling
persons, agents, advisors or representatives on any basis (including, without
limitation, in contract or tort, under Federal or state securities laws or
otherwise) based upon any financial projections provided or otherwise made
available, or statements made regarding such projections, (or
omissions to so provide, make available or state), to Buyer or any of its
directors, officers, employees, Affiliates, controlling persons, agents,
advisors or representatives.
3.9 ACQUISITION FOR INVESTMENT. Buyer is acquiring the Shares solely
for its own account and not with a view to any distribution or other
disposition of such Shares, and the Shares will not be transferred except in
a transaction registered or exempt from registration under the Securities Act.
3.10 ABILITY TO PERFORM UNDER SERVICES AGREEMENT. Buyer represents and
warrants that it has or will have, the financial, personnel, and systems
capabilities to perform its obligations under the Service Agreement, in
accordance with the transition schedule set forth therein.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SUBSIDIARIES
The Company and the Subsidiaries, jointly and severally, make the
following representations and warranties to Buyer:
4.1 CORPORATE STATUS. Each of the Company and the Subsidiaries is a
corporation, duly organized and validly existing and, except where the
failure would not have a Material Adverse Effect on FHPS or the Purchased
Assets, has the requisite power and authority to own or lease its properties
and to carry on its business as presently conducted, except where any such
failure would not have a Material Adverse Effect on FHPS or the Purchased
Assets. Each of the Company and the Subsidiaries is duly qualified to do
business as a foreign corporation in each of the jurisdictions where the
nature of its properties and the conduct of its business require such
qualification, except for such jurisdictions where the failure to be so
qualified would not have a Material Adverse Effect on the Company or a
Subsidiary. Each of the Company and the Subsidiaries is in good standing in
each of the jurisdictions in which it is so qualified. There is no pending or
threatened proceeding for the dissolution, liquidation, insolvency or
rehabilitation of the Company or a Subsidiary.
4.2 POWER AND AUTHORITY. Each of the Company and the Subsidiaries has
the corporate power and authority to execute and deliver this Agreement and
the Service Agreement, to perform its obligations hereunder and under the
Service Agreement, and to consummate the transactions contemplated hereby and
by the Service Agreement. Each of the Company and the Subsidiaries has taken
all corporate action necessary to authorize the execution and delivery of
this Agreement and the Service Agreement, the performance of its obligations
hereunder and under the Service Agreement, and the consummation of the
transactions contemplated hereby and by the Service Agreement.
4.3 ENFORCEABILITY. Each of this Agreement and the Service Agreement
has been duly executed and delivered by the Company and each of the
Subsidiaries (hereinafter sometimes referred to individually as a "COMPANY
PARTY" and collectively as the "COMPANY PARTIES") and constitutes the legal,
valid and binding obligation of each of them, enforceable against each of
them in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and general
equitable principles regardless of whether such enforceability is considered
in a proceeding at law or in equity.
4.4 CAPITALIZATION. Schedule 4.4 sets forth, as of the date hereof,
with respect to FHPS, (a) the number of authorized shares of each class of
its capital stock, (b) the number of issued and outstanding shares of each
class of its capital stock and (c) the number of shares of each class of its
capital stock which are held in treasury. FHC owns 100% of the capital stock
of FHPS. All of the issued and outstanding shares of capital stock of FHPS
(a) have been duly authorized and validly issued and are fully paid and
non-assessable, (b) were issued in compliance with all applicable state and
federal securities laws and (c) were not issued in violation of any
preemptive rights or rights of first refusal. Except as set forth on SCHEDULE
4.4, no preemptive rights, rights of first refusal or similar rights exist
with respect to the shares of capital stock of FHPS, and no such rights arise
or become exercisable by virtue of or in connection with the transactions
contemplated hereby. Except as set forth on SCHEDULE 4.4, there are no
outstanding or authorized rights, options, warrants, convertible securities,
subscription rights, conversion rights, exchange rights or other agreements
or commitments of any kind that could require FHPS to issue or sell any
shares of its capital stock (or securities convertible into or exchangeable
for shares of its capital stock). Except as set forth on SCHEDULE 4.4, there
are no outstanding stock appreciation, phantom stock, profit participation or
other similar rights with respect to FHPS. There are no proxies, voting
rights or other agreements or understandings with respect to the voting or
transfer of the capital stock of FHPS. The shares of capital stock of FHPS
are free and clear of all Liens. FHPS is not obligated to redeem or otherwise
acquire any of its outstanding shares of capital stock.
4.5 NO LIENS ON ASSETS. The Purchased Assets are free and clear of all
Liens.
4.6 NO VIOLATION, CONSENTS. The execution and delivery of this
Agreement and the Service Agreement by the Company Parties, the performance
by each of the Company Parties of their obligations hereunder and under the
Service Agreement and the consummation by them of the transactions
contemplated by this Agreement and the Service Agreement will not (a)
contravene any provision of the certificates of incorporation, bylaws or
other organizational or governing document of the Company or a Subsidiary,
(b) violate or conflict with any law, statute, ordinance, rule, regulation,
decree, writ, injunction, judgment, ruling or order of any Governmental
Authority or of any arbitration award which is either applicable to, binding
upon or enforceable against the Company or a Subsidiary, the occurrence of
any of which would have a Material Adverse Effect on FHPS or the Purchased
Assets, (c) conflict with, result in any breach of, or constitute a default
(or an event which would, with the passage of time or the giving of notice or
both, constitute a default) under, or give rise to a right of payment under
or the right to terminate, amend, modify, abandon or accelerate, any Material
Contract which is applicable to, binding upon or enforceable against FHPS,
the occurrence of any of which would have a Material Adverse Effect on FHPS
or the Purchased Assets, subject to SECTION 5.12 below, (d) result in or
require the creation or imposition of any Lien upon or with respect to any of
the properties or assets of FHPS or the Purchased Assets, (e) except as set
forth on SCHEDULE 4.6, give to any individual or entity a right or claim
against FHPS which would have a Material Adverse Effect on FHPS or the
Purchased Assets or (f) except as set forth on SCHEDULE 4.6, require the
consent, approval, authorization or permit of, or filing with or notification
to, any
Governmental Authority, any court or tribunal or any other Person, except (i)
pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and applicable reporting requirements
of the Exchange Act, the Securities Act or the New York Stock Exchange, Inc.,
(ii) filings required under the securities or blue sky laws of the various
states, or (iii) except where the failure to obtain such consent or approval
would not have a Material Adverse Effect on FHPS or the Purchased Assets, or
the ability of the Company to consummate the transactions set forth in this
Agreement.
4.7 RECORDS OF FHPS. The copies of the certificates of incorporation
and bylaws of FHPS and the agreements of FHPS and IPS which were provided to
Buyer are true, accurate, and complete and reflect all amendments made
through the date of this Agreement. The minute books and other records of
corporate actions for FHPS made available to Buyer for review were correct
and complete as of the date of such review, no further entries have been made
through the date of this Agreement, such minute books and records contain the
true signatures of the persons purporting to have signed them, and such
minute books and records contain an accurate record of all corporate actions
of the stockholders and directors (and any committees thereof) of FHPS taken
by written consent or at a meeting since formation. All corporate actions
taken by FHPS have been duly authorized or ratified. All accounts, books,
ledgers and official and other records of FHPS have been fully, properly and
accurately kept and are complete, and there are no material inaccuracies or
discrepancies contained therein. The stock ledgers of FHPS, as previously
made available to Buyer, contain accurate and complete records of all
issuances, transfers and cancellations of shares of the capital stock of
FHPS. To the Company Parties' knowledge, the books and all corporate
(including minute books and stock record books) and financial records of FHPS
are substantially complete and correct in all material respects and have been
maintained in accordance with applicable sound business practices, laws and
other requirements.
4.8 FINANCIAL STATEMENTS. The Company has delivered to Buyer the
unaudited financial statements of FHPS, consisting of balance sheets at
December 31, 1995, 1996 and 1997 and the related statements of operations for
the respective periods then ended (collectively, the "FINANCIAL STATEMENTS").
The 1995, 1996 and 1997 financial statements of FHPS are referred to herein
as its "PRIOR FINANCIAL STATEMENTS." The financial statements for the twelve
(12) months ended December 31, 1998 are referred to herein as the "CURRENT
FINANCIAL STATEMENTS." The Financial Statements (i) were prepared from the
books and records of FHPS, (ii) were prepared in accordance with GAAP applied
on a consistent basis (except as may be expressly indicated therein or in any
notes thereto, or except for the absence of notes, statement of cash flows,
and statement of shareholders equity which may otherwise be required under
GAAP) and (iii) present fairly the financial position of FHPS as at the dates
thereof and the results of its operations for the periods then ended (subject
to normal year-end adjustments which would not in the aggregate have a
Material Adverse Effect on the FHPS and any other adjustments expressly
described therein or in the notes thereto). The balance sheets included in
the Current Financial Statements do not reflect any writeup or revaluation
increasing the book value of any assets, except as specifically disclosed in
the notes thereto or as otherwise disclosed in writing to Buyer. All
financial projections, forecasts, or budgets that the Company and the
Subsidiaries have made available to Buyer have been or will be prepared in
good faith based upon assumptions that the Company and the Subsidiaries
believe to be reasonable.
4.9 CHANGES SINCE THE CURRENT BALANCE SHEET DATE. Except as set forth on
SCHEDULE 4.9, since the date of the balance sheet dated as of December 31,
1998 included in the Current Financial Statements (the "CURRENT BALANCE
SHEET"), FHPS has not (a) issued, sold, pledged, disposed of, encumbered, or
authorized the issuance, sale, pledge, disposition, grant or encumbrance of
any shares of its capital stock, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of such capital
stock or any other ownership interest of FHPS, (b) declared, set aside, made,
or paid any dividend or other distribution payable in cash, stock, property
or otherwise of or with respect to its capital stock or other securities, or
reclassified, combined, split, subdivided or redeemed, purchased or otherwise
acquired, directly or indirectly, any of its capital stock or other
securities; (c) except for raises in the ordinary course and consistent with
past practice, paid any bonus to or increased the rate of compensation of any
of its officers or salaried employees or amended any other terms of
employment of such persons; (d) sold, leased or transferred any of its
properties or assets or acquired any properties or assets other than in the
ordinary course of business consistent with past practice; (e) made or
obligated itself to make capital expenditures other than in the ordinary
course of business consistent with past practice; (f) made any payment in
respect of its liabilities other than in the ordinary course of business
consistent with past practice; (g) incurred any obligations or liabilities
(including, without limitation, any indebtedness for borrowed money, issuance
of any debt securities, or the assumption, guarantee, or endorsement of the
obligations of any person) or entered into any transaction or series of
transactions involving in excess of $15,000 individually or $50,000 in the
aggregate out of the ordinary course of business, except for this Agreement
and the transactions contemplated hereby; (h) suffered any theft, damage,
destruction or casualty loss, whether or not covered by insurance, in excess
of $15,000 individually or $50,000 in the aggregate; (i) suffered any
extraordinary losses (whether or not covered by insurance); (j) waived,
canceled, compromised or released any rights having a value in excess of
$15,000 individually or $50,000 in the aggregate other than in the ordinary
course of business consistent with past practice; (k) made or adopted any
material change in its accounting practice or policies; (l) made any material
adjustment to its books and records other than in respect of the conduct of
its business activities in the ordinary course consistent with past practice;
(m) entered into any material transaction with any other Company Party or any
Affiliate of any of the Company Parties, except in the ordinary course of
business; (n) entered into any employment agreement not terminable at will;
(o) terminated, amended or modified any agreement involving an amount in
excess of $15,000 individually or $50,000 in the aggregate other than in the
ordinary course of business consistent with past practice; (p) imposed any
material security interest or other Lien on any of its assets other than in
the ordinary course of business consistent with past practice; (q) delayed
paying any account payable beyond forty-five (45) days following the date on
which it is due and payable except to the extent being contested in good
faith; (r) made or pledged any charitable contributions in excess of $1,000
individually or $5,000 in the aggregate; (s) acquired (including, without
limitation, for cash or shares of stock, by merger, consolidation, or
acquisition of stock or assets) any interest in any corporation, partnership
or other business organization or division thereof or any assets, or made any
investment in another Person either by purchase of stock or securities,
contributions or property transfer of capital other than as permitted or
provided in this Agreement; (t) increased or decreased prices charged to
customers, except in the ordinary course of business consistent with past
practice, materially increased or decreased the average monthly inventory,
other than in the ordinary course of business consistent with past practice,
ordered any inventory which would be inconsistent with the prior practices of
such Company, or taken any actions which might reasonably result in any
material increase in the loss of customers; (u) entered into any other
transaction or been subject to any event which has or may reasonably be
expected to have a Material Adverse Effect on FHPS; or (v) agreed to do or
authorized any of the foregoing.
4.10 LIABILITIES OF FHPS. Except as set forth on Schedule 4.10(a), FHPS
has no liabilities or obligations, whether accrued, absolute, contingent or
otherwise, except (a) to the extent reflected on the Current Balance Sheet
and not heretofore paid or discharged; (b) liabilities incurred in the
ordinary course of business consistent with past practice since the date of
the Current Balance Sheet (none of which relates to breach of contract,
breach of warranty, tort, infringement or violation of law, or which arose
out of any action, suit, claim, governmental investigation or arbitration
proceeding) and which, in the aggregate would not have a Material Adverse
Effect on FHPS; (c) liabilities incurred prior to the date of the Current
Balance Sheet which, in accordance with GAAP consistently applied, were not
required to be recorded thereon and which, in the aggregate, would not have a
Material Adverse Effect on FHPS; or (d) inter-company liabilities that on a
consolidated basis are not reflected on the Current Balance Sheet. SCHEDULE
4.10(b) lists all indebtedness in excess of $10,000 owed by FHPS to a bank or
any other Person, including without limitation, indebtedness for borrowed
money (including principal and accrued but unpaid interest) and capitalized
equipment leases of FHPS. SCHEDULE 4.10(c) lists each deposit account
maintained by or for the benefit of FHPS with any bank, broker or other
depository institution, and the names of all persons authorized to withdraw
funds from each such account.
4.11 LITIGATION. Except as set forth on SCHEDULE 4.11, there is no
action, suit or other legal or administrative proceeding or governmental
investigation pending, or, to the Company Parties' knowledge, threatened
against or anticipated or contemplated to be initiated by, FHPS, or FHPS'
properties or assets, or the Purchased Assets, or which question the validity
or enforceability of this Agreement or the transactions contemplated hereby,
and, to the Company Parties' knowledge, there is no reasonable basis for any
of the foregoing. The Company shall retain all actions, suits and other
legal and administrative proceedings and governmental investigations set
forth on SCHEDULE 4.11. There are no outstanding orders, decrees or
stipulations issued by any Governmental Authority in any proceeding to which
FHPS is or was a party which have not been substantially complied with or
which continue to impose any material obligations on FHPS.
4.12 ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE 4.12:
(a) During the period commencing from the date in 1991 on which
FHPS became a wholly owned subsidiary of the Company to the date of this
Agreement, the business of FHPS has been and is operated in compliance with
all Federal, state and local environmental protection, health and safety or
similar laws, statutes, ordinances, restrictions, licenses, rules,
regulations, permit conditions and legal requirements, including without
limitation the Federal Clean Water Act ("CWA") 42 U.S.C. Section 7401 ET
SEQ., Safe Drinking Water Act, ("SDWA") 42 U.S.C. Section 300f ET SEQ.,
Resource Conservation & Recovery Act ("RCRA") 42 U.S.C. Section 6901 ET SEQ.,
Clean Air Act ("CAA") 42 U.S.C. Section 7401 ET SEQ., Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") 42 U.S.C.
Section 9601 ET SEQ., Emergency Planning and Community Right to Know Act
("EPCRA") 42 U.S.C. Section 11001 ET SEQ., Toxic Substances
Control Act ("TSCA") 15 U.S.C. Section 2601 ET SEQ., and the Occupational
Safety and Health Act ("OSHA") 29 U.S.C. Section 655 ET SEQ., each as amended
and currently in effect (collectively, "ENVIRONMENTAL LAWS"), except where
the failure to be so in compliance would not result in a Material Adverse
Effect on FHPS.
(b) During the period commencing from the date in 1991 on which
FHPS became a wholly owned subsidiary of the Company to the date of this
Agreement, FHPS has not received any written notice from any Governmental
Authority or other third party or, to the knowledge of the Company Parties,
any other communication alleging or concerning any violation by FHPS, or
responsibility for or liability of FHPS under any Environmental Law, which,
if decided unfavorably to FHPS would have a Material Adverse Effect on FHPS
or the Purchased Assets. There are no pending, or to the knowledge of the
Company Parties, threatened, claims, suits, actions, proceedings or
investigations with respect to the businesses or operations of FHPS alleging
or concerning any violation of or responsibility for or liability under any
Environmental Law, nor does any Company Party have any knowledge of any fact
or condition that could give rise to such a claim, suit, action, proceeding
or investigation which, if decided unfavorably to FHPS would have a Material
Adverse Effect on FHPS or the Purchased Assets.
4.13 REAL ESTATE. FHPS does not currently own any real property.
SCHEDULE 4.13 sets forth a list of all leases, licenses or similar use or
occupancy agreements to which FHPS is a party, which are for the use or
occupancy of real estate owned by a third party ("LEASES") (true and complete
copies of which have previously been furnished to Buyer), in each case,
setting forth: (i) the lessor and lessee thereof and the commencement date,
term and renewal rights under each of the Leases; and (ii) the street address
or legal description of each property covered thereby (the "LEASED
PREMISES"). The Leases are in full force and effect and have not been amended
except as disclosed in SCHEDULE 4.13, and there have been no notices of
default by either party to the Leases. With respect to each such Leased
Premises: (i) FHPS' interests in the Leased Premises are free and clear of
any Liens, covenants and easements or title defects created or suffered to be
created by FHPS, except for Liens for taxes which are not yet due or are
otherwise being contested; and (ii) none of the Company Parties has received
notice of (A) any condemnation proceeding with respect to any portion of the
Leased Premises or any access thereto and, to the knowledge of the Company
Parties, no such proceeding is contemplated by any Governmental Authority; or
(B) any special assessment which may affect any of the Leased Premises and,
to the knowledge of the Company Parties, no such special assessment is
contemplated by any Governmental Authority, any of which would have a
Material Adverse Effect on FHPS.
4.14 COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.14, FHPS
is in substantial compliance with all laws, regulations and orders applicable
to it, its business, operations, properties and assets, except where the
failure to comply would not have a Material Adverse Effect on FHPS or the
Purchased Assets. During the period commencing from when FHPS became a wholly
owned subsidiary of the Company in 1991 to the date of this Agreement, FHPS
has not been cited, fined or otherwise notified of any asserted past or
present failure to comply with any laws, regulations or orders, where there
remains any remedial action to be undertaken by FHPS as a result thereof, and
no proceeding with respect to any such violation is pending or to the Company
Parties' knowledge threatened. Except as set forth on SCHEDULE 4.14,
FHPS is not subject to any decree or injunction to which it is a party which
restricts the continued operation of its business or the expansion thereof to
other geographical areas, customers and suppliers or lines of business, which
decree or injunction has a Material Adverse Effect on FHPS.
4.15 LABOR AND EMPLOYMENT MATTERS. FHPS is not a party to or bound by
any collective bargaining agreement or any other agreement with a labor
union. There is not now any actual or threatened labor dispute, strike or
work stoppage which affects or which may affect the business of FHPS or which
may interfere with its continued operations. Except as set forth on SCHEDULE
4.15, none of the Company Parties is aware that any executive or key employee
or group of employees of FHPS or IPS has any plans to terminate his, her or
their employment with FHPS or IPS as a result of the transactions
contemplated hereby or otherwise.
4.16 EMPLOYEE BENEFIT PLANS.
(a) EMPLOYEE BENEFIT PLANS. SCHEDULE 4.16(a) contains a list
setting forth each employee benefit plan or arrangement of FHPS, including
but not limited to employee pension benefit plans, as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
Multiemployer Plans, if any, as defined in Section 3(37) of ERISA, employee
welfare benefit plans, as defined in Section 3(1) of ERISA, deferred
compensation plans, stock option plans, bonus plans, stock purchase plans,
hospitalization, disability and other insurance plans, severance or
termination pay plans and policies, whether or not described in Section 3(3)
of ERISA, in which employees, their spouses or dependents, of the Company
participate ("EMPLOYEE BENEFIT PLANS") (true and accurate copies of which,
together with the most recent annual reports on Form 5500 and summary plan
descriptions with respect thereto, were furnished to Buyer).
(b) COMPLIANCE WITH LAW. With respect to each Employee Benefit
Plan to the best knowledge of the Company Parties: (i) each has been
administered in all respects in compliance with its terms and with all
applicable laws, including, but not limited to, ERISA and the Code; (ii) no
actions, suits, claims or disputes, other than routine benefit claims, are
pending, or threatened; (iii) no audits, inquiries, reviews, proceedings,
claims, or demands are pending with any governmental or regulatory agency;
(iv) there are no facts which could give rise to any material liability in
the event of any such investigation, claim, action, suit, audit, review, or
other proceeding; (v) except as set forth on SCHEDULE 4.16(b), all reports,
returns and similar documents required to be filed with any Governmental
Authority or distributed to any plan participant have been duly or timely
filed or distributed; and (vi) no "prohibited transaction" has occurred under
Section 406 of ERISA or Section 4975 of the Code, except where the failure of
any of the matters in subparagraphs (i)-(vi) would not have a Material
Adverse Effect on FHPS.
(c) TITLE IV PLANS. FHPS does not contribute to a Multiemployer
Plan as described in Section 4001(a)(3) of ERISA or a defined benefit plan.
(d) WELFARE PLANS. (i) Except as otherwise provided by applicable
state or federal law, FHPS is not obligated under any employee welfare
benefit plan as described in Section 3(1) of ERISA ("WELFARE PLAN") to
provide medical or death benefits with respect to any employee or former
employee of FHPS or its predecessors after termination of employment;
(ii) no violations of the notice and continuation coverage requirements of
Section 4980B of the Code or Sections 601 through 608 of ERISA have occurred
with respect to any Welfare Plan that is a group health plan within the
meaning of Section 5000(b)(1) of the Code which would have a Material Adverse
Effect on FHPS; and (iii) there are no reserves, assets, surplus or prepaid
premiums under any Welfare Plan which is an Employee Benefit Plan.
(e) PBGC LIABILITY. FHPS (i) has never terminated or withdrawn
from an employee benefit plan under circumstances resulting (or expected to
result) in liability to the Pension Benefit Guaranty Corporation ("PBGC")
(other than routine claims for benefits); (ii) has no assets subject to (or
expected to be subject to) a lien for unpaid contributions to any employee
benefit plan; (iii) has not failed to pay premiums to the PBGC when due (iv)
is not subject to (or expected to be subject) an excise tax under Code
Section 4971; (v) has not engaged in any transaction which would give rise to
liability under Section 4069 or Section 4212(c) of ERISA; or (vi) has not
violated Code Section 4980B or Section 601 through 608 of ERISA, any of which
matters described in clauses (i)-(vi) would have a Material Adverse Effect on
FHPS.
(f) OTHER LIABILITIES. Except as set forth on SCHEDULE 4.16(f),
(i) FHPS is not obligated to pay separation, severance, termination or
similar benefits or to vest any person, in whole or in part, solely as a
result of any transaction contemplated by this Agreement or solely as a
result of a "change of control" (as such term is defined in Section 280G of
the Code); and (ii) none of the Employee Benefit Plans has any unfunded
liabilities which are not reflected on the Current Balance Sheet or the books
and records of FHPS.
4.17 INSURANCE. FHPS and the Purchased Assets are covered by policies
of insurance for its properties, assets and businesses (the "INSURANCE
POLICIES"), which policies are in full force and effect, and which coverage
amounts are adequate for the business conducted by FHPS and the Purchased
Assets, and all premiums due thereon have been paid. Prior to the Closing
Date, each of the Insurance Policies will be in full force and effect. FHPS
has complied with the provisions of such Insurance Policies, except where the
failure to comply would not have a Material Adverse Effect on FHPS. There is
no pending claim under any of the Insurance Policies for an amount in excess
of $10,000 individually or $50,000 in the aggregate that relates to loss or
damage to the properties, assets or business of FHPS.
4.18 RECEIVABLES. All of the Receivables of FHPS, net of any allowance
for doubtful accounts reflected in the Current Balance Sheet, are valid and
legally binding, represent bona fide transactions and arose in the ordinary
course of business of FHPS. To the best of the Company Parties' knowledge,
all of the Receivables of FHPS reflected in each Current Balance Sheet are
collectible in accordance with the terms of such receivables, without set off
or counterclaims, subject to the allowance for doubtful accounts, if any, set
forth on such Current Balance Sheet. For purposes of this Agreement, the term
"RECEIVABLES" means all receivables of FHPS, including without limitation,
trade account receivables arising from the provision of services, sale of
inventory, notes receivable, and insurance proceeds receivable, whether or
not billed.
4.19 LICENSES AND PERMITS. There are no licenses and governmental or
official approvals, permits or authorizations required for the conduct of
FHPS' business and operations, the absence of which would have a Material
Adverse Effect on FHPS (collectively, the "FHPS
PERMITS"). All FHPS Permits are valid and in full force and effect, FHPS is
in compliance with the respective requirements thereof, no proceeding is
pending or, to the Company Parties' knowledge, threatened to revoke or amend
any of them, and none of the FHPS Permits is or will be impaired or affected,
which impairment or affect would have a Material Adverse Effect on FHPS, by
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for such of the preceding which,
individually or in the aggregate, would not have a Material Adverse Effect on
FHPS or on the ability of the parties to consummate the transactions
contemplated herein.
4.20 ADEQUACY OF THE ASSETS; RELATIONSHIPS WITH CUSTOMERS AND SUPPLIERS;
AFFILIATED TRANSACTIONS. Except as set forth on SCHEDULE 4.20, the Purchased
Assets, including Purchased Assets held by IPS, and assets and properties
currently owned and operated by FHPS constitute, in the aggregate, all of the
assets and properties used in the conduct of the business of FHPS and IPS,
with respect to the Purchased Assets, in the manner in which and to the
extent to which such business is currently being conducted. Neither FHPS,
nor, with respect to the Purchase Assets, IPS, has received any notice from
any current supplier of items essential to the conduct of its business that
such supplier intends to terminate or materially alter a business
relationship with FHPS or, with respect to the Purchased Assets, IPS, for any
reason, involving an amount in excess of $50,000, and to the Company Parties'
knowledge, no such supplier intends to terminate or materially alter any such
business relationship with FHPS, or IPS. Neither FHPS nor IPS has received
any notice from any customer that such customer intends to discontinue
purchases of products or services from FHPS, or, in connection with the
Purchased Assets, IPS, and to the Company Parties' knowledge no such customer
intends to discontinue or cancel purchases or orders, involving in each case
amounts in excess of $50,000. No Company Party has any direct or indirect
interest in any customer, supplier or competitor of FHPS or in any Person
from whom FHPS leases real or personal property, except to the extent that
any such customer, supplier or competitor is also an Affiliate of the
Company, or except for any passive investment interest held by any of the
Company Parties.
4.21 INTELLECTUAL PROPERTY. Except as set forth in SCHEDULE 4.21, FHPS
has full legal right, title and interest in and to all trademarks, service
marks, trade names, copyrights, know-how, patents, trade secrets, licenses
(including licenses for the use of computer software programs), and other
intellectual property used in the conduct of its business (the "INTELLECTUAL
PROPERTY"), the absence of which would have a Material Adverse Effect on FHPS
or the Purchased Assets. SCHEDULE 4.21 sets forth a true and correct list of
all Intellectual Property of FHPS. To the Company Parties' knowledge, FHPS
owns or possesses adequate rights to use all Intellectual Property reasonably
necessary to the conduct of the business of FHPS as presently conducted, and
the unrestricted conduct and the unrestricted use and exploitation of the
Intellectual Property does not infringe or misappropriate any rights held or
asserted by any Person, except where the failure to possess such rights or
the infringement would not have a Material Adverse Effect on FHPS or the
Purchased Assets. To the Company Parties' knowledge, no Person is infringing
on the Intellectual Property, and no payments are required for the continued
use of the Intellectual Property, except for software licenses entered into
in the ordinary course of business. None of the Intellectual Property has
ever been declared invalid or unenforceable, or is the subject of any pending
or, to the Company Parties' knowledge, threatened action for opposition,
cancellation, declaration, infringement, or invalidity, unenforceability or
misappropriation or like claim, action or proceeding, which declaration or
unenforceability, or which pending or threatened action would have a Material
Adverse Effect on FHPS if decided adversely to FHPS.
4.22 MATERIAL CONTRACTS. SCHEDULE 4.22 sets forth a list of each
Material Contract of each Subsidiary, including all material contracts with
customers for the provision of products or services by each Subsidiary, other
than any Material Contract relating to any excluded assets or liabilities
(the "PURCHASED MATERIAL CONTRACTS"). The copy of each Material Contract
furnished to Buyer is a true and complete copy of the document it purports to
represent and reflects all amendments thereto made through the date of this
Agreement. Neither Subsidiary has violated any of the terms or conditions of
any Purchased Material Contract which would permit termination or material
modification of any Purchased Material Contract. All of the material
covenants to be performed by each Subsidiary and, to the knowledge of the
Company Parties, any other party thereto, have been fully performed in all
material respects, and neither Subsidiary has received notice for breach or
indemnification or notice of default or termination under any Purchased
Material Contract by or against FHPS or IPS or to the knowledge of the
Company Parties, any other party thereto. To the knowledge of the Company
Parties, no event has occurred which constitutes, or after notice or the
passage of time, or both, would constitute, a default by either Subsidiary
under any Purchased Material Contract, and to the knowledge of the Company
Parties no such event has occurred which constitutes or would constitute a
material default by any other party. Neither Subsidiary is subject to any
liability or payment resulting from re-negotiation of amounts paid under any
Purchased Material Contract. As used in this Section 4.22, Purchased
Material Contracts shall mean formal or informal, written or oral (a) loan
agreements, indentures, mortgages, pledges, hypothecations, deeds of trust,
conditional sale or title retention agreements, security agreements,
equipment financing obligations or guaranties, or other sources of contingent
liability in respect of any indebtedness or obligations to any other Person,
or letters of intent or commitment letters with respect to same, which exceed
$10,000 individually or $50,000 in the aggregate; (b) contracts obligating
FHPS or IPS to provide products or services for a period of one year or more;
(c) leases of real property extending for a period of one year or more; (d)
leases of personal property which individually provide for total payments in
excess of $10,000, or in the aggregate $25,000 and which are not cancelable
without penalty on notice of sixty (60) days or less; (e) agreements
providing for an independent contractor's services, or letters of intent with
respect to same, where the payment due thereunder exceeds $10,000; (f)
employment agreements, management service agreements, consulting agreements,
having a value in the form of revenue or expense in excess of $10,000; (g)
any contract relating to pending capital expenditures by FHPS in excess of
$10,000; (h) contracts obligating FHPS to purchase supplies, equipment, media
and related services of any kind, in an amount exceeding $10,000 and not
cancelable without penalty on notice of thirty (30) days or less; (i) any
non-competition agreements restricting FHPS in any manner; and (j)
confidentiality agreements, non-competition agreements, employee handbooks,
policy statements and any other agreements relating to any employee of FHPS,
which is not terminable as of the Closing.
4.23 ACCURACY OF INFORMATION FURNISHED. Subject to Buyer's
representation and warranty under SECTION 3.10, no representation, statement
or information contained in this Agreement (including, without limitation,
the various Schedules attached hereto) or any agreement executed in
connection herewith or in any certificate delivered pursuant hereto or
thereto contains any untrue statement of a material fact or omits any
material fact necessary to
make the information contained therein not misleading. The Company Parties
have provided Buyer with true, accurate and complete copies of all documents
listed or described in the various Schedules attached hereto.
4.24 NO COMMISSIONS. Other than ▇ ▇ ▇▇▇▇▇ Securities Corporation,
neither the Company nor any Subsidiary has incurred any obligation for any
finder's or broker's or agent's fees or commissions or similar compensation
in connection with the transactions contemplated hereby.
4.25 ABSENCE OF SENSITIVE PAYMENTS. FHPS has not made or maintained (a)
any contributions, payments or gifts of its funds or property to any
governmental official, employee or agent where either the payment or the
purpose of such contribution, payment or gift was or is illegal under the
laws of the United States or any state thereof, or any other jurisdiction
(foreign or domestic); or (b) any contribution, or reimbursement of any
political gift or contribution made by any other Person, to candidates for
public office, whether federal, state, local or foreign, where such
contributions by FHPS were or would be a violation of applicable law.
4.26 TAX MATTERS. Within the times (including extensions) and in the
manner prescribed by law, FHPS (or the Company, on behalf of FHPS) has filed
all federal, state, local and foreign returns for Taxes ("RETURNS") required
to be filed in any jurisdiction (including, without limitation, informational
returns) and such Returns are complete, true and correct in all material
respects. All Returns complied in all material respects with the tax laws,
rules and regulations, as presently interpreted, applicable to such Returns.
FHPS (or the Company on behalf of FHPS) has not waived or extended any
statute of limitations relating to the assessment of any Taxes. No audit or
examination of any of the Returns of FHPS is currently in progress or, to the
Company Parties' knowledge, threatened or has occurred in the past. All Taxes
required to be paid pursuant to such Returns have been paid on or before
their respective due dates, including any extensions thereof.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further
actions as may be necessary or appropriate to effectuate, carry out and
comply with all of the terms of this Agreement and the transactions
contemplated hereby.
5.2 COMPLIANCE WITH COVENANTS. The Company shall, and shall cause the
Subsidiaries to, comply with all of the covenants of the Company Parties
under this Agreement.
5.3 COOPERATION. Each of the parties agrees to cooperate with the other
in the preparation and filing of all forms, notifications, reports and
information, if any, required or reasonably deemed advisable pursuant to any
law, rule or regulation in connection with the transactions contemplated by
this Agreement and to use its respective reasonable best efforts to agree
jointly on a method to overcome any objections by any Governmental Authority
to any such transactions. In addition, the Company agrees to cooperate with
Buyer, with third party
costs paid by Buyer, in connection with any audit of historical financial
information that may be required under the rules and regulations of the
Securities and Exchange Commission.
5.4 APPLICATIONS AND OTHER ACTIONS. Each of the parties hereto shall
use its reasonable best efforts to take, or cause to be taken, all
appropriate actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated herein, including, without
limitation, using its reasonable best efforts to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
any Governmental Authority and parties to Material Contracts with the Company
and the Subsidiaries as are necessary for the consummation of the
transactions contemplated hereby. Each of the parties shall make on a prompt
and timely basis all governmental or regulatory notifications and filings
required to be made by it for the consummation of the transactions
contemplated hereby.
5.5 PURCHASE PRICE ALLOCATION AND SECTION 338 ELECTIONS. If requested
by Buyer, Buyer, the Company and the Subsidiaries shall join in an election
to have the provisions of Section 338(h)(10) of the Code and similar
provisions of state law ("SECTION 338 ELECTION") apply to the acquisition of
FHPS. Buyer shall be responsible for, and control, the preparation and
filing of such election. Each of the Company and the Subsidiaries shall
allocate the Purchase Price in accordance with SECTION 2.2 and shall report,
act and file in all respects and for all purposes consistent with such
SCHEDULE 2.2, unless to do so would cause undue hardship on the Company.
Each of the Company and the Subsidiaries shall execute and deliver to Buyer
such documents or forms (including Section 338 Forms, as defined below) as
Buyer shall request or as are required by applicable law for an effective
338(h)(10) Election. "SECTION 338 FORMS" shall mean all returns, documents,
statements, and other forms that are required to be submitted to any federal,
state, county or other local taxing authority in connection with a 338(h)(10)
Election, including, without limitation, any "statement of Section 338
election" and IRS Form 8023 (together with any schedules or attachments
thereto) that are required pursuant to Treasury Regulations.
5.6 ACCESS TO INFORMATION. From the date hereof to the Closing Date,
the Company shall, and shall cause each of the Subsidiaries and their
respective directors, officers, employees, auditors, counsel and agents to,
afford Buyer and Buyer's officers, employees, auditors, counsel and agents
reasonable access, during regular business hours and upon reasonable advance
notice, to its properties, offices and other facilities, to its officers and
employees and to all books and records, and shall furnish such persons with
all financial, operating and other data and information as may be requested.
No information provided to or obtained by Buyer shall affect any
representation or warranty in this Agreement.
5.7 NOTIFICATION OF CERTAIN MATTERS. From the date hereof to the
Closing Date, each of the parties to this Agreement shall give prompt notice
to the other parties of the occurrence or non-occurrence of any event which
would likely cause any representation or warranty made by such party herein
to be untrue or inaccurate or any covenant, condition or agreement contained
herein not to be complied with or satisfied (provided, however, that, any
such disclosure shall not in any way be deemed to amend, modify or in any way
affect the representations, warranties and covenants made by any party in or
pursuant to this Agreement).
5.8 CONFIDENTIALITY; PUBLICITY. Except as may be required by law or as
otherwise permitted or expressly contemplated herein, no party hereto or
their respective Affiliates, employees, agents and representatives shall
disclose to any third party this Agreement, the subject matter or terms
hereof or any confidential information or other proprietary knowledge
concerning the business or affairs of the other party which it may have
acquired from such party in the course of pursuing the transactions
contemplated by this Agreement, including all notes, documents and materials
prepared by or for the respective party which reflect, interpret, evaluate,
include or are derived from such confidential information or proprietary
knowledge of the other party, without the prior consent of the other party
hereto; provided, that any information that is otherwise publicly available,
without breach of this provision, or has been obtained from a third party,
or has been requested pursuant to the order of a court of competent
jurisdiction or governmental agency having the authority to obtain such
information, or pursuant to the rules of any applicable stock exchange to
which any of the parties is subject shall not be deemed confidential
information; provided, however, that the party from whom disclosure is
sought, regarding information concerning the other party shall promptly
notify such party and allow such party to obtain any order blocking or
otherwise controlling the disclosure of such information. Any press releases
or any other public announcements concerning this Agreement or the
transactions contemplated hereby shall be approved by both Buyer and the
Company; PROVIDED, HOWEVER, that if any party reasonably believes that it has
a legal obligation to make a press release and the consent of the other party
cannot be obtained, then the release may be made without such approval. Prior
to such time, the parties shall not make any public disclosure regarding the
Agreement or the transactions contemplated hereby.
5.9 NO OTHER DISCUSSIONS. The Company Parties and their Affiliates
shall not directly or indirectly, through any officer, director, employee,
affiliate or agent or otherwise, take any action to solicit, initiate, seek,
entertain, encourage, support or respond to any inquiry, proposal or offer
from, furnish any information to, or participate in any negotiations with,
any third party regarding any acquisition of FHPS or the Purchased Assets,
any merger or consolidation with or involving FHPS or the Purchased Assets,
or any acquisition of any material portion of the Shares of FHPS or Purchased
Assets, including the grant of any license to any Intellectual Property of
FHPS other than licenses in the ordinary course of business related to the
sale of FHPS' products. The Company agrees that any such negotiations (other
than negotiations with Buyer) in progress as of the date hereof will be
suspended and that the Company will not accept or enter into any agreement,
arrangement or understanding regarding any such third party acquisition
transaction prior to the termination hereof. In the event a Company Party or
any of their respective officers, directors, employees, affiliates or agents
receives any proposal for, any third party acquisition transaction involving
FHPS or the Purchased Assets, or any request for nonpublic information in
connection with any such proposal, the Company will immediately notify Buyer,
describing in detail the identity of the Person making such proposal and the
terms and conditions of such proposal. Nothing contained in this Section
shall be construed as limiting the ability of the Company as to any matter
described in this section, with regard to any other assets of the Company
other than the Purchased Assets and the Shares.
5.10 FHPS TAX MATTERS.
(a) COMPANY RETURNS. The Company and/or FHPS shall duly prepare,
or cause to be prepared, and the Company shall file, or cause to be filed, on
a timely basis all Returns of FHPS for any period ending on or before the
Closing Date. The Company shall file amended Tax Returns with respect to
periods ending on or before the Closing Date only as agreed by Buyer and the
Company.
(b) BUYER RETURNS. Buyer shall duly prepare, or cause to be
prepared, and file, or cause to be filed, on a timely basis all Returns of
FHPS for any tax period which ends after the Closing Date, including but not
limited to any Straddle Periods. Any such Returns with respect to the
Straddle Periods shall, insofar as they relate to FHPS, be on a basis
consistent with previous Returns filed in respect of FHPS, unless Buyer and
the Company conclude that there is no reasonable basis for such position.
(c) TAX COOPERATION. The Company and Buyer shall provide the other
party with such forms, information and records and make such of its officers,
directors, employees and agents available as may be reasonably requested by
such other party in connection with the preparation of any Return or any
audit or other proceeding, including any ruling request, that relates to FHPS.
(d) COMPANY INDEMNIFICATION. The Company shall be liable for and
shall indemnify and hold Buyer harmless against all Taxes of FHPS or
attributable to the Purchased Assets payable for any taxable year or taxable
period ending on or before the Closing Date. To appropriately apportion any
income taxes relating to any taxable year, beginning before and ending after
the Closing Date, the parties shall apportion such income taxes to the
taxable period ending on or before the Closing Date by a closing of the books
consistent with their past practice for reporting items, except that (i)
exemptions, allowances or deductions that are calculated on a time basis,
such as the deduction for depreciation shall be apportioned on a time basis,
and (ii) all Taxes relating to actions outside the ordinary course of
business, occurring after the Closing, on the Closing Date shall be
apportioned to the period ending after the Closing Date. To appropriately
apportion any non-income taxes relating to any taxable year beginning before
and ending after the Closing Date, the parties shall apportion such
non-income taxes to the taxable period ending on or before the Closing Date,
as follows: (x) ad valorem taxes (including without limitations real and
personal property taxes), shall be accrued on a daily basis over the period
for which such taxes are levied, or, if it cannot be determined over the
period such taxes are being levied, over the fiscal period of the relevant
taxing authority in each case irrespective of the lien or assessment date of
such taxes, (y) all taxes relating to actions outside the ordinary course of
business occurring after the Closing on the Closing Date shall be apportioned
to the period ending after the Closing Date, and (z) franchise and other
privilege taxes not measured by income shall be accrued on a daily basis over
the period to the which the privilege relates.
(e) BUYER AND FHPS INDEMNIFICATION. Buyer and FHPS shall be
liable for, and shall indemnify and hold the Company and any of its
Affiliates harmless against any and all Taxes imposed on FHPS relating or
apportioned to any taxable year or portion thereof ending after the Closing
Date, including without limitation all Taxes relating to actions outside the
ordinary course of business occurring after the Closing, on the Closing Date.
(f) REFUNDS OR CREDITS. Buyer and FHPS shall promptly pay to the
Company any refunds or credits (including interest paid to Buyer thereon)
relating to Taxes for which the Company may be liable under SECTION 5.10
hereof. For purposes of this SECTION 5.10(f), the terms "refund" and "credit"
shall include a reduction in Taxes and the use of an overpayment of Taxes as
an audit or other tax offset. Receipt of a refund shall occur upon the
filing of a Tax Return or an adjustment therein, using such reduction,
overpayment or offset, or upon the receipt of cash. Upon the reasonable
request and cost of the Company, Buyer shall prepare and file or cause to be
prepared and filed, all claims for refunds relating to such Taxes; provided,
however, that Buyer shall not be required to file such claims for refund to
the extent such claim for refund would have a Material Adverse Effect on
Buyer or FHPS in the future, or to the extent such claims for refund relate
to a carryback of an item. Buyer shall be entitled to all other refunds and
credits of Taxes; provided, however, Buyer will not allow the amendment of
any Tax Return relating to any Taxes for a period (or portion thereof)
ending on or prior to the Closing Date or the carryback of an item to a
period ending on or prior to Closing without the Company's consent.
(g) CONSENT. Whenever any taxing authority asserts a claim, makes
an assessment or otherwise disputes the amount of taxes for which the Company
is or may be liable under this Agreement, Buyer shall, if informed of such
assertion, promptly inform the Company within fifteen business days, and the
Company shall have the right to control the resulting proceedings and to
determine whether and when to settle any such claim, assessment or dispute to
the extent such proceedings or determinations affect the amount of taxes for
which the Company may be liable under this Agreement. Whenever any taxing
authority asserts a claim, makes an assessment, or otherwise disputes the
amount of taxes for which the Buyer is liable under this Agreement, the Buyer
shall have the right to control any resulting proceedings and to determine
whether and when to settle any such claim, assessment or dispute, except to
the extent such proceeding affect the amount of taxes for which the Company
may be liable under this Agreement.
(h) SURVIVAL. The obligations of the parties set forth in this
SECTION 5.10 shall be unconditional and absolute and shall remain in effect
until thirty days after the expiration of the applicable statute of
limitations.
5.11 SERVICE AGREEMENT. Buyer, the Company and IPS shall enter into a
service agreement (the "SERVICE AGREEMENT") in the form of EXHIBIT D hereto
under which Buyer or any of its subsidiaries or Affiliates shall be the
provider of certain mail order, network claims processing and other pharmacy
benefit management services set forth in the Service Agreement.
5.12 TRANSITION OF SERVICES.
(a) IMPLEMENTATION SCHEDULE. On or before the Closing, the parties
will complete a schedule and attach it to this Agreement as SCHEDULE 5.12,
which schedule will include the name, address, contact person and number of
lives eligible for pharmacy benefits for each plan covered by the Affiliated
Business and the Non-affiliated Business and the targeted date that such
business will be transitioned to Buyer's pharmacy claims processing system
(the "IMPLEMENTATION SCHEDULE"). The parties shall use their respective
reasonable best efforts to ensure that all of such business is transitioned
to and implemented by Buyer.
(b) TRANSITION OF THE COMPANY AFFILIATED BUSINESS. Upon Closing,
Buyer shall provide claims processing services, retail pharmacy network
management services, rebate contracting and formulary management services,
mail service pharmacy and other pharmacy benefit management services for the
Company Affiliated Business in accordance with the terms and provisions set
forth in the Service Agreement, including subject to the transition schedule
set forth therein.
(c) TRANSITION OF THE NON-AFFILIATED BUSINESS.
(i) The Company agrees that, following the Closing and until
such time as the claims processing services are implemented by Buyer for
each plan, the Company shall continue to perform the same scope of claims
processing services that it provided for each such plan prior to the
Closing. The Company shall use its reasonable best efforts to ensure that
during this transition period such services are performed in such a manner
that is consistent with the ordinary course of business immediately prior
to Closing in order to preserve and keep intact the business relationships
with such plans.
(ii) The Company and IPS agree that following the Closing and
until such time as the FHS Affiliated Business has been transitioned to the
jointly negotiated drug manufacturer agreements (as contemplated by the
Service Agreement), upon the request of Buyer, the Company and IPS shall
cause the Non-affiliated Business to be eligible for rebates under any or
all of the existing IPS rebate agreements should Buyer determine in its
sole discretion that it desires to continue to use such agreements for the
Non-affiliated Business. The Company and IPS agree that such rebates will
be serviced in accordance with Buyer's instructions. IPS agrees that all
rebates collected by IPS based on the utilization of the Non-affiliated
Business prior to Closing shall be paid by IPS following Closing pursuant
to the terms and conditions of the respective agreements for the
Non-affiliated Business, and that Advance Paradigm's obligation to pay such
rebates on such business shall begin with the rebates collected for the
quarter ending June 30, 1999.
(iii) Upon Closing, subject to the respective agreements
between Buyer and each plan covered by the Non-affiliated Business, mail
pharmacy services shall be provided for the Non-Affiliated Business as
determined by Buyer in its sole discretion.
(d) PHARMACY NETWORK AGREEMENTS. Pursuant to the transactions
contemplated by this Agreement, IPS will assign to FHPS prior to Closing or
directly to Buyer as of the Closing, and Buyer will acquire, all of the
retail pharmacy network contracts held by IPS, including, but not limited to
those set forth on SCHEDULE 4.22, and Buyer will assume all of the rights and
obligations thereunder upon Closing, or as soon thereafter as is practical;
provided, however, that the parties may agree to substitute new agreements
between Buyer and any such pharmacies in lieu of assignment of any such
agreements. In addition, the parties will use their reasonable best efforts
to obtain assignments of all other retail pharmacy network agreements,
subject to any limitations imposed under applicable law or regulation
affecting any of the Company's Affiliates. Subject to the respective
agreements between Buyer and each plan covered by the Non-affiliated
Business, the pharmacy eligible participants covered by such plans will
continue to receive their prescription services from such retail pharmacies.
The parties will
use their reasonable best efforts to obtain a release of IPS and/or FHS from
any liability arising from any such pharmacy network agreements from and
after the Closing. In the event Buyer has failed or is otherwise unable to
pay any such pharmacies in accordance with such agreements (a "DEFAULT IN
PHARMACY PAYMENT"), upon written notice to Buyer and confirmation from
Buyer's chief financial officer that such amounts have not been paid to the
pharmacies or to the pharmacies' Affiliates or designees, FHS, or an FHS
Affiliated Plan may make payment in order to remedy any such Default in
Pharmacy Payment, and FHS shall have the right to offset any amounts that
would have been due to Buyer for such claims under the Service Agreement for
such claims.
5.13 CONDUCT OF COMPANY PENDING TRANSITION. From and after the date
hereof and prior to the complete transition of the Affiliated Business and
the Non-affiliated Business, unless Buyer shall otherwise agree in writing,
and except as otherwise expressly contemplated by this Agreement, each of the
Company and the Subsidiaries consents and agrees that the businesses of FHPS
and the business relating to the Purchased Assets shall be conducted only in,
and each of the Company and the Subsidiaries shall not take any action
affecting FHPS or the Purchased Assets except in, the ordinary course of
business and consistent with past practices, and each of the Company and the
Subsidiaries shall use its best efforts to maintain and preserve the business
organization, assets, employees and advantageous business relationships of
FHPS and the Purchased Assets.
5.14 RESTRICTIVE COVENANTS.
(a) In order to assure that Buyer will realize the benefits of the
transactions contemplated hereby, subject to the Company's right to terminate
the Service Agreement after five (5) years, during the term of the Service
Agreement, but in any event not less than the five-year period following the
Closing Date, the Company and its Affiliates shall not engage in pharmacy
claims processing, retail pharmacy network management, mail service pharmacy,
rebate management or (subject to Section 3 of the Service Agreement) the
negotiation and performance of drug manufacturer agreements. Notwithstanding
the foregoing, (i) if the parties' obligations regarding formulary management
and drug manufacturer agreements are terminated in accordance with Section
11(c)(i) of the Service Agreement, then, so long as the Company complies with
Section 11(c)(i) of the Service Agreement, the Company may thereafter provide
such services for the FHS Affiliated Members; and (ii) if the Company
releases Buyer from its obligations to perform the retail pharmacy network
management services in accordance with Section 11(c)(ii) of the Service
Agreement, then, so long as the Company is in compliance with Section
11(c)(ii) of the Service Agreement, the Company may thereafter provide such
services for the FHS Affiliated Members; both (i) and (ii) including
participation (which may include minority ownership interests representing
not more than twenty percent (20%) of the equity or voting control) in
cooperative groups or alliances, provided the Company shall not market such
services to third parties. This section shall not be deemed to be a
limitation on providing clinical services (including pharmacy formulary and
rebate management services in accordance with Section 3 of the Service
Agreement) to the FHS Affiliated Members and the Company's contracting
medical groups, or the disease management services offered by the Company, or
otherwise limit the Company or any Affiliate from undertaking activities
relating to the processing and payment of medical claims generally as a payor
of such claims.
(b) SECTION 5.14(a) shall not be deemed to be a limitation on
providing clinical services (including pharmacy formulary and rebate
management services in accordance with Section 3 of the Services Agreement)
to the Affiliated Business and the Company's contracting medical groups, or
the disease management services offered by the Company, or otherwise limit
the Company or any Affiliate from undertaking activities relating to the
processing and payment of medical claims generally as a payor of such claims.
(c) Nothing contained in this SECTION 5.14 shall limit any FHS
Successor from owning and operating any business (or line of business), for
the benefit of the enrollees of the FHS Successor or other third parties with
whom the FHS Successor contracts, which would otherwise be construed as
violating the provisions of this SECTION 5.14; provided that the FHS
Successor shall be bound to this SECTION 5.14 with respect to the business of
the Company and the Affiliated Business, including business that would have
been attributable to the Company but for the Change of Control of the
Company; and provided further that except as expressly otherwise stated
herein, all terms, conditions and obligations of this Agreement shall become
the obligations of any FHS Successor. The Buyer and the FHS Successor shall
use their respective best efforts to agree on the allocation of enrollees
between FHS and the FHS Successor that are subject to this provision. To the
extent that the Company acquires any managed care company that has an
ownership in or otherwise provides services that would conflict with this
provision, this provision shall not apply to the enrollees of such managed
care organization as of the effective date of such acquisition; provided that
the provisions of this SECTION 5.14 shall continue to apply to any and all
current and additional Affiliated Business. In addition, prior to
consummating any acquisition of a managed care company that has an ownership
interest on or otherwise provide services that would conflict with this
SECTION 5.14, the Company shall notify Buyer of such acquisition, and Buyer
shall engage in good faith negotiations regarding cooperative efforts with
such entity, including Buyer's opportunity to acquire such business.
(d) Notwithstanding anything contained herein to the contrary, in
the event of a breach or threatened breach of the covenants contained in
SECTION 5.14(a) hereof, Buyer may, in addition to any other available
remedies, be entitled to an injunction enjoining the Company and its
Affiliates or any person or persons acting for or with the Company in any
capacity whatsoever from violating any of the terms herein, in accordance
with applicable law regarding the award of an equitable remedy.
5.15 RETENTION OF LITIGATION BY THE COMPANY. The Parties agree that the
Company shall retain all actions, suits and other legal and administrative
proceedings and governmental investigations pending or threatened against
FHPS, or FHPS' properties or assets, or the Purchased Assets. The Parties
agree that the Buyer has not agreed to assume, and shall not be required to
assume, any such pending or threatened action, suit or other legal or
administrative proceeding or governmental investigation, and the Company
agrees that it will take all actions and do all things necessary to ensure
that Buyer is not liable for any of the foregoing.
5.16 FHPS FUNDS. The Company shall cause FHPS to have not less than
Five Million Dollars ($5,000,000.00) in cash immediately prior to and at the
Closing.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF THE BUYER
The obligations of Buyer to effect the transactions contemplated hereby
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions, any or all of which may be waived in whole or in part
by Buyer:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Company Parties
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing Date with the same force and effect as
though made at and as of that time except (a) for changes specifically
permitted by this Agreement and (b) that those representations and warranties
which address matters only as of a particular date shall remain true and
correct as of such date. Each of the Company Parties shall have performed or
complied with in all material respects all of their obligations required by
this Agreement to be performed or complied with at or prior to the Closing
Date. Each of the Company Parties shall have delivered to Buyer a
certificate, dated as of the Closing, duly signed by the Chief Executive
Officer and principal accounting officer, certifying that such
representations and warranties are true and correct in all material respects
and that all such obligations have been performed and complied with in all
material respects.
6.2 NO MATERIAL ADVERSE CHANGE OR DESTRUCTION OF PROPERTY. Between
September 30, 1998 and the Closing Date, (a) there shall have been no
Material Adverse Change to FHPS or the Purchased Assets, (b) there shall have
been no adverse federal, state or local legislative or regulatory change
affecting in any material respect the services, products, business or
prospects of FHPS or the Purchased Assets, and (c) none of the Purchased
Assets or the assets of FHPS shall have been damaged by fire, flood,
casualty, act of God or the public enemy or other cause (regardless of
insurance coverage for such damage), which damages may have a Material
Adverse Effect on the Purchased Assets or FHPS, or have become the subject of
a condemnation proceeding, and the Company Parties shall have delivered to
Buyer a certificate, dated as of the Closing Date, to that effect.
6.3 CORPORATE CERTIFICATES. The Company shall have delivered to Buyer
(i) copies of the organizational documents of FHPS as in effect immediately
prior to the Closing Date, (ii) copies of resolutions adopted by the Board of
Directors and stockholders of the Company and the Subsidiaries authorizing
the transactions contemplated by this Agreement, and (iii) a certificate of
good standing of each of the Company and the Subsidiaries issued by the
Secretary of State of its respective state of incorporation and each other
state in which each is qualified to do business as of a recent date,
certified in each case as of the Closing Date by the Secretary of the
respective Company Party as being true, correct and complete.
6.4 OPINION OF COUNSEL. Buyer shall have received an opinion dated as
of the Closing Date from counsel for the Company Parties in form and
substance reasonably acceptable to Buyer.
6.5 CERTIFICATES AND TRANSACTION DOCUMENTS. Buyer shall have received
from the Company all of the certificates and transfer documents set forth on
EXHIBIT C.
6.6 CONSENTS AND APPROVALS. The Company Parties shall have received
and furnished to Buyer all consents to the transaction contemplated hereby
and waivers of rights to terminate or modify any material rights or
obligations of the Company Parties from any Person from whom such consent or
waiver is required under any Material Contract on or prior to the Closing and
effective through and including the Closing Date, or who as a result of the
transactions contemplated hereby, would have such rights to terminate or
modify such Contracts or instruments, either by the terms thereof or as a
matter of law. The requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, if applicable,
shall have been satisfied.
6.7 NO ADVERSE LITIGATION. There shall not be pending or threatened
any action or proceeding by or before any court or other governmental body
which shall seek to restrain, prohibit, invalidate or collect damages arising
out of the transactions contemplated hereby, and which, in the reasonable
judgment of Buyer, makes it inadvisable to proceed with the transactions
contemplated hereby.
6.8 LIABILITIES. Prior to the Closing, the Company shall have obtained
full satisfactions or releases of all obligations and liabilities due to or
on behalf of any Affiliate of a Subsidiary.
6.9 LIENS. The shares of capital stock of each Subsidiary held by the
Company shall be free and clear of any Liens. The Purchased Assets shall be
free and clear of any Liens.
6.10 SERVICE AGREEMENT. The Service Agreement shall be executed and
become effective immediately following the Closing.
6.11 IMPLEMENTATION SCHEDULE. Buyer and the Company shall have agreed
upon the Implementation Schedule set forth on SCHEDULE 5.12.
6.12 FINANCIAL STATEMENTS. The Company shall have delivered, or shall
have caused to be delivered, to Buyer the Prior Financial Statements and the
Current Financial Statements. The Company shall have agreed to deliver the
balance sheet of FHPS at March 31, 1999 within thirty (30) days of the
Closing.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY PARTIES
The obligations of the Company Parties to effect the transactions
contemplated hereby shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions, any or all of which may be waived
in whole or in part by the Company Parties:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date with the same force and effect as though made at and as of that
time except (a) for changes specifically permitted by or disclosed pursuant
to this Agreement and (b) that those representations and warranties which
address matters only as of a particular date shall remain true and correct as
of such date. Buyer
shall have performed and complied with in all material respects all of its
obligations required by this Agreement to be performed or complied with at or
prior to the Closing Date. Buyer shall have delivered to the Company a
certificate, dated as of the Closing Date, and signed by an executive
officer, certifying that such representations and warranties are true and
correct in all material respects and that all such obligations have been
performed and complied with in all material respects.
7.2 NO ADVERSE LITIGATION OR LEGISLATION. There shall not be pending
or threatened any action or proceeding by or before any court or other
governmental body which shall seek to restrain, prohibit, invalidate or
collect damages arising out of the transactions contemplated hereby, and
which, in the reasonable judgment of the Company Parties, makes it
inadvisable to proceed with the transactions contemplated hereby.
7.3 NO MATERIAL ADVERSE CHANGE. Between September 30, 1998 and the
Closing Date, there shall have been no Material Adverse Change to Buyer.
7.4 OPINION OF BUYER COUNSEL. The Company shall have received an
opinion dated as of the Closing Date from counsel to Buyer in form and
substance reasonably acceptable to the Company.
7.5 ▇▇▇▇ - ▇▇▇▇▇ - ▇▇▇▇▇▇ ACT. The requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, if applicable, shall have been satisfied.
ARTICLE 8
REMEDIES FOR BREACHES OF THIS AGREEMENT
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the Closing (except if the Party suffering Adverse Consequences
knew or had reason to know of any misrepresentation or breach of warranty or
covenant at the time of Closing) and continue in full force and effect
thereafter until the earlier of: (i) the completion of the Buyer's
consolidated audit for the fiscal year ending March 31, 2000, or (ii) ninety
(90) days following the end of the fiscal year ending March 31, 2000.
8.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER. In the event any
Company Party breaches (or in the event any third party alleges facts that,
if true, would mean any Company Party has breached) any representations,
warranties, and covenants of the Company Parties contained herein, then the
Company agrees to indemnify Buyer from and against any Adverse Consequences
Buyer may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences suffered after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature
of, or caused by the breach (or the alleged breach), subject to the
limitations set forth below.
8.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE COMPANY. In the
event Buyer breaches (or in the event any third party alleges facts that, if
true, would mean Buyer has breached) any representations, warranties, and
covenants of Buyer contained herein, then Buyer agrees to indemnify the
Company from and against any Adverse Consequences the Company may suffer
through and after the date of the claim for indemnification (including any
Adverse
Consequences suffered after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of or caused by
the breach (or the alleged breach), subject to the limitations set forth
below.
8.4 PROCEDURE FOR MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify any Party (the "INDEMNIFIED
PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which may give
rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this ARTICLE 8, then the Indemnified Party shall
promptly issue a Claim Notice to the Indemnifying Party with respect thereto.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within fifteen
(15) days following the receipt of the Claim Notice that the Indemnifying
Party will indemnify the Indemnified Party from and against the entirety of
any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim, (ii) upon request of the Indemnified Party, the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, and (iii) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(c) The Indemnified Party: (i) may retain separate co-counsel at
its sole cost and expense and participate in the defense of the Third Party
Claim and (ii) will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld unreasonably);
and the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be withheld
unreasonably).
(d) In the event any of the conditions in SECTION 8.4(b) is or
becomes unsatisfied, (i) the Indemnified Party may defend against the Third
Party Claim in any manner it reasonably may deem appropriate, (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (iii) the
Indemnifying Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in
the nature of, or caused by the Third Party Claim to the fullest extent
provided in this ARTICLE 8.
8.5 NOTICE OF CLAIM. A Party suffering Adverse Consequences that gives
or could give rise to a claim for indemnification under this ARTICLE 8 shall
promptly notify each other Party thereof in writing (a "CLAIM NOTICE") in
accordance with SECTION 10.1. The Claim Notice shall contain a brief
description of the nature of the Adverse Consequences suffered and, if
practicable, an aggregate dollar value estimate of the Adverse Consequence
suffered. No delay in
the issuance of a Claim Notice shall relieve any Party from any obligation
under this ARTICLE 8, unless and solely to the extent such Party is thereby
prejudiced.
8.6 LIMITATION ON AND EXPIRATION OF INDEMNIFICATION. Notwithstanding
anything in this ARTICLE 8 to the contrary, the Company's rights to
indemnification from Buyer, and Buyer's rights to indemnification from the
Company, shall be limited as follows:
(a) all rights of the parties hereto to indemnification hereunder
for breaches of representations and warranties shall expire following the
completion of the Buyer's consolidated audit for the fiscal year ending March
31, 2000; provided, however, if, prior to such expiration, a state of facts
shall have become known which threatens to give rise to a liability against
which any party hereto would be entitled to indemnification hereunder and the
indemnified party shall have given notice of such facts to the indemnifying
party, then the rights of the indemnified party to indemnification with
respect to such liability shall continue until such liability shall have been
finally determined and disposed of; and provided, further, that any
obligation for indemnification by the Company arising out of Taxes shall
continue for the period of the applicable statute of limitations for such
Taxes.
(b) No party shall be entitled to indemnification pursuant to
SECTION 8.1 or 8.2 unless and until the aggregate amount of damages resulting
from any and all indemnification sustained by such party exceeds $500,000.
Further, the aggregate amount to which an Indemnified Party shall be entitled
to recover for all obligations of indemnification under this Section 8 shall
not exceed the amount of $20 million.
(c) whenever the word "material" or phrase "Material Adverse
Effect" is used in this Agreement, it shall be construed as referring to
damages with respect to any individual claim which exceeds $75,000.
8.7 ADJUSTMENT FOR INSURANCE. The amount which an Indemnifying Party is
required to pay to, for or on behalf of the Indemnified Party pursuant to
this Article 8 shall be adjusted (including, without limitation,
retroactively) by any insurance proceeds actually recovered by or on behalf
of such Indemnified Party in reduction of the related indemnifiable loss (the
"INDEMNIFIABLE LOSS"). Amounts required to be paid, as so reduced, are
hereinafter sometimes called an "INDEMNITY PAYMENT". If an Indemnified Party
has received or has had paid on its behalf an Indemnity Payment for an
Indemnifiable Loss and subsequently receives insurance proceeds for such
Indemnifiable Loss, then the Indemnified Party shall (x) promptly notify the
Indemnifying Party of the amount and nature of such proceeds, and (y) pay to
the Indemnifying Party the amount of such insurance proceeds or, if lesser,
the amount of the Indemnity Payment.
8.8 MITIGATION OF LOSS. Each Indemnified Party is obligated to use all
reasonable efforts to mitigate to the fullest extent practicable the amount
of any Indemnifiable Loss for which it is entitled to seek indemnification
hereunder, and the Indemnifying Party shall not be required to make any
payment to an Indemnitee in respect of such Indemnifiable Loss to the extent
such Indemnified Party failed to comply with the foregoing obligation.
8.9 SUBROGATION. Upon making any Indemnity Payment, the Indemnifying
Party will, to the extent of such payment, be subrogated to all rights of the
Indemnified Party against
any third party in respect of the Indemnifiable Loss to which the payment
relates; PROVIDED, HOWEVER, that until the Indemnified Party recovers full
payment of its Indemnifiable Loss, any and all claims of the Indemnifying
Party against any such third party on account of such payment are hereby made
expressly subordinated and subjected in right of payment of the Indemnified
Party's rights against such third party. Without limiting the generality of
any other provision hereof, each such Indemnified Party and Indemnifying
Party will duly execute, upon request, all instruments reasonably necessary
to evidence and perfect the above-described subrogation and subordination
rights.
8.10 OTHER INDEMNIFICATION PROVISIONS. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy (including without limitation any such remedy
arising under Environmental, Health, and Safety Requirements) any Party may
have with respect to the transactions contemplated by this Agreement;
provided, however, that the limitations contained in SECTION 8.6 shall apply
to such remedies, except with respect to any equitable remedy, or any rights
of any of the parties arising under the Service Agreement.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by mutual written consent of all of the parties hereto at any
time prior to the Closing; or
(b) by Buyer upon delivery of written notice to the Company in
accordance with SECTION 10.1 of this Agreement in the event of a material
breach by a Company Party of any provision of this Agreement; or
(c) by the Company upon delivery of written notice to Buyer in
accordance with SECTION 10.1 of this Agreement in the event of a material
breach by Buyer of any provision of this Agreement; or
(d) by Buyer or the Company upon delivery of written notice to the
other in accordance with SECTION 10.1 of this Agreement, if the Closing shall
not have occurred by March 31, 1999, unless the failure of the Closing to
occur is the result of a breach by the terminating party that caused the
Closing to be delayed.
9.2 EFFECT OF TERMINATION. Except for the provisions of ARTICLE 8 and
SECTION 10.3 hereof, which shall survive any termination of this Agreement,
in the event of termination of this Agreement pursuant to SECTION 9.1, this
Agreement shall forthwith become void and of no further force and effect, and
the parties shall be released from any and all obligations hereunder;
provided, however, that nothing herein shall relieve any party from liability
for the willful breach of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
ARTICLE 10
GENERAL PROVISIONS
10.1 NOTICES. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage pre-paid),
guaranteed overnight delivery or facsimile transmission, if such transmission
is confirmed by delivery by certified or registered mail (first class postage
pre-paid) or guaranteed overnight delivery, to the following addresses and
telecopy numbers (or to such other addresses or telecopy numbers which such
party shall designate by like notice to the other party):
(a) if to Buyer to:
Advance Paradigm, Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chief Executive Officer, President and Chairman
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., P.C.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company Parties to:
Foundation Health Systems, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President - Specialty Services
Telecopy: ▇-▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Foundation Health Systems, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: B. ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esquire
Senior Vice President, General Counsel and
Secretary
Telecopy: ▇-▇▇▇-▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esquire
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
10.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules attached hereto, and other documents delivered at the Closing
pursuant hereto), contains the entire understanding of the parties in respect
of its subject matter and supersedes all prior agreements and understanding
(oral or written) between or among the parties with respect to such subject
matter. The Exhibits and Schedules constitute a part of this Agreement as
though set forth in full herein.
10.3 EXPENSES; SALES TAX. Except as otherwise provided herein, each
party shall bear its own transaction fees. The Company shall bear, be
responsible for and pay any state sales tax arising as a result of sale of
the Shares.
10.4 AMENDMENT; WAIVER. This Agreement may not be modified, amended,
supplemented, canceled, or discharged, except by written instrument executed
by all parties. No failure to exercise and no delay in exercising, any right,
power or privilege under this Agreement shall operate as a waiver, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude the exercise of such or any other right, power or privilege. No
waiver of any breach of any provision shall be deemed to be a waiver of any
preceding or succeeding breach of the same or any other provision, nor shall
any waiver be implied from any course of dealing between the parties. No
extension of time for performance of any obligations or other acts hereunder
or under any other agreement shall be deemed to be an extension of the time
for performance of any other obligations or any other acts.
10.5 BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns. Nothing expressed or implied
herein shall be construed to give any other Person any legal or equitable
rights hereunder. Except as expressly provided herein, the rights and
obligations of this Agreement may not be assigned by the Company Parties
without the prior written consent of Buyer. Buyer may assign all or any
portion of its rights hereunder to one or more of its wholly owned
subsidiaries.
10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument.
10.7 INTERPRETATION. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule or exhibit, such reference
shall be deemed to be to this Agreement unless otherwise indicated. The
headings contained herein and on the schedules are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement or the schedules. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation." Time shall be of the essence in this
Agreement.
10.8 GOVERNING LAW; INTERPRETATION. This Agreement shall be construed
in accordance with and governed for all purposes by the laws of the State of
Delaware without giving effect to the principles of conflicts of laws.
10.9 JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the United States
District Court for the District of Delaware and each of the parties consents
to the jurisdiction of such court (and of the appropriate appellate courts)
in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world. To the extent not
prohibited by applicable law, each of the parties hereby waives any right to
trial by jury in any action or proceeding based on or arising out of this
Agreement.
10.10 ARM'S LENGTH NEGOTIATIONS. Each party hereto expressly
represents and warrants to all other parties hereto that (a) before executing
this Agreement, said party has fully informed himself or itself of the terms,
contents, conditions, and effects of this Agreement; (b) said party has
relied solely and completely upon his or its own judgment in executing this
Agreement; (c) said party has had the opportunity to seek and has obtained
the advice of counsel before executing this Agreement; (d) said party has
acted voluntarily and of his or its own free will in executing this
Agreement; (e) said party is not acting under duress, whether economic or
physical, in executing this Agreement; and (f) this Agreement is the result
of arm's length negotiations conducted by and among the parties and their
respective counsel.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
ADVANCE PARADIGM, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chairman, CEO
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FOUNDATION HEALTH SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Title: President Specialty Services
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FOUNDATION HEALTH PHARMACEUTICAL SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Title: CEO
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INTEGRATED PHARMACEUTICAL SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Title: CEO
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FOUNDATION HEALTH CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Title:
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