STOCK AND WARRANT PURCHASE AGREEMENT
STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement"), dated as of
December 22, 1995, between Magellan Health Services, Inc. (f/n/a Charter Medical
Corporation), a Delaware corporation (the "Company"), and the persons whose
names are set forth on Annex I hereto (such persons being referred to herein
individually as a "Buyer" and collectively as "Buyers").
WHEREAS, the Company desires to sell to Buyers, and Buyers desire to
purchase from the Company, shares of Common Stock, par value $.25 per share, of
the Company ("Common Stock") and warrants to purchase shares of Common Stock;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company and Buyers hereby agree as follows:
ARTICLE I
TERMS OF THE TRANSACTION
1.1 Agreement to Sell and to Purchase Common Stock and Warrants. At the
Closing (as hereinafter defined), and on the terms and subject to the conditions
set forth in this Agreement, the Company shall sell and deliver to each Buyer,
and each Buyer shall purchase and accept from the Company, the number of shares
of Common Stock (collectively, the "Shares") and warrants (collectively, the
"Warrants", and herein together with the Shares referred to as the "Securities")
to purchase the number of shares of Common Stock (subject to adjustment from
time to time as provided in the Warrants), set forth opposite the name of such
Buyer on Annex I hereto. The Warrants shall be in substantially the form set
forth as Exhibit A hereto.
1.2 Purchase Price and Payment. The aggregate purchase price for the
Securities is $69,732,000 (the "Purchase Price"). The parties acknowledge that
the Purchase Price, as calculated on a per share basis, is equal to 95% of the
average closing price of the Common Stock as reported in the Wall Street Journal
over the ten trading days beginning on Monday, November 13, 1995 and continuing
through the close of business on Monday, November 27, 1995, which average was
$18.350 per share (i.e. $18.350 x .95 = $17.433 per share). The portion of the
Purchase Price payable by each Buyer for the Securities to be purchased by it is
set forth opposite the name of such Buyer on Annex I hereto and shall be paid by
each Buyer on or before the Closing Date (as hereinafter defined) in immediately
available funds by confirmed wire transfer to a bank account to be designated by
the Company (such designation to occur no later than the third Business Day (as
hereinafter defined) prior to the Closing Date).
1.3 Allocation of the Purchase Price. The parties hereto acknowledge
that the allocation of the Purchase Price between the Shares and the Warrants
was made by them in arm's length negotiation and agree that a written allocation
of the Purchase Price between the Shares and the Warrants shall be provided
before Closing and such allocation shall be made as of the date of this
Agreement.
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ARTICLE II
CLOSING AND CLOSING DATE
The closing of the transactions contemplated hereby (the "Closing")
shall take place (i) at the offices of Thompson & Knight, P.C., 1700 Pacific
Avenue, Suite 3300, Dallas, Texas, at 9:00 a.m., local time, on the third
Business Day following the satisfaction or waiver (subject to Applicable Law [as
hereinafter defined]) of each of the conditions to the obligations of the
parties set forth in Articles VI and VII hereof, or (ii) at such other time or
place or on such other date as the parties hereto shall agree. The date on which
the Closing is required to take place is herein referred to as the "Closing
Date". All Closing transactions shall be deemed to have occurred simultaneously.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Buyer, as of the date
hereof, that:
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority in all material
respects to own, lease, and operate its properties and to carry on its business
as now being conducted. No actions or proceedings to dissolve the Company are
pending or, to the best knowledge of the Company, threatened.
3.2 Qualification. Each of the Company and the Subsidiaries (as
hereinafter defined) is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased, or operated
by it or the conduct of its business requires such qualification or licensing,
except where the failure to do so would not have a material adverse effect on
the business, assets, results of operations or financial condition of the
Company or on the ability of the Company to consummate the transactions
contemplated hereby.
3.3 Capitalization of the Company.
(a) The authorized capital stock of the Company consists of (i)
80,000,000 shares of Common Stock, of which, as of the date hereof, 28,650,715
shares are outstanding and 187,435 shares are held in the Company's treasury,
and (ii) 10,000,000 shares of Preferred Stock, without par value, of which, as
of the date hereof, no shares are outstanding. All outstanding shares of capital
stock of the Company have been validly issued and are fully paid and
nonassessable, and no shares of capital stock of the Company are subject to, nor
have any been issued in violation of, preemptive or similar rights. As of the
date hereof, (i) an aggregate of 4,851,186 shares of Common Stock are reserved
for issuance pursuant to stock options granted to certain directors, officers,
and employees; (ii) an aggregate of 172,981 shares of Common Stock are reserved
for issuance and issuable upon the exercise of outstanding warrants; (iii)
certain shares of Common Stock are reserved for issuance upon the exercise of
certain purchase rights which become exercisable pursuant to the terms of the
Rights Agreement (as hereinafter defined); and (iv) an aggregate of 3,557,900
shares of Common stock are reserved for issuance and issuable under the Exchange
Agreement (as hereinafter defined).
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(b) Except as set forth above in subparagraph (a) of this Section 3.3
and as contemplated by this Agreement, there are outstanding (i) no shares of
capital stock or other voting securities of the Company; (ii) no securities of
the Company convertible into or exchangeable for shares of capital stock or
other voting securities of the Company; (iii) no options or other rights to
acquire from the Company, and no obligation of the Company to issue or sell, any
shares of capital stock or other voting securities of the Company or any
securities of the Company convertible into or exchangeable for such capital
stock or voting securities; and (iv) other than employee compensation plans
based on the Company's earnings and executive officer employment agreements, no
equity equivalents, interests in the ownership or earnings, or other similar
rights of or with respect to the Company. There are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any shares
of Common Stock or any other securities of the type described in clauses (i) -
(iv) of the preceding sentence.
3.4 Authority Relative to This Agreement. The Company has full
corporate power and authority to execute, deliver, and perform this Agreement
and the Ancillary Documents (as hereinafter defined) to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery, and performance by the Company of this Agreement and the Ancillary
Documents to which it is a party, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action of the Company. This Agreement has been duly executed and
delivered by the Company and constitutes, and each Ancillary Document executed
or to be executed by the Company has been, or when executed will be, duly
executed and delivered by the Company and constitutes, or when executed and
delivered will constitute, a valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
that such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally, and (ii) equitable principles which may limit the availability
of certain equitable remedies (such as specific performance) in certain
instances.
3.5 Noncontravention. The execution, delivery, and performance by the
Company of this Agreement and the Ancillary Documents to which it is a party and
the consummation by it of the transactions contemplated hereby and thereby do
not and will not (i) conflict with or result in a violation of any provision of
the Company's Restated Certificate of Incorporation or the Company's Bylaws, as
amended, or the charter, bylaws or other governing instruments of any
Subsidiary, (ii) conflict with or result in a violation of any provision of, or
constitute (with or without the giving of notice or the passage of time or both)
a default under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage, indenture, lease,
agreement, or other instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any of their
respective properties may be bound, (iii) result in the creation or imposition
of any Encumbrance upon the properties of the Company or any Subsidiary, or (iv)
assuming compliance with the matters referred to in Section 3.6, violate any
Applicable Law binding upon the Company or any Subsidiary, except, in the case
of clauses (ii), (iii), and (iv) above, for any such conflicts, violations,
defaults, terminations, cancellations, accelerations, or Encumbrances which
would not, individually or in the aggregate, have a material adverse effect on
the business, assets, results of operations, or financial condition of the
Company and the Subsidiaries taken as a whole or the ability of the Company to
consummate the transactions contemplated hereby.
3.6 Governmental Approvals. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any Governmental
Entity (as hereinafter defined) is required to be obtained or made by the
Company or any Subsidiary in connection with the execution, delivery, or
performance by the Company of this Agreement and the Ancillary Documents to
which it is a party or the consummation by it of the transactions contemplated
hereby and thereby, other than (i) compliance with any applicable
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requirements of the HSR Act (as hereinafter defined); (ii) compliance with any
applicable requirements of the Securities Act (as hereinafter defined); (iii)
compliance with any applicable requirements of the Exchange Act (as hereinafter
defined); (iv) compliance with any applicable state securities laws; and (v)
such consents, approvals, orders, or authorizations which, if not obtained, and
such declarations, filings, or registrations which, if not made, would not,
individually or in the aggregate, have a material adverse effect on the
business, assets, results of operations, or financial condition of the Company
or on the ability of the Company to consummate the transactions contemplated
hereby. The representations and warranties of the Company contained in this
Section 3.6, insofar as such representations and warranties pertain to
compliance by the Company with the requirements of the Securities Act and
applicable state securities laws, are based on the representations and
warranties of Buyers contained in Section 4.5.
3.7 Authorization of Issuance; Reservation of Shares. When issued and
delivered pursuant to this Agreement against payment therefor, the Securities
will have been duly authorized, issued and delivered and will constitute valid
and legally binding obligations of the Company entitled to the benefits provided
therein. When issued and delivered pursuant to the Agreement against payment
therefor, the Shares will be fully paid and nonassessable. During the period
within which the Warrants may be exercised, the Company will at all times have
authorized and reserved for the purpose of issue upon exercise of the Warrants,
a sufficient number of shares of Common Stock to provide for the exercise of the
Warrants. All shares of Common Stock which are issuable upon exercise of the
Warrants (the "Warrant Shares") will, when issued, be validly issued, fully paid
and nonassessable. The issuance of the Shares is not, and upon exercise of the
Warrants the issuance of the Warrant Shares will not be, subject to any
preemptive or similar rights.
3.8 Subsidiaries. Except as listed on Section 3.8 of the Company's
Disclosure Schedule attached hereto (the "Disclosure Schedule), there are no
"Significant Subsidiaries" as that term is defined in Regulation S-X promulgated
by the Securities and Exchange Commission (the "Commission"). Each Subsidiary is
a corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Each Subsidiary has all requisite
corporate power and corporate authority to own, lease, and operate its
properties and to carry on its business as now being conducted. No actions or
proceedings to dissolve any Subsidiary are pending.
3.9 SEC Filings. The Company has filed with the Commission all forms,
reports, schedules, statements, and other documents (excluding exhibits)
required to be filed by it since September 30, 1993 under the Securities Act,
the Exchange Act, and all other federal securities laws. All forms, reports,
schedules, statements, and other documents (including all amendments thereto)
filed by the Company with the Commission since such date are herein collectively
referred to as the "SEC Filings". The SEC Filings, at the time filed, complied
in all material respects with all applicable requirements of federal securities
laws. None of the SEC Filings, including, without limitation, any financial
statements or schedules included therein, at the time filed, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading except as the same was corrected or superseded in a subsequent
document duly filed with the Commission. Except as set forth in Section 3.9 of
the Disclosure Schedule and except for those contracts not required to be filed
pursuant to the rules and regulations of the Commission, all material contracts
of the Company and the Subsidiaries have been included in the SEC Filings. The
audited consolidated financial statements and unaudited consolidated interim
financial statements of the Company included in the SEC Filings present fairly
in all material respects, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto and, in the case of the unaudited consolidated interim financial
statements, except to the extent that preparation of such financial statements
in accordance with generally accepted accounting principles is not required by
applicable rules of the Commission), the
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consolidated financial position of the Company as of the dates thereof and its
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end audit adjustments in the case of any unaudited
interim financial statements).
3.10 Absence of Undisclosed Liabilities. Except as set forth in Section
3.10 of the Disclosure Schedule or to the extent disclosed in the SEC Filings
filed prior to the date hereof, (a) as of June 30, 1995, neither the Company nor
any Subsidiary had any liabilities or obligations (whether accrued, absolute,
contingent, unliquidated, or otherwise) material to the Company and the
Subsidiaries considered as a whole, and (b) since June 30, 1995, neither the
Company nor any Subsidiary has incurred any such material liabilities or
obligations, other than those incurred in the ordinary course of business
consistent with past practice or pursuant to or as contemplated by this
Agreement.
3.11 Absence of Certain Changes. Except as disclosed in the SEC Filings
filed prior to the date hereof, since June 30, 1995, (i) there has not been any
material adverse change in, or any event or condition that might reasonably be
expected to result in any material adverse change in, the business, assets,
results of operations, condition (financial or otherwise), of the Company and
the Subsidiaries considered as a whole, other than as a result of legal or
regulatory changes affecting the U.S. health care industry generally and (ii)
neither the Company nor any Subsidiary has incurred any material liability,
engaged in any material transaction, or entered into any material agreement in
each case outside the ordinary course of business consistent with past practice.
3.12 Compliance With Laws. Except as set forth in Section 3.12 of the
Disclosure Schedule, since July 31, 1992, (i) the Company and the Subsidiaries
have complied in all material respects with all Applicable Laws (including
without limitation Applicable Laws relating to securities, properties, Medicare
or Medicaid participation, business products, advertising and sales practices,
employment practices, terms and conditions of employment, wages and hours,
safety, occupational safety, health, environmental protection, product safety,
and civil rights); (ii) neither the Company nor any Subsidiary has received any
written notice, which has not been dismissed or otherwise disposed of, that the
Company or any Subsidiary has not so complied and (iii) neither the Company nor
any Subsidiary is charged or, to the best knowledge of the Company, threatened
with, or, to the best knowledge of the Company, under investigation with respect
to, any violation of any Applicable Law relating to any aspect of the business
of the Company or any Subsidiary other than violations which in the reasonable
judgement of the Company, individually or in the aggregate, do not and will not
have a material adverse effect on the business, assets, results of operation or
financial condition of the Company or the ability of the Company to consummate
the transactions contemplated hereby.
3.13 Litigation. Except as set forth in Section 3.13 of the Disclosure
Schedule, (i) there is (whether insured or uninsured) no action, suit,
proceeding or investigation pending or, to the knowledge of the Company,
threatened in writing, at law or in equity, in any court or before any
Governmental Entity against the Company or any Subsidiary or affecting the
Company or any Subsidiary or any of the respective assets or properties of the
Company or any Subsidiary that, in the reasonable judgement of the Company,
individually or in the aggregate would have a material adverse effect on the
Company or would prevent the Company from consummating the transactions
contemplated by this Agreement, and (ii) the Company and the Subsidiaries and
their respective assets and properties are not subject to any order from any
Governmental Entity that has or is likely to have a material adverse effect on
the Company.
3.14 Prior Private Offerings. Since July 31, 1992, (i) all securities
offered or sold by the Company which were not registered pursuant to the
Securities Act and applicable state securities laws, were offered or sold
pursuant to valid exemptions from the Securities Act and applicable state
securities laws and (ii) no private offering memorandum or other information
furnished (whether in writing or
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orally) to any offeree or purchaser of such securities, at the time of delivery
of such private offering memorandum or other information, contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
3.15 Private Offering of the Securities. The Company agrees that
neither the Company nor anyone acting on its behalf has offered or will offer
the Securities or any part hereof or any similar securities for issue or sale
to, or has solicited or will solicit any offer to acquire any of the same from,
anyone so as to bring the issuance and sale of the Securities within the
provisions of Section 5 of the Securities Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYERS
Each Buyer severally (and not jointly) represents and warrants to the
Company that:
4.1 Organization. If Buyer is a corporation, such Buyer is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. If Buyer is a partnership or trust, such
Buyer is duly formed and validly existing as a partnership or trust under the
laws of the jurisdiction of its formation.
4.2 Authority Relative to This Agreement. Buyer has full power and
authority to execute, deliver, and perform this Agreement and the Ancillary
Documents to which it is a party and to consummate the transactions contemplated
hereby and thereby. If Buyer is a corporation, partnership or trust, the
execution, delivery, and performance by Buyer of this Agreement and the
Ancillary Documents to which it is a party, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action of Buyer. This Agreement has been duly executed and delivered
by Buyer and constitutes, and each Ancillary Document executed or to be executed
by Buyer has been, or when executed will be, duly executed and delivered by
Buyer and constitutes, or when executed and delivered will constitute, a valid
and legally binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, except that such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting
creditors' rights generally and (ii) equitable principles which may limit the
availability of certain equitable remedies (such as specific performance) in
certain instances.
4.3 Noncontravention. The execution, delivery, and performance by Buyer
of this Agreement and the Ancillary Documents to which it is a party and the
consummation by it of the transactions contemplated hereby and thereby do not
and will not (i) if Buyer is a corporation, partnership or trust, conflict with
or result in a violation of any provision of the charter, bylaws, or similar
organizational documents of Buyer, (ii) conflict with or result in a violation
of any provision of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any right of termination,
cancellation, or acceleration under, any bond, debenture, note, mortgage,
indenture, lease, agreement, or other instrument or obligation to which Buyer is
a party or by which Buyer or any of its properties may be bound, (iii) result in
the creation or imposition of any Encumbrance upon the properties of Buyer, or
(iv) violate any Applicable Law binding upon Buyer, except, in the case of
clauses (ii), (iii), and (iv) above, for any such conflicts, violations,
defaults, terminations, cancellations, accelerations, or Encumbrances which
would not, individually or in the aggregate, have a material adverse effect on
the business, assets, results
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of operations, or financial condition of Buyer or on the ability of Buyer to
consummate the transactions contemplated hereby.
4.4 Governmental Approvals. Other than any HSR Act filing, no consent,
approval, order, or authorization of, or declaration, filing, or registration
with, any Governmental Entity is required to be obtained or made by Buyer in
connection with the execution, delivery, or performance by Buyer of this
Agreement or the consummation by it of the transactions contemplated hereby.
4.5 Purchase for Investment. Buyer has been furnished with all
information that it has requested for the purpose of evaluating the proposed
acquisition of the Securities pursuant hereto, and Buyer has had an opportunity
to ask questions of and receive answers from the Company regarding the Company
and its business, assets, results of operations, and financial condition and the
terms and conditions of the issuance of the Securities. Buyer is acquiring the
Securities to be purchased by it for its own account for investment and not for
distribution in any manner that would violate applicable securities laws, but
without prejudice to Buyer's rights to dispose of such Securities or a portion
thereof to a transferee or transferee, in accordance with such laws if at some
time in the future Buyer deems is advisable to do so. Buyer can bear the risk of
an investment in the Securities, and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of a prospective investment in the Securities. The acquisition of such
Securities by Buyer at Closing shall constitute Buyer's confirmation of the
foregoing representations. Buyer understands that such Securities are being sold
to it in a transaction which is exempt from the registration requirements of the
Securities Act, and that, in making the representations and warranties contained
in Section 3.6 pertaining to compliance by the Company with the requirements of
the Securities Act and applicable securities laws, the Company is relying, to
the extent applicable, upon Buyer's representations set forth herein.
4.6 No Other Shares. Except for such rights as may be conferred
on Buyer by this Agreement and the Ancillary Documents, as of the date hereof,
Buyer does not beneficially own, directly or indirectly, any shares of capital
stock of the Company.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Press Releases. Except as may be required by Applicable Law or by
the rules of any national securities exchange, neither Buyer, on the one hand,
nor the Company, on the other, shall issue any press release with respect to
this Agreement or the transactions contemplated hereby without the prior written
consent of the other party (which consent shall not be unreasonably withheld
under the circumstances). Any such press release required by Applicable Law or
by the rules of any national securities exchange shall only be made after
reasonable notice to the other party.
5.2 Stock Exchange Listing. The Company shall use its reasonable best
efforts to cause the Shares and the Warrant Shares to be approved for listing on
the American Stock Exchange, subject to official notice of issuance, prior to
the Closing Date, and at such time as the Common Stock is listed on the New York
Stock Exchange, cause the Shares and the Warrant Shares to be listed on the New
York Stock Exchange as soon as practicable thereafter.
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5.3 Registration Rights.
(a) Registration of Shares. Within 30 days following the Closing, the
Company will prepare and file a registration statement under the Securities Act,
and shall use its best efforts to cause such registration statement to become
effective as promptly as possible thereafter, with respect to the resale of the
Registrable Shares (as hereinafter defined).
(b) Registration of Warrant Shares. Prior to the first date on which
the Warrant Shares are issuable upon exercise of the Warrants, the Company will
prepare and file one or more registration statements under the Securities Act,
and cause such registration statements to become effective as promptly as
possible, with respect to the issuance of the Warrant Shares upon exercise of
the Warrants and the resale of the Registrable Warrant Shares (as hereinafter
defined).
(c) Piggyback Registrations. Until such time as the Buyer Group (as
hereinafter defined) no longer beneficially owns in the aggregate at least 10%
of the Shares and Underlying Warrant Shares (as hereinafter defined) initially
purchased hereunder, whenever the Company proposes to register an offering of
any of its Common Stock under the Securities Act other than (i) under employee
compensation or benefit programs or otherwise on Form S-8 or an equivalent form,
(ii) an exchange offer or an offering of securities solely to the existing
stockholders or employees of the Company or to the existing stockholders of
another company in connection with a merger or acquisition or otherwise on Form
S-4 or an equivalent form or (iii) a secondary registration solely on behalf of
holders of securities of the Company, and the registration form to be used may
be used for the registration of the Registrable Securities (as hereinafter
defined), the Company will give prompt written notice to all Buyers of its
intention to effect such a registration and will include in such registration
and offering all Registrable Securities which are then owned by members of the
Buyer Group and with respect to which the Company has received written requests
for inclusion therein within 20 days after the receipt of the Company's notice
(a "Piggyback Registration"). The Company shall use reasonable efforts to cause
the managing underwriters of a proposed underwritten offering to permit the
Registrable Securities then owned by members of the Buyer Group which have been
requested to be included in the registration statement (or registration
statements) for such offering to be included therein and in the prospectus used
in connection therewith on the same terms and conditions as are provided for
therein for persons other than Buyers. Notwithstanding the foregoing, if the
Company gives notice of such a proposed registration, the total number of
Registrable Securities which shall be included in such registration shall be
reduced pro rata to such number, if any, as in the reasonable opinion of the
managing underwriters of such offering would not adversely affect the
marketability or offering price of all of the securities proposed to be offered
by the Company in such offering; provided however, that to the extent not
prohibited by any registration rights agreements existing as of the date hereof,
the securities to be included in the registration statement (or registration
statements) for any person other than Buyers and the Company shall be first
reduced prior to any such pro rata reduction. It is specifically agreed that the
Piggyback Registration rights set forth in this subparagraph (c) shall not be
assignable to any transferee of Registrable Securities if such transferee is not
a member of the Buyer Group.
(d) Registration Procedures. With respect to each registration
statement filed in accordance with this Section 5.3 (the "Registration
Statement"), the Company shall:
(i) cause the Registration Statement and the related
prospectus and any amendment or supplement, (A) to comply in all
material respects with the applicable requirements of the Securities
Act and under the rules and regulations promulgated thereunder, and (B)
not to contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading;
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(ii) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in
connection therewith, and upon the mandatory expiration of the
Registration Statement, one or more additional registration statements,
as may be necessary to keep the Registration Statement effective on a
continual basis for so long as the Buyer Group collectively owns Shares
and Underlying Warrant Shares constituting more than 25% of the Shares
and Underlying Warrant Shares initially purchased hereunder; provided
that, the Company shall not be required to maintain the effectiveness
of the Registration Statement filed for a Piggyback Registration for
more than 90 days, and shall not be required to maintain the
effectiveness of any other Registration Statement filed hereunder for a
period in excess of three years from the Closing Date if after the
expiration of such period the Registrable Securities may be resold
without any restrictions under the Securities Act, it being agreed that
if the Registrable Securities remain subject to any restrictions under
the Securities Act (including any volume restrictions imposed upon
"affiliates" under Rule 144) the Company will continue to maintain the
effectiveness of such statement beyond the three year period subject to
the terms hereof;
(iii) furnish, upon written request, to each Buyer a copy of
any amendment or supplement to the Registration Statement or prospectus
prior to filing it after effectiveness and not file any such amendment
or supplement to which any such Buyer shall have reasonably objected on
the grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act or of the
rules or regulations promulgated thereunder;
(iv) furnish to each Buyer such number of copies of the
Registration Statement, each amendment and supplement thereto, the
prospectus used in connection therewith (including, without limitation,
each preliminary prospectus and final prospectus) and such other
document as such Buyer may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Buyer;
(v) use its best efforts to register or qualify all
Registrable Securities covered by the Registration Statement under such
other securities or blue sky laws of the states of the United States as
may be required for the issuance and sale of the Registrable
Securities, to keep such registration or qualification in effect for so
long as the Registration Statement remains in effect except that the
Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction in which it
is not and would not, but for the requirements of this Section 5.3, be
obligated to be so qualified, or to subject itself to taxation in any
such jurisdiction, or to consent to general service of process in any
such jurisdiction;
(vi) prior to any sale of the Registrable Securities effected
on the American Stock Exchange or the New York Stock Exchange, as
applicable, deliver to such national securities exchange copies of the
prospectus to be used in connection with the offering to be conducted
pursuant to the Registration Statement;
(vii) upon discovery that, or upon the happening of any event
as a result of which, the prospectus included in the Registration
Statement, as then in effect, includes or in the judgment of the
Company may include an untrue statement of a material fact or omits or
may omit to state any material fact required to be stated in such
prospectus or necessary to make the statements in such prospectus not
misleading in the light of the circumstances in which they were made,
which circumstance requires amendment of the Registration Statement or
supplementation of the prospectus, prepare and file as promptly as
reasonably possible a supplement to or an amendment of such prospectus
as may be necessary so that, as when delivered (if required by the
Securities Act) to a purchaser of Registrable Securities, such
prospectus shall not include an untrue statement
9
of a material fact or omit to state a material fact required to be
stated in such prospectus or necessary to make the statements in such
prospectus not misleading in the light of the circumstances in which
they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations under the Securities Act and, in its
discretion, to make available to its securities holders, as soon as
reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with
the first month of the first fiscal quarter after the effective date of
the Registration Statement, which earnings statement shall satisfy the
provisions of section 11(a) of the Securities Act;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by the Registration
Statement from and after a date not later than the effective date of
the Registration Statement;
(x) use its best efforts to list all Registrable Securities
covered by the Registration Statement on any national securities
exchange on which securities of the same class as the Registrable
Securities are then listed;
(xi) after any sale of the Registrable Securities pursuant to
this Section 5.3, to the extent not prohibited by law, cause any
restrictive legends to be removed and any transfer restrictions to be
rescinded with respect to the Registrable Securities;
(xii) enter into such customary agreements (including, without
limitation, underwriting agreements in customary form, substance, and
scope) and take all such other actions as the holders of a majority of
the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition
of such Shares;
(xiii) in the event of the issuance of any stop order
suspending the effectiveness of the Registration Statement, or of any
order suspending or preventing the use of any related prospectus or
suspending the disqualification of any Common Stock included in the
Registration Statement for sale in any jurisdiction, the Company will
use its best efforts promptly to obtain the withdrawal of such order;
and
(xiv) use its best efforts to cause such Registrable
Securities covered by the Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary to enable the Buyers thereof to consummate the disposition
of such Shares.
(e) Obligations of Buyer. Each member of the Buyer Group holding
Registrable Securities shall furnish to the Company such information regarding
such member as the Company may from time to time reasonably request in writing
(and will notify the Company of any changes in such information) and as shall be
required by the Securities Act in connection with such registration. Each such
member of the Buyer Group shall enter into such customary agreements (including,
without limitation, underwriting agreements, custody agreements and powers of
attorney in customary form, substance and scope) and take all such other actions
as the Company or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of the Registrable Securities.
(f) Delay of Sales. During any period in which the Company is
maintaining the effectiveness of a Registration Statement for the Registrable
Securities pursuant to this Section 5.3, the Company shall have the right, upon
giving notice to the members of the Buyer Group holding Registrable Securities
of
10
the exercise of such right, to require such members not to sell any Registrable
Securities pursuant to such Registration Statement for a period of time the
Company deems reasonably necessary, which time shall be specified in such notice
but in no event longer than a period of 90 days, if (i) the Company is engaged
in an offering of shares by the Company for its own account or is engaged in or
proposes to engage in discussions or negotiations with respect to, or has
proposed or taken a substantial step to commence, or there otherwise is pending,
any merger, acquisition, other form of business combination, divestiture, tender
offer, financing or other transaction, or there is an event or state of facts
relating to the Company, in each case which is material to the Company (any such
negotiation, step, event or state of facts being herein called a "Material
Activity"), (ii) such Material Activity would, in the opinion of counsel for the
Company, require disclosure so as to permit the Registrable Securities to be
sold in compliance with applicable law, and (iii) such disclosure would, in the
reasonable judgment of the Company, be adverse to its interests; provided, that,
the Company shall have no right to delay the filing of a Registration Statement
or the selling of Registrable Securities if at any time during the twelve months
preceding the date on which such notice was given the Company had delayed the
selling of Registrable Securities pursuant to this subparagraph (f). The Company
shall have no obligation to include in any notice contemplated by this
subparagraph (f) any reference to or description of the facts based upon which
the Company is delivering such notice.
(g) Indemnification.
(i) The Company shall indemnify and hold harmless each member
of the Buyer Group holding Registrable Securities, and if such member
is a corporation or partnership, its directors, Affiliates (as
hereinafter defined) and officers, and each other person, if any, who
controls such member within the meaning of the Securities Act against
any losses, claims, damages, liabilities or expenses (including
reasonable fees and expenses of counsel), joint or several, to which
such member or any such director, Affiliate or officer or participating
or controlling person may become subject under the Securities Act or
otherwise in connection with or as a result of a sale by such member of
the Registrable Securities, insofar as such losses, claims, damages,
liabilities or expenses (or related actions or proceedings) arise out
of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement,
any preliminary prospectus, final prospectus or summary prospectus
contained in the Registration Statement, or any amendment or supplement
to the Registration Statement, or any document incorporated by
reference in the Registration Statement, or (ii) any omission or
alleged omission to state in any such document a material fact required
to be stated in any such document or necessary to make the statements
in any such document not misleading, and the Company will reimburse
such member and each such director, Affiliate, officer, participating
person and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or expense (or action
or proceeding in respect of any such loss, claim, damage, liability or
expense) which arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance
upon and in conformity with written information furnished to the
Company by such member or any such director, Affiliate, officer,
participating person or controlling person for use in the preparation
of the Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf
of such member or any such director, Affiliate, officer, participating
person or controlling person and shall survive the transfer of such
securities by such member.
11
(ii) Each member of the Buyer Group holding Registrable
Securities, severally and not jointly, shall indemnify and hold
harmless (in the same manner and to the same extent as set forth in
clause (i) of this subparagraph (g)) the Company, each director of the
Company, each officer of the Company who shall sign the Registration
Statement and each other person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any untrue
statement in or omission from the Registration Statement, any
preliminary prospectus, final prospectus or summary prospectus included
in the Registration Statement, or any amendment or supplement to the
Registration Statement, but only to the extent that such statement or
omission was made in direct reliance upon and in conformity with
written information furnished to the Company by such member for use in
the preparation of the Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of the
Registrable Securities by such member.
(iii) Indemnification under this Section 5.3 shall be made as
set forth in Article IX hereof.
(h) Registration Expenses. All expenses incident to the Company's
registration of the Registrable Securities pursuant to the provisions of this
Section 5.3, including, without limitation, all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws, printing and
engraving expenses, messenger and delivery expenses and fees and disbursements
of counsel for the Company and all independent certified public accountants,
underwriters (excluding underwriting discounts and any selling commissions) and
any persons retained by the Company (all such expenses being herein called
"Registration Expenses"), will be paid by the Company; provided, that, all
expenses incurred by members of the Buyer Group holding Registrable Securities
to retain any counsel, accountant or other advisor will not be deemed to be
Registration Expenses and will be paid by such members pro rata based upon the
number of Registrable Securities included in the registration. The underwriting
discounts or commissions and any selling commissions together with any stock
transfer or similar taxes attributable to sales of the Registrable Securities
will be paid by the holders of the Registrable Securities pro rata based upon
the number of Registrable Securities held by them.
5.4 Board Representation. In connection with the Company's 1996 annual
meeting of stockholders, the Company will nominate a designee of Rainwater, Inc.
(the "Initial Designee") that is acceptable to the Company to fill a vacancy in
the Board of Directors of the Company existing on the date hereof and will use
its reasonable best efforts to cause the Initial Designee to become elected to
the Board. As long as Buyers and their Affiliates continue to beneficially own
in the aggregate at least 600,000 Shares, Warrant Shares and/or Underlying
Warrant Shares (appropriately adjusted for stock splits, combinations and
similar changes), the Company will continue to nominate the Initial Designee or
other designee of Rainwater, Inc. that is acceptable to the Company on each
subsequent date for re-nomination of the Initial Designee or other designee, as
applicable, and will use its reasonable best efforts to cause such designee to
become elected to the Board.
5.5 Fees and Expenses. The Company shall (i) at the Closing pay
Rainwater, Inc., the amount of $150,000; (ii) upon the earlier of the Closing or
the termination of this Agreement, unless this Agreement is terminated solely as
a result of any Buyer's breach of the terms hereof, reimburse Rainwater, Inc.
for (A) up to two filing fees for HSR Act approval of the transaction proposed
herein together with all other fees and expenses (including fees and expenses of
counsel) incurred in connection with such filings and (B) all other fees and
expenses (including fees and expenses of counsel, financial advisors,
accountants and other third party consultants) incurred in connection with this
Agreement and the
12
Ancillary Documents, up to a maximum of $100,000 for such other fees and
expenses incurred in connection with this Agreement and the Ancillary Documents;
and (iii) for so long as Buyers and their Affiliates continue to beneficially
own in the aggregate at least 600,000 Shares, Warrant Shares and/or Underlying
Warrant Shares (appropriately adjusted for stock splits, combinations and
similar changes), pay Rainwater, Inc. $75,000 annually, due quarterly in arrears
beginning March 31, 1995 (adjusted pro-rata for any period which is less than a
full quarter), and reimburse Rainwater, Inc. annually (payable quarterly in
arrears) for all fees and expenses, including legal fees, reasonably incurred by
Rainwater, Inc. in connection with the ownership of the Securities, up to a
maximum of $25,000 for any calendar year, unless the Company shall have approved
a greater amount.
5.6 Restrictions on Transfers; Restrictions on Exercise of
Warrants.
(a) Restrictions on Transfer of Shares, Warrants and Warrant
Shares. Subject to the provisions of subsection (c), no member of the Buyer
Group, without having obtained the prior written consent of the Company, shall:
(i) prior to the first anniversary of the Closing Date, sell
or transfer any of the Shares held by such member to any other person,
except for (A) Excluded Transfers (as hereinafter defined), or (B)
sales or transfers of a number of Shares, which together with all other
sales or transfers of Shares made by Rainwater, Inc. (or upon its
approval, other members of the Buyer Group) pursuant to this clause
(B), does not exceed 1% of the Shares initially purchased hereunder;
(ii) sell or transfer any of the Warrants held by such member
to any other person, except for Excluded Transfers; and
(iii) prior to the fourth anniversary of the Closing Date,
except for an Excluded Transfer, sell or transfer in a privately
negotiated transaction to a single purchaser and its Affiliates, or any
"Group" (as such term is defined in Rule 13d-5(b)(1) under the Exchange
Act) any combination of Shares, Warrants and/or Warrant Shares, if the
aggregate number of Shares, Warrant Shares and Underlying Warrant
Shares to be so transferred equals 5% or more of the Common Stock then
outstanding on a fully-diluted basis (i.e. including all shares of
Common Stock issuable under the terms of any options, warrants and
similar rights).
(b) Restrictions on Exercise of Warrants. Subject to the provisions of
subsection (d), the members of the Buyer Group shall not, during the time
periods set forth below, exercise Warrants to purchase less than the number of
Warrant Shares set forth opposite such time period (appropriately adjusted for
stock splits, combinations and similar changes):
Time Period Warrant Shares
----------- --------------
From the date immediately following
the first anniversary of the Closing Date 400,000
to and including the second Anniversary of
Closing Date
From the date immediately following
the second Anniversary of the Closing Date
to and including the third Anniversary of 200,000
Closing Date
13
From and after the third Anniversary
of the Closing Date No restriction
(c) Exceptions to Transfer Restrictions. Notwithstanding subsection
(a), any member of the Buyer Group may sell or transfer any of the Shares,
Warrants and/or Warrant Shares to any person pursuant to, as a result of, or in
connection with (i) a tender offer or an exchange offer approved by the Board of
Directors of the Company; (ii) the consummation of a merger (provided the
Company is not the surviving corporation in such merger), consolidation, or a
sale of all or substantially all the assets of the Company; or (iii) any other
"Fundamental Change Transaction" (as such term is defined in the Warrant).
(d) Exceptions to Warrant Exercise Restrictions. The limitations on
the exercise of the Warrants during the Exercise Period (as defined in the
Warrant) which are set forth in subsection (b) are subject to the following
exceptions:
(i) the holders may at any time exercise the balance of the
Warrants remaining outstanding at any time;
(ii) upon the written request of Rainwater, Inc., the holders
of the Warrants may exercise once in each calendar year Warrants to
purchase up to 100,000 Warrant Shares; and
(iii)any of the Warrants may be exercised in connection with
a transaction described in subsection (c).
(e) Transferees; No Other Restrictions. During the period in which the
restrictions set forth in this Section 5.6 remain applicable, neither Buyer nor
any transferee who is a member of the Buyer Group shall be entitled to, directly
or indirectly, sell or transfer any of the Shares, Warrants and/or Warrant
Shares in an Excluded Transfer to any person who is not a party to this
Agreement, unless the purported transferee executes an instrument acknowledging
that it is bound by the terms of this Section 5.6 and such instrument is
delivered to the Company. Except as provided in subsection (a) and this
subsection (e), and subject to compliance with the applicable provisions of the
Securities Act, the Shares, the Warrants and the Warrant Shares are freely
transferable.
5.7 Indemnification of Brokerage. The Company shall be solely
responsible for the payment of any amounts owed to Dean Witter Reynolds Inc. in
connection with the transactions contemplated herein. Each of the parties hereto
agrees to indemnify and hold harmless each other party from and against any
claim or demand for a commission or other compensation by any financial advisor,
broker, agent, finder, or similar intermediary claiming to have been employed by
or on behalf of such indemnifying party and to bear the cost of legal fees and
expenses incurred in defending against any such claim or demand.
5.8 Delivery of Information. The Company will deliver to each Buyer
promptly upon the filing thereof, copies of all registration statements (other
than the exhibits thereto and any registration statements on Form S-8 or its
equivalent) and reports on Forms 10-K (or their equivalents) which the Company
shall have filed with the Commission or any similar reports filed with any state
securities commission or office.
5.9 Rule 144 and Rule 144A Information. With a view to making available
to each Buyer the benefits of Rule 144 and Rule 144A promulgated under the 1933
Act and any other rule or regulation of the Commission that may at any time
permit the Buyers to sell Common Stock of the Company to the public without
registration, the Company agrees to:
14
(i) make and keep public information available, as those
terms are understood and defined in Rule 144;
(ii) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act
and the Exchange Act; and
(iii)furnish to each Buyer forthwith upon request (A) a
written statement by the Company that it has complied with the
reporting requirements of Rule 144, the Securities Act and the Exchange
Act, (B) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company
under the Securities Act and the Exchange Act and (C) such other
information as may be reasonably requested by each Buyer in availing
itself of any rule or regulation of the Commission which permits the
selling of any such securities without registration.
(iv) comply with all rules and regulations of the Commission
applicable to the Company in connection with use of Rule 144A (or any
successor thereto); and
(v) within five business days of the Company's receipt of a
request made by, or on behalf of, any prospective transferee of who is
a Qualified Institutional Buyer (as defined in Rule 144A) and would be
purchasing Common Stock of the Company in reliance upon Rule 144A),
provide to such prospective transferee copies of annual audited and
quarterly unaudited financial statements of the Company for it to
comply with Rule 144A.
5.10 Standstill.
(a) General. Each Buyer agrees that during the two year period ending
on the second anniversary of the Closing Date, it will not, and it will cause
its Affiliates and employees not to, purchase additional shares of the Company's
Common Stock so that Buyers and their Affiliates and employees collectively own
20% or more of the Company's Common Stock then outstanding; provided, however,
that Buyers and their Affiliates and employees shall not be deemed to own 20% or
more of the Common Stock then outstanding solely by reason of the Company's
purchase of any Common Stock unless thereafter Buyers and their Affiliates and
employees purchase any additional shares of Common Stock (excluding any
acquisition of Warrant Shares upon exercise of the Warrants, which shall not be
restricted hereunder).
(b) Additional Standstill Obligations. Each Buyer further agrees that
during the two year period ending on the second anniversary of the Closing Date,
it will not, and it will cause its Affiliates and employees not to, without
prior Company consent, (i) effect or cause to be effected any (A) "solicitation"
of "proxies" (as such terms are used in the proxy rules of the Commission) with
respect to the Company or any action resulting in such person becoming a
"participant" in any "election contest" (as such terms are used in the proxy
rules of the Commission) with respect to the Company, or (B) any tender or
exchange offer or offer for a merger, consolidation, share exchange or business
combination involving the Company or substantially all of its assets, or (ii)
propose any matter for submission to a vote of the stockholders of the Company.
(c) Amendments to Rights Agreement. If the Company undertakes the
purchase of any Common Stock under circumstances in which any exercise of
Warrants would be considered to cause Buyers and their Affiliates to become an
"Acquiring Person" under the Rights Agreement, the Company agrees to amend the
Rights Agreement to either (i) include the Buyers and their Affiliates in the
definition of an "Initial Shareholder", or (ii) change the definition of "Exempt
Person" so as to exclude any exercise
15
of the Warrants from being considered as an additional purchase of shares of
Common Stock for purposes of the Rights Agreement.
5.11 Participation in Subsequent Private Placements. Until such time as
Buyers and their Affiliates no longer beneficially own in the aggregate at least
600,000 Shares, Warrant Shares and/or Underlying Warrant Shares, in the event
that the Company desires to issue any Equity Securities (as hereinafter defined)
for cash in a private placement transaction, the Company shall, prior to such
issuance, provide written notice to Rainwater, Inc. describing in detail the
Equity Securities to be issued, the potential purchasers thereof, if
specifically known, and the consideration to be received therefrom (a
"Preemptive Notice"). The Buyer Group shall have the right, during the 20
Business Days following receipt of the Preemptive Notice (the "Preemptive Right
Offer Period"), to elect to subscribe for and purchase (the "Preemptive Right")
at the same price, and on such other terms and conditions as are set forth in
the Preemptive Notice, such number of shares of Equity Securities (in the
Company's sole discretion either as a portion of or in addition to the Equity
Securities covered by the Preemptive Notice) as may be required to cause the
Equity Ownership Interest (as hereinafter defined) of the Buyer Group
immediately following such issuance to be equal to the Equity Ownership Interest
of the Buyer Group on the date of the Preemptive Notice. Any notice by the Buyer
Group of their election to exercise the Preemptive Right shall be provided by
Rainwater, Inc. on behalf of such group. Any Equity Securities to be purchased
by the Buyer Group shall be allocated pro-rata among the members of the Buyer
Group electing to exercise the Preemptive Right, as determined by Rainwater,
Inc.
5.12 No Solicitation. From the date of this Agreement to the earlier of
(i) the Closing Date, (ii) January 31, 1996, or (ii) the termination of this
Agreement in accordance with its terms (but not including upon or due to a
breach of this Agreement by the Company), the Company agrees that, except
pursuant to agreements in existence as of the date hereof, (A) it will not, (B)
it will not permit any Subsidiary to and (C) it will not authorize or permit any
officer, director or employee of the Company or any Subsidiary, or any
investment banker, attorney, financial advisor, accountant or other person
retained by the Company or any Subsidiary, directly or indirectly (including by
way of furnishing any information) to (i) solicit, initiate, assist, encourage
or accept any proposal regarding a financing, sale of stock, or any other
transaction involving the Company, which in each case is similar to the proposed
investment contemplated herein (a "Transaction"); (ii) engage in any
negotiations with respect to, or otherwise attempt to consummate, a Transaction;
(iii) provide any public or non-public information concerning the Company to any
person in connection with any proposal for a Transaction or to any person whom
the Company or any Subsidiary knows or has reason to believe is in the process
of planning or considering a Transaction; or (iv) reach any agreement or
understanding for or with respect to any Transaction. The Company will
immediately advise Buyer orally and, within one Business Day, in writing of any
such inquiries, requests for information or Transaction proposals of which it
has knowledge. If the Company or any Subsidiary receives from any person any
offer, inquiry or informational request referred to above, the Company will
promptly advise such person in writing of the terms of this Section 5.12 and
will send Buyer a copy of such notice.
5.13 Amendment of Schedules. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Sections 6.1 and 7.1
have been fulfilled, the Schedules hereto shall be deemed to include only that
information contained therein on the date of this Agreement and shall be deemed
to exclude all information contained in any supplement or amendment thereto;
provided, however, that if the Closing shall occur, then all matters
16
disclosed pursuant to any such supplement or amendment at or prior to the
Closing shall be waived and no party shall be entitled to make a claim thereon
pursuant to the terms of this Agreement.
5.14 Access to Information. Between the date hereof and the Closing,
the Company (i) shall give Buyers and their authorized representatives
reasonable access to the Company's employees, offices and other facilities, and
all books and records of the Company and the Subsidiaries, (ii) shall permit
Buyer and its authorized representatives to make such inspections as they may
reasonably require to verify the accuracy of any representation or warranty
contained in Article III, and (iii) shall cause the Company's officers to
furnish Buyer and its authorized representatives with such financial and
operating data and other information with respect to the Company and the
Subsidiaries as Buyer may from time to time reasonably request; provided,
however, that no investigation pursuant to this Section shall affect any
representation or warranty of the Company contained in this Agreement or in any
agreement, instrument, or document delivered pursuant hereto or in connection
herewith; and provided further that the Company shall have the right to have a
representative present at all times.
5.15 HSR Act Notification. To the extent it is determined that the HSR
Act will be applicable to the transaction contemplated hereby, each of the
parties hereto shall (i) file or cause to be filed, as promptly as practicable
after the execution and delivery of this Agreement and in no event later than
January 10, 1996, with the Federal Trade Commission and the United States
Department of Justice, all reports and other documents required to be filed by
such party under the HSR Act concerning the transactions contemplated hereby and
(ii) promptly comply with or cause to be complied with any requests by the
Federal Trade Commission or the United States Department of Justice for
additional information concerning such transactions, in each case so that the
waiting period applicable to this Agreement and the transactions contemplated
hereby under the HSR Act shall expire as soon as practicable after the execution
and delivery of this Agreement. Each party hereto agrees to request, and to
cooperate with the other party or parties in requesting, early termination of
any applicable waiting period under the HSR Act.
5.16 Survival of Covenants. Except for any covenant or agreement which
by its terms expressly terminates as of a specific date, the covenants and
agreements of the parties hereto contained in this Agreement shall survive the
Closing without contractual limitation.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions:
6.1 Representations and Warranties True. All the representations and
warranties of Buyers contained in this Agreement shall be true and correct on
and as of the Closing Date, except to the extent that any such representation or
warranty is made as of a specified date, in which case such representation or
warranty shall have been true and correct as of such specified date, except to
the extent contemplated by this Agreement or the Ancillary Documents.
6.2 Covenants and Agreements Performed. Buyers shall have performed
and complied with all covenants and agreements required by this Agreement, if
any, to be performed or complied with by them on or prior to the Closing Date.
17
6.3 HSR Act. To the extent that the HSR Act is applicable to the
transaction contemplated herein, all waiting periods (and any extensions
thereof) applicable to this Agreement and the transactions contemplated hereby
under the HSR Act shall have expired or been terminated.
6.4 Legal Proceedings. No Proceeding (as hereinafter defined) shall, on
the Closing Date, be pending or threatened seeking to restrain, prohibit, or
obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
6.5 Certificate. The Company shall have received a certificate executed
by each Buyer, and if Buyer is a corporation, partnership or trust, by a duly
authorized person on behalf of Buyer dated the Closing Date, representing and
certifying, in such detail as the Company may reasonably request, that the
conditions set forth in Sections 6.1 and 6.2 have been fulfilled.
6.6 Private Placement Information. The Company shall have received
evidence reasonably satisfactory it establishing the status (as "accredited
investors" or otherwise) of all Buyers who are assignees of the Buyer initially
executing this Agreement, to the extent reasonably required to establish that
the issuance and sale of the Securities is exempt from the registration
requirements of the Securities Act.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYERS
The obligations of Buyers to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment on or prior to the Closing
Date of each of the following conditions:
7.1 Representations and Warranties True. All the representations and
warranties (other than Section 3.11) of the Company contained in this Agreement
shall be true and correct on and as of the Closing Date (except that the
representations and warranties contained in Sections 3.3(a) and 3.8 shall be
true and correct in all material respects), except to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct as of such specified
date, except to the extent contemplated by this Agreement or the Ancillary
Documents.
7.2 Covenants and Agreements Performed. The Company shall have
performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
7.3 Opinion of Counsel. Each Buyer shall have received an opinion of
legal counsel to the Company, dated the Closing Date, in form and substance
satisfactory to the Buyers and their counsel, covering those matters set forth
in Exhibit 7.3 attached hereto.
7.4 Legal Proceedings. No Proceeding shall, on the Closing Date, be
pending or threatened seeking to restrain, prohibit, or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
18
7.5 Certificates. Each Buyer shall have received a certificate or
certificates representing the Shares and the Warrants, as applicable, in
definitive form representing the Shares and Warrants purchased by it, (in the
case of the Warrants in substantially the form set forth in Exhibit A hereto)
registered in the name of such Buyer and duly executed by the Company.
7.6 Officer Certificate. Buyer shall have received a certificate
executed on behalf of the Company by the chief executive officer or the chief
financial officer of the Company, dated the Closing Date, representing and
certifying, in such detail as the Buyer may reasonably request, that the
conditions set forth in Sections 7.1, 7.2 and 7.4 have been fulfilled.
ARTICLE VIII
TERMINATION, AMENDMENT, AND WAIVER
8.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing in
the following manner:
(a) by mutual written consent of the Company and Buyers; or
(b) by the Company, if, on the Closing Date, any of the conditions set
forth in Article VI shall not have been satisfied and shall not have been waived
by the Company; or
(c) by Buyers, if, on the Closing Date, any of the conditions set
forth in Article VII shall not have been satisfied and shall not have been
waived by Buyers; or
(d) by the Company or Buyers if the Closing has not occurred by the
close of business on January 31, 1996, so long as the failure to consummate the
transaction on or before such date does not result from a breach of this
Agreement by the party seeking termination of this Agreement; provided that, if
the failure to consummate the transaction on or before such date is due solely
to the failure to have satisfied the condition in Section 6.3, then the earliest
date upon which this Agreement may be terminated pursuant to this subparagraph
(d) is March 31, 1996; or
(e) at any time before the Closing, by Company or Buyers, in the event
(i) of a material breach of this Agreement by any non-terminating party if such
non-terminating party fails to cure such breach within five Business Days
following notification by any one or more terminating parties, or (ii) upon
notification to the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party's obligations under this
Agreement has become impossible or impractical with the use of best efforts, if
the failure of such condition to be satisfied is not caused by a breach by the
terminating party.
8.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1 by the Company, on the one hand, or Buyers, on
the other, written notice thereof shall forthwith be given to the other party
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall become void and have no effect, except that the agreements
contained in this Section and in Sections 5.1, 5.5 and 5.7 and Article IX shall
survive the termination hereof. Nothing contained in this Section shall relieve
any party from liability for any breach of this Agreement.
8.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of all the parties hereto.
19
8.4 Waiver. No failure or delay by a party hereto in exercising any
right, power, or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege. The provisions
of this Agreement may not be waived except by an instrument in writing signed by
or on behalf of the party against whom such waiver is sought to be enforced.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION
9.1 Survival. The representations and warranties of the parties hereto
contained in this Agreement or in any certificate, instrument or document
delivered pursuant hereto shall survive the Closing, regardless of any
investigation made by or on behalf of any party, until the second anniversary of
the Closing Date; provided, however, that the representations and warranties of
the Company contained in Sections 3.1, 3.3., 3.4 and 3.7 shall survive until 30
days after the expiration of the limitation period under the applicable statute
of limitations (each such anniversary and time of expiration, a "Survival
Date"). No action may be brought with respect to a breach of any representation
after the Survival Date unless, prior to such time, the party seeking to bring
such an action has notified the other parties of such claim, specifying in
reasonable detail the nature of the loss suffered. The provisions of this
Section 9.1 shall have no effect upon any of the covenants of the parties set
forth in Article V or any of the other obligations of the parties hereto under
the Agreement, whether to be performed later, at or after the Closing.
9.2 Indemnification by Company. The Company shall indemnify, defend,
and hold harmless Buyers from and against any and all claims, actions, causes of
action, demands, losses, damages, liabilities, costs, and expenses (including
reasonable attorneys' fees and expenses) (collectively, "Damages"), asserted
against, resulting to, imposed upon, or incurred by Buyers, directly or
indirectly, by reason of or resulting from any breach by the Company of any of
its representations, warranties, covenants, or agreements contained in this
Agreement or in any certificate, instrument, or document delivered pursuant
hereto.
9.3 Indemnification by Buyers. Each Buyer severally (but not jointly)
shall indemnify, defend, and hold harmless the Company from and against any and
all Damages asserted against, resulting to, imposed upon, or incurred by the
Company, directly or indirectly, by reason of or resulting from any breach by
such Buyer of any of its representations, warranties, covenants, or agreements
contained in this Agreement or in any certificate, instrument, or document
delivered pursuant hereto.
9.4 Procedure for Indemnification. Promptly after receipt by an
indemnified party under Section 9.2 or 9.3 of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such Section, give written notice to
the indemnifying party of the commencement thereof, but the failure so to notify
the indemnifying party shall not relieve it of any liability that it may have to
any indemnified party except to the extent the indemnifying party demonstrates
that the defense of such action is prejudiced thereby. In case any such action
shall be brought against an indemnified party and it shall give written notice
to the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it may wish, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. If the indemnifying party elects to assume the defense of
such action, the indemnified party shall have the right to employ separate
counsel at its own expense and to participate in the defense thereof. If the
indemnifying party elects not to assume (or fails to assume) the defense of such
action,
20
the indemnified party shall be entitled to assume the defense of such action
with counsel of its own choice, at the expense of the indemnifying party. If the
action is asserted against both the indemnifying party and the indemnified party
and there is a conflict of interests which renders it inappropriate for the same
counsel to represent both the indemnifying party and the indemnified party, the
indemnifying party shall be responsible for paying for separate counsel for the
indemnified party; provided, however, that if there is more than one indemnified
party, the indemnifying party shall not be responsible for paying for more than
one separate firm of attorneys to represent the indemnified parties, regardless
of the number of indemnified parties. The indemnifying party shall have no
liability with respect to any compromise or settlement of any action effected
without its written consent (which shall not be unreasonably withheld).
ARTICLE X
MISCELLANEOUS
10.1 Notices. All notices, requests, demands, and other communications
required or permitted to be given or made hereunder by any party hereto shall be
in writing and shall be deemed to have been duly given or made if delivered
personally, or transmitted by first class registered or certified mail, postage
prepaid, return receipt requested, or sent by prepaid overnight delivery
service, or sent by cable, telegram, or telefax, to the parties at the addresses
and telefax numbers set forth opposite their names on the signature page hereof
(in the case of the Company) and on Annex I hereto (in the case of Buyers) (or
at such other addresses and telefax numbers as shall be specified by the parties
by like notice).
10.2 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
10.3 Binding Effect; Assignment; No Third Party Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors, and permitted assigns.
Except as otherwise expressly provided in this Agreement, neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties, except that any Buyer may assign to any partnership in which Rainwater,
Inc. is the sole managing partner, or to any other member of the Buyer Group,
any of Buyer's rights, interests, or obligations hereunder, upon notice to the
other party or parties. Prior to the Closing, any assignee of the initial Buyer
executing this Agreement shall, upon such assignment, execute this Agreement as
a Buyer and the provisions of Annex I shall be amended to accurately reflect the
portion of the Securities to be purchased by each Buyer. Except as provided in
Article IX, nothing in this Agreement, express or implied, is intended to or
shall confer upon any person other than the parties hereto, and their respective
heirs, legal representatives, successors, and permitted assigns, any rights,
benefits, or remedies of any nature whatsoever under or by reason of this
Agreement.
10.4 Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in all
other respects this Agreement shall remain in full force and effect; provided
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by applicable law.
10.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
21
DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
10.6 Counterparts. This Agreement may be executed by the parties hereto
in any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same agreement. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, the parties hereto.
ARTICLE XI
DEFINITIONS
11.1 Certain Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Article:
"Affiliate" has the meaning specified in Rule 12b-2
promulgated under the Exchange Act.
"Ancillary Documents" means each agreement, instrument, and
document (other than this Agreement) executed or to be executed by the
Company or Buyer in connection with the transactions contemplated by
this Agreement, including without limitation the Warrants.
"Applicable Law" means any statute, law, rule, or regulation
or any judgment, order, writ, injunction, or decree of any Governmental
Entity to which a specified person or property is subject.
"Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in Atlanta, Georgia are
authorized or obligated by law or executive order to close.
"Buyer Group" shall mean collectively, all Buyers together
with their respective Affiliates and bona fide employees.
"Encumbrances" means liens, charges, pledges, options,
mortgages, deeds of trust, security interests, claims, restrictions
(whether on voting, sale, transfer, disposition, or otherwise),
easements, and other encumbrances of every type and description,
whether imposed by law, agreement, understanding, or otherwise.
"Equity Ownership Interests" shall mean, with respect to the
members of the Buyer Group, at any time, the fraction (a) having as its
numerator the number of shares of Common Stock and Underlying Warrant
Shares held beneficially by all members of the Buyer Group at such
time, and (b) having as its denominator the aggregate number of shares
of Common Stock (calculated on a fully diluted basis) issued and
outstanding at such time.
"Equity Securities" means any capital stock of the Company,
and any securities directly or indirectly convertible into, or
exercisable or exchangeable for any capital stock of the Company, or
any right, option, warrant or other security which, with the payment of
additional consideration, the expiration of time or the occurrence of
any event shall give the holder thereof the right to acquire any
capital stock of the company or any security convertible into or
exercisable or exchangeable for, any capital stock of the Company.
22
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Agreement" means that certain Exchange Agreement
among the Company and certain other parties dated as of December 13,
1995.
"Excluded Transfer" means any transfer by a member of the
Buyer Group to (i) an affiliate or bona fide employee of the
transferor, (ii) any other Buyer, or (iii) to any Affiliate or bona
fide employee of another Buyer.
"Governmental Entity" means any court or tribunal in any
jurisdiction (domestic or foreign) or any public, governmental, or
regulatory body, agency, department, commission, board, bureau, or
other authority or instrumentality (domestic or foreign).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, enterprise,
unincorporated organization, or Governmental Entity.
"Proceedings" means all proceedings, actions, suits,
investigations, and inquiries by or before any arbitrator or
Governmental Entity.
"Registrable Securities" means the Registrable Shares and the
Registrable Warrant Shares.
"Registrable Shares" means the Shares and any Common Stock or
other Equity Securities issued with respect thereto by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise.
"Registrable Warrant Shares" means the Warrant Shares and any
Common Stock or other Equity Securities issued with respect thereto by
way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise.
"Rights Agreement" means that certain Rights Agreement, dated
as of July 21, 1992 between the Company and First Union National Bank
of North Carolina, as rights agent.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means any corporation more than 50% of whose
outstanding voting securities, or any general partnership, joint
venture, or similar entity more than 50% of whose total equity
interests, is owned, directly or indirectly, by the Company, or any
limited Partnership of which the Company or any Subsidiary is a general
partner.
"Underlying Warrant Shares" shall mean, at any time, all
shares of Common Stock which may be acquired upon exercise of the
Warrants. For purposes hereof, any person who holds Warrants shall be
deemed to be the holder of the Underlying Warrant Shares obtainable
upon exercise of such Warrants.
23
11.2 Certain Additional Defined Terms. In addition to such terms as
are defined in the opening paragraph of and the recitals to this Agreement and
in Section 11.1, the following terms are used in this Agreement as defined in
the Sections set forth opposite such terms:
Defined Term Section Reference
------------ -----------------
Closing..................................................................................................Article II
Closing Date.............................................................................................Article II
Commission..................................................................................................... 3.8
Damages........................................................................................................ 9.2
Disclosure Schedule............................................................................................ 3.8
Initial Designee............................................................................................... 5.4
Material Activity...............................................................................................5.3
Preemptive Notice..............................................................................................5.11
Preemptive Right...............................................................................................5.11
Preemptive Right Offer Period..................................................................................5.11
Piggyback Registration......................................................................................... 5.3
Purchase Price..................................................................................................1.2
Registration Expenses...........................................................................................5.3
Registration Statement............................................................................................?
SEC Filings.................................................................................................... 3.9
Securities......................................................................................................1.1
Shares..........................................................................................................1.1
Survival Date.................................................................................................. 9.1
Transaction................................................................................................... 5.12
Warrant Registration Agreement....................................................................................?
Warrant Shares..................................................................................................3.7
Warrants........................................................................................................1.1
24
IN WITNESS WHEREOF, the parties have executed this Agreement, or caused
this Agreement to be executed by their duly authorized representatives, all as
of the day and year first above written.
MAGELLAN HEALTH SERVICES, INC.
Address:
3414 Peachtree Road, N.E.
Suite 1400
Atlanta, Georgia 30326 By: /s/ E. Mac Crawford
Fax: (404) 814-5717 -----------------------------------
E. Mac Crawford, Chairman
and Chief Executive Officer
BUYER(S):
/s/ Richard E. Rainwater
---------------------------------------
Richard E. Rainwater
25
ANNEX I
Number of Shares Shares Underlying Total
Name of Buyer Address and Fax ------ Warrants Purchase Price
- ------------- --------------- -------- --------------
Richard E. 777 Main St. 4,000,000 2,000,000 $69,732,000
Rainwater Suite 2700
Fort Worth, TX
76102
(817)878-0460
EXHIBIT A
(Form of Warrants)
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE
DISPOSED OF IN UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THAT ACT OR
UNLESS AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
THE RIGHT TO SELL OR OTHERWISE TRANSFER THIS WARRANT IS SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN A STOCK AND WARRANT PURCHASE AGREEMENT DATED DECEMBER
22, 1995, BETWEEN THE COMPANY AND THE INITIAL BUYERS OF THE WARRANTS, A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF THE COMPANY. THIS WARRANT
MAY NOT BE SOLD OR TRANSFERRED EXCEPT UPON THE CONDITIONS SPECIFIED IN THE STOCK
AND WARRANT PURCHASE AGREEMENT AND IN THIS WARRANT, AND NO SALE OR TRANSFER OF
THIS WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL
HAVE BEEN COMPLIED WITH.
-----------------------------------------------
MAGELLAN HEALTH SERVICES, INC.
(Incorporated under the laws of the State of Delaware)
Void after 5:00 p.m., Atlanta, Georgia, local time,
on January , 2000.
-----
No. Right to Purchase
----- Shares
----------
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, _________________________,
(the "Holder"), or registered assigns, is entitled to purchase from Magellan
Health Services, Inc. (f/n/a Charter Medical Corporation), a Delaware
Corporation (the "Company"), at any time or from time to time during the period
specified in Paragraph 2 hereof, ___________________________________________( )
fully paid and nonassessable shares of the Company's Common Stock, par value
$.25 per share (the "Common Stock"), at an exercise price per share of $26.150
(the "Exercise Price"). The term "Warrant Shares", as used herein, refers to the
shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4 hereof.
This Warrant is one of a series of Warrants (the "Warrants") issued
pursuant to, and is subject to all terms, provisions, and conditions contained
in, that certain Stock and Warrant Purchase Agreement, dated December 22, 1995
(the "Purchase Agreement"), by and among the Company, the Holder and other
purchasers of the Warrants. This Warrant is subject to the following additional
terms, provisions, and conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof and the provisions of the Purchase Agreement
which restrict the exercise of the Warrants, this Warrant may be exercised by
the holder hereof, in whole or in part, by the surrender of this
A-1
Warrant, together with a completed Exercise Agreement in the form attached
hereto, to the Company during normal business hours on any business day at the
Company's principal office in Atlanta, Georgia (or such other office or agency
of the Company as it may designate by notice to the holder hereof), during the
Exercise Period (as defined in Paragraph 2), and upon payment to the Company of
the Exercise Price for the Warrant Shares specified in said Exercise Agreement,
which such payment shall be made in cash or by certified or official bank check.
The Company shall not be required to issue fractional Warrant Shares upon any
exercise of the Warrant, but instead shall pay to the holder of this Warrant the
cash value of any such fractional Warrant Shares. The Warrant Shares so
purchased shall be deemed to be issued to the holder hereof or its designee as
the record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered, the completed Exercise Agreement
delivered, and payment made for such shares as aforesaid. Certificates for the
Warrant Shares so purchased, representing the aggregate number of shares
specified in said Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time, not exceeding ten business days, after this Warrant
shall have been so exercised. The certificates so delivered shall be in such
denominations as may be reasonably requested by the holder hereof, shall, unless
the Warrant Shares evidenced by such certificate have previously been registered
under the Securities Act of 1933, as amended (the "Securities Act") be imprinted
with a restrictive legend substantially similar to the legend appearing on the
face of this Warrant, and shall be registered in the name of said holder or such
other name as shall be designated by said holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of said certificates, deliver to
said holder a new Warrant representing the number of shares with respect to
which this Warrant shall not then have been exercised, which Warrant shall be
imprinted on its face with the same legend appearing on the face of this
Warrant. The Company shall pay all taxes and other expenses and charges payable
in connection with the preparation, execution, and delivery of stock
certificates (and any new Warrants) pursuant to this Paragraph 1 except that, in
case such stock certificates shall be registered in a name or names other than
the holder of this Warrant, funds sufficient to pay all stock transfer taxes
which shall be payable in connection with the execution and delivery of such
stock certificates shall be paid by the holder hereof to the Company at the time
of the delivery of such stock certificates by the Company as mentioned above.
2. Period of Exercise. Subject to the provisions of the Purchase
Agreement which restrict the exercise of the Warrants, this Warrant is
exercisable at any time or from time to time during the period commencing on
January ____, 1997 and ending 5:00 p.m. Atlanta, Georgia, local time, on January
, 2000 (the "Exercise Period").
3. Certain Actions Prohibited. The Company will not, by amendment of
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant.
Without limiting the generality of the foregoing,
(i) the Company will not increase the par value of the shares
of Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect,
(ii) before taking any action which would cause an adjustment
reducing the Exercise Price below the then par value of the shares of
Common Stock so receivable, the Company will
A-2
take all such corporate action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Exercise Price
upon the exercise of this Warrant, or
(iii) the Company will not take any action which results in
any adjustment of the Exercise Price if the total number of shares of
Common Stock issuable after the action upon the exercise of this
Warrant would exceed the total number of shares of Common Stock then
authorized by the Company's charter and available for other the purpose
of issue upon such exercise.
4. Anti-dilution Provisions. The Exercise Price shall be subject to
adjustment from time to time as provided in this Paragraph 4. Upon each
adjustment of the Exercise Price, the holder of this Warrant shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, the
largest number of Warrant Shares obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
purchasable hereunder immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment. For
purposes of this Paragraph 4, the term "Capital Stock", as used herein, includes
the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation which may be
authorized in the future by an amendment to the Company's charter, provided that
the shares purchasable pursuant to this Warrant shall include only shares of
Common Stock, or shares resulting from any subdivision or combination of the
Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in this Paragraph 4,
the stock or other securities or property provided for in this Paragraph 4.
(a) Subdivisions and Combinations. In case at any time the Company
shall (i) subdivide the outstanding shares of Capital Stock into a greater
number of shares, or (ii) combine the outstanding shares of Capital Stock into a
smaller number of shares, the Exercise Price in effect immediately prior thereto
shall be adjusted proportionately so that the adjusted Exercise Price shall bear
the same relation to the Exercise Price in effect immediately prior to such
event as the total number of shares of Capital Stock outstanding immediately
prior to such event shall bear to the total number of shares of Capital Stock
outstanding immediately after such event. Such adjustment shall become effective
immediately after the effective date of a subdivision or combination.
(b) Stock Dividends. In case the Company at any time after the date
hereof shall declare, order, pay or make any dividend or other distribution to
all holders of the Capital Stock payable in Capital Stock, then in each such
case, subject to Paragraph 4(d) hereof, the Exercise Price in effect immediately
prior to the close of business on the record date fixed for the determination of
holders of any class of securities entitled to receive such dividend or
distribution shall be reduced to a price (calculated to the nearest .001 of a
cent) determined by multiplying such Exercise Price by a fraction
(i) the numerator of which shall be the number of shares of
Capital Stock outstanding immediately prior to such dividend or
distribution, and
(ii) the denominator of which shall be the number of shares of
Capital Stock outstanding immediately after such dividend or
distribution.
Such adjustment shall be made on the date such dividend is paid or such
distribution is made and shall become effective retroactive to the record date
for the determination of shareholders entitled to receive such dividend or
distribution.
A-3
(c) Dividends other than Stock Dividends. In case the Company at any
time after the date hereof shall declare, order, pay or make any dividend or
other distribution to all holders of the Capital Stock, other than a dividend
payable in shares of Capital Stock (including, without limitation, dividends or
distributions payable in cash, evidences of indebtedness, rights, options or
warrants to subscribe for or purchase any Capital Stock or other securities, or
any other securities or other property), then, and in each such case, subject to
Paragraph 4(d) hereof, the Exercise Price in effect immediately prior to the
close of business on the record date fixed for the determination of holders of
any class of securities entitled to receive such dividend or distribution shall
be reduced to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Exercise Price by a fraction
(i) the numerator of which shall be the "Market Price" (as
defined below) in effect on such record date or, if any class of
Capital Stock trades on an ex-dividend basis, the trading date
immediately prior to the date of commencement of ex-dividend trading,
less the value of such dividend or distribution (as determined in good
faith by the Board of Directors of the Company) applicable to one share
of Capital Stock, and
(ii) the denominator of which shall be such Market Price on
such record date or, if any class of Capital Stock trades on an
ex-dividend basis, the trading date immediately prior to the date of
commencement of ex-dividend trading.
Such adjustment shall be made on the date such dividend is paid or such
distribution is made and shall become effective retroactive to the record date
for the determination of shareholders entitled to receive such dividend or
distribution.
For the purpose hereof, "Market Price" shall mean, on any date
specified herein, (A) if any class of Capital Stock is listed or admitted to
trading on any national securities exchange, the highest price obtained by
taking the arithmetic mean over a period of 20 consecutive days on which such
national securities exchange (or if such stock is traded on more than one
national securities exchange, the exchange the Company has designated under the
Securities Exchange Act of 1934 to receive copies of reports filed by the
Company under such act) is open for trading on a regular basis (any such day is
a "Trading Day") ending the Trading Day immediately prior to such date of the
average, on each such Trading Day, of the high and low sale prices of shares of
each such class of Capital Stock or if no such sale takes place on such date,
the average of the highest closing bid and lowest closing asked prices thereof
on such date, in each case as officially reported on all national securities
exchanges on which each such class of Capital Stock is then listed or admitted
to trading, or (B) if no shares of any class of Capital Stock are then listed or
admitted to trading on any national securities exchange, the highest closing
price of any class of Capital Stock on such date in the over-the-counter market
as shown by the NASDAQ National Market System or, if no such shares of any class
of Capital Stock are then quoted in such system, as published by the National
Quotation Bureau, Inc. or any similar successor organization, and in either case
as reported by any member firm of the New York Stock Exchange selected by the
Company. If no shares of any class of Capital Stock are then listed or admitted
to trading on any national securities exchange and if no closing bid and asked
prices thereof are then so quoted or published in the over-the-counter market,
"Market Price" shall mean the higher of (x) the book value per share of Capital
Stock (assuming for the purposes of this calculation the economic equivalence of
all shares of all classes of Capital Stock) as determined on a fully diluted
basis in accordance with generally accepted accounting principles by the Board
of Directors of the Company as of the last day of any month ending within 60
days preceding the date as of which the determination is to be made or (y) the
fair value per share of Capital Stock (assuming for the purposes of this
calculation the economic equivalence of all shares of all classes of Capital
Stock), as determined on a fully diluted basis in good faith by the Board of
Directors of the Company, as of a date which is 15 days preceding the date as of
which the determination is to be made.
A-4
(d) Minimum Adjustment of Exercise Price. If the amount of any
adjustment of the Exercise Price required pursuant to this Paragraph 4 would be
less than one percent (1%) of the Exercise Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one percent (1%)
of such Exercise Price; provided that, upon the exercise of this Warrant, all
adjustments carried forward and not theretofore made up to and including the
date of such exercise shall, with respect to the portion of this Warrant then
exercised, be made to the nearest .001 of a cent.
(e) Fundamental Change Transaction. In case at any time after the date
hereof a purchase, tender, or exchange offer shall have been made to and
accepted by the holders of more than 50% of the outstanding shares of Capital
Stock, or the Company is otherwise a party to any transaction (including,
without limitation, a merger, consolidation, sale of all or substantially all
the Company's assets, liquidation, or recapitalization of the Capital Stock)
which is to be effected in such a way that as a result of such transaction or
offer (x) the holders of Common Stock (or any other securities of the Company
then issuable upon the exercise of this Warrant) shall be entitled to receive
stock or other securities or property (including cash) with respect to or in
exchange for Common Stock (or such other securities), or (y) the Capital Stock
ceases to be a publicly traded security either listed on the American Stock
Exchange, the New York Stock Exchange or the NASDAQ National Market System or
any successor thereto or comparable system (each such transaction being herein
called a "Fundamental Change Transaction"), then, as a condition of such
Fundamental Change Transaction, lawful and adequate provision shall be made
whereby the holder of this Warrant shall thereafter have the right to purchase
and receive upon the basis and upon the terms and conditions specified in this
Warrant, and in lieu of the shares of Common Stock (or such other securities)
purchasable immediately before such transaction upon the exercise hereof, such
stock or other securities or property (including cash) as may be issuable or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock (or such other securities) equal to the number of shares of Common
Stock (or such other securities) purchasable immediately before such transaction
upon the exercise hereof, had such Fundamental Change Transaction not taken
place. In any such case appropriate provision shall be made with respect to the
rights and interests of the holder of this Warrant to the end that the
provisions hereof (including, without limitation, the provisions for adjustments
of the Exercise Price and of the number of Warrant Shares purchasable upon
exercise hereof) shall thereafter be applicable, as nearly as reasonably may be,
in relation to the stock or other securities or property thereafter deliverable
upon the exercise hereof (including an immediate adjustment of the Exercise
Price if by reason of or in connection with such Fundamental Change Transaction
any securities are issued or event occurs which would, under the terms hereof,
require an adjustment of the Exercise Price). In the event of a consolidation or
merger of the Company with or into another corporation or entity as a result of
which a greater or lesser number of shares of common stock of the surviving
corporation or entity are issuable to holders of Capital Stock in respect of the
number of shares of Capital Stock outstanding immediately prior to such
consolidation or merger, then the Exercise Price in effect immediately prior to
such consolidation or merger shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding shares of Capital
Stock. The Company shall not effect any such Fundamental Change Transaction
unless prior to or simultaneously with the consummation thereof the successor
corporation or entity (if other than the Company) resulting from such
consolidation or merger or the corporation or entity purchasing such assets and
any other corporation or entity the shares of stock or other securities or
property of which are receivable thereupon by the holder of this Warrant shall
expressly assume, by written instrument executed and delivered (and satisfactory
in form) to the holder of this Warrant, (i) the obligation to deliver to such
holder such stock or other securities or property
A-5
as, in accordance with the foregoing provisions, such holder may be entitled to
purchase and (ii) all other obligations of the Company hereunder.
(f) Notice of Adjustment. Upon the occurrence of any event requiring an
adjustment of the Exercise Price, then and in each such case the Company shall
promptly deliver to the holder of this Warrant a notice stating the Exercise
Price resulting from such adjustment and the increase or decrease, if any, in
the number of shares of Common Stock issuable upon exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Within 90 days after each fiscal year in which
any such adjustment shall have occurred, or within 30 days after any request
therefor by the holder of this Warrant stating that such holder contemplates
exercise of this Warrant, the Company will deliver to the holder of this Warrant
a certificate of the Company's chief financial officer confirming the statements
in the most recent notice delivered under this Paragraph 4(f).
(g) Other Notices. In case at any time:
(i) the Company shall declare or pay to all the holders of
Capital Stock any dividend (whether payable in Capital Stock, cash,
securities or other property);
(ii) the Company shall offer for subscription pro rata to all
the holders of Capital Stock any additional shares of stock of any class
or other rights;
(iii) there shall be any capital reorganization, or
reclassification of the Capital Stock of the Company, or consolidation
or merger of the Company with, or sale of all or substantially all its
assets to, another corporation or other entity;
(iv) there shall be a voluntary or involuntary dissolution,
liquidation, or winding-up of the Company; or
(v) there shall be any other Fundamental Change Transaction;
then, in any one or more of such cases, the Company shall give to the holder of
this Warrant (a) at least 15 days prior to any event referred to in clause (i)
above, at least 30 days prior to any event referred to in clause (ii), (iii),
(iv) or (v) above, written notice of the date on which the books of the Company
shall close or a record shall be taken for such dividend, distribution, or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, or Transaction and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, or Transaction known to the Company, at least 30 days
prior written notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice in accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution, or subscription rights, the date on
which such holders of Capital Stock shall be entitled thereto, and such notice
in accordance with the foregoing clause (b) shall also specify the date on which
such holders of Capital Stock shall be entitled to exchange their Capital Stock
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up, or Transaction, as the case may be. Such notice shall also state
that the action in question or the record date is subject to the effectiveness
of a registration statement under the Securities Act, or to a favorable vote of
security holders, if either is required.
A-6
(h) Certain Events. If any event occurs as to which, in the good faith
judgment of the Board of Directors of the Company, the other provisions of this
Paragraph 4 are not strictly applicable or if strictly applicable would not
fairly protect the exercise rights of the holder of this Warrant in accordance
with the essential intent and principles of such provisions, then the Board of
Directors of the Company shall make such adjustment, if any, on a basis
consistent with such essential intent and principles, necessary to preserve,
without dilution, the rights of the holder of this Warrant; provided, that no
such adjustment shall have the effect of increasing the Exercise Price as
otherwise determined pursuant to this Paragraph 4.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax in respect thereof, provided that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any warrant or
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, and Replacement of Warrant; Registration Rights.
(a) Warrant Transferable. The transfer of this Warrant and all rights
hereunder, in whole or in part, is registrable at the office or agency of the
Company referred to in Paragraph 7(e) hereof by the holder hereof in person or
by his duly authorized attorney, upon surrender of this Warrant properly
endorsed. Upon any transfer of this Warrant to any person, other than a person
who is at that time a holder of other Warrants, the Company shall have the right
to require the holder and the transferee to make customary representations to
the extent reasonably necessary to assure that the transfer will comply with the
Securities Act and any applicable state securities laws. Each holder of this
Warrant, by taking or holding the same, consents and agrees that this Warrant,
when endorsed in blank, shall be deemed negotiable, and that the holder hereof,
when this Warrant shall have been so endorsed, may be treated by the Company and
all other persons dealing with this Warrant as the absolute owner and holder
hereof for any purpose and as the person entitled to exercise the rights
represented by this Warrant and to the registration of transfer hereof on the
books of the Company; but until due presentment for registration of transfer on
such books the Company may treat the registered holder hereof as the owner and
holder hereof for all purposes, and the Company shall not be affected by any
notice to the contrary.
(b) Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) hereof, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to be imprinted with the same legend appearing on the face of this
Warrant and to represent the right to purchase such number of shares as shall be
designated by said holder hereof at the time of such surrender. For purposes
hereof, the term "Warrant" shall be deemed to include any and all such
replacement Warrants, whether issued pursuant to this subparagraph (b) or any
other Paragraph hereof.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or
A-7
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly cancelled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal office in
Atlanta, Georgia (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) Registration Rights. The issuance of any Warrant Shares required to
be reserved for purposes of exercise of this Warrant and the resale of such
Warrant Shares are entitled to the benefits of the registration rights set forth
in the Purchase Agreement.
8. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail, postage prepaid and addressed, to such holder at the address
shown for such holder on the books of the Company, or at such other address as
shall have been furnished to the Company by notice from such holder. All
notices, requests, and other communications required or permitted to be given or
delivered hereunder to the Company shall be in writing, and shall be personally
delivered, or shall be sent by certified or registered mail, postage prepaid and
addressed, to the office of the Company at 3414 Peachtree Road, N.E., Suite
1400, Atlanta, GA 30326, Attention:
-------------------------------------------,
or at such other address as shall have been furnished to the holder of this
Warrant by notice from the Company. Any such notice, request, or other
communication may be sent by telegram or telex, but shall in such case be
subsequently confirmed by a writing personally delivered or sent by certified or
registered mail as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
delivery thereof to (or the receipt by, in the case of a telegram or telex) the
person entitled to receive such notice at the address of such person for
purposes of this Paragraph 8, or, if mailed, at the completion of the third full
day following the time of such mailing thereof to such address, as the case may
be.
9. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF DELAWARE, WITHOUT REGARD TO ANY
CHOICE OF LAW PRINCIPLES OF SUCH STATE.
10. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific enforcement of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
A-8
11. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may not be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party (or any predecessor in interest thereof) against
which enforcement of the same is sought.
(b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) Successors and Assigns. This Warrant shall, to the extent provided
in Section 4(e), be binding upon any entity succeeding to the Company by merger,
consolidation, or acquisition of all or substantially all the Company's assets.
A-9
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer under its corporate seal, attested by its duly
authorized officer, on this day of 1996.
---- ------------------,
MAGELLAN HEALTH SERVICES, INC.
By:
------------------------------------
Name:
-------------------------------
Title:
-------------------------------
[CORPORATE SEAL]
Attest:
- -----------------------------
Name:
------------------------
Title:
------------------------
A-10
FORM OF EXERCISE AGREEMENT
Dated:
----------, -----
To:
--------------------------
--------------------------
--------------------------
Attention:
----------------
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase shares of Common Stock covered
-----
by such Warrant, and makes payment herewith in full therefor at the price
per share provided by such Warrant *[in cash or by certified or official bank
check in the amount of $ ] held by the undersigned and any applicable
--------
taxes payable by undersigned. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:
-------------------------------------------------------------
Signature:
--------------------------------------------------------
Title of Signing Officer or Agent(if any):
------------------------
Note: The above signature should correspond exactly with the
name on the face of the within Warrant or with the
name of the assignee appearing in the assignment form.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
A-11
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights represented by and under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
, and hereby irrevocably constitutes and appoints
------------------------------
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: , .
---------------------- -----
In the presence of
- -----------------------------------
Name:
---------------------------------------
Signature:
----------------------------------
Title of Signing Officer or Agent
(if any):
-----------------------------------
Address:
------------------------------------
------------------------------------
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
A-12
COMPANY DISCLOSURE SCHEDULE
Section 3.8. - List of Significant Subsidiaries
Charter Behavioral Health Systems Inc.
Section 3.9 - List of Material Agreements
Employment agreement of Craig L. McKnight is being filed with
the Company's 10-K for the year ended September 30, 1995.
Section 3.10 - List of Material Liabilities/Obligations
(a) the litigation and non-compliance with laws referred to in the
letter from Steve J. Davis to Steve Surbaugh dated November 10, 1995, and the
update thereto from Steve J. Davis to Cherie Fuzzell and Bob Miller dated
November 21, 1995 (copies of which have been delivered to Buyers), which in the
reasonable judgment of the Company, do not and will not, individually and in the
aggregate have a material adverse effect on the business, assets, results of
operations or financial condition of the Company.
(b) acquisition of a majority interest in Green Springs Health Systems
Inc.
Section 3.12 - Compliance with Laws
(ii) those notices of noncompliance referred to in the letter from
Steve J. Davis to Steve Surbaugh dated November 10, 1995, and the update thereto
from Steve J. Davis to Cherie Fuzzell and Bob Miller dated November 21, 1995
(copies of which have been delivered to Buyers).
Section 3.13 - Litigation
None
EXHIBIT 7.3
Matters to be Covered in Opinion of Counsel to Company
- ------------------------------------------------------
- due incorporation, valid existence and good standing of Company and
significant subsidiaries under the laws of the State of Delaware, and corporate
power to own, lease and operate properties and to carry on business as presently
conducted
- qualification to do business and good standing as a foreign
corporation in states necessary for conduct of current business
- confirmation of authorized and outstanding capital stock of Company
- issuance of shares duly authorized, and shares are validly issued,
fully paid and nonassessable
- warrant shares to be issued are validly authorized and reserved for
issuance and assuming no changes in law, warrant shares will be validly issued,
fully paid and nonassessable upon proper exercise of warrant and payment of
exercise price
- issuance of the Securities and any Warrant Shares upon exercise of
Warrants is not subject to any preemptive right under the Delaware General
Corporation Law or the certificate of incorporation or bylaws of Company
- due authorization, execution, delivery and performance of agreements
- agreements are legal, valid and binding upon Company
- agreements and transaction will not conflict with or violate
certificate of incorporation, bylaws or applicable law or breach, violate or
cause default under material contracts, judgements, orders etc., or result in
creation of material lien upon properties
- any required consents approvals, filings etc. required under
applicable law have been obtained
- confirmation of no material adverse litigation and proceedings
- issuance of Securities exempt from registration requirements
- confirmation that private offering of Warrants and Shares will not be
integrated with public offering of Warrant Shares and resale of Warrant Shares.
40334 00002 CORP 103264
CORPORATE INCENTIVE PLAN
FY96
I. PURPOSE
The purpose of this plan is to provide an incentive to certain
executives and key employees of the Company who contribute to the
success of the enterprise by offering an opportunity to such persons to
earn compensation in addition to their salaries, based on the pre-tax
net income of Magellan Health Services, Inc. (the "Company").
II. ELIGIBLE PARTICIPANTS
Eligibility for participation in the Incentive Plan shall be determined
by management from among those key employees who are in a position to
materially contribute to the success of the Company. Additionally,
requirements for participation are outlined in Section III, Conditions
for Receiving Payment.
If a person otherwise eligible for participation in the Incentive Plan
becomes an employee of the Company during the fiscal year, such
employee shall be eligible to receive a prorated portion of the annual
bonus (number of semi-monthly pay periods of employment divided by
twenty-four), subject to the approval of such employee's vice
president.
III. CONDITIONS FOR RECEIVING PAYMENT
Incentive compensation under the Incentive Plan is not an integral part
of an employee's compensation package. An employee's base salary
compensates the employee for the expected results of any given job.
Payment of incentive compensation is at the discretion of the
Companies' Board of Directors.
NO INCENTIVE COMPENSATION WILL BE PAID TO ANY EMPLOYEE IF EMPLOYMENT IS
-----------------------------------------------------------------------
TERMINATED, WHETHER VOLUNTARY OR INVOLUNTARY, PRIOR TO THE ACTUAL
-----------------------------------------------------------------------
PAYMENT DATE.
-------------
However, the Companies' Board of Directors retains authority to make
exceptions to the foregoing policy in unusual or meritorious cases
including, but not limited to, the death of an employee during the
fiscal year or termination of employment due to total or partial
disability or retirement with the consent of the Company.
IV. METHOD OF CALCULATION
Each participant must meet the goals established by management. In
order to receive a bonus, each participant must be recommended for all,
part or none of the bonus by his superior, with the approval of the
Chairman. Each participant's assigned bonus percentage of base pay
corresponds to established targets set by management. The percentages
are on a variable scale and calculated on performance to target. The
various percentages of achievement are:
TARGET BONUS PERCENTAGE
-----------------------
100% 110% 120%
---- ---- ----
Chairman 50.0% 67.5% 85%
Senior Officer (SVP & above) 40.0% 65.0% 85% BASE
Officer (AVP & VP) 32.5% 60.0% 80% SALARY
Sr. Exec., Exec. & Sr. Dir. 25.0% 40.0% 50%
Director 15.0% 25.0% 35%
Other Corporate 5.0% 10.0% 15%
1
V. DISTRIBUTION
The distribution of bonuses shall be made promptly after completion of
unaudited financial statements for the 1996 fiscal year or as may be
otherwise approved by the Board of Directors. Specific provisions
regarding distribution are outlined in Section III, Conditions for
Receiving Payment.
VI. ADMINISTRATION
The plan will be administered by a Committee of Company officers.
VII. INTERPRETATION AND DURATION
Any areas of question, interpretation, dispute, etc., concerning any
area of this plan shall be governed by the Committee of Company
officers. The Committee is defined as the Chairman, the Executive Vice
President/ Chief Financial Officer, the Executive Vice President of
Administration, and the Sr. Vice President of Human Resources. This
plan shall be effective for the fiscal year beginning October 1, 1995.
The Committee and the Board of Directors each retain the authority to
modify, repeal or discontinue the plan on a prospective or
retrospective basis, for any reason.
VIII. DEFINITION OF TERMS
A. Pre-tax Net Income of the Company is income before provision
for state and federal income taxes and subject to adjustment
for the following:
1. Change in Operations
A significant, unexpected change in the operation of
the company as a result of condemnation, major
physical damage from a fire or other catastrophe,
strike, governmental seizure or disruption due to
construction will result in an adjustment to income.
This will avoid any penalty or windfall as a result
of changes in capacity to contribute to overall
parent company earnings which are not the result of
the participant's ability to manage the operation.
This does not include changes in Blue Cross or
governmental reimbursement policies, loss of a prime
admitter, expansion by another hospital, etc., which
are regarded as normal business risks.
2. Change in Accounting Policy or Practice
A material change (from the prior year) in accounting
policy or practice which has an effect on the
company's Pre-tax Net Income will be considered as an
adjustment to Pre-tax Net Income. Year end
adjustments to correct prior errors or to adjust
previous estimates and accruals will not be regarded
as changes in policy or practice.
2
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made and executed as of the 18th day of March , 1993, by
and between GREEN SPRING HEALTH SERVICES, INC., a Delaware corporation
hereinafter the "Employer") and Henry T. Harbin, M.D. (hereinafter the
"Employee").
WITNESSETH:
WHEREAS, the Employee currently serves in the capacity of Executive
Vice-President and Chief Operating Officer.
WHEREAS, it is the intention of the parties hereto to set out the terms
and conditions of that employment and the rights and duties of the Employee in
fulfilling the capacity of Executive Vice-President and Chief Operating Officer
for the Employer.
NOW, THEREFORE, in consideration of the mutual promises of the parties
and the mutual benefits they will gain by the performance thereof, all in
accordance with the provisions hereinafter set forth, it is agreed by and
between the parties hereto as follows:
1. (a) Effective as of the date hereof the Employer confirms the
employment of the Employee and the Employee agrees to continue to be employed
by the Employer and to continue to serve as the Executive Vice-President and
Chief Operating Officer of the Employer, pursuant to the terms of this
Agreement.
(b) (i) The term of this employment shall commence on the date
hereof and shall terminate on the last day of the calendar month in which occurs
the third (3rd) anniversary of the date hereof ("Initial Term"). After the
Initial Term, this Agreement shall automatically renew for a one year period and
for subsequent one year periods thereafter unless one party presents to the
other party written notice of intent to terminate the Agreement at least ninety
(90) calendar days prior to the applicable expiration date of this Agreement.
2. (a) During the period commencing as of the date hereof through
December 31, 1993, the Employee will be entitled as compensation for the
performance of his duties an annual salary (the "Salary") of Two hundred and
twenty-two thousand dollars ($222,000). On the first (1st) day of January, 1994
and on the first (1st) day of each January thereafter during the term of this
Agreement, the annual Salary in effect immediately preceding the
1
month of the adjustment shall be adjusted by (i) the increase in the cost of
living which shall be accomplished by multiplying the then annual salary by a
fraction the numerator of which is the Index (as hereinafter defined) most
recently published as of the month immediately preceding the month of the
adjustment and the denominator of which shall be the Index most recently
published as of the thirteenth (13th) month immediately preceding the month of
the adjustment, provided, however, in no event shall any annual adjustment be
less than two percent (2%) nor more than seven percent (7%), and if but for this
proviso the adjustment would be less than two percent (2%), then and in such
event the adjustment shall be two percent (2%), and if but for this proviso, the
adjustment would be more than seven percent (7%), then and in such event the
adjustment shall be seven percent (7%). For the purposes hereof, the "Index"
shall be the Consumer Price Index for all urban wage earner (CPIU) for
Washington D.C. maintained by the United States Department of Labor, Bureau of
Labor Statistics (1982-84 - 100); (ii) or any other increase in annual salary
which shall not be less than the increase set forth in 2(a)(i) above; and
(b) (i) In addition to the annual Salary, the Employee shall
be entitled subject to the discretion of the President to an annual short term
incentive target of 17.5%. The calculation of the short term incentive target
will be a minimum based upon the same method used by Employer during calendar
year 1992. (ii) Additionally, in the event of a Change of Control of the Company
set forth in the 1992 Stock and Performance Incentive Plan ("Incentive Plan"),
the vesting schedule set forth in the Incentive Plan shall accelerate as set
forth in Exhibit A, attached hereto and incorporated herein. (iii) In the event
there is an agreement to consummate a merger agreement with MEDCO or an
affiliate of MEDCO or there is an agreement to consummate any other merger
agreement or acquisition agreement, in which it is contemplated that all awards
will be vested and paid at or before the closing for said merger or acquisition,
all Employee's awards will be fully vested and exercised by Employee upon the
closing of a merger or acquisition, and Employee hereby agrees if he/she has
options under the Incentive Plan, his/her options under the Incentive Plan will
be void and canceled immediately prior to the consummation of the merger of
acquisition; and further the Employee agrees that the fair market value of the
company in determining the value of the awards will be $45,000,000.00; and
2
(c) All payments of compensation shall be subject to all
lawful deductions such as Federal Withholding Taxes and FICA; and
(d) In addition to the compensation payable to the Employee as
provided by subparagraphs 2(a) and 2(b) above, the Employee shall be entitled to
fringe benefits similar to those the Employee enjoyed prior to the Change of
Control. This provision does not apply to the Transition Assistance Policy or
Vacation Policy which the Employer had in place prior to the Change of Control.
3. (a) During the term of this employment the Employee shall:
(i) hold the title of Executive Vice President and Chief
Operating Officer; and
(ii) generally perform the duties on behalf of the Employer
that he performs as of the date hereof and such other duties which may be
required commensurate with the Employee's professional ability and
qualifications.
(b) During the term of this employment, if the Employer and
the Employee mutually agree to a change in the duties of the Employee, then and
in that event the parties shall to the extent necessary and appropriate modify
the terms of this Agreement, including, if such modification requires, an
adjustment to the Salary and/or fringe benefits.
4. (a) The Employee agrees: (i) not to disclose any trade or secret
data or any other proprietary or confidential information acquired during
employment by the Employer or a subsidiary of the Employer, during employment or
after the termination of employment or retirement, except with the prior
permission of Employer, unless said information becomes generally available to
the public or becomes available to Employee on a non-confidential basis from a
source other than the Employer; (ii) not to interfere with the employment of any
other employee of the Employer or a subsidiary of the Employer, or urge, induce
or solicit other employees to leave the Employer or a subsidiary of Employer;
(iii) during the term of employment with the Employer and for a period of two
(2) years following employment termination, not to solicit the business of,
contract with, or become employed by any entity with which the
3
Employer has contracts or had contracts within the two (2) years period prior to
termination, including subsidiaries, affiliates or organizations related to such
entities; and (iv) during the term of employment and for one (1) year after the
termination of employment, engage, directly or indirectly, or through any
corporations or associations in any business enterprise or employment which is
directly competitive (including but not limited to the following activities:
utilization management, network management or mental health and/or substance
abuse managed care) with the Employer or an subsidiary in any state or
territory, including the District of Columbia, where the Employer does business
at the time of the Employee's termination of employment. (b) Section 4(a)(iv)
and 4(a)(v) shall not be binding on Employee is Employee has completed the
Employment Period set forth in paragraph 1 and the Employee is not offered
continued employment with the Employer, or if Employee's Employment Period is
terminated by Employer without cause earlier than that time set forth in
paragraph 1.
5. The Employment Period shall terminate earlier than that time set
forth in Paragraph 1 above in the event of the occurrence of the following:
(a) the death of the Employee; or
(b) the disability of the Employee as defined by Paragraph 6
hereinbelow; or
(c) the default by the Employee as defined by Paragraph 7
hereinbelow.
6. For purposes of this Agreement, the term disability means that the
Employee is substantially unable to discharge his responsibilities to the
Employer and its affiliates by reason of physical or mental illness or
incapacity, whether arising out of sickness, accident or otherwise, and shall be
evidenced by the written determination of a qualified medical doctor acceptable
to the Employer, which determination shall specify the date and time when such
disability commenced and that it has continued uninterrupted for a period of at
least one hundred eighty (180) days.
4
7. For purposes of this Agreement, the term default means that the
Employee has:
(a) by deliberate and intentional actions refused to perform his
duties for the Employer as provided by Paragraph 3 above. In the event that
the Employer determines that the Employee has deliberately or intentionally
failed to perform his duties for the Employer as provided in Paragraph 3, the
Employer shall notify the Employee in writing of the reasons for its
determination and shall provide the Employee a reasonable period in which to
either contest the determination or to correct the defects in performance; or
(b) breached or otherwise failed to comply with the provisions of
Paragraph 4 above; or
(c) committed an act of dishonesty, fraud, misrepresentation or
other acts of moral turpitude which in the reasonable opinion of the Board of
Directors of the Employer causes it to conclude that the continuation of
employment is not in the best interests of the Employer; or
8. In the event the Employer shall terminate without cause the
Employment Period earlier than that time set forth in Paragraph 1, or Employer
shall change the location of Employee's primary base of employment from
Columbia, Maryland, the Employee shall be entitled to all compensation set forth
in paragraph 2(a), 2(b), and 2(d) for the remaining balance of the Employment
Period.
9. All notices required hereunder shall be in writing and either
delivered by hand delivery or by certified mail, postage prepaid, return receipt
requested. Notices to the Employer shall be addressed as follows: Green Spring
Health Services, Inc., Suite 500, 5565 Sterrett Place, Columbia, Maryland 21044,
Attn: President, with a copy to: Joyce Fitch, Esquire, c/o Green Spring Health
Services, Inc., Suite 500, 5565 Sterrett Place, Columbia, Maryland 21044; and
notices to the Employee shall be addressed to the then last know address of the
Employee as reflected on the records of the Employer.
5
10. Other than as set forth in paragraph 13 of this agreement, upon the
dissolution, reorganization, or consolidation of Employer, Employee shall not be
bound by the terms of this Agreement.
11. This Agreement shall be binding upon the parties hereto, and their
respective heirs, executors, administrators, successors and assigns. The
Employee, however, shall not assign any part of his rights and/or duties under
this Agreement, unless the Employer agrees thereto in writing.
12. This instrument contains the entire agreement of the parties. It
may not be changed orally and only by an agreement in writing signed by the
party against whom enforcement or any waiver, change, modification,
extension or discharge is sought.
13. Notwithstanding the provisions of Paragraph 1(b) setforth above,
this Agreement shall terminate upon the merger of MEDCO or an affiliate of
MEDCO. Additionally, in the event there is an Agreement to consummate a merger
agreement with MEDCO or an affiliate of MEDCO, Employee shall be bound by the
provisions of Paragraph 2(b)(iii).
14. This Agreement shall be governed by the laws of the State of
Maryland.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
the day and year first above written.
ATTEST: GREEN SPRING HEALTH SERVICES, INC.
/s/ Joyce N. Fitch By: /s/ Paul G. Shoffeit
- ----------------------- --------------------------------
President
WITNESS:
/s/ Judith Poulin /s/ Henry Harbin, M.D. (SEAL)
- ----------------------- --------------------------------
6
EXHIBIT A
AMENDMENTS TO STOCK AND PERFORMANCE
INCENTIVE PLAN AGREEMENTS
FOR PARTICIPANTS WHO HAVE ENTERED INTO
EMPLOYMENT AGREEMENTS
Section I.D. of the Stock and Performance Incentive Plan Agreements
(for PAR Grants, PAR and Option Grants and PRU and Option Grants) (the "Plan
Agreements") is amended by inserting after the vesting schedule set forth in
such section, the following:
In the vent of a Change of Control of the Company, the vesting schedule
set forth above, as of the next January 1 after such Change of Control
(the "Acceleration Date") (except as set forth below), automatically
shall be accelerated by one year (so that at such Acceleration Date,
the award shall vest by that percentage that would have vested on the
next anniversary of the grant that follows the Acceleration Date
pursuant to the above schedule; at such next anniversary of the grant
following the Acceleration Date, the amount vested shall be that
percentage that would have otherwise vested on the next succeeding
anniversary pursuant to the above schedules; etc). Notwithstanding the
foregoing with respect to the effective date of such accelerated
vesting, for purposes of Sections 2.3(c) and 3.3(c) of the Incentive
Plan, if any event specified in Section 2.3(c) or 3.3(c) occurs after a
Change of Control of the Company but prior to the Acceleration Date,
the vesting schedule set forth above automatically shall be accelerated
by one year as of the date of such event specified in Section 2.3(c) or
3.3(c) (so that upon such event the amount vested shall be that
percentage that would have otherwise vested at the next anniversary of
the grant after such event pursuant to the above schedule or on the
Acceleration Date pursuant to the previous sentence, whichever would
occur first). Notwithstanding these provisions with respect to
acceleration, awards shall vest pursuant to the above schedule on any
anniversary of the date of grant that occurs between a Change of
Control and the Acceleration Date.
7
GS HOLDING CORP.
1013 CENTRE ROAD
WILMINGTON, DELAWARE 19805
November 9, 1993
Henry T. Harbin, M.D.
Chief Operating Officer
Executive Vice President
GreenSpring Mental Health Services
5565 Sterrett Place
Suite 500
Columbia, Maryland 21044
Dear Henry:
As we have discussed, GreenSpring's Board of Directors places great value on
your leadership and your continuing commitment to the success of our company. We
have taken the action described below to demonstrate our desire for you to have
a long and rewarding career with GreenSpring. This letter constitutes an
agreement (the "Agreement") between you and Green Spring Health Services (the
"Company") to provide a benefit to you at retirement based on your continued
employment with the Company until retirement or employment termination, as
defined herein. This Agreement is entered into in consideration of (i) your past
contribution to the Company and the value created by your efforts, (ii) the
desire of the Board of Directors to encourage continued employment with the
Company until your retirement, and (iii) the expected contribution that you will
make to the profitability of the Company. This Agreement is made as a separate
Agreement from any employment contract currently in effect between you and the
Company.
The terms and conditions of this Agreement are as follows:
1. It is the intent of the Board that you shall be provided with
a lump-sum dollar amount, or equivalent annual annuity
payment, in an amount as determined by the Board at the time
of payment, at the time of your retirement or termination from
the Company, as defined below. The amount of the payment shall
be specified below.
2. The amount of the payment shall be:
a. $1,250,000 if the average Earnings Before Interest
and Taxes (EBIT) as defined below) over your
employment period exceeds 10 percent of Shareowner's
Investment, as defined below.
b. $850,000 if the average EBIT over your employment
period is 10 percent or less of Shareowner's
Investment.
Henry T. Harbin
Page 2
November 9, 1993
In each of the above cases, the amount of the payment shall be
reduced by any payments to you, as determined from the date of
this Agreement until your employment termination or
retirement, from amounts earned under the grant of PARs, or
other long-term incentive payments, for any plan approved by
the Board of Directors.
3. Retirement shall be defined as termination of employment from
the Company on or after age 60 years. If termination occurs
prior to age 60 years, then the payment will be based on the
conditions of termination, as defined below.
4. If you voluntarily terminate your employment with the Company,
or the Board terminates your employment For-Cause, as it is
defined in your employment contract (or in the Company's
long-term incentive plan, e.g., the Performance Appreciation
Rights Plan), then there shall be no payment other than any
payments received under the long-term incentive plan of the
Company.
5. If your employment is terminated as a result of death,
disability (as defined in your employment contract or the
company's retirement income plan), or at the request of the
Board of Directors, then the payment shall be as defined in
paragraph 2, above at the time of termination.
6. Earnings Before Interest and Taxes shall be as defined in the
Company's long-term incentive plan, except that it shall
include any accruals, under GAAP accounting, for the Company's
long-term incentive plan.
7. Shareowners' Investment shall be defined as equal to the book
value of the GreenSpring Health Services as determined by
purchase accounting as of April 30, 1993 adjusted for
acquisitions at cost as determined by the Board of Directors
of the Company.
8. If you so elect at the time of retirement or termination, the
benefit payment may be in the form of an annual annuity
payment. Such annuity amount will be determined by the Board
of Directors at the time of request and reflect actuarial
considerations or the cost of providing the annuity if
provided by a third-party. You may select the type of annuity,
e.g., single or joint-and-survivor, to meet your needs at the
time of the payment.
9. This Agreement shall be binding upon the Company, its
successors and assigns, and shall inure to the benefit of you
and your personal representative and/or executor.
Henry T. Harbin
Page 3
November 9, 1993
Each and every payment required hereunder shall be made as
provided herein without regard to your personal state at the
time of required payment, except for annuity payments where
the amount is dependent on your death.
We trust that this Agreement connotes the importance the Board places on your
continued involvement with the success of Green Spring. You have contributed
immensely to its founding and development and we trust that you will see fit to
continue this contribution to corporate performance and success in the future.
Sincerely,
/s/ Neil Hollander
Neil Hollander
Chairman of the Board
NH/lm
September 19, 1994
Henry T. Harbin, M.D.
Chief Executive Officer
President
Green Spring Health Services
5565 Sterrett Place
Suite 500
Columbia, Maryland 21044
Dear Henry:
In a letter, dated November 9, 1993, the Board of Directors agreed to provide
you with certain guaranteed termination and retirement benefits (hereinafter
referred to as the "Original Agreement"). The Original Agreement was entered
into in consideration of (i) your past contribution to the Company and the value
created by your efforts, (ii) the desire of the Board of Directors to encourage
continued employment with the Company until your retirement, and (iii) the
expected contribution that you will make to the profitability of the Company. At
the time of the Original Agreement you were employed by the Company as its Chief
Operating Officer and Executive Vice President. Since the date of the Original
Agreement, you have assumed the responsibilities of the Company's Chief
Executive Officer and President position.
In consideration of the enhanced responsibilities of the new role, the Board of
Directors has directed me to amend paragraph 2 of the Original Agreement to
provide for additional compensation in the event of termination or retirement as
defined by the Original Agreement. Paragraph 2 of the Original Agreement shall
now provide as follows:
2. The amount of the payment shall be:
a. $1,500,000 if the average Earnings Before Interest
and Taxes (EBIT as defined below) over your
employment period exceeds 10 percent of Shareowners'
Investment, as defined below.
b. $1,000,000 if the average EBIT over your employment
period is 10 percent or less of Shareowners'
Investment.
In each of the above cases, the amount of the payment shall be reduced
by any payments to you, as determined from the date of this Agreement
until your employment termination or retirement, from amounts earned
under the grant of PARs, or other long-term incentive payments, for any
plan approved by the Board of Directors.
All other provisions of the Original Agreement shall remain in full force and
effect. I thank you for your continuing efforts in the Company's success.
Sincerely,
/s/ Neil Hollander
Neil Hollander
Chairman of the Board
CONFORMED COPY
STOCK PURCHASE AGREEMENT
among
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.
HEALTH CARE SERVICE CORPORATION
INDEPENDENCE BLUE CROSS
MEDICAL SERVICE ASSOCIATION OF PENNSYLVANIA
PIERCE COUNTY MEDICAL BUREAU, INC.
VERITUS, INC.
GREEN SPRING HEALTH SERVICES, INC.
and
CHARTER MEDICAL CORPORATION
dated
November 14, 1995
STOCK PURCHASE AGREEMENT
Table of Contents
Page
ARTICLE 1.
DEFINITIONS........................................................... 1
Section 1.1. Affiliate............................................................. 1
Section 1.2. Associate............................................................. 1
Section 1.3. Audited Financial Statements.......................................... 1
Section 1.4. Balance Sheet......................................................... 1
Section 1.5. Balance Sheet Date.................................................... 1
Section 1.6. Basket Amount......................................................... 1
Section 1.7. Benefit Plans......................................................... 2
Section 1.8. Business.............................................................. 2
Section 1.9. Business Day.......................................................... 2
Section 1.10. Buyer Disclosure Schedule............................................. 2
Section 1.11. Buyer SEC Reports..................................................... 2
Section 1.12. Buyer Subsidiary...................................................... 2
Section 1.13. Buyer Subsidiary Shares............................................... 2
Section 1.14. Cash Portion of Purchase Price........................................ 2
Section 1.15. Charter Common Stock.................................................. 2
Section 1.16. Closing............................................................... 2
Section 1.17. Closing Date.......................................................... 2
Section 1.18. Code.................................................................. 2
Section 1.19. Company Affiliate..................................................... 2
Section 1.20. Confidentiality Agreement............................................. 2
Section 1.21. Contract.............................................................. 2
Section 1.22. Credit Agreement...................................................... 2
Section 1.23. Director and Officer Policies......................................... 3
Section 1.24. Employment Contracts.................................................. 3
Section 1.25. Encumbrances.......................................................... 3
Section 1.26. Environmental Laws.................................................... 3
Section 1.27. ERISA................................................................. 3
Section 1.28. ERISA Affiliate....................................................... 3
Section 1.29. ERISA Pension Plan.................................................... 3
Section 1.30. ERISA Welfare Plan.................................................... 3
Section 1.31. Exchange Agreement.................................................... 3
Section 1.32. Family Member......................................................... 3
Section 1.33. Financial Statements.................................................. 3
Section 1.34. GAAP.................................................................. 3
Section 1.35. Governmental Antitrust Authority...................................... 3
Section 1.36. Governmental Authority................................................ 3
Section 1.37. GPA................................................................... 4
- i -
Section 1.38. GPA Balance Sheet..................................................... 4
Section 1.39. GPA Balance Sheet Date................................................ 4
Section 1.40. GPA Common Stock...................................................... 4
Section 1.41. GPA Company Affiliate................................................. 4
Section 1.42. GPA Disclosure Letter................................................. 4
Section 1.43. GPA Financial Statements.............................................. 4
Section 1.44. GPA Stock Exchange Agreement.......................................... 4
Section 1.45. GPA Subsidiary........................................................ 4
Section 1.46. GPA Subsidiary Shares................................................. 4
Section 1.47. GSHS Disclosure Schedule.............................................. 4
Section 1.48. GSHS Long Term Compensation Plan...................................... 4
Section 1.49. GSHS Shares........................................................... 4
Section 1.50. HSR Act............................................................... 4
Section 1.51. Indemnifiable Damages................................................. 4
Section 1.52. Interim Financial Statements.......................................... 4
Section 1.53. Intellectual Property................................................. 4
Section 1.54. IRS................................................................... 5
Section 1.55. Knowledge............................................................. 5
Section 1.56. Leased Real Property.................................................. 5
Section 1.57. Leases................................................................ 5
Section 1.58. Market Value.......................................................... 5
Section 1.59. New GSHS Shares....................................................... 5
Section 1.60. New Stockholders' Agreement........................................... 5
Section 1.61. Old Shareholders' Agreement........................................... 5
Section 1.62. Operating Agreement................................................... 5
Section 1.63. Parachute Plan........................................................ 5
Section 1.64. Permits............................................................... 5
Section 1.65. Permitted Encumbrances................................................ 5
Section 1.66. Purchase Price........................................................ 5
Section 1.67. Registration Statement................................................ 5
Section 1.68. Seller Disclosure Schedule............................................ 6
Section 1.69. Stock Portion of Purchase Price....................................... 6
Section 1.70. Subsidiary............................................................ 6
Section 1.71. Subsidiary Shares..................................................... 6
Section 1.72. Takeover Proposal .................................................... 6
Section 1.73. Tax or Taxes ......................................................... 6
Section 1.74. Tax Return............................................................ 6
Section 1.75. Tax Sharing Agreement................................................. 6
Section 1.76. Third-Party Claim..................................................... 6
Section 1.77. Undisclosed Liability................................................. 6
Section 1.78. 1933 Act.............................................................. 6
Section 1.79. 1934 Act.............................................................. 6
Section 1.80. Other Defined Terms................................................... 6
ARTICLE 2.
SALE OF STOCK; CLOSING................................................ 6
Section 2.1. Purchase and Sale..................................................... 6
Section 2.2. Purchase Price........................................................ 7
- ii -
Section 2.3. Transfer and Delivery of GSHS Shares and
New GSHS Shares; Payment of Purchase Price............................ 7
Section 2.4. Time and Place of Closing............................................. 8
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF GSHS................................ 8
Section 3.1. Organization, etc..................................................... 8
Section 3.2. Authorization; Execution; Binding Effect.............................. 8
Section 3.3. Capitalization; Share Ownership....................................... 9
Section 3.4. Subsidiaries.......................................................... 9
Section 3.5. No Conflicting Agreements or Charter
Provisions............................................................ 10
Section 3.6. Consents, Approvals, Licenses, Etc.................................... 10
Section 3.7. Litigation............................................................ 10
Section 3.8. Financial Statements.................................................. 11
Section 3.9. No Undisclosed Liabilities............................................ 11
Section 3.10. Compliance with Laws; Permits......................................... 11
Section 3.11. No Adverse Changes.................................................... 11
Section 3.12. Intellectual Property................................................. 12
Section 3.13. Certain Transactions.................................................. 13
Section 3.14. Benefit Plans......................................................... 13
Section 3.15. Tax Matters........................................................... 15
Section 3.16. Contracts............................................................. 16
Section 3.17. Insurance............................................................. 17
Section 3.18. Personnel Matters..................................................... 17
Section 3.19. Properties............................................................ 17
Section 3.20. Absence of Certain Commercial Practices............................... 18
Section 3.21. Obligations Under Certain Agreements.................................. 18
Section 3.22. Brokers, Finders and Investment Bankers............................... 18
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . 19
Section 4.1. Organization, etc..................................................... 19
Section 4.2. Authorization; Execution; Binding Effect.............................. 19
Section 4.3. Capitalization; Share Ownership....................................... 19
Section 4.4. No Conflicting Agreements or
Charter Provisions.................................................... 19
Section 4.5. Consents, Approvals, Licenses, Etc.................................... 20
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF BUYER............................... 20
Section 5.1. Organization, etc..................................................... 20
- iii -
Section 5.2. Authorization; Execution; Binding Effect.............................. 20
Section 5.3. No Conflicting Agreements or
Charter Provisions.................................................... 21
Section 5.4. Securities Filings.................................................... 21
Section 5.5. Capitalization........................................................ 21
Section 5.6. Absence of Certain Changes or Events.................................. 22
Section 5.7. Litigation............................................................ 22
Section 5.8. Compliance with Laws.................................................. 22
Section 5.9. Credit Agreement Amendment............................................ 23
Section 5.10. No Undisclosed Liabilities............................................ 23
Section 5.11. Brokers, Finders and Investment Bankers............................... 23
Section 5.12. Subsidiaries.......................................................... 23
Section 5.13. Takeover Provisions Inapplicable...................................... 23
Section 5.14. GPA................................................................... 23
ARTICLE 6.
COVENANTS OF SELLER AND BUYER AND GSHS................................ 32
Section 6.1. Investigation of Business; Access to
Properties and Records................................................ 32
Section 6.2. Regulatory and Other Authorizations................................... 32
Section 6.3. Best Efforts; Obtaining Consents and
Making Notifications; Disclosure of Changes........................... 34
Section 6.4. Further Assurances.................................................... 34
Section 6.5. Conduct of Business of GSHS and Subsidiaries.......................... 34
Section 6.6. Preservation of Business.............................................. 36
Section 6.7. Public Announcements.................................................. 36
Section 6.8. No Solicitation....................................................... 36
Section 6.9. Right to Update, Cure................................................. 37
Section 6.10. Conduct of Buyer Business Prior to Closing............................ 37
Section 6.11. GSHS Long-Term Compensation Plan...................................... 37
Section 6.12. Post-Closing Operations and Events.................................... 37
Section 6.13. Registration Statement................................................ 38
Section 6.14. New GSHS Shares....................................................... 42
ARTICLE 7.
CONDITIONS TO BUYER'S OBLIGATION TO CLOSE............................. 42
Section 7.1. Representations, Warranties and
Covenants of Seller................................................... 42
Section 7.2. Filings; Consents; Waiting Periods.................................... 42
Section 7.3. No Injunction......................................................... 43
Section 7.4. Closing Documents..................................................... 43
Section 7.5. Absence of Litigation................................................. 44
Section 7.6. Customer Contracts.................................................... 44
Section 7.7. Old Shareholders' Agreement........................................... 44
Section 7.8. Exchange Agreement.................................................... 44
Section 7.9. GPA Stock Exchange Agreement.......................................... 44
- iv -
Section 7.10. New Stockholders' Agreement........................................... 44
Section 7.11. Operating Agreements.................................................. 44
Section 7.12. Purchase of New GSHS Shares........................................... 45
Section 7.13. GSHS Certificate of Incorporation
and Bylaws............................................................ 45
Section 7.14. Agreement Among Sellers............................................... 45
Section 7.15. Fairness Opinion...................................................... 45
Section 7.16. Credit Agreement...................................................... 45
Section 7.17. Certain Capital Contributions......................................... 45
Section 7.18. Board Approvals....................................................... 45
Section 7.19. GSHS Long-Term Compensation Plan...................................... 45
Section 7.20. Section 6.13.......................................................... 45
ARTICLE 8.
CONDITIONS TO SELLER'S OBLIGATIONS TO CLOSE........................... 46
Section 8.1. Representations, Warranties and
Covenants of Buyer.................................................... 46
Section 8.2. Filings; Consents; Waiting Periods.................................... 46
Section 8.3. No Injunction......................................................... 46
Section 8.4. No Material Adverse Change............................................ 46
Section 8.5. Closing Documents..................................................... 46
Section 8.6. Absence of Litigation................................................. 47
Section 8.7. Execution of Other Agreements......................................... 47
Section 8.8. GPA Stock Exchange; New GSHS Shares;
GSHS Certificate of Incorporation
and Bylaws............................................................ 47
Section 8.9. Credit Agreement...................................................... 47
Section 8.10. Board Approvals....................................................... 47
Section 8.11. Fairness Opinion...................................................... 47
Section 8.12. Section 6.13.......................................................... 47
ARTICLE 9.
SURVIVAL; INDEMNIFICATION ............................................ 47
Section 9.1. Survival.............................................................. 47
Section 9.2. Indemnification....................................................... 48
Section 9.3. Exclusive Remedy...................................................... 50
ARTICLE 10.
TERMINATION........................................................... 51
Section 10.1. Termination........................................................... 51
Section 10.2. Procedure and Effect of Termination................................... 51
- v -
ARTICLE 11.
MISCELLANEOUS......................................................... 52
Section 11.1. Counterparts.......................................................... 52
Section 11.2. Governing Law......................................................... 52
Section 11.3. No Third Party Beneficiaries.......................................... 52
Section 11.4. Entire Agreement...................................................... 52
Section 11.5. Expenses.............................................................. 52
Section 11.6. Notices............................................................... 52
Section 11.7. Successors and Assigns................................................ 56
Section 11.8. Headings; Definitions................................................. 56
Section 11.9. Amendments and Waivers................................................ 56
Section 11.10. Specific Performance.................................................. 56
Section 11.11. Severability of Provisions............................................ 56
Section 11.12. Seller Liability...................................................... 57
- vi -
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") dated as of the 14th day
of November, 1995, is made and entered into by and among Blue Cross and Blue
Shield of New Jersey, Inc. ("BCBS"), a New Jersey health service corporation,
Health Care Service Corporation ("HCSC"), an Illinois legal mutual reserve
company, Independence Blue Cross ("IBC"), a Pennsylvania non-profit hospital
plan corporation, Medical Service Association of Pennsylvania ("MSAP"), a
Pennsylvania corporation, Pierce County Medical Bureau, Inc. ("PCMB"), a
Washington non-profit corporation, Veritus, Inc. ("VI"), a Pennsylvania
non-profit corporation, Green Spring Health Services, Inc. ("GSHS"), a Delaware
corporation, and Charter Medical Corporation, a Delaware corporation ("Buyer").
(Each of BCBS, HCSC, IBC, MSAP, PCMB and VI is referred to in this Agreement as
a "Seller" and together as the "Sellers").
WHEREAS, Sellers own all of the issued and outstanding common stock
of GSHS in the amounts set forth in Section 3.3 of the GSHS Disclosure Schedule
and Section 4.3 of the Seller Disclosure Schedule;
WHEREAS, Buyer desires to purchase from Sellers, and Sellers desire
to sell to Buyer, 5,391.92 of the issued and outstanding shares of common stock
of GSHS as of the date of this Agreement and 516.82 shares of the common stock
of GSHS that are to be purchased by Sellers pursuant to Section 6.15 prior to
the Closing of the transactions contemplated by this Agreement, both upon the
terms and subject to the conditions set forth in this Agreement (the sale and
purchase of such shares are referred to in this Agreement as the "Stock
Purchase");
NOW, THEREFORE, the parties to this Agreement agree as follows:
ARTICLE 1.
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
Section 1.1. "Affiliate" shall mean, with respect to any person, a
person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such person.
Section 1.2. "Associate" shall mean, with respect to any person, any
corporation or other business organization of which such person is an executive
officer (as such term is defined in Rule 3b-7 under the 1934 Act) or partner or
is the beneficial owner, directly or indirectly, of ten percent or more of any
class of equity securities, any trust or estate in which such person has a
substantial beneficial interest or as to which such person serves as a trustee
or in a similar capacity and any relative or spouse of such person, or any
relative of such spouse, who has the same home as such person.
Section 1.3. "Audited Financial Statements" shall mean the audited
consolidated balance sheets of GSHS at December 31, 1994, 1993 and 1992 and the
related audited consolidated statements of operations, changes in stockholders'
equity and cash flows for the years then ended, including related footnotes, in
each case as examined by and accompanied by the report of Arthur Andersen LLP,
independent certified public accountants, which Audited Financial Statements are
included in the GSHS Disclosure Schedule.
Section 1.4. "Balance Sheet" shall mean the unaudited consolidated
balance sheet of GSHS as of August 31, 1995 included in the Interim Financial
Statements.
Section 1.5. "Balance Sheet Date" shall mean August 31, 1995.
Section 1.6. "Basket Amount" shall mean an amount equal to Five
Million Dollars ($5,000,000).
1
Section 1.7. "Benefit Plans" shall mean all plans, programs, ERISA
Welfare Plans, ERISA Pension Plans and other arrangements under which or through
which GSHS or an ERISA Affiliate provides, or has an obligation to provide, or
makes, or has an obligation to make, contributions to provide, compensation or
benefits of any kind or description whatsoever (whether current or deferred and
whether paid in cash or in kind) to, or on behalf of, one, or more than one,
employee or director or former employee or former director, other than any
plans, programs or other arrangements which only provide for the payment of cash
compensation currently from the general assets of GSHS or an ERISA Affiliate on
a payday by payday basis as base salary or hourly wages for current services.
Section 1.8. "Business" shall mean the business of providing managed
behavioral health care services, including managed alcohol and other substance
abuse services and employee assistance plan services; and the components of such
services may include for a particular client or customer one or more of the
following concerning behavioral healthcare: case or care management,
administrative services for self-insured or partly self-insured customers,
utilization review, certification or pre-admission or pre-treatment
certification, assessment and referral, triage, services priced on a capitated,
non-capitated or partly-capitated basis, staff clinical services, provider
network services and preferred provider organization services.
Section 1.9. "Business Day" shall mean any day that is not a
Saturday, a Sunday or other day on which banks are required or authorized by law
to be closed in the City of New York.
Section 1.10. "Buyer Disclosure Schedule" shall mean the disclosure
schedule, dated as of the date of this Agreement, delivered to Sellers by Buyer,
as amended and updated pursuant to Section 6.9.
Section 1.11. "Buyer SEC Reports" shall have the meaning set forth in
Section 5.4.
Section 1.12."Buyer Subsidiary" shall mean a corporation,
partnership or other entity of which the Buyer satisfies the provisions of
either clause (i) or clause (ii) of the definition of Subsidiary.
Section 1.13. "Buyer Subsidiary Shares" shall have the meaning set
forth in Section 5.13.
Section 1.14. "Cash Portion of Purchase Price" shall have the meaning
set forth in Section 2.2.
Section 1.15. "Charter Common Stock" shall mean the common stock, par
value $0.25 per share, of Buyer.
Section 1.16. "Closing" shall have the meaning set forth in Section
2.4.
Section 1.17. "Closing Date" shall mean the date and effective time
at which the Closing occurs.
Section 1.18. "Code" shall mean the Internal Revenue Code of 1986,
as amended, together with the regulations promulgated thereunder.
Section 1.19. "Company Affiliate" shall have the meaning set forth in
Section 3.13.
Section 1.20. "Confidentiality Agreement" shall mean the
Confidentiality Agreement between GSHS and Buyer dated as of April 25, 1995.
Section 1.21."Contract" shall mean any contract, agreement,
indenture, lease of personal property (whether or not capitalized), note, bond,
loan agreement, letter of credit agreement, line of credit agreement,
instrument, lien, conditional sales contract, mortgage, franchise, commitment,
obligation or other arrangement or agreement, but shall exclude leases of real
property and insurance policies.
Section 1.22. "Credit Agreement" shall have the meaning set forth in
Section 6.12(a).
2
Section 1.23. "Director and Officer Policies" shall mean any
insurance policies providing coverage or benefits with respect to liabilities
incurred by or imposed on the directors or officers of GSHS or any Subsidiary.
Section 1.24. "Employment Contracts" shall mean all Contracts or
other arrangements under which GSHS or a Subsidiary has agreed to employ any
person for any period, including severance contracts.
Section 1.25. "Encumbrances" shall mean any security interest,
pledge, mortgage, lien, charge, adverse claim of ownership or use, or other
encumbrance of any kind.
Section 1.26. "Environmental Laws" shall mean all federal, state and
local laws, statutes, regulations, rules, ordinances, and orders with respect to
pollution or protection of the environments including laws relating to Hazardous
Substances or other toxic materials or wastes into ambient air, surface water,
ground space water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or Hazardous Substances or other toxic
materials or wastes.
Section 1.27. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the rulings and regulations under the
Employee Retirement Income Security Act of 1974, as amended.
Section 1.28. "ERISA Affiliate" shall mean a corporation that is or
was a member of a controlled group of corporations with GSHS within the meaning
of Section 414(b) of the Code, a trade or business (including a sole
proprietorship, partnership, limited liability company, trust, estate or
corporation) that is under common control with GSHS within the meaning of
Section 414(m) of the Code, or a trade or business which together with GSHS is
treated as a single employer under Section 414(o) of the Code.
Section 1.29. "ERISA Pension Plan" shall mean any employee pension
benefit plan as defined in Section 3(2) of ERISA which is established,
maintained or contributed to by GSHS or any ERISA Affiliate.
Section 1.30. "ERISA Welfare Plan" shall mean any employee welfare
benefit plan as defined in Section 3(1) of ERISA which is established,
maintained or contributed to by GSHS or any ERISA Affiliate.
Section 1.31. "Exchange Agreement" shall mean the Exchange Agreement
among certain of the Sellers and Buyer, dated as of the Closing Date and
attached to this Agreement as Exhibit A.
Section 1.32. "Family Member" shall have the meaning set forth in
Section 3.13.
Section 1.33. "Financial Statements" shall mean the Audited
Financial Statements and the Interim Financial Statements.
Section 1.34. "GAAP" shall mean generally accepted accounting
principles (as such term is used in the American Institute of Certified Public
Accountants' Professional Standards) from time to time in effect.
Section 1.35. "Governmental Antitrust Authority" shall mean any
governmental authority (federal or state) with jurisdiction over the enforcement
of any applicable antitrust laws.
Section 1.36. "Governmental Authority" shall mean any foreign,
federal, state or local governmental entity or municipality or subdivision
thereof or any authority, department, commission, board, bureau, agency, court
or instrumentality thereof.
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Section 1.37. "GPA" shall mean Group Practice Affiliates, Inc., a
Delaware corporation and a wholly-owned subsidiary of Buyer.
Section 1.38. "GPA Balance Sheet" shall have the meaning set forth
in Section 5.14(l).
Section 1.39. "GPA Balance Sheet Date" shall have the meaning set
forth in Section 5.14(l).
Section 1.40. "GPA Common Stock" shall have the meaning set forth in
Section 5.14(a).
Section 1.41. "GPA Company Affiliate" shall have the meaning set
forth in Section 5.14(p).
Section 1.42. "GPA Disclosure Letter" shall have the meaning set
forth in Section 5.14(g).
Section 1.43. "GPA Financial Statements" shall have the meaning set
forth in Section 5.14(e).
Section 1.44. "GPA Stock Exchange Agreement" shall mean the GPA Stock
Exchange Agreement, dated the date of this Agreement, between Buyer and GSHS
providing for the acquisition by GSHS on the Closing Date, in a tax-free
reorganization pursuant to Section 368(a)(1)(B) of the Code, of all the issued
and outstanding common stock of GPA from Buyer for 969.04 shares of the common
stock of GSHS, a copy of which is attached as Exhibit B.
Section 1.45. "GPA Subsidiary" shall have the meaning set forth in
Section 5.14(f).
Section 1.46. "GPA Subsidiary Shares" shall have the meaning set
forth in Section 5.14(h).
Section 1.47. "GSHS Disclosure Schedule" shall mean the disclosure
schedule, dated as of the date of this Agreement, delivered to Buyer by GSHS, as
amended and updated pursuant to Section 6.9.
Section 1.48. "GSHS Long Term Compensation Plan" shall have the
meaning set forth in Section 6.11.
Section 1.49. "GSHS Shares" shall have the meaning set forth in
Section 2.1.
Section 1.50. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the regulations promulgated
thereunder.
Section 1.51. "Indemnifiable Damages" shall mean any and all
liabilities, losses, interest, penalties, obligations, judgments, damages,
fines, amounts paid or payable in settlement, expenses and costs (including,
without limitation, reasonable counsel fees, accounting fees, investigation
costs and costs and expenses incurred in connection with the foregoing).
Section 1.52. "Interim Financial Statements" shall mean the unaudited
consolidated balance sheet of GSHS at August 31, 1995 and the related unaudited
consolidated statement of operations for the eight-month period then ended,
which Interim Financial Statements are included in the GSHS Disclosure Schedule.
Section 1.53. "Intellectual Property" means all patents and patent
rights, trademarks and trademark rights, trade names and trade name rights,
service marks and service mark rights, service names and service name rights,
brand names, inventions, procedures, formulae, copyrights and copyright rights,
trade dress, business and product names, logos, slogans, trade secrets,
processes, designs, methodologies, computer programs (including all source
codes) and related documentation, technical information, know-how and all
pending applications for and registrations of patents, trademarks, service marks
and copyrights.
4
Section 1.54. "IRS" shall mean the Internal Revenue Service.
Section 1.55. "Knowledge" shall mean actual knowledge of an executive
officer of any Seller, Buyer or Buyer Subsidiary and, in the case of GSHS or any
Subsidiary, actual knowledge of any executive officer or director.
Section 1.56. "Leased Real Property" shall mean the real property
leased by GSHS or any Subsidiary, as tenant, together with, to the extent leased
by GSHS or a Subsidiary, all buildings and other structures, facilities or
improvements currently or subsequently located on or at such property, all
fixtures, systems, equipment and items of personal property of GSHS attached or
appurtenant to such real property, and all easements, licenses, rights and
appurtenances relating to the foregoing.
Section 1.57. "Leases" shall mean the leases for the Leased Real
Property.
Section 1.58. "Market Value" shall mean the arithmetic average of the
closing sale prices for a share of Charter Common Stock as reported by the
American Stock Exchange for the ten trading days immediately preceding the third
business day prior to the Closing Date; provided, however, that if such
arithmetic average is less than $20.00, the Market Value shall be deemed to be
$20.00 and provided, further, that if such arithmetic average is greater than
$22.00, the Market Value shall be deemed to be $22.00.
Section 1.59. "New GSHS Shares" shall mean the shares of common stock
of GSHS to be purchased by Sellers pursuant to Section 6.14 prior to the Closing
and sold to Buyer at the Closing pursuant to Section 6.14.
Section 1.60. "New Stockholders' Agreement" shall mean the
Stockholders' Agreement among Sellers (other than MSAP and VI), Buyer and GSHS,
dated as of the Closing Date and attached to this Agreement as Exhibit C.
Section 1.61. "Old Shareholders' Agreement" shall mean the
Subscription and Stockholders' Agreement among Sellers and GSHS, initially dated
as of April 29, 1993, as amended from time to time after such date.
Section 1.62. "Operating Agreement" shall mean an agreement between
GSHS (or a Subsidiary) and a customer for the provision by GSHS (or a
Subsidiary) to the customer of services related to one or more aspects of the
Business.
Section 1.63. "Parachute Plan" shall mean any plan, program or policy
of any kind or description whatsoever or provision in an Employment Contract
that promises any special or enhanced benefits as a result of a change of
control in GSHS or any Subsidiary.
Section 1.64. "Permits" shall mean all permits, licenses and other
governmental approvals, accreditations, participation agreements, consents,
authorizations, certificates of authority and orders.
Section 1.65. "Permitted Encumbrances" shall mean (i) Encumbrances
for Taxes not yet payable and for Taxes being contested in good faith, (ii)
Encumbrances arising out of, under or in connection with this Agreement and
(iii) Encumbrances and imperfections of title that do not secure payment of
borrowed money and the existence of which do not materially affect the use of
the property subject to such Encumbrances.
Section 1.66. "Purchase Price" shall have the meaning set forth in
Section 2.2.
Section 1.67. "Registration Statement" shall have the meaning set
forth in Section 6.13.
5
Section 1.68. "Seller Disclosure Schedule" shall mean the disclosure
schedule, dated as of the date of this Agreement, delivered to Buyer by Sellers,
as amended and updated pursuant to Section 6.9.
Section 1.69. "Stock Portion of Purchase Price" shall have the
meaning set forth in Section 2.2.
Section 1.70. "Subsidiary" shall mean a corporation, partnership or
other entity of which GSHS (i) has the power to elect more than 50% of the board
of directors or other governing authority either directly or indirectly or (ii)
owns or controls more than 50% of the outstanding equity securities or equity
interests either directly or through an unbroken chain of entities as to each of
which 50% or more of the outstanding equity securities or equity interests is
owned directly or indirectly by its parent.
Section 1.71. "Subsidiary Shares" shall have the meaning set forth in
Section 3.4(b).
Section 1.72. "Takeover Proposal" shall mean any proposal for a
merger, consolidation, acquisition of all of the stock or assets of GSHS or the
acquisition of a substantial equity interest in GSHS or a substantial portion of
the consolidated assets of GSHS or any solicitation of proxies in connection
with any meeting for the purpose of effecting a business combination or change
in control.
Section 1.73. "Tax" or "Taxes" shall mean all federal, state, local
or foreign taxes, levies, imposts, duties, licenses and registration fees, and
charges of any nature whatsoever including, without limitation, income tax
withholding, unemployment and social security taxes, interest, penalties and
additions to tax with respect to such taxes.
Section 1.74. "Tax Return" shall mean any return, declaration,
report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment to such documents and any amendment of such
documents.
Section 1.75. "Tax Sharing Agreement" shall have the meaning set
forth in Section 6.12(b).
Section 1.76. "Third-Party Claim" shall have the meaning set forth
in Section 9.2(c).
Section 1.77. "Undisclosed Liability" shall mean an obligation,
indebtedness or liability of any nature (each of which, for purposes of this
definition, is assumed to be material), which is required by GAAP to be
reflected on the Balance Sheet or in the notes to the Balance Sheet or to the
Financial Statements of which the Balance Sheet is a part and which is not
reflected, reserved against or disclosed on the Balance Sheet or the notes to
the Financial Statements or disclosed in this Agreement or the GSHS Disclosure
Schedule.
Section 1.78. "1933 Act" shall mean the Securities Act of 1933, as
amended.
Section 1.79. "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
Section 1.80. Other Defined Terms. The terms defined in first
paragraph and in the whereas clauses shall have the meanings given to such
terms in such paragraph and whereas clauses.
ARTICLE 2.
SALE OF STOCK; CLOSING
Section 2.1. Purchase and Sale. On the basis of the representations,
warranties, covenants and agreements and subject to the satisfaction or waiver
of the conditions to Closing set forth in this Agreement, at the Closing Sellers
will sell and Buyer will purchase (a) an aggregate of 5,391.92 shares of common
stock of GSHS, par value $0.01 per share (collectively, the "GSHS Shares"),
which constitute, and will constitute as of the Closing,
6
approximately 40% of the issued and outstanding capital stock of GSHS; and Buyer
will purchase the GSHS Shares from each Seller, and each Seller will sell the
GSHS Shares to Buyer, in the following amounts: BCBS - 347.98 shares, HCSC -
347.98 shares, IBC - 347.98 shares, MSAP - 2,000 shares, PCMB - 347.98 shares,
and VI - 2,000 shares; and (b) the New GSHS Shares, which will consist of an
aggregate of 516.82 shares of common stock of GSHS, par value $0.01 per share,
which shares shall be the shares purchased by Sellers from GSHS prior to Closing
pursuant to Section 6.14; and Buyer will purchase the New GSHS Shares from each
Seller, and each Seller will sell the New GSHS Shares to Buyer in the following
amounts: BCBS - 86.14 shares, HCSC - 86.14 shares, IBC - 86.14 shares, MSAP -
86.14 shares, PCMB - 86.14 shares, and VI - 86.14 shares.
Section 2.2. Purchase Price. In full payment for the GSHS Shares and
the New GSHS Shares, Buyer will pay and deliver to Sellers an aggregate purchase
price of Seventy-three Million, One Hundred Sixty-nine Thousand Nine Hundred
Ninety-five and 46/100 Dollars ($73,169,995.46) (the "Purchase Price") payable
to each Seller in the following amounts:
Purchase Price Purchase Price Total
Seller For GSHS Shares For New GSHS Shares Purchase Price
------ --------------- ------------------- --------------
1. BCBS $ 4,309,158.13 $ 1,066,660.49 $ 5,375,818.62
2. HCSC $ 4,309,158.13 $ 1,066,660.49 $ 5,375,818.62
3. IBC $ 4,309,158.13 $ 1,066,660.49 $ 5,375,818.62
4. MSAP $24,766,700.00 $ 1,066,660.49 $25,833,360.49
5. PCMB $ 4,309,158.13 $ 1,066,660.49 $ 5,375,818.62
6. VI $24,766,700.00 $ 1,066,660.49 $25,833,360.49
Each Seller (other than MSAP and VI) may elect, by written notice
delivered to Buyer not later than November 15, 1995, or such later date as Buyer
may agree upon in writing, to receive all or any portion of the Purchase Price
payable to such Seller in the form of Charter Common Stock valued at Market
Value; provided, however, that if the aggregate preliminary elections made by
all such Sellers exceed $18,290,000 of Charter Common Stock valued at Market
Value, each such Seller's election shall be reduced by such Seller's pro rata
share of the amount in excess of $18,290,000 (the "Stock Portion of the Purchase
Price"). Any such election shall be irrevocable. The portion of the Purchase
Price payable to MSAP and VI shall be paid in cash. The difference between the
aggregate Purchase Price and the Stock Portion of the Purchase Price shall be
payable in cash (the "Cash Portion of the Purchase Price").
Section 2.3. Transfer and Delivery of GSHS Shares and New GSHS
Shares; Payment of Purchase Price.
(a) GSHS Shares. At the Closing, each Seller, severally and not
jointly, shall sell, assign, transfer and deliver to Buyer (i) the number of
GSHS Shares set forth by its name in Section 2.1 by delivery to Buyer of a
certificate or certificates representing such GSHS Shares, duly endorsed for
transfer or accompanied by duly executed stock powers, and (ii) the number of
New GSHS Shares set forth by its name in Section 2.1 by delivery to Buyer of a
certificate or certificates representing such New GSHS Shares, duly endorsed for
transfer or accompanied by duly executed stock powers. Sellers severally
covenant and agree with Buyer to cause GSHS to, and GSHS agrees to,
7
immediately upon the Closing, accept for transfer such certificates for the GSHS
Shares and the New GSHS Shares and to issue to Buyer a certificate or
certificates, in the name of Buyer, representing the GSHS Shares and the New
GSHS Shares.
(b) Payment of Cash Portion of the Purchase Price. At the Closing,
Buyer will pay to each Seller its portion of the Cash Portion of the Purchase
Price by wire transfer of immediately available funds to an account of each
Seller designated by each Seller in writing to Buyer not less than three
Business Days prior to the Closing.
(c) Payment of Stock Portion of the Purchase Price. At the Closing,
Buyer will deliver to each Seller its portion of the Stock Portion of the
Purchase Price by delivery to such Seller of a certificate registered in the
name of such Seller for a number of shares of Charter Common Stock equal to such
Seller's Stock Portion of the Purchase Price divided by the Market Value of
Charter Common Stock and rounded up to the nearest whole number.
Section 2.4. Time and Place of Closing. The closing (the "Closing")
of the Stock Purchase will be held at 10:00 a.m. on the fifth Business Day after
the latest to occur of (i) the termination of the waiting periods under the HSR
Act, (ii) the fulfillment or waiver of the conditions set forth in Articles 7
and 8, and (iii) November 30, 1995, at the offices of King & Spalding, 191
Peachtree Street, Atlanta, Georgia or, if Buyer so requests, at offices in New
York, New York of counsel to Buyer's commercial lenders, or at such other time
and place as the parties may agree. It is understood that the Stock Purchase
shall be deemed to take place effective as of the close of business on the
Closing Date, regardless of the time at which the Closing actually occurs on the
Closing Date.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF GSHS
GSHS represents and warrants to Buyer as follows and acknowledges
that Buyer is relying upon such representations and warranties in connection
with the transactions provided for in this Agreement. The parties acknowledge
that certain of the representations and warranties set forth in this Article 3
lack qualifications as to materiality in light of the agreements set forth in
Sections 7.1 and 9.2(f).
Section 3.1. Organization, etc. GSHS and each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of their respective states of incorporation and has all requisite corporate
power and authority (i) to conduct its business as it is now conducted and to
own or lease all of the properties owned or leased by it; and (ii) in the case
of GSHS, to enter into and perform its obligations under this Agreement. True,
correct and complete copies of the Certificate or Articles of Incorporation and
bylaws of GSHS and each Subsidiary as of the date of this Agreement have been
previously delivered or made available to Buyer. The corporate records and
minute books of GSHS and each Subsidiary contain complete and accurate minutes
of all meetings and other corporate actions of the directors and stockholders of
GSHS and each Subsidiary held, in the case of GSHS, since its date of
incorporation, and in the case of each Subsidiary, since the date of its
acquisition by GSHS, and the share certificate books and register of
stockholders of GSHS and each Subsidiary are complete and accurate. GSHS and
each Subsidiary is duly qualified to do business as a foreign corporation, and
is in good standing, in all jurisdictions in which the ownership or lease of
property by it or the conduct of its business makes such qualification
necessary.
Section 3.2. Authorization; Execution; Binding Effect. The execution,
delivery and performance of this Agreement, the GPA Stock Exchange Agreement and
the New Stockholders' Agreement, and the consummation of the transactions
provided for in such agreements have been duly authorized by all necessary
corporate action on the part of GSHS. Assuming due execution and delivery by the
other parties, this Agreement, the GPA Stock Exchange Agreement and the New
Stockholders' Agreement constitute the legal, valid and binding obligation of
GSHS,
8
enforceable against GSHS in accordance with its respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other laws affecting creditors' rights and remedies generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
Section 3.3. Capitalization; Share Ownership. The authorized capital
stock of GSHS consists of 12,000 shares of $0.01 par value common stock, of
which 12,000 shares are issued and outstanding. Upon completion of the amendment
to the Certificate of Incorporation of GSHS and the issuance and sale of the New
GSHS Shares, as provided by Section 6.14, the authorized capital stock of GSHS
will consist of 15,000 shares of $0.01 common stock, of which 12,516.82 shares
will be issued and outstanding. All outstanding shares of the capital stock of
GSHS are, and upon the sale and issuance pursuant to Section 6.14 and the GPA
Stock Exchange Agreement, respectively, the New GSHS Shares and the shares of
common stock of GSHS to be issued pursuant to the GPA Stock Exchange Agreement
will be, duly authorized, validly issued and fully paid, nonassessable and in no
case issued in violation of any pre-emptive rights granted by GSHS. GSHS has no
shares of its capital stock in its treasury. Except for this Agreement, the
transactions contemplated by the GPA Stock Exchange Agreement and Section 6.14,
and as set forth in Section 3.3 of the GSHS Disclosure Schedule, (i) there is no
existing subscription, option, warrant, call, right, commitment or other
agreement (whether pre-emptive or contractual) to which GSHS is a party
requiring, and there are no convertible securities of GSHS outstanding which
upon conversion would require, directly or indirectly, the issuance of any
additional common stock of GSHS or other securities convertible into or
exercisable or exchangeable for common stock of GSHS or any other equity
security of GSHS, and (ii) there are no outstanding contractual obligations of
GSHS to repurchase, redeem or otherwise acquire any outstanding capital stock of
GSHS. There are no bonds, debentures, notes or other indebtedness issued and
outstanding having the right to vote on any matters on which GSHS's stockholders
may vote. There are no obligations, contingent or otherwise, of GSHS or any
Subsidiary to (x) repurchase, redeem or otherwise acquire any outstanding
capital stock of GSHS or the capital stock of, or other equity interests in, any
Subsidiary or (y) except for guarantees of obligations of, or loans and advances
to, GSHS or any Subsidiary, provide funds to, or make investments in, or provide
any guarantee with respect to the obligations of any other person. The GSHS
Shares sold pursuant to this Agreement have been duly authorized and validly
issued, fully paid and nonassessable, will be delivered free and clear of all
liens, charges and encumbrances of any kind or nature and will not be in
violation of any pre-emptive rights. Except for the Old Shareholders' Agreement,
GSHS has granted no person or entity any registration rights in respect of
common stock of GSHS or securities convertible into or exercisable or
exchangeable for common stock of GSHS. Each Seller is the sole record owner of
the shares of GSHS listed beside such Seller's name in Section 3.3 of the GSHS
Disclosure Schedule and, upon consummation of the transactions contemplated by
Section 6.14, will be the sole record owner of the number of New GSHS Shares
listed beside such Seller's name in Section 6.14. The Old Shareholders'
Agreement is the only stockholder agreement, voting agreement, voting trust,
proxy or other agreement to which GSHS is a party with respect to the voting or
transfer of the common stock of GSHS.
Section 3.4. Subsidiaries. (a) Other than the Subsidiaries set forth
in Section 3.4(b) of the GSHS Disclosure Schedule, there are no other
corporations, partnerships, limited liability companies, joint ventures or other
entities in which GSHS or any Subsidiary owns, of record or beneficially, any
direct or indirect equity interest or any right (contingent or otherwise) to
acquire the same.
(b) Section 3.4(b) of the GSHS Disclosure Schedule sets forth the
jurisdiction of incorporation of each Subsidiary, its authorized capital stock,
the number and class or series of its issued and outstanding shares of capital
stock, and the current ownership by GSHS and its Subsidiaries of such shares
(collectively, the "Subsidiary Shares"). The Subsidiary Shares constitute all
the issued and outstanding shares of capital stock of the Subsidiaries. The
Subsidiary Shares have been duly authorized and validly issued and are fully
paid and nonassessable and were not issued in violation of any pre-emptive
rights. There are no existing subscriptions, options, warrants, calls, rights of
conversion or other rights, agreements, arrangements or commitments relating to
the capital stock of any Subsidiary
9
obligating any Subsidiary to issue or sell any shares of its capital stock.
Either GSHS or another Subsidiary owns the Subsidiary Shares issued by the
respective Subsidiaries free and clear of all Encumbrances, except (i) as set
forth in Section 3.4(b) of the GSHS Disclosure Schedule and (ii) Encumbrances
arising out of or in connection with this Agreement. There are no voting trusts,
stockholder agreements, proxies or other agreements in effect with respect to
the voting or transfer of the Subsidiary Shares.
Section 3.5. No Conflicting Agreements or Charter Provisions. Except
as set forth in Section 3.5 of the GSHS Disclosure Schedule, the execution,
delivery and compliance with and performance by GSHS of the terms and provisions
of this Agreement, the GPA Stock Exchange Agreement and the New Stockholders'
Agreement, and the consummation of the transactions contemplated by such
agreements, will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default (or an event which, with
notice, lapse of time, or both, would constitute a default) under, (iii) result
in any violation of, (iv) require the obtaining of any consent, approval or
action of, make any filing with or give notice to any person (except for a
Governmental Authority) as a result of or under the terms of, (v) result in or
give to any person any right of termination, cancellation, acceleration,
modification, or increased or accelerated rights, entitlements or payments
under, or (vi) result in the creation or imposition of any Encumbrance upon GSHS
or any Subsidiary or any of their respective assets under: (A) the Certificate
or Articles of Incorporation or bylaws of GSHS or any Subsidiary or any
resolutions adopted by the stockholders or the Board of Directors of GSHS or any
Subsidiary (assuming the Certificate of Incorporation of GSHS has been amended
as provided in Section 6.14), or (B) any order, judgment or decree (in a
proceeding to which a Governmental Authority is not a party) to which GSHS or
any Subsidiary is subject.
Section 3.6. Consents, Approvals, Licenses, Etc. No consent,
approval, authorization, license, statute, law, rule, regulation, order or
Permit of, or declaration, filing or registration with, or notification to, any
Governmental Authority is required to be made or obtained by GSHS or any
Subsidiary in connection with the execution, delivery and performance of this
Agreement, the GPA Stock Exchange Agreement and the New Stockholders' Agreement,
or the consummation of the transactions contemplated by such agreements, except:
(i) as set forth in Section 3.6 of the GSHS Disclosure Schedule; (ii) applicable
requirements, if any, of the Delaware General Corporation Law, the 1934 Act,
state securities or blue sky laws and the HSR Act; or (iii) where the failure to
obtain such Permits, or to make such declarations, filing or registration or
notifications, would not, either individually or in the aggregate, have an
adverse effect on GSHS or any Subsidiary or Buyer involving more than $20,000.
Section 3.7. Litigation. Except as set forth in Section 3.7 of the
GSHS Disclosure Schedule, there is (whether insured or uninsured) no action,
suit, proceeding or investigation pending or, to the Knowledge of GSHS or any
Subsidiary, threatened in writing, at law or in equity, in any court or before
or by any Governmental Authority: (i) against GSHS or any Subsidiary, except for
uninsured private civil litigation not involving a claim for equitable relief
and involving a claim for less than $100,000; (ii) to the Knowledge of GSHS or
any Subsidiary, affecting GSHS or any Subsidiary or any of their properties,
except for uninsured private civil litigation not involving a claim for
equitable relief and involving a claim for less than $100,000; or (iii) to the
Knowledge of GSHS or any Subsidiary, affecting this Agreement, the GPA Stock
Exchange Agreement or the New Stockholders' Agreement or any action taken or to
be taken or documents executed or to be executed pursuant to or in connection
with the provisions of any such agreement. Prior to the execution of this
Agreement, GSHS has delivered to Buyer all responses of counsel for GSHS and the
Subsidiaries to auditors' requests for information delivered in connection with
the 1994 Audited Financial Statements (together with any updates provided by
such counsel) regarding actions or proceedings pending or threatened against,
relating to or affecting GSHS or any Subsidiary.
10
Section 3.8. Financial Statements. The GSHS Disclosure Schedule
includes true, correct and complete copies of the Financial Statements. Each of
the Financial Statements (i) has been prepared from the books and records of
GSHS and the Subsidiaries, which in all material respects account for
transactions, assets and liabilities consistent with good business and
accounting practice and Section 13(b)(2) of the 1934 Act and (ii) fairly
presents the financial position, results of operations, changes in stockholder's
equity and cash flows of GSHS on a consolidated basis as of the dates and for
the periods set forth in such Financial Statements, in accordance with GAAP
applied consistently throughout the periods involved, except as set forth in
Section 3.8 of the GSHS Disclosure Schedule. Each of the financial statements
delivered by GSHS pursuant to Section 6.1(c) shall comply with the preceding
sentence.
Section 3.9. No Undisclosed Liabilities. To the Knowledge of GSHS or
any Subsidiary, neither GSHS nor any Subsidiary had any Undisclosed Liability as
of the Balance Sheet Date, and except (i) as set forth in Section 3.9 of the
GSHS Disclosure Schedule, (ii) as set forth in the Balance Sheet or (iii) for
normal and recurring current liabilities accruing in the ordinary course of
business since the date of the Balance Sheet, neither GSHS nor any Subsidiary,
on the date of this Agreement, has outstanding any Undisclosed Liability. Except
as set forth in the Financial Statements or in Section 3.9 of the GSHS
Disclosure Schedule, neither GSHS nor any Subsidiary has any long-term
indebtedness, any lease obligation required to be recorded under GAAP as a
capitalized lease and on the Closing Date will have no long-term debt due to or
from any Seller (except as reflected in the most recent Audited Financial
Statements).
Section 3.10. Compliance with Laws; Permits. GSHS and each Subsidiary
has, since July 1, 1994, complied with all laws, regulations and orders relating
or applicable to the operation of its respective business. GSHS and each
Subsidiary holds all Permits required to be held by it in order to own, occupy
and lease its assets and to conduct and operate its business (as presently
conducted and as conducted on the Closing Date) in compliance with all
applicable laws and regulations. A true and correct copy of each such Permit has
previously been delivered or made available to Buyer. Except as set forth in
Section 3.6 or Section 3.10 of the GSHS Disclosure Schedule, neither GSHS nor
any Subsidiary is in default or, to GSHS's Knowledge, alleged to be in default
with respect to any judgment, order, writ, injunction or decree of any
Governmental Authority which would have an adverse effect on the business,
assets or financial condition of GSHS or any Subsidiary in excess of $50,000, no
notice from any Governmental Authority or agency in respect to (including an
investigation) the revocation, termination, suspension or limitation of any
Permit or the failure to have any Permit has been issued or given to GSHS or any
Subsidiary, nor does GSHS or any Subsidiary have any Knowledge of the proposed
or threatened issuance of any such notice or of any pending or threatened
investigation with respect to any such matter.
Section 3.11. No Adverse Changes. Since the Balance Sheet Date and
except as set forth in Section 3.11 of the GSHS Disclosure Schedule or as
contemplated by this Agreement or the GPA Stock Exchange Agreement, there has
not been, occurred or arisen:
(i) any adverse change in the financial condition, results
of operations, prospects, business or properties of GSHS and the
Subsidiaries;
(ii) any termination (or, to the Knowledge of GSHS or any
Subsidiary, threat of termination) of any Contract to which either
GSHS or any Subsidiary is a party representing $500,000 or more of
revenue to GSHS or a Subsidiary for the 12-month period ended June
30, 1995;
(iii) any increase in the compensation payable or to become
payable by GSHS or any Subsidiary to any of its directors, officers,
management, employees, consultants or agents whose base
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annual salary or, in the case of a non-employee, base annual
compensation (for any individual) exceeds $75,000 or any increase in
benefits under any bonus, insurance, pension or other benefit plan
made for or with any of such persons (including, but not limited to,
any change in targets, goals, bonus pools and the like under any
Benefit Plan, Employment Contract or other employee compensation
arrangement) except for such increases made in the ordinary course of
business and consistent with the past practices of GSHS or such
Subsidiary;
(iv) any direct or indirect redemption, purchase or other
acquisition by GSHS or any Subsidiary of any shares of capital stock
of GSHS or any Subsidiary, any declaration, setting aside or payment
of any dividend or other distribution by GSHS or any Subsidiary in
respect of shares of capital stock of GSHS or any Subsidiary whether
in cash, shares or property, or any loan to any stockholder;
(v) any unusual or extraordinary item resulting in a loss
suffered by GSHS or any Subsidiary, which, individually or in the
aggregate, is equal to or in excess of $500,000;
(vi) any mortgage on, pledge of or grant of a security
interest in any of the assets of GSHS or any Subsidiary other than
Permitted Encumbrances;
(vii) any payment default or event of default by GSHS or any
Subsidiary under any debt with a principal amount equal to or greater
than $100,000 or under any Lease or lease agreement with annual
rental payments equal to or greater than $50,000;
(viii) any guaranty of any obligation or debt of any person or
entity by GSHS or any Subsidiary (other than GSHS or a Subsidiary),
except in the ordinary course of business;
(ix) any material change in (i) any investment, accounting or
Tax practice or policy of GSHS or any Subsidiary or (ii) any method
of calculating any bad debt, contingency, IBNR (incurred but not
reported claims) or other reserve of GSHS or any Subsidiary for
accounting or Tax purposes;
(x) any business combination involving GSHS or any
Subsidiary and any other person (other than with respect to this
Agreement);
(xi) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any
consent with respect to any Contract which is required (or had it
been in effect on the date of this Agreement would have been
required) to be disclosed in Section 3.16 of the GSHS Disclosure
Schedule (other than any of the foregoing contemplated by this
Agreement);
(xii) any capital expenditures or commitments for additions to
property, plant or equipment of GSHS or any Subsidiary in an
aggregate amount exceeding $200,000; or
(xiii) any other transaction involving GSHS or any Subsidiary
outside the ordinary course of business.
Section 3.12. Intellectual Property. GSHS or a Subsidiary
either has all right, title and interest in or a valid and binding
license to use all of the Intellectual Property used by GSHS or any
Subsidiary in the conduct of their respective businesses. No other
Intellectual Property is used or necessary in the conduct of the
business of GSHS or any Subsidiary. Except as disclosed in Section
3.12 of the GSHS Disclosure Schedule, (i) all registrations with and
12
applications to Governmental Authorities in respect of such
Intellectual Property are valid and in full force and effect, (ii)
GSHS and the Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of their trade
secrets, and (iii) neither GSHS nor any Subsidiary is, or has
received any notice that it is, in default (or with the giving of
notice or lapse of time or both, would be in default) under any
license to use such Intellectual Property. Neither GSHS nor any
Subsidiary has received notice that GSHS or any Subsidiary is
infringing any Intellectual Property of any other person, no claim is
pending or, to the Knowledge of GSHS or any Subsidiary, has been made
to such effect that has not been resolved and, to the Knowledge of
GSHS and each Subsidiary, neither GSHS nor any Subsidiary is
infringing any Intellectual Property rights of any other person.
Section 3.13. Certain Transactions. Except as set forth in Section
3.13 of the GSHS Disclosure Schedule, to the Knowledge of GSHS or any
Subsidiary:
(a) No Seller, no Affiliate or Associate of any Seller
(other than GSHS and its Subsidiaries), no officer, director or other
Affiliate of GSHS or any Subsidiary ("Company Affiliate") and no
Associate or Family Member of any Company Affiliate has directly or
indirectly (i) any interest in any corporation, partnership, limited
liability company, proprietorship or other entity which sells to or
purchases from GSHS or any Subsidiary any products or services, (ii)
sells to or purchases from GSHS or any Subsidiary any products or
services, (iii) any cause of action or claim against GSHS or any
Subsidiary; or (iv) a beneficial interest in any Contract to which
GSHS or any Subsidiary is a party or by which it is bound;
(b) Neither GSHS nor any Subsidiary is indebted, either
directly or indirectly, to any Company Affiliate, or any Associate or
Family Member of any Company Affiliate in any amount other than
current obligations for payments of salaries, bonuses and other
fringe benefits for past services rendered and recorded on the books
of GSHS or a Subsidiary; and
(c) No Company Affiliate or any Associate or Family
Member of a Company Affiliate is indebted to GSHS or any Subsidiary.
For purposes of this Section 3.13, there shall be
disregarded any interest which arises solely from the ownership of
less than a five percent equity interest in a corporation whose stock
is regularly traded on any national securities exchange or on the
NASD National Market System; and the term "Family Member" shall mean
a member of an immediate family as the term "immediate family" is
defined in the instructions to Item 404 of Regulation S-K under the
1933 Act and the 1934 Act.
Section 3.14. Benefit Plans.
(a) There are no Benefit Plans or Employment Contracts other than
those set forth in Section 3.14(a) of the GSHS Disclosure Schedule; and no such
Benefit Plans or Employment Contracts obligate GSHS or any Subsidiary to provide
post-retirement health or life insurance benefits to employees or former
employees of GSHS or any Subsidiary other than continuation coverage provisions
under Federal and state law, including with respect to the Consolidated Omnibus
Budget Reconciliation Act of 1985.
(b) GSHS has furnished or made available to Buyer a true, complete
and correct copy of each Benefit Plan and Employment Contract which is set forth
in writing and a complete description of each other Benefit Plan and Employment
Contract.
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(c) Except as set forth in Section 3.14(c) of the GSHS Disclosure
Schedule, no assets have been set aside in a trust or other separate account
(other than in a tax-exempt trust or tax-exempt separate account) by GSHS or any
ERISA Affiliate to pay directly or indirectly any benefits under any Benefit
Plan or Employment Contract, and all of the assets of any such tax-exempt trust
or separate account are shown on the books and records of such trust or separate
account at their current fair market value.
(d) GSHS, each Subsidiary and each ERISA Affiliate have established,
maintained, administered, reported and disclosed, made contributions to and
otherwise performed all their duties and responsibilities under each Benefit
Plan and each Employment Contract in compliance with all applicable laws.
Neither GSHS, any Subsidiary nor any ERISA Affiliate has any duty or obligation
to indemnify or hold any other person harmless for any liability attributable to
any acts or omissions by such person with respect to any Benefit Plan,
Employment Contract or employee or former employee.
(e) Neither GSHS, any Subsidiary nor any ERISA Affiliate has any
liability for any unpaid Tax or penalty with respect to any Benefit Plan or
Employment Contract, including without limitation, any unpaid Tax or penalty
under ERISA or under the Code.
(f) There are no claims which have been made or, to the Knowledge of
any ERISA Affiliate, threatened under any of the Benefit Plans or Employment
Contracts or against GSHS or any ERISA Affiliate with respect to any of the
Benefit Plans or Employment Contracts (other than routine claims made in the
ordinary course of plan or contract operations) or with respect to the
employment or termination of employment or treatment of any employee or former
employee, and no ERISA Affiliate has any Knowledge of any proposed or actual
audit or investigation by any governmental or other law enforcement agency with
respect to any Benefit Plan, Employment Contract or the employment or
termination of employment or treatment of any employee or former employee.
(g) Except as set forth in Section 3.14(g) of the GSHS Disclosure
Schedule, neither GSHS, any Subsidiary nor any ERISA Affiliate is subject to any
liabilities (including withdrawal liabilities) with respect to any Benefit Plan
or employee benefit plan subject to Title IV of ERISA, including without
limitation, any liabilities arising from Title I or Title IV of ERISA, other
than the liability to make current contributions when due and to pay current
expenses and premiums when due. All such contributions, expenses and premiums
have been paid in full when due.
(h) Except as set forth in Section 3.14(h) of the GSHS Disclosure
Schedule, GSHS or a Subsidiary has the right under the terms of each Benefit
Plan and under applicable law to terminate such plan at any time exclusively by
action of GSHS or such Subsidiary, and no additional contributions would be
required in order to properly effect the termination of such plan in accordance
with the terms of such plan and applicable law.
(i) Neither GSHS nor any Subsidiary employs, or has ever employed, or
leases, or has ever leased, from another employer, any person who is a member of
a collective bargaining unit, and neither GSHS nor any Subsidiary makes or has
made, or has an obligation to make, or has had an obligation to make, or
reimburses or has an obligation to reimburse, or has reimbursed or has had an
obligation to reimburse, another employer directly or indirectly for making,
contributions to an employee benefit plan for the benefit of such a person.
(j) Section 280G of the Code shall not apply to any payments to be
made by GSHS or any Subsidiary as a result of the transactions contemplated by
this Agreement. There are no Parachute Plans to which GSHS or any Subsidiary is
a party or other payment obligations of GSHS or any Subsidiary to an employee or
former employee of GSHS or a Subsidiary which will be triggered as a result of
the change in the control of GSHS contemplated by this Agreement and the GPA
Stock Exchange Agreement, and which constitute an "excess parachute payment"
within the meaning of Section 280G of the Code.
(k) No employer securities, employer real property or other employer
property is included in the assets of any Benefit Plan.
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Section 3.15. Tax Matters.
(a) Except as set forth in Section 3.15(a) of the GSHS Disclosure
Schedule, GSHS and each Subsidiary have (i) filed when due (after taking into
account applicable extensions) with the appropriate federal, state, local,
foreign and other governmental agencies all Tax Returns required to be filed by
them, and (ii) paid when due and payable all Taxes owed by them or, to the
extent of Taxes not yet due and payable, have accrued or otherwise adequately
reserved on the Financial Statements in accordance with GAAP for the payment of
such Taxes not yet due and payable. All such Tax Returns are correct and
complete in all material respects. Complete and accurate copies of all such Tax
Returns due or filed since January 1, 1993, have been furnished or made
available to Buyer. GSHS and each Subsidiary set forth in Section 3.15(a) of the
GSHS Disclosure Schedule is a member of the affiliated group (as defined in
Section 1504 of the Code) of corporations filing a consolidated federal income
tax return of which GSHS is the common parent. GSHS has included the
Subsidiaries in its consolidated federal income Tax Returns, and in its
consolidated, combined or unitary state or local Tax Returns, to the extent set
forth in Section 3.15(a) of the GSHS Disclosure Schedule. Except as set forth in
Section 3.15(a) of the GSHS Disclosure Schedule, neither GSHS nor any Subsidiary
has obtained an extension of the time within which to file any Tax Return that
has not yet been filed. Neither GSHS nor any Subsidiary has received notice from
any Governmental Authority in a jurisdiction in which such entity does not file
a Tax Return stating that such entity is or may be subject to taxation by that
jurisdiction.
(b) There are no Taxes assessed or, to the Knowledge of GSHS or any
Subsidiary, asserted in respect of any Tax Returns filed by GSHS or any
Subsidiary or claimed to be due by any taxing authority or otherwise that are
not accrued or adequately reserved for on the Financial Statements in accordance
with GAAP. Except as set forth in Section 3.15(b) of the GSHS Disclosure
Schedule, to the Knowledge of GSHS or any Subsidiary, no Tax Return of GSHS or
any Subsidiary is currently being audited or, to GSHS or any such Subsidiary's
Knowledge, is scheduled for future audit by the IRS or any other taxing
authority (whether foreign or domestic). Except as set forth in Section 3.15(b)
of the GSHS Disclosure Schedule, neither GSHS nor any Subsidiary has executed or
filed with the IRS or any other taxing authority (whether foreign or domestic)
any agreement, waiver, or other document extending, or having the effect of
extending, the period for assessment or collection of any Taxes, which extension
or waiver is still in effect. GSHS has delivered to Buyer correct and complete
copies of all examination reports, statements of deficiencies and similar
documents prepared by the IRS or any other taxing authority in the possession of
GSHS or any Subsidiary that relate to the income, operations or business of GSHS
or any Subsidiary. All final adjustments made by the IRS with respect to any
federal Tax Return of GSHS or any Subsidiary have been reported to the relevant
state, local, or foreign taxing authorities to the extent required by law. No
requests for ruling or determination letters filed by GSHS or any Subsidiary are
pending with any taxing authority. Except with respect to the consolidated group
of which GSHS is the parent, neither GSHS nor any Subsidiary is a party to any
Tax allocation or sharing agreement with any other entity or has any liability
or obligation to any other entity under any such agreement that previously was
in effect. Except as set forth in Section 3.15(b) of the GSHS Disclosure
Schedule, neither GSHS nor any Subsidiary has any liability to any person or
entity with respect to Taxes paid, owed or to be paid for periods of time during
which GSHS or any Subsidiary or any predecessor of any such entity were members
of a consolidated group other than the consolidated group of which GSHS is or
was the common parent.
(c) Neither GSHS nor any Subsidiary has filed a consent pursuant to
Section 341(f) of the Code, or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by it. No property of GSHS or any
Subsidiary is property that such a corporation is or will be required to treat
as being owned by another person pursuant to the provisions of Section 168(f)(8)
of the Code of 1954, as amended and in effect immediately prior to the enactment
of the Tax Reform Act of 1986, or is "tax exempt use property" within the
meaning of Section 168(h)(1) of the Code. Except as set forth in Section 3.18(c)
of the GSHS Disclosure Schedule, neither GSHS nor any Subsidiary has agreed to
or, to the Knowledge of GSHS or any Subsidiary, is required to make any
adjustment pursuant to Section 481(a) of the Code by reason of
15
a change in accounting method initiated by GSHS or any Subsidiary, and GSHS has
no Knowledge that the IRS has proposed any such adjustment or change in
accounting method. Except as set forth in Section 3.15(c) of the GSHS Disclosure
Schedule, neither GSHS nor any Subsidiary (i) has been a member of an affiliated
group filing a consolidated federal income Tax Return, other than the affiliated
group the common parent of which is GSHS, or (ii) has any liability for Taxes of
any person (other than GSHS and its Subsidiaries) under Treasury Regulation ss.
1.1502-6 or any similar provision of state, local or foreign law, or as a
transferee or successor, by contract, or otherwise.
(d) Proper and timely filings of all required forms and elections
have been made with the IRS to permit treatment under Section 338(h)(10) of the
Code for (i) the acquisition by GSHS (then called GS Holding Corp.) of 80
percent of the stock of the Delaware corporation then called Green Spring Health
Services, Inc. on April 30, 1993, pursuant to a Stock Purchase Agreement dated
as of March 19, 1993, and (ii) the acquisition by GSHS of all of the outstanding
stock of TAO, Inc. on June 30, 1994, pursuant to a Stock Purchase Agreement
dated June 16, 1994. All federal Tax Returns filed by GSHS and any Subsidiary
subsequent to such acquisitions have consistently reflected such treatment for
federal income tax purposes. With respect to the acquisition described in clause
(i) of the first sentence of this paragraph, the requirements of Section
1.197-1T(c) and (e) of the Treasury Regulations were properly and timely
fulfilled such that Section 197 of the Code was retroactively effective with
respect to such acquisition.
Section 3.16. Contracts.
(a) Except for Contracts which are terminable by GSHS or any
Subsidiary without penalty or payment of any amount on 120 days' or less prior
written notice, Section 3.16 of the GSHS Disclosure Schedule sets forth each of
the following Contracts to which GSHS or any Subsidiary is a party: (i) any
contract for borrowed money or deferred portion of purchase price equal to or in
excess of $100,000 that is secured by an Encumbrance on any property of the
Company or any Subsidiary; (ii) any loan agreement, credit agreement, promissory
note, guarantee, indenture, subordination agreement, letter of credit, interest
rate or foreign currency protection agreement or any other similar type of
Contract in each case involving a debt or similar obligation of $100,000 or
more; (iii) any consulting or other Contract with attorneys, accountants,
actuaries, appraisers, investment bankers, lobbyists, government relations
persons or other professional advisers equal to or in excess of $500,000 per
year; (iv) any brokerage agreement, marketing agreement, sales agent or
consulting agreement providing for the payment of commissions or other
compensation with respect to referring or directing business to GSHS or any
Subsidiary equal to or in excess of $150,000 per year; (v) any Contract (except
for Contracts with customers) which, in whole or in part, (A) presently
restricts or precludes GSHS or any present or future Subsidiary or Affiliate of
GSHS from conducting any business anywhere in the world, or (B) upon the
occurrence of any event, the giving of notice or the passage of time, by its
terms would have such an effect; (vi) any Contract (except for Contracts with
customers) that involves aggregate payments by or to GSHS or any Subsidiary in
excess of $500,000; (vii) any indemnification agreement (except those entered
into in the ordinary course of business), guaranty or power of attorney granted
to any person or entity (other than GSHS or a Subsidiary); (viii) any lease or
Lease with annual rental payments equal to or in excess of $50,000; and (ix)
Contracts with the 15 largest customers of GSHS and the Subsidiaries measured by
revenues from such customers during the twelve-month period ended June 30, 1995.
GSHS has delivered or otherwise made available to Buyer true, correct and
complete copies of the Contracts set forth in Section 3.16 of the GSHS
Disclosure Schedule, together with all amendments, waivers, modifications,
supplements or side letters materially affecting the obligations of any party
under such Contracts.
(b) Except as set forth opposite or otherwise as part of the
description of such Contract in Section 3.16 of the GSHS Disclosure Schedule:
(i) Each of the Contracts set forth in Section 3.16 of the
GSHS Disclosure Schedule with respect to clause (ix) of Section
3.16(a) is valid and enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, and reorganization and
similar laws affecting creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law
or in equity);
16
(ii) Since January 1, 1995, no party to any such Contract has
given to GSHS or any Subsidiary notice of any breach or default under
any such Contract by GSHS or a Subsidiary which has not been cured or
waived;
(iii) Neither GSHS nor any Subsidiary is in violation, breach
of or default under any such Contract in any material respect or,
with notice of lapse of time or both, would be in violation, breach
of or default under any such Contract; and, to the Knowledge of GSHS
and its Subsidiaries no other party to any such Contract is in
violation, breach of or default under any such Contract or, with
notice or lapse of time or both, would be in violation, breach of or
default under any such Contract; and
(iv) No consent by or of any party to any such Contract is
required in order to consummate the transactions contemplated by this
Agreement or the GPA Stock Exchange Agreement without causing a
breach or violation of or a default under such Contract.
Section 3.17. Insurance. Section 3.17 of the GSHS Disclosure Schedule
sets forth (i) a true and correct list of all insurance policies and other
surety arrangements of any kind or nature whatsoever which are in force and to
which GSHS or any Subsidiary is a named insured or beneficiary, and a true and
correct copy of each such policy has been furnished to Buyer and (ii) a summary
description of each pending claim asserting liability of GSHS or a Subsidiary
equal to or greater than $200,000 under each such policy.
Section 3.18. Personnel Matters. Except as set forth in Section 3.18
of the GSHS Disclosure Schedule:
(a) Neither GSHS nor any Subsidiary is a party to any
collective bargaining or similar agreement nor are any of GSHS' or its
Subsidiaries' employees currently represented by a labor organization for
purposes of collective bargaining as provided under the National Labor Relations
Act;
(b) there is no unfair labor practice charge or complaint or
any other matter against or involving GSHS or any Subsidiary pending or, to the
Knowledge of any Seller, GSHS or any Subsidiary, threatened before the National
Labor Relations Board or any court of law;
(c) there is no labor strike, or other dispute, slowdown or
stoppage pending against GSHS or any Subsidiary; and
(d) there are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including discrimination
based upon sex, age, marital status, race, national origin, sexual preference,
disability or veteran status) pending before the Equal Employment Opportunity
Commission or any Governmental Authority against GSHS or any Subsidiary.
Section 3.19. Properties.
(a) Title to Properties. Except as set forth in Section
3.19(a) of the GSHS Disclosure Schedule, GSHS and the Subsidiaries collectively
have a valid leasehold interest in or have legal right to use without
restriction all of the real property and GSHS and the Subsidiaries collectively
own, have a valid leasehold interest in or have legal right to use without
restriction the tangible personal property used in the conduct of their
businesses, free and clear of
17
all Encumbrances, except Permitted Encumbrances and Encumbrances reflected on
the Financial Statements.
(b) Personalty, Equipment and Fixtures. Substantially all
fixtures, facilities, computers, computer hardware and peripheral equipment,
personal property and equipment owned or leased by GSHS or any Subsidiary (i)
are in good working order, ordinary wear and tear excepted, and GSHS and each
Subsidiary has maintained the same in accordance with sound industry practices
(except for equipment awaiting repair in the ordinary course of GSHS's or any
Subsidiary's business consistent with past practices), and (ii) meet and comply
in all material respects with all applicable laws, rules and regulations of any
Governmental Authority.
Section 3.20. Absence of Certain Commercial Practices. Since
January 1, 1991, none of GSHS or any Subsidiary, any of their directors,
officers or employees has:
(a) given, proposed to give, or agreed to give any material
gift or similar material benefit to any customer, supplier or any other person
(other than as described in subsection (b) of this Section 3.20), for the
purpose of furthering the business of GSHS or a Subsidiary;
(b) in connection with the business of GSHS or any
Subsidiary, used any corporate or other funds for contributions, payments,
gifts, or entertainment, or made any expenditures relating to political
activities to government employees, officials or others in violation of any
applicable law or established or maintained any unlawful or unrecorded funds; or
(c) offered or paid or solicited or received any
remuneration (as such term has been interpreted under 42 U.S.C. ss. 1320a-7b(b))
to induce or in return for any referral of healthcare business or ordering of
healthcare items or services in violation of any federal or state civil or
criminal law.
To the knowledge of GSHS or any Subsidiary, none of GSHS, any
Subsidiary, any of their respective directors, officers, or employees has
accepted or received any unlawful contributions, payments or gifts in connection
with the business of GSHS and the Subsidiaries.
Section 3.21. Obligations Under Certain Agreements. Except as set
forth in Section 3.21 of the GSHS Disclosure Schedule, with respect to (i) the
Stock Purchase Agreement, dated March 19, 1993, among VI, HCSC, GS Holding, Inc.
and Blue Cross and Blue Shield of Maryland, Inc., (ii) the Subscription
Agreement, dated January 11, 1994, among GSHS, Green Spring Mental Health
Services of New Jersey, Inc., BCBS, and Quality Health Management, (iii) the
Stock Purchase Agreement, dated June 16, 1994, among GSHS, VI, HCSC and IBC,
(iv) the Stock Purchase Agreement, dated June 16, 1994, among GSHS, VI and MSAP
(v) the Stock Purchase Agreement, dated June 16, 1994, between GSHS and IBC
relating to TAO, Inc., and (vi) the Stock Purchase Agreement, dated October 25,
1993, among GSHS, PCMB and Maschoff, Barr and Associates, Inc., there are no
pending, unresolved or unpaid indemnification or similar claims against or
further payments or consideration payable by GSHS or any Subsidiary under any of
such agreements or any related agreement.
Section 3.22. Brokers, Finders and Investment Bankers. Except for
Dean Witter Reynolds, Inc., no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Sellers. GSHS is solely responsible for the fees and expenses of
Dean Witter Reynolds, Inc.
18
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller, severally and not jointly, represents and warrants to
Buyer as follows and acknowledges that Buyer is relying upon such
representations and warranties in connection with the transactions provided for
in this Agreement. The parties acknowledge that certain of the representations
and warranties set forth in this Article 4 lack qualifications as to materiality
in light of the agreements set forth in Sections 7.1 and 9.2(f).
Section 4.1. Organization. Such Seller is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to enter into
and perform its obligations under this Agreement and each Operating Agreement to
which it or a subsidiary is a party, and, in the case of each Seller other than
MSAP and VI, the Exchange Agreement and the New Stockholders' Agreement.
Section 4.2. Authorization; Execution; Binding Effect. Subject to the
conditions contained in Section 8.10, the execution, delivery and performance of
this Agreement, and, in the case of each Seller other than MSAP and VI, the
Exchange Agreement and the New Stockholders' Agreement, and the consummation of
the transactions provided for in such agreements have been duly authorized by
all necessary corporate action on the part of such Seller. Subject to the
conditions contained in Section 8.10, assuming due execution and delivery by the
other parties, this Agreement constitutes, and, in the case of each Seller other
than MSAP and VI, the Exchange Agreement and the New Stockholders' Agreement,
will constitute, the legal, valid and binding obligations of such Seller,
enforceable against such Seller in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other laws affecting creditors' rights and remedies generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
Section 4.3. Capitalization; Share Ownership. Except for this
Agreement (including but not limited to Section 6.14), the GPA Stock Exchange
Agreement and as set forth in Section 4.3 of the Seller Disclosure Schedule, (i)
there is no existing subscription, option, warrant, call, right, commitment or
other agreement (whether pre-emptive or contractual) to which such Seller is a
party requiring, directly or indirectly, the issuance of any additional shares
of common stock of GSHS or other securities convertible into or exercisable or
exchangeable for shares of common stock of GSHS or any other equity security of
GSHS, and (ii) there are no outstanding contractual obligations of such Seller
to repurchase, redeem or otherwise acquire any outstanding capital stock of
GSHS. The GSHS Shares and the New GSHS Shares to be sold pursuant to this
Agreement will be delivered free and clear of all liens, charges and
encumbrances of any kind or nature and will not be in violation of any
pre-emptive rights. Except pursuant to the Old Shareholders' Agreement, such
Seller does not have registration rights in respect of the GSHS Shares or the
New GSHS Shares or securities convertible into or exercisable or exchangeable
for GSHS Shares or the New GSHS Shares. Such Seller is the sole beneficial owner
of the shares of GSHS listed beside such Seller's name in Section 4.3 of the
Seller Disclosure Schedule and, upon consummation of the transactions provided
by Section 6.14, will be the sole beneficial owner of the New GSHS Shares listed
beside such Seller's name in Section 6.14. The Old Shareholders' Agreement is
the only stockholder agreement, voting agreement, voting trust, proxy or other
agreement to which such Seller is a party with respect to the voting or transfer
of GSHS Shares.
Section 4.4. No Conflicting Agreements or Charter Provisions. Except
as set forth in Section 4.4 of the Seller Disclosure Schedule, the execution,
delivery and compliance with and performance of the terms and provisions of this
Agreement, and, in the case of each Seller other than MSAP and VI, the Exchange
Agreement and the New Stockholders' Agreement by such Seller will not (i)
conflict with or result in a breach of the terms, conditions or
19
provisions of, (ii) constitute a default (or an event which, with notice, lapse
of time, or both, would constitute a default) under, (iii) result in any
violation of, (iv) require the obtaining of any consent, approval or action of,
make any filing with or give notice to any person (except for a Governmental
Authority) as a result of or under the terms of, (v) result in or give to any
persons any right of termination, cancellation, acceleration, modification, or
increased or accelerated rights, entitlements or payments under, or (vi) result
in the creation or imposition of any Encumbrance upon such Seller or any of its
assets under: (A) the Certificate or Articles of Incorporation or bylaws of such
Seller or any resolutions adopted by the stockholders or the Board of Directors
(or a duly authorized committee of the Board of Directors) of such Seller, (B)
any provision of any material Contract to which such Seller is a party or by
which it or any part of any of its assets may be bound, or (C) any order,
decree, license, permit, statute, law, rule or regulation to which such Seller
is subject.
Section 4.5. Consents, Approvals, Licenses, Etc. No consent,
approval, authorization, license, order or Permit of, or declaration, filing or
registration with, or notification to, any Governmental Authority is required to
be made or obtained by such Seller in connection with the execution, delivery
and performance of this Agreement, and, in the case of each Seller other than
MSAP and VI, the Exchange Agreement and the New Stockholders' Agreement and the
consummation of the transactions contemplated by such agreements, except (i) as
set forth in Section 4.5 of the Seller Disclosure Schedule; or (ii) applicable
requirements, if any, of the Delaware General Corporation Law, the 1934 Act,
state securities or blue sky laws and the HSR Act.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows and acknowledges
that Sellers are relying on such representations and warranties in connection
with the transactions provided for in this Agreement:
Section 5.1. Organization, etc. Buyer is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate or other power and authority (i) to
conduct its business as it is now conducted and to own or lease all of the
properties owned or leased by it; and (ii) to enter into and perform this
Agreement, the Exchange Agreement, the GPA Stock Exchange Agreement and the New
Stockholders' Agreement. True, correct and complete copies of the Certificate or
Articles of Incorporation and bylaws of Buyer and each Buyer Subsidiary as of
the date of this Agreement have been previously delivered or made available to
GSHS. The corporate records and minute books of Buyer contain complete and
accurate minutes of all meetings and other corporate actions of the directors
and stockholders of Buyer held, in the case of Buyer, since its date of
incorporation, and in the case of each Buyer Subsidiary, since the date of its
acquisition by Buyer, and the share certificate books and register of
stockholders of each Buyer Subsidiary are complete and accurate. Buyer and each
Buyer Subsidiary is duly qualified as a foreign corporation to do business, and
is in good standing, in all jurisdictions in which the ownership or lease of
property or the conduct of its business make such qualification necessary,
except where the failure to be so qualified would not have an aggregate adverse
effect of more than $50,000 on the financial condition of Buyer and the Buyer
Subsidiaries, taken together.
Section 5.2. Authorization; Execution; Binding Effect. The execution,
delivery and performance of this Agreement, the Exchange Agreement, the GPA
Stock Exchange Agreement and the New Stockholders' Agreement and the
consummation of the transactions provided for in such agreements have been duly
authorized by all necessary corporate action on the part of Buyer. Assuming due
execution and delivery by the other parties, this Agreement, the Exchange
Agreement, the GPA Stock Exchange Agreement and the New Stockholders' Agreement
constitute the legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights and
20
remedies generally and by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
Section 5.3. No Conflicting Agreements or Charter Provisions. The
execution, delivery, compliance with and performance of the terms and provisions
of this Agreement, the Exchange Agreement, the GPA Stock Exchange Agreement and
the New Stockholders' Agreement will not (i) conflict with or result in a breach
of the terms, conditions or provisions of, (ii) constitute a default (or an
event which, with notice, lapse of time, or both, would constitute a default)
under, (iii) result in any violation of, (iv) require the obtaining of any
consent, approval or action of, or the making of any filing with or give notice
to any person (except for a Governmental Authority) as a result of or under the
terms of, or (v) result in or give to any person any right of termination,
cancellation, acceleration, modification, or increased or accelerated rights,
entitlements or payments under, (A) the Certificate of Incorporation or bylaws
of Buyer, (B) except as set forth in Section 5.3 of the Buyer Disclosure
Schedule, any provision of any material Contract to which Buyer is a party, or
(C) any order, judgment, decree, license, permit, statute, law, rule or
regulation to which Buyer is subject.
Section 5.4. Securities Filings. (a) True and complete copies of all
reports and registration statements filed with respect to Buyer pursuant to the
1933 Act or pursuant to the 1934 Act during the period from October 1, 1992 to
the date of this Agreement (the "Buyer SEC Reports") have been delivered to
GSHS. The Buyer SEC Reports conform in all material respects to the applicable
requirements of the 1933 Act and the 1934 Act and the rules and regulations
promulgated under such acts and did not include at the time of filing such
documents any untrue statement of a material fact or omit to state any material
fact required to be stated or necessary to make the statements made, in light of
the circumstances under which they were made, not misleading. During the period
from October 1, 1992 through the date of this Agreement, Buyer has not failed to
make any filing required by the 1933 Act or the 1934 Act on a timely basis.
(b) Each of the consolidated financial statements (including, in each
case, any related notes to the consolidated financial statements) contained in
the Buyer SEC Reports (i) was prepared in accordance with GAAP (except, in the
case of unaudited consolidated financial statements included in the Buyer SEC
Reports, to the extent preparation of such financial statements in accordance
with GAAP is not required by applicable rules of the Securities and Exchange
Commission) in a manner consistent (except for the required adoption by Buyer
effective on July 31, 1992 of Fresh-Start Accounting pursuant to GAAP) with
prior periods; (ii) presents fairly, in all material respects, the financial
position, results of operations, changes in stockholders' equity and cash flows
of the Buyer on a consolidated basis at the date and for the period indicated;
(iii) are in all material respects, in accordance with the books of account and
records of the Buyer; and (iv) comply as to form in all material respects with
applicable accounting requirements and with the rules and regulations of the
Commission with respect thereto.
Section 5.5. Capitalization. The authorized capital stock of Buyer
consists of (a) 80 million shares of Charter Common Stock and (b) 10 million
shares of preferred stock, no par value. As of September 30, 1995: (i)
28,398,166 shares of Charter Common Stock were issued and outstanding, all of
which are duly authorized, validly issued, fully paid and nonassessable and not
in violation of any pre-emptive rights; (ii) 2,863,515 shares of Charter Common
Stock were reserved for future issuance pursuant to stock options granted
certain directors, officers and employees; (iii) 177,567 shares of Charter
Common Stock were reserved for future issuance upon exercise of warrants; and
(iv) 39,205 shares of Charter Common Stock were reserved in connection with the
acquisition of Magellan Health Services, Inc. Since September 30, 1995, there
has been no material change in the number of issued and outstanding shares of
Charter Common Stock as set forth in subsection (i) above. No shares of
preferred stock are issued and outstanding. Except for this Agreement, as set
forth in clauses (ii) through (iv) of the second sentence of this Section
21
5.5, and as set forth in Section 5.5 of the Buyer Disclosure Schedule, (i) there
is no existing subscription, option, warrant, call, right, commitment or other
agreement (whether pre-emptive or contractual) to which Buyer is a party
requiring, and there are no convertible securities of Buyer outstanding which
upon conversion would require, directly or indirectly, the issuance of any
additional Common Stock of Buyer or other securities convertible into or
exercisable or exchangeable for Common Stock of Buyer or any other equity
security of Buyer, and (ii) there are no outstanding contractual obligations of
Buyer to repurchase, redeem or otherwise acquire any outstanding capital stock
of Buyer. There are no bonds, debentures, notes or other indebtedness issued and
outstanding having the right to vote on any matters on which Buyer's
stockholders may vote. There are no obligations, contingent or otherwise, of
Buyer or any Buyer Subsidiary to (x) repurchase, redeem or otherwise acquire any
outstanding capital stock of Buyer or (except to the extent of not more than
$10,000,000) the capital stock of, or other equity interests in, any Buyer
Subsidiary or (y) except to the extent permitted by the Credit Agreement, and
except for guarantees of obligations of, or loans and advances to, Buyer or any
Buyer Subsidiary, provide funds to, or make investments in, or provide any
guarantee with respect to the obligations of any other person. The shares of
Charter Common Stock to be issued pursuant to this Agreement and the Exchange
Agreement have been or will, upon issuance in accordance with the terms of such
agreements, be duly authorized and validly issued, fully paid and nonassessable,
will be delivered free and clear of all liens, charges and encumbrances of any
kind or nature and such issuance will not be in violation of any pre-emptive
rights. Buyer has granted no person or entity any registration rights in respect
of the capital stock of Buyer or securities convertible into or exercisable or
exchangeable for such capital stock, which registration rights are outstanding
as of the date of this Agreement. Buyer is not a party to any stockholder
agreement, voting agreement, voting trust, proxy or other agreement in effect
with respect to the capital stock of Buyer.
Section 5.6. Absence of Certain Changes or Events. Since June 30,
1995 and except as disclosed in the Buyer SEC Reports filed prior to the date of
this Agreement, Buyer has operated its business in the ordinary course and there
has not been (a) any event or circumstance that has had a material adverse
effect on Buyer's business, (b) any material change by Buyer in its application
of GAAP, (c) any damage, destruction or loss, whether or not covered by
insurance, which, insofar as reasonably can be foreseen, in the future would
have a material adverse effect on Buyer and the Buyer Subsidiaries, taken as a
whole, or (d) any entry into any commitment or transaction material to Buyer and
the Buyer Subsidiaries, taken as a whole (including, without limitation, any
borrowing or sale of assets) except in the ordinary course of business
consistent with past practice.
Section 5.7. Litigation. Except as set forth in Section 5.7 of the
Buyer Disclosure Schedule, (a) there is (whether insured or uninsured) no
action, suit, proceeding or investigation pending or, to the Knowledge of Buyer,
threatened in writing, at law or in equity, in any court or before any
Governmental Authority against Buyer or any Buyer Subsidiary or affecting Buyer
or any Buyer Subsidiary or any of the respective assets or properties of Buyer
or any Buyer Subsidiary that, individually or in the aggregate would have a
material adverse effect on Buyer or would prevent Buyer from consummating the
transactions contemplated by this Agreement, the Exchange Agreement, the GPA
Stock Exchange Agreement, and the New Stockholders' Agreement, and (b) Buyer and
the Buyer Subsidiaries and their respective assets and properties are not
subject to any order from any Governmental Authority that has or is likely to
have a material adverse effect on Buyer.
Section 5.8. Compliance with Laws. Except as set forth in Section
5.8 of the Buyer Disclosure Schedule, the conduct by Buyer and the Buyer
Subsidiaries of their respective businesses is in compliance in all material
respects with all applicable laws, regulations and orders. Neither Buyer nor
any Buyer Subsidiary has received any notice to the effect that Buyer or any
Buyer Subsidiary is not in compliance in all material respects with any
applicable law, regulation or order except (i) as set forth in Section 5.8 of
the Buyer Disclosure Schedule or (ii) for deficiencies noted in hospital
licensure, Medicare or Medicaid surveys and inspections where revocation of
licensure or Medicare or Medicaid participation is not proposed or pending if
deficiencies are corrected in a timely manner pursuant to a plan of correction,
and Buyer or the applicable Buyer Subsidiary is correcting such deficiencies in
a timely manner. Neither
22
Buyer nor any Buyer Subsidiary has any Knowledge of the proposed or threatened
issuance of any such notice or of any pending or threatened investigation with
respect to any such matter.
Section 5.9. Credit Agreement Amendment. Buyer has obtained from the
requisite lenders under the Credit Agreement and will deliver prior to the
Closing to GSHS and Sellers a true, correct and fully executed amendment that,
subject to the conditions contained therein, permits Buyer, without violating
any provision of the Credit Agreement or any of the documents relating to the
Credit Agreement, to enter into and consummate this Agreement, the Exchange
Agreement, the New Stockholders' Agreement and the GPA Stock Exchange Agreement
and to consummate the transactions contemplated thereby, except for a
requirement that the incurrence of indebtedness by Buyer and the Buyer
Subsidiaries, the making of capital contributions to the Buyer Subsidiaries and
the purchase of equity securities of Buyer Subsidiaries shall be subject to
certain limitations contained in the Credit Agreement.
Section 5.10. No Undisclosed Liabilities. Buyer and the Buyer
Subsidiaries did not have as of June 30, 1995, any material indebtedness,
liability or obligation of any kind or nature (fixed or contingent) that is
required to be reflected on the balance sheet as of such date in accordance with
GAAP which is not reflected, reserved against or disclosed in the Buyer SEC
Reports or disclosed in the Buyer Disclosure Schedule.
Section 5.11. Brokers, Finders and Investment Bankers. Except for
Paine Webber Incorporated, no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer. Buyer is solely responsible for the fees and expenses of
Paine Webber Incorporated.
Section 5.12. Subsidiaries.
(a) Buyer has no "Significant Subsidiaries" (as such term is defined
in Rule 1-02 of Regulation S-X of the Securities and Exchange Commission.
(b) The shares of capital stock of the Buyer Subsidiaries owned by
Buyer or a Buyer Subsidiary (the "Buyer Subsidiary Shares") have been duly
authorized and validly issued and are fully paid and nonassessable and were not
issued in violation of any preemptive rights. Except for the GPA Stock Exchange
Agreement and as set forth in Section 5.12(b) of the Buyer Disclosure Schedule,
there are no existing subscriptions, options, warrants, calls, rights of
conversion or other rights, agreements, arrangements or commitments relating to
the capital stock of any Buyer Subsidiary or obligation of any Buyer Subsidiary
to issue or sell any of its shares of capital stock. Either Buyer or another
Buyer Subsidiary owns the Buyer Subsidiary Shares free and clear of all
Encumbrances, except as set forth in Section 5.12(b) of the Buyer Disclosure
Schedule. Except for the GPA Stock Exchange Agreement as set forth in Section
5.12(b) of the Buyer Disclosure Schedule, there are no voting trusts,
stockholder agreements, proxies or other agreements in effect with respect to
the voting or transfer of the Buyer Subsidiary Shares.
Section 5.13. Takeover Provisions Inapplicable. As of the date hereof
and at all times on or prior to the Closing Date, Section 203 of the Delaware
General Corporation Law is, and shall be, inapplicable to the transactions
contemplated by this Agreement.
Section 5.14. GPA. (a) The 1,000,000 shares of the common stock of
GPA (such shares, the "GPA Common Stock") to be acquired by GSHS pursuant to the
GPA Stock Exchange Agreement (i) are validly issued
23
and outstanding, fully paid and nonassessable and not issued in violation of any
pre-emptive rights and (ii) have been issued in compliance with applicable
federal and state statutes and regulations.
(b) Buyer is the lawful record and beneficial owner of and has good
and valid title to the shares of GPA Common Stock, free and clear of all
Encumbrances, with full right, power and authority to transfer and contribute
the GPA Common Stock to GSHS.
(c) The certificate or certificates representing GPA Common Stock
delivered to GSHS at the Closing, together with any other instruments of
transfer deemed necessary by GSHS, will be sufficient to transfer and vest in
GSHS good and valid title to the GPA Common Stock, free and clear of all
Encumbrances and upon the closing of the transactions provided for by the GPA
Stock Exchange Agreement, GSHS will acquire the beneficial and legal, good and
valid title to the GPA Common Stock, free and clear of all Encumbrances.
(d) The shares of GPA Common Stock constitute all of the issued and
outstanding capital stock of GPA, and other than the GPA Stock Exchange
Agreement, (i) there is no existing subscription, option, warrant, call, right,
commitment or other agreement (whether pre-emptive or contractual) to which
Buyer is a party requiring, and there are no convertible securities of GPA
outstanding which upon conversion would require, directly or indirectly, the
issuance of any additional shares of common stock of GPA or other securities
convertible into or exercisable or exchangeable for common stock of GPA or any
other equity security of GPA, and (ii) there are no outstanding contractual
obligations of GPA to repurchase, redeem or otherwise acquire any outstanding
shares of common stock of GPA. There are no bonds, debentures, notes or other
indebtedness issued and outstanding having the right to vote on any matters on
which GPA's stockholders may vote. There are no obligations, contingent or
otherwise, of GPA or any subsidiary of GPA to (x) repurchase, redeem or
otherwise acquire any outstanding shares of common stock of GPA or the capital
stock of, or other equity interests in, any subsidiary of GPA or (y) except for
guarantees of obligations of, or loans and advances to, GPA or any subsidiary of
GPA, provide funds to, or make investments in, or provide any guarantee with
respect to the obligations of any other person. GPA has granted no person or
entity any registration rights in respect of any shares of its common stock or
securities convertible into or exercisable or exchangeable for any shares of the
common stock of GPA. Buyer is the sole record and beneficial owner of the GPA
Common Stock.
(e) Buyer has delivered to GSHS true and complete copies of the
unaudited consolidated balance sheet of GPA as of or at September 30, 1995 and
unaudited statements of income, changes in stockholder's equity and cash flows
for the 12-month period ended September 30, 1995 (the "GPA Financial
Statements"). The GPA Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied and fairly present
the financial position of GPA as at their dates and the results of operations
and changes in financial position of GPA for the periods ended, except for the
absence of notes to the GPA Financial Statements and normal, recurring audit
adjustments which will not be material in amount. Since September 30, 1995,
there has been no material adverse change in the assets, liabilities, business,
prospects, results of operations or financial condition of GPA.
(f) GPA and each corporation, partnership or other entity of which
GPA (i) has the power to elect more than 50% of the board of directors or other
governing authority either directly or indirectly or (ii) owns or controls more
than 50% of the outstanding equity securities or equity interests either
directly or through an unbroken chain of entities as to each of which 50% or
more of the outstanding equity securities or equity interests is owned directly
by its parent (a "GPA Subsidiary") is a corporation duly organized, validly
existing and in good standing under the laws of their respective states of
incorporation and has all requisite corporate power and authority to conduct its
business as it is now conducted and to own or lease all of the properties owned
or leased by it. True, correct and complete copies of the Certificate or
Articles of Incorporation and bylaws of GPA and each GPA Subsidiary as of the
date of this Agreement have been previously delivered or made available to GSHS.
The corporate records and minute books of GPA and each GPA Subsidiary contain
complete and accurate minutes of all meetings and other corporate actions of the
directors and stockholders of GPA and each GPA Subsidiary held, in the case of
GPA, since its date of incorporation, and in the case of each GPA Subsidiary,
since the date of its incorporation or acquisition by GPA, and the share
certificate books and register of stockholders of GPA and each GPA Subsidiary
are complete and accurate. GPA and each GPA Subsidiary
24
is duly qualified to do business as a foreign corporation, and is in good
standing, in all jurisdictions in which the ownership or lease of property by it
or the conduct of its business makes such qualification necessary.
(g) Other than the GPA Subsidiaries set forth in Section 5.14(g) of
the disclosure letter from CMC to the Company, dated the date of this Agreement
(the "GPA Disclosure Letter"), there are no other corporations, partnerships,
limited liability companies, joint ventures or other entities in which GPA or
any GPA Subsidiary owns, of record or beneficially, any direct or indirect
equity interest or any right (contingent or otherwise) to acquire the same.
(h) Section 5.14(h) of the GPA Disclosure Letter sets forth the
jurisdiction of incorporation of each GPA Subsidiary, its authorized capital
stock, the number and class or series of its issued and outstanding shares of
capital stock, and the current ownership by GPA and the GPA Subsidiaries of such
shares (collectively, the "GPA Subsidiary Shares"), as well as the current
ownership percentages held by third parties. Except as set forth in Section
5.14(h) of the GPA Disclosure Letter, the GPA Subsidiary Shares constitute all
the issued and outstanding shares of capital stock of the GPA Subsidiaries. The
GPA Subsidiary Shares have been duly authorized and validly issued and are fully
paid and nonassessable and were not issued in violation of any pre-emptive
rights. There are no existing subscriptions, options, warrants, calls, rights of
conversion or other rights, agreements, arrangements or commitments relating to
the capital stock of any GPA Subsidiary obligating any GPA Subsidiary to issue
or sell any shares of its capital stock. Either GPA or another GPA Subsidiary
owns the GPA Subsidiary Shares issued by the respective GPA Subsidiaries free
and clear of all Encumbrances, except (i) as set forth in Section 5.14(h)(i) of
the GPA Disclosure Letter and (ii) Encumbrances arising out of or in connection
with this Agreement. There are no voting trusts, proxies or other agreements in
effect with respect to the voting or transfer of the GPA Subsidiary Shares.
(i) The consummation of the transactions contemplated by this
Agreement and the GPA Stock Exchange Agreement, will not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default (or an event which, with notice, lapse of time, or both, would
constitute a default) under, (iii) result in any violation of, (iv) require the
obtaining of any consent, approval or action of, make any filing with or give
notice to any person (except for a Governmental Authority) as a result of or
under the terms of, (v) result in or give to any person any right of
termination, cancellation, acceleration, modification, or increased or
accelerated rights, entitlements or payments under, or (vi) result in the
creation or imposition of any Encumbrance upon GPA or any GPA Subsidiary or any
of their respective assets under: (A) the Certificate or Articles of
Incorporation or bylaws of GPA or any GPA Subsidiary or any resolutions adopted
by the stockholders or the Board of Directors of GPA or any GPA Subsidiary, or
(B) any order, judgment or decree (in a proceeding to which a Governmental
Authority is not a party) to which GPA or any GPA Subsidiary is subject.
(j) No consent, approval, authorization, license, statute, law, rule,
regulation, order or Permit of, or declaration, filing or registration with, or
notification to, any Governmental Authority is required to be made or obtained
by GPA or any GPA Subsidiary in connection with the execution, delivery and
performance of this Agreement, or the consummation of the transactions
contemplated by this Agreement or the GPA Stock Exchange Agreement, except: (i)
as set forth in Section 5.14(j)(i) of the GPA Disclosure Letter; (ii) applicable
requirements, if any, of the Delaware General Corporation Law, the 1934 Act,
state securities or blue sky laws and the HSR Act; or (iii) where the failure to
obtain such Permits, or to make such declarations, filing or registration or
notifications, would not, either individually or in the aggregate, have an
adverse effect on GPA or any GPA Subsidiary involving more than $20,000.
(k) Except as set forth in Section 5.14(k) of the GPA Disclosure
Letter, there is (whether insured or uninsured) no action, suit, proceeding or
investigation pending or, to the Knowledge of GPA or a GPA Subsidiary,
threatened in writing, at law or in equity, in any court or before or by any
Governmental Authority: (i) against GPA or any GPA Subsidiary, except for
uninsured private civil litigation not involving a claim for equitable relief
and involving a claim for less than $200,000; (ii) to the Knowledge of GPA or
any GPA Subsidiary, affecting GPA or any GPA Subsidiary or any of their
properties, except for uninsured private civil litigation not involving a claim
for equitable
25
relief and involving a claim for less than $200,000; or (iii) to the Knowledge
of GPA or any GPA Subsidiary, affecting this Agreement, the GPA Stock Exchange
Agreement or any action taken or to be taken or documents executed or to be
executed pursuant to or in connection with the provisions of this Agreement.
(l) As of September 30, 1995 (the "GPA Balance Sheet Date"), neither
GPA nor any GPA Subsidiary had any Undisclosed Liability. Except (i) as set
forth in Section 5.14(l) of the GPA Disclosure Letter, (ii) as set forth in the
unaudited consolidated balance sheet of GPA as of September 30, 1995 included in
the GPA Financial Statements (the "GPA Balance Sheet") or (iii) for normal and
recurring current liabilities accruing in the ordinary course of business since
the date of the Balance Sheet, neither GPA nor any GPA Subsidiary, on the date
of this Agreement, has outstanding any undisclosed liability that would be an
Undisclosed Liability if the definition of such term referred to the GPA Balance
Sheet, the GPA Financial Statements and the GPA Disclosure Letter. Except as set
forth in the GPA Financial Statements or in Section 5.14(l) of the GPA
Disclosure Letter, neither GPA nor any GPA Subsidiary has any long-term
indebtedness, any lease obligation required to be recorded under GAAP as a
capitalized lease and on the Closing Date will have no debt due to or from Buyer
(except as reflected in the most recent GPA Financial Statements).
(m) GPA and each GPA Subsidiary has, since their respective dates of
incorporation, complied in all material respects with all laws, regulations and
orders relating or applicable to the operation of its respective business. GPA
and each GPA Subsidiary holds all Permits required to be held by it in order to
own, occupy and lease its assets and to conduct and operate its business (as
presently conducted and as conducted on the Closing Date) in compliance with all
applicable laws and regulations. A true and correct copy of each such Permit has
previously been delivered or made available to GSHS. Except as set forth in
Section 5.14(j)(i) or Section 5.14(m) of the GPA Disclosure Letter, neither GPA
nor any GPA Subsidiary is in default or, to GPA's Knowledge, alleged to be in
default with respect to any judgment, order, writ, injunction or decree of any
Governmental Authority which would have an adverse effect on the business,
assets or financial condition of GPA or any GPA Subsidiary in excess of $50,000,
no notice from any Governmental Authority or agency in respect to (including an
investigation) the revocation, termination, suspension or limitation of any
Permit or the failure to have any Permit has been issued or given to GPA or any
GPA Subsidiary, nor does GPA or any GPA Subsidiary have any Knowledge of the
proposed or threatened issuance of any such notice or of any pending or
threatened investigation with respect to any such matter.
(n) Since the Balance Sheet Date and except as set forth in Section
5.14(n) of the GPA Disclosure Letter or as contemplated by this Agreement, there
has not been, occurred or arisen:
(i) any material adverse change in the financial condition,
results of operations, prospects, business, properties, assets or
liabilities of GPA and the GPA Subsidiaries;
(ii) any termination (or, to the Knowledge of GPA or any GPA
Subsidiary, threat of termination) of any Contract to which either
GPA or any GPA Subsidiary is a party representing $500,000 or more of
revenue to GPA or a GPA Subsidiary for the 12-month period ended
September 30, 1995;
(iii) any increase in the compensation payable or to become
payable by GPA or any GPA Subsidiary to any of its directors,
officers, management, employees, consultants or agents whose base
annual salary or, in the case of a non-employee, base annual
compensation (for any individual) exceeds $75,000 or any increase in
benefits under any bonus, insurance, pension or other benefit plan
made for or with any of such persons (including, but not limited to,
any change in targets, goals, bonus pools and the like under any
Benefit Plan, Employment Contract or other employee compensation
arrangement) except for such increases made in the ordinary course of
business and consistent with the past practices of GPA or such GPA
Subsidiary;
(iv) any direct or indirect redemption, purchase or other
acquisition by GPA or any GPA Subsidiary of any shares of capital
stock of GPA or any GPA Subsidiary, any declaration,
26
setting aside or payment of any dividend or other distribution by GPA
or any GPA Subsidiary in respect of shares of capital stock of GPA or
any GPA Subsidiary whether in cash, shares or property, or any loan
to any stockholder;
(v) any unusual or extraordinary item resulting in a loss
suffered by GPA or any GPA Subsidiary, which, individually or in the
aggregate, is equal to or in excess of $500,000;
(vi) any mortgage on, pledge of or grant of a security
interest in any of the assets of GPA or any GPA Subsidiary other than
Permitted Encumbrances;
(vii) any payment default or event of default by GPA or any
GPA Subsidiary under any debt with a principal amount equal to or
greater than $500,000 or under any lease agreement with annual rental
payments equal to or greater than $200,000;
(viii) any guaranty of any obligation or debt of any person or
entity by GPA or any GPA Subsidiary (other than GPA or a GPA
Subsidiary), except in the ordinary course of business;
(ix) any material change in (A) any investment, accounting or
Tax practice or policy of GPA or any GPA Subsidiary or (B) any method
of calculating any bad debt, contingency, IBNR (incurred but not
reported claims) or other reserve of GPA or any GPA Subsidiary for
accounting or Tax purposes;
(x) any business combination involving GPA or any GPA
Subsidiary and any other person (other than with respect to this
Agreement or the GPA Stock Exchange Agreement);
(xi) any entering into, amendment, modification, termination
(partial or complete) or granting of a waiver under or giving any
consent with respect to any Contract which is required (or had it
been in effect on the date of this Agreement would have been
required) to be disclosed in Section 5.14(ac) of the GPA Disclosure
Letter (other than any of the foregoing contemplated by this
Agreement);
(xii) any capital expenditures or commitments for additions to
property, plant or equipment of GPA or any GPA Subsidiary in an
aggregate amount exceeding $200,000; or
(xiii) any other transaction involving or development affecting
GPA or any GPA Subsidiary outside the ordinary course of business.
(o) GPA or a GPA Subsidiary either has all right, title and interest
in or a valid and binding license to use all of the Intellectual Property used
by GPA or any GPA Subsidiary in the conduct of their respective businesses. No
other Intellectual Property is used or necessary in the conduct of the business
of GPA or any GPA Subsidiary. Except as disclosed in Section 5.14(o) of the GPA
Disclosure Letter, (i) all registrations with and applications to Governmental
Authorities in respect of such Intellectual Property are valid and in full force
and effect, (ii) GPA and the GPA Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of their trade
secrets, and (iii) neither GPA nor any GPA Subsidiary is, or has received any
notice that it is, in default (or with the giving of notice or lapse of time or
both, would be in default) under any license to use such Intellectual Property.
Neither GPA nor any GPA Subsidiary has received notice that GPA or any GPA
Subsidiary is infringing any Intellectual Property of any other person, no claim
is pending or, to the Knowledge of GPA or any GPA Subsidiary, has been made to
such effect that has not been resolved and, to the Knowledge of GPA and each GPA
Subsidiary, neither GPA nor any GPA Subsidiary is infringing any Intellectual
Property rights of any other person.
27
(p) Except as set forth in Section 5.14(p) of the GPA Disclosure
Letter, and except intercompany agreements and charges between GPA and Buyer, to
the Knowledge of GPA or any GPA Subsidiary:
(i) No officer, director or other Affiliate of GPA or any
GPA Subsidiary ("GPA Company Affiliate") and no Associate or Family
Member of any Company Affiliate has directly or indirectly (i) any
interest in any corporation, partnership, limited liability company,
proprietorship or other entity which sells to or purchases from GPA
or any GPA Subsidiary any products or services, (ii) sells to or
purchases from GPA or any GPA Subsidiary any products or services,
(iii) any cause of action or claim against GPA or any GPA Subsidiary;
or (iv) a beneficial interest in any Contract to which GPA or any GPA
Subsidiary is a party or by which it is bound;
(ii) Except as referenced in subparagraph 5.14(ac)(ii),
neither GPA nor any GPA Subsidiary is indebted, either directly or
indirectly, to any Company Affiliate, or any Associate or Family
Member of any Company Affiliate in any amount other than current
obligations for payments of salaries, bonuses and other fringe
benefits for past services rendered and recorded on the books of GPA
or a GPA Subsidiary; and
(iii) No Company Affiliate or any Associate or Family Member
of a Company Affiliate is indebted to GPA or any GPA Subsidiary.
For purposes of this Section 5.14(p), there shall be disregarded any
interest which arises solely from the ownership of less than a five percent
equity interest in a corporation whose stock is regularly traded on any national
securities exchange or on the NASD National Market System; and the term "Family
Member" shall mean a member of an immediate family as the term "immediate
family" is defined in the instructions to Item 404 of Regulation S-K under the
1933 Act and the 1934 Act (as defined in the Stock Purchase Agreement).
(q) There are no Benefit Plans or Employment Contracts other than
those set forth in Section 5.14(q) of the GPA Disclosure Letter; and no such
Benefit Plans or Employment Contracts obligate GPA or any GPA Subsidiary to
provide post-retirement health or life insurance benefits to employees or former
employees of GPA or any GPA Subsidiary other than continuation coverage
provisions under Federal and state law, including with respect to the
Consolidated Omnibus Budget Reconciliation Act of 1985.
(r) GPA has furnished or made available to GSHS a true, complete and
correct copy of each Benefit Plan and Employment Contract which is set forth in
writing and a complete description of each other Benefit Plan and Employment
Contract.
(s) Except as set forth in Section 5.14(s) of the GPA Disclosure
Letter, no assets have been set aside in a trust or other separate account
(other than in a tax-exempt trust or tax-exempt separate account) by GPA or any
ERISA Affiliate to pay directly or indirectly any benefits under any Benefit
Plan or Employment Contract, and all of the assets of any such tax-exempt trust
or separate account are shown on the books and records of such trust or separate
account at their current fair market value.
(t) GPA, each GPA Subsidiary and each ERISA Affiliate have
established, maintained, administered, reported and disclosed, made
contributions to and otherwise performed all their duties and responsibilities
under each Benefit Plan and each Employment Contract in compliance with all
applicable laws. Neither GPA, any GPA Subsidiary nor any ERISA Affiliate has any
duty or obligation to indemnify or hold any other person harmless for any
liability attributable to any acts or omissions by such person with respect to
any Benefit Plan, Employment Contract or employee or former employee.
28
(u) Neither GPA, any GPA Subsidiary nor any ERISA Affiliate has any
liability for any unpaid Tax or penalty with respect to any Benefit Plan or
Employment Contract, including without limitation, any unpaid Tax or penalty
under ERISA or under the Code.
(v) There are no claims which have been made or, to the Knowledge of
any ERISA Affiliate, threatened under any of the Benefit Plans or Employment
Contracts or against GPA or any ERISA Affiliate with respect to any of the
Benefit Plans or Employment Contracts (other than routine claims made in the
ordinary course of plan or contract operations) or with respect to the
employment or termination of employment or treatment of any employee or former
employee, and no ERISA Affiliate has any Knowledge of any proposed or actual
audit or investigation by any governmental or other law enforcement agency with
respect to any Benefit Plan, Employment Contract or the employment or
termination of employment or treatment of any employee or former employee.
(w) Except as set forth in Section 5.14(w) of the GPA Disclosure
Letter, neither GPA, any GPA Subsidiary nor any ERISA Affiliate is subject to
any liabilities (including withdrawal liabilities) with respect to any Benefit
Plan or employee benefit plan subject to Title IV of ERISA, including without
limitation, any liabilities arising from Title I or Title IV of ERISA, other
than the liability to make current contributions when due and to pay current
expenses and premiums when due. All such contributions, expenses and premiums
have been paid in full when due.
(x) Except as set forth in Section 5.14(x) of the GPA Disclosure
Letter, GPA or a GPA Subsidiary has the right under the terms of each Benefit
Plan and under applicable law to terminate such plan at any time exclusively by
action of GPA or such GPA Subsidiary, and no additional contributions would be
required in order to properly effect the termination of such plan in accordance
with the terms of such plan and applicable law.
(y) Neither GPA nor any GPA Subsidiary employs, or has ever employed,
or leases, or has ever leased, from another employer, any person who is a member
of a collective bargaining unit, and neither GPA nor any GPA Subsidiary makes or
has made, or has an obligation to make, or has had an obligation to make, or
reimburses or has an obligation to reimburse, or has reimbursed or has had an
obligation to reimburse, another employer directly or indirectly for making,
contributions to an employee benefit plan for the benefit of such a person.
(z) Section 280G of the Code shall not apply to any payments to be
made by GPA or any GPA Subsidiary as a result of the transactions contemplated
by this Agreement. There are no Parachute Plans to which GPA or any GPA
Subsidiary is a party or other payment obligations of GPA or any GPA Subsidiary
to an employee or former employee of GPA or a GPA Subsidiary which will be
triggered as a result of the change in the control of GPA contemplated by this
Agreement and the GPA Stock Exchange Agreement, and which constitute an "excess
parachute payment" within the meaning of Section 280G of the Code.
(aa) No employer securities, employer real property or other employer
property is included in the assets of any Benefit Plan.
(bb) The tax filings for GPA and each GPA Subsidiary are all made on
a consolidated basis with those of Buyer. Neither GPA nor any GPA Subsidiary has
received notice from any Governmental Authority in a jurisdiction in which such
entity does not file a Tax Return stating that such entity is or may be subject
to taxation by that jurisdiction.
(cc) Except for Contracts which are terminable by GPA or any GPA
Subsidiary without penalty on 120 days' or less prior written notice, and except
for the management and/or service agreements the GPA Subsidiaries have entered
into with the professional corporations they manage, Section 5.14(ac) of the GPA
Disclosure Letter sets forth each of the following Contracts to which GPA or any
GPA Subsidiary is a party: (i) any contract for borrowed money or deferred
portion of purchase price equal to or in excess of $500,000 that is secured by
an Encumbrance on any
29
property of the Company or any GPA Subsidiary; (ii) any loan agreement, credit
agreement, promissory note, guarantee, indenture, subordination agreement,
letter of credit, interest rate or foreign currency protection agreement or any
other similar type of Contract in each case involving a debt or similar
obligation of $500,000 or more; (iii) any consulting or other Contract with
attorneys, accountants, actuaries, appraisers, investment bankers, lobbyists,
government relations persons or other professional advisers equal to or in
excess of $500,000 per year; (iv) any brokerage agreement, marketing agreement,
sales agent or consulting agreement providing for the payment of commissions or
other compensation with respect to referring or directing business to GPA or any
GPA Subsidiary equal to or in excess of $150,000 per year; (v) any Contract
which, in whole or in part, (A) presently restricts or precludes GPA or any
present or future GPA Subsidiary or Affiliate of GPA from conducting any
business anywhere in the world, or (B) upon the occurrence of any event, the
giving of notice or the passage of time, by its terms would have such an effect;
(vi) any Contract that involves aggregate payments by or to GPA or any GPA
Subsidiary in excess of $500,000; (vii) any indemnification agreement (except
those entered into in the ordinary course of business), guaranty or power of
attorney granted to any person or entity (other than GPA or a GPA Subsidiary);
and (viii) any lease with annual rental payments equal to or in excess of
$100,000. GPA has delivered or otherwise made available to GSHS true, correct
and complete copies of the Contracts set forth in Section 5.14(ac) of the GPA
Disclosure Letter, together with all amendments, waivers, modifications,
supplements or side letters materially affecting the obligations of any party
under such Contracts.
(dd) Except as set forth opposite or otherwise as part of the
description of such Contract in Section 5.14(ad) of the GPA Disclosure Letter:
(i) Since January 1, 1995, no party to any such Contract has
given to GPA or any GPA Subsidiary notice of any breach or default
under any such Contract by GPA or a GPA Subsidiary which has not been
cured or waived.
(ii) Neither GPA nor any GPA Subsidiary is in violation,
breach of or default under any such Contract in any material respect
or, with notice of lapse of time or both, would be in violation,
breach of or default under any such Contract; and, to the Knowledge
of GPA and the GPA Subsidiaries no other party to any such Contract
is in violation, breach of or default under any such Contract or,
with notice or lapse of time or both, would be in violation, breach
of or default under any such Contract; and
(iii) No consent by or of any party to any such Contract is
required in order to consummate the transactions contemplated by this
Agreement without causing a breach or violation of or a default under
such Contract.
(ee) Except for a Directors and Officers' liability policy issued to
Orange County Behavioral Management Company, all insurance policies and other
surety arrangements of any kind or nature whatsoever which are in force and to
which GPA or any GPA Subsidiary is a named insured or beneficiary are issued
through Buyer. There are no claims asserting liability of GPA or a GPA
Subsidiary equal to or greater than $500,000 under any such policy.
(ff) Except as set forth in Section 5.14(af) of the GPA
Disclosure Letter:
(i) Neither GPA nor any GPA Subsidiary is a party to any
collective bargaining or similar agreement nor are any of GPA's or
the GPA Subsidiaries' employees currently represented by a labor
organization for purposes of collective bargaining as provided under
the National Labor Relations Act;
30
(ii) there is no unfair labor practice charge or complaint or
any other matter against or involving GPA or any GPA Subsidiary
pending or, to the Knowledge of GPA or any GPA Subsidiary, threatened
before the National Labor Relations Board or any court of law;
(iii) there is no labor strike, or other dispute, slowdown or
stoppage pending against GPA or any GPA Subsidiary; and
(iv) there are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including
discrimination based upon sex, age, marital status, race, national
origin, sexual preference, disability or veteran status) pending
before the Equal Employment Opportunity Commission or any
Governmental Authority against GPA or any GPA Subsidiary.
(gg) Except as set forth in Section 5.14(ag) of the GPA Disclosure
Letter, GPA and the GPA Subsidiaries collectively own, have a valid leasehold
interest in or have legal right to use without restriction all of the real
property and tangible personal property used in the conduct of their businesses,
free and clear of all Encumbrances, except Permitted Encumbrances and
Encumbrances reflected on the Financial Statements.
(hh) Substantially all fixtures, facilities, computers, computer
hardware and peripheral equipment, personal property and equipment owned or
leased by GPA or any GPA Subsidiary (i) are in good working order, ordinary wear
and tear excepted, and GPA and each GPA Subsidiary has maintained the same in
accordance with sound industry practices (except for equipment awaiting repair
in the ordinary course of GPA's or any GPA Subsidiary's business consistent with
past practices), and (ii) meet and comply in all material respects with all
applicable laws, rules and regulations of any Governmental Authority.
(ii) Since their respective dates of incorporation or acquisition,
none of GPA or any GPA Subsidiary, any of their directors, officers or employees
has:
(i) given, proposed to give, or agreed to give any material
gift or similar material benefit to any customer, supplier or any
other person (other than as described in subsection (ii) of this
subparagraph 5.14(ai)), for the purpose of furthering the business of
GPA or a GPA Subsidiary;
(ii) in connection with the business of GPA or any GPA
Subsidiary, used any corporate or other funds for contributions,
payments, gifts, or entertainment, or made any expenditures relating
to political activities to government employees, officials or others
in violation of any applicable law or established or maintained any
unlawful or unrecorded funds; or
(iii) offered or paid or solicited or received any remuneration
(as such term has been interpreted under 42 U.S.C. ss. 1320a-7b(b))
to induce or in return for any referral of healthcare business or
ordering of healthcare items or services in violation of any federal
or state civil or criminal law.
To the knowledge of GPA or any GPA Subsidiary, none of GPA, any GPA
Subsidiary, any of their respective directors, officers, or employees has
accepted or received any unlawful contributions, payments or gifts in connection
with the business of GPA and the GPA Subsidiaries.
31
ARTICLE 6.
COVENANTS OF SELLERS, BUYER AND GSHS
Section 6.1. Investigation of Business; Access to Properties and
Records. (a) Subject to restrictions contained in confidentiality agreements to
which such party is subject with respect to any information relating to any
third party, prior to the Closing or termination of this Agreement, Sellers
shall give and shall cause GSHS to give to Buyer and its legal counsel,
accountants, lenders and other representatives reasonable access during normal
business hours to all of GSHS's and the Subsidiaries' properties for inspection
(including environmental), books, contracts, commitments and records, and shall
permit them to consult with management employees of each Seller, GSHS and the
Subsidiaries to allow Buyer full opportunity to make such investigations as are
necessary to review the affairs of GSHS and the Subsidiaries. If, prior to
Closing, Buyer discovers any breach of any representation or warranty contained
in this Agreement or any circumstances or condition that, to the Knowledge of
Buyer would constitute such a breach, Buyer will use reasonable efforts to
notify Sellers promptly of such facts known to Buyer and the nature of the
breach. Notwithstanding any other provision of this Agreement, no investigation
by one party to this Agreement shall affect the representations and warranties
of another party, and each such representation and warranty shall survive any
such in vestigation.
(b) Subject to restrictions contained in confidentiality agreements
to which such party is subject with respect to any information relating to any
third party, prior to the Closing or termination of this Agreement, Buyer shall
give GSHS, Sellers and their respective legal counsel, accountants, lenders and
other representatives reasonable access during normal business hours to all of
Buyer's and GPA's properties for inspection (including environmental), books,
contracts, commitments and records, and shall permit them to consult with
management employees of Buyer to allow GSHS or any Seller full opportunity to
make such investigations as are necessary to review the affairs of Buyer. If,
prior to Closing, GSHS or any Seller discovers any breach of any representation
or warranty contained in this Agreement or any circumstances or condition that,
to the Knowledge of GSHS or such Seller, would constitute such a breach, GSHS or
such Seller, as the case may be, will use reasonable efforts to notify Buyer
promptly of such facts known to GSHS or such Seller, as the case may be, and the
nature of the breach. Notwithstanding any other provision of this Agreement, no
investigation by one party to this Agreement shall affect the representations
and warranties of another party, and each such representation and warranty shall
survive any such investigation.
(c) Prior to the Closing Date, Sellers shall cause GSHS to deliver to
Buyer, as soon as available but not later than 30 days after the end of the
month with respect to monthly financial statements and not later than 45 days
after the end of the quarter with respect to quarterly financial statements,
unaudited condensed consolidated monthly and quarterly financial statements of
GSHS. Such financial statements shall include a balance sheet as of the end of
such period and statements of income and cash flows for the period then ended,
shall be prepared from and be, in all material respects, in accordance with the
books and records of GSHS and its Subsidiaries, shall apply GAAP in a manner
consistent with the Audited Financial Statements, and shall otherwise be
prepared on a basis consistent with GSHS's past practices with respect to
monthly and quarterly financial statements.
(d) Any information provided to or obtained by any party to this
Agreement, its legal counsel, accountants, lenders or other representatives
pursuant to this Agreement shall be held by such party, its representatives and
lenders in accordance with, and shall be subject to the terms of, the
Confidentiality Agreement.
Section 6.2. Regulatory and Other Authorizations.
(a) Subject to the limitations set forth in this Section 6.2,
Sellers, GSHS and Buyer will use their respective best efforts to obtain all
authorizations, consents, orders and approvals of all Governmental Authorities
that may be or become necessary for the execution, delivery and the performance
of their respective obligations pursuant to this Agreement and the GPA Stock
Exchange Agreement and will cooperate fully with one another in promptly seeking
to obtain all such authorizations, consents, orders and approvals. Each party to
this Agreement agrees to make (if required of such party by the HSR Act) a
timely [subject to Section 6.2(b)(i)] and appropriate filing of a Notification
32
and Report Form pursuant to the HSR Act with respect to the transactions
contemplated by this Agreement and, if required by the HSR Act, the Exchange
Agreement and the GPA Stock Exchange Agreement, to provide information requested
by any Governmental Antitrust Authority or the other party and agrees that it
will not take any action that will have the effect of delaying, impairing or
impeding the receipt of any required approvals.
(b) Notwithstanding anything in Section 6.2(a) to the contrary, Buyer
shall coordinate on behalf of all parties and, except as may be required by law,
shall determine in its sole judgment and discretion the timing and Buyer and
Sellers shall by mutual agreement determine the substance of all communications
and filings made by the parties with any Governmental Antitrust Authority
regarding the transactions contemplated by this Agreement, including without
limitation:
(i) the timing of all HSR filings by Buyer, GSHS and Sellers;
(ii) the extent to which it may be necessary to resolve or
settle any concerns on the part of any Governmental Antitrust
Authority regarding the legality under any antitrust law of the
transactions contemplated by this Agreement, the Exchange Agreement
or the GPA Stock Exchange Agreement by entering into negotiations,
providing information, making proposals, entering into and performing
agreements or submitting to judicial or administrative orders,
agreeing to any restrictions on conduct of business after Closing by
Buyer, GSHS or any Subsidiary, or selling or otherwise disposing of,
or holding separate (through the establishment of a trust or
otherwise), particular assets or categories of assets, or businesses,
of Buyer (or any Buyer Subsidiaries), including, after the Closing,
GSHS and its Subsidiaries;
(iii) contesting the entry in a judicial or administrative
proceeding brought under any antitrust law by any Governmental
Antitrust Authority or any other person of any permanent or
preliminary injunction or other order that would make consummation of
the transactions contemplated by this Agreement, the GPA Stock
Exchange Agreement or the Exchange Agreement unlawful or would
prevent or delay the transactions, including, without limitation,
taking the steps contemplated by Section 6.2(b)(ii);
(iv) if such an injunction or order has been issued in such a
proceeding, taking any and all steps, including, without limitation,
appeal thereof, the posting of bond or the steps contemplated by
Section 6.2(b)(ii), necessary to vacate, modify or suspend such
injunction or order so as to permit the consummation of the
transaction on the schedule contemplated by this Agreement;
(v) responding to and complying with any request or subpoena
for additional information by any Governmental Antitrust Authority;
and
(vi) determining any other appropriate response or initiative
to avoid or eliminate impediments under any antitrust law that may be
asserted by any Governmental Antitrust Authority or any other person
to the consummation of the transactions contemplated by this
Agreement, the Exchange Agreement or the GPA Stock Exchange
Agreement.
33
Section 6.3. Best Efforts; Obtaining Consents and Making
Notifications; Disclosure of Changes. Subject to the terms and conditions
provided in this Agreement, each Seller, GSHS and Buyer each will use their
respective best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement and to cooperate with one another in connection with the foregoing,
including using best efforts:
(a) to obtain all necessary waivers, consents, releases and
approvals from other parties to loan agreements, leases, guarantees
and other contracts;
(b) to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to this
Agreement to consummate the transactions contemplated by this
Agreement; and
(c) to fulfill all conditions to this Agreement.
Nothing contained in this Agreement (including but not limited to the
term "best efforts" in Section 6.2(a), Section 6.3 and Section
10.1(c)) shall require any party to this Agreement to agree to hold
separate or to divest any of the assets, properties or businesses of
GSHS, any Subsidiary or Buyer or any Buyer Subsidiary or otherwise
agree to the imposition of any restriction on the operations of GSHS
or any Subsidiary after the Closing, Buyer or any Buyer Subsidiary or
a covenant or agreement that would cause any economic or financial
detriment to the ongoing operations of Buyer, Buyer Subsidiaries,
GSHS or any Subsidiary after the Closing.
Section 6.4. Further Assurances. Sellers, GSHS and Buyer
agree that, from time to time, at or after the Closing Date, each of
them will execute and deliver such further instruments of conveyance
and transfer and take such other action as may be necessary to carry
out the purposes and intents of this Agreement.
Section 6.5. Conduct of Business of GSHS and Subsidiaries. From the
date of this Agreement through the Closing, except as otherwise provided by this
Agreement or the GPA Stock Exchange Agreement and, except as consented to or
approved by Buyer in writing, Sellers and GSHS covenant and agree that:
(a) GSHS and the Subsidiaries shall operate their
businesses in the ordinary and usual course in all material respects
in accordance with past practices;
(b) GSHS or a Subsidiary (and the Sellers acting with
respect to the stock of GSHS) shall not issue, purchase or agree to
purchase, sell or agree to issue or sell:
(i) any shares of its capital stock; or
(ii) any securities convertible into or
evidencing the right to purchase, or options with respect
to, or rights to subscribe for, any shares of its capital
stock;
(c) neither GSHS nor a Subsidiary (and the Sellers acting
with respect to the stock of GSHS) shall amend its Certificate or
Articles of Incorporation or bylaws or declare or pay any dividend
(whether in cash or property) or declare or effect any stock split,
reclassification or other change in capital structure;
(d) GSHS and the Subsidiaries shall maintain their
books and records in the usual, regular and ordinary manner
consistent with past practice;
34
(e) GSHS and the Subsidiaries shall comply in all
material respects with all applicable laws; and
(f) neither GSHS nor any Subsidiary shall:
(i) enter into or consummate any joint venture,
partnership or other similar arrangement or form any other
new arrangement for the conduct of its business or acquire
or enter into any agreement or letter of intent to acquire,
by merger, consolidation, or purchase of stock or assets,
any business, entity or person;
(ii) purchase any material assets or securities
of any person, except for asset purchases in the ordinary
course of its business for individual amounts not in excess
of $50,000;
(iii)enter into any transactions, commitments or
obligations outside the ordinary course of business or incur
any indebtedness, including notes payable, current
maturities of long-term debt or capital lease obligations,
except for trade payables and other normal items accrued as
current liabilities;
(iv) take or agree to take any action prohibited
by this Section 6.5 or that would otherwise cause any
representation or warranty made by Sellers in this Agreement
to be untrue or inaccurate at the Closing Date or result in
the breach of any covenant or agreement in this Agreement
required to be performed by Sellers, any Seller or GSHS on
or prior to the Closing Date;
(v) take any action to amend or terminate any
Benefit Plan or to adopt any other plan, program,
arrangement or practice providing benefits for or
compensation to or on behalf of its employees or former
employees before the Closing Date, except as provided by
Section 6.11 with respect to the GSHS Long-Term Compensation
Plan or as required by applicable law;
(vi) terminate or cancel any insurance policy
that covers GSHS or a Subsidiary;
(vii)increase the base compensation or bonus,
incentive, severance or other benefit plan of any employee,
consultant or agent whose base annual salary or compensation
exceeds $75,000, except for increases in base annual
salaries in the ordinary course of business;
(viii) grant any Encumbrance on any asset,
except for Permitted Encumbrances;
(ix) enter into any lease for a term of more
than two years or an annual rent of more than $25,000;
(x) make any change in any investment,
accounting or Tax practice or policy of GSHS or any
Subsidiary or any method of calculating any bad debt,
contingency, IBNR or other charge or reserve of GSHS or any
Subsidiary.
35
Section 6.6. Preservation of Business. Subject to the terms and
conditions of this Agreement and except as otherwise provided by this
Agreement, GSHS shall, and Sellers shall cause GSHS and the Subsidiaries
to, use reasonable efforts to:
(a) preserve the business of GSHS and the Subsidiaries and
keep generally available to GSHS and the Subsidiaries the services of the
employees, officers, consultants, contractors and agents of GSHS and the
Subsidiaries;
(b) preserve generally the goodwill of customers, suppliers,
creditors and others having business relations with GSHS or a Subsidiary; and
(c) continue performance in the ordinary course of their
respective obligations under Contracts.
In connection with the operation of the business of GSHS and the
Subsidiaries between the date of this Agreement and the Closing, GSHS shall
confer in good faith on a regular and frequent basis with one or more designated
representatives of Buyer (which representatives shall have been designated by
Buyer to GSHS in writing) with respect to material matters affecting or
impacting the operations of GSHS and the Subsidiaries and to consult in general
with respect to the ongoing operations of GSHS and the Subsidiaries. Sellers
acknowledge that Buyer does not and will not waive any rights it may have under
this Agreement as a result of such consultations nor shall Buyer be responsible
for any decisions made by the officers and directors of GSHS with respect to
matters which are the subject of such consultation.
Section 6.7. Public Announcements. Neither Sellers, GSHS, the
Subsidiaries or Buyer, any agent nor any Affiliate of such entities shall make
any public statements, including, without limitation, any press releases or
other public disclosure, with respect to this Agreement and the transactions
contemplated by this Agreement without the prior consent of the other parties to
this Agreement (which consent may not be unreasonably withheld or delayed),
except as required by law and, in the case of Buyer, the American Stock
Exchange.
Section 6.8. No Solicitation. From the date of this Agreement to the
earlier of (i) the Closing Date or (ii) the termination of this Agreement in
accordance with its terms (but not including upon or due to a breach of this
Agreement by any Seller or GSHS), Sellers agree that (A) they will not, (B) they
will not permit GSHS or any Subsidiary to, and (C) they will not authorize or
permit any officer, director or employee of any Seller, GSHS, or any Subsidiary,
or any investment banker, attorney, financial advisor, accountant or other
person retained by any Seller, GSHS or any Subsidiary, directly or indirectly
(including by way of furnishing any information) to: (i) solicit, initiate,
assist, encourage or accept any Takeover Proposal or any inquiries relating to a
Takeover Proposal or to make any proposals which could reasonably be expected to
lead to any Takeover Proposal relating to GSHS or any Subsidiary; (ii) engage in
any negotiations with respect to, or otherwise attempt to consummate, a Takeover
Proposal; (iii) provide any public or nonpublic information concerning GSHS or
any Subsidiary to any person in connection with any Takeover Proposal or to any
person whom any Seller, GSHS or any Subsidiary knows or has reason to believe is
in the process of planning or considering a Takeover Proposal; or (iv) reach any
agreement or understanding for or with respect to any Takeover Proposal. Sellers
and GSHS will immediately advise Buyer orally and, within one Business Day, in
writing of any such inquiries, requests for information or Takeover Proposals of
which any of them has Knowledge. If any Seller, GSHS or any Subsidiary receives
from any person any offer, inquiry or informational request referred to above,
Sellers will promptly advise such person in writing of the terms of this Section
6.8 and will send Buyer a copy of such notice.
36
Section 6.9. Right to Update, Cure.
(a) From time to time prior to the Closing, Buyer, GSHS and Sellers
shall update or amend their respective disclosure of any matter set forth or
required to be set forth in their respective Disclosure Schedules to reflect any
changes in (or any inaccuracies in) such Disclosure Schedule. No such update
shall be deemed to cure (for purposes of Section 7.1, Section 8.1 or otherwise)
any breach of any representation and warranty by Sellers or by Buyer made in
this Agreement unless Buyer or Sellers, as the case may be, consent in writing
to the update made by the other. Notwithstanding anything in this Agreement to
the contrary, any party that receives a proposed amendment or update may defer
the Closing Date for up to five Business Days after receipt of such proposed
update or amendment.
(b) Each of the parties to this Agreement agrees to notify the other
parties promptly in writing of, and contemporaneously will provide the other
parties with true and complete copies of, any and all information or documents
relating to, and will use all commercially reasonable efforts to cure before
Closing, any event, transaction or circumstance occurring after the date of this
Agreement that causes or will cause any covenant or agreement under this
Agreement to be breached or that renders or will render untrue any
representation or warranty contained in this Agreement as if the same were made
on or as of the date of such event, transaction or circumstance. Each of the
parties to this Agreement also agrees to notify the other parties promptly in
writing of, and will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach of any representation, warranty, covenant or
agreement made in this Agreement, whether occurring or arising before, on or
after the date of this Agreement. No notice given pursuant to this Section
6.9(b) shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition to Closing or shall in any way limit any party's right to seek
indemnity under this Agreement.
Section 6.10. Conduct of Buyer Business Prior to Closing. Unless the
Sellers otherwise agree in writing and except as otherwise set forth in this
Agreement, in the Buyer Disclosure Schedule or the GPA Disclosure Letter,
between the date of this Agreement and the Closing Date Buyer and Buyer
Subsidiaries (including GPA and the GPA Subsidiaries) will conduct their
businesses only in the ordinary course. In addition, between the date of this
Agreement and the Closing Date, Buyer shall not take any action that would
interfere with the consummation of the transactions contemplated by this
Agreement or the GPA Stock Exchange Agreement, make such consummation more
difficult or delay the consummation of such transactions.
Section 6.11. GSHS Long-Term Compensation Plan. Sellers covenant and
agree with Buyer that, prior to Closing, they shall use their respective best
efforts to cause GSHS to terminate or amend (to the reasonable satisfaction of
Buyer) the GSHS Long-Term Compensation Plan, as amended (the "GSHS Long-Term
Compensation Plan"), for an aggregate cost of not more than the amount set forth
in Section 6.11 of the GSHS Disclosure Schedule. Sellers further covenant and
agree with Buyer that, prior to Closing, they shall cause GSHS to take all
actions that are necessary or appropriate in the reasonable judgment of Buyer to
permit all payments under the GSHS Long-Term Compensation Plan to qualify for
the exemption provided by Section 280G(b)(5)(A)(ii) and (B) of the Code.
Section 6.12. Post-Closing Operations and Events. Sellers,
severally and not jointly, covenant and agree with Buyer that from and after the
Closing:
(a) Sellers acknowledge that Buyer is obligated upon Closing to grant
a security interest in and to pledge Buyer's shares of the capital stock of GSHS
to Bankers Trust Company, as Collateral Agent (and its successors and assigns)
under the Second Amended and Restated Credit Agreement, dated as of May 2, 1994,
among Buyer, Bankers Trust Company, as Agent, First Union National Bank of North
Carolina, as Co-Agent, and the Lenders from time to time a party to such credit
agreement, as amended through the date of this Agreement and as from time to
time hereafter amended, supplemented or otherwise modified (the "Credit
Agreement").
37
(b) Sellers acknowledge that, if and when Buyer or Buyer Subsidiaries
together, directly or indirectly, own 80% or more of the voting power and value
of the outstanding stock of GSHS, Buyer will be obligated by law to include GSHS
and its 80% or more-owned subsidiaries in Buyer's consolidated federal income
tax return and, depending on applicable state law, in Buyer's consolidated or
unitary state income tax returns. Sellers covenant and agree with Buyer that in
such event and for so long as any such consolidated or unitary income tax
returns are required by federal or applicable state law, (i) Buyer's inclusion
of GSHS and its subsidiaries in any such consolidated or unitary income tax
return shall not constitute a breach or violation of or a default under any
provision of the New Stockholders' Agreement or any provision of any other
agreement among Sellers and Buyer; (ii) Sellers, together with Buyer, shall
cause their representatives on the Board of Directors of GSHS to cooperate in
the preparation and filing of such tax returns; and (iii) Sellers, together with
Buyer, shall cause their representatives on the Board of Directors of GSHS to
approve the execution and performance by GSHS of a tax sharing agreement (the
"Tax Sharing Agreement"), which Tax Sharing Agreement is required of Buyer by
Section 7.8 of the Credit Agreement. The Tax Sharing Agreement shall be
equitable to the parties and shall be in customary form for such agreements.
Section 6.13. Registration Statement. (a)(1) Promptly after the
Closing, Buyer will file a registration statement (a "Registration Statement")
under the 1933 Act, and cause such Registration Statement to become effective as
promptly as possible, with respect to the resale by Sellers (other than MSAP and
VI) of the shares of Charter Common Stock that may be issued under this
Agreement; and, prior to the first date on which shares of Charter Common Stock
may be issued under the Exchange Agreement, Buyer will file a registration
statement (a "Registration Statement") under the 1933 Act,and cause such
Registration Statement to become effective, with respect to the issuance to
Sellers (other than MSAP and VI) of the shares of Charter Common Stock that may
be issued under the Exchange Agreement.
(2) With respect to each Registration Statement, Buyer shall:
(i) cause the Registration Statement and the related
prospectus and any amendment or supplement, (A) to comply in all
material respects with the applicable requirements of the 1933 Act
and the rules and regulations promulgated under the 1933 Act and (B)
not to contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading;
(ii) prepare and file with the Securities and Exchange
Commission such amendments and supplements to the Registration
Statement and the prospectus used in connection with the Registration
Statement as may be necessary to keep the Registration Statement
effective, in the case of the Registration Statement relating to the
Exchange Agreement, until 40 days after the later of (A) the Last
Exchange Closing (as defined in the Exchange Agreement) or (B) the
end of the Exchange Period (as defined in the Exchange Agreement)
and, in the case of the Registration Statement relating to resales of
shares of Common Stock issued pursuant to this Agreement, until the
later of (A) the resale of all such shares of Charter Common Stock by
Sellers (other than MSAP and VI) or (B) two years after the Closing;
and to comply with applicable provisions of the 1933 Act with respect
to all shares of Charter Common Stock that may be issuable under this
Agreement and under the Exchange Agreement (in each case, the
"Registrable Securities"); and will furnish, upon written request, to
each Seller (other than MSAP and VI) a copy of any amendment or
supplement to the Registration Statement or prospectus prior to
filing it after effectiveness and shall not file any such amendment
or supplement to which any such Seller shall have reasonably objected
on the grounds that such amendment or supplement does not comply in
all material respects with the requirements of the 1933 Act or of the
rules or regulations under the 1933 Act;
(iii) furnish to each Seller (other than MSAP and VI) a
conformed copy of the Registration Statement and of each amendment
and supplement to the Registration Statement
38
(excluding exhibits unless requested in writing), a reasonable number
of copies of the prospectus included in the Registration Statement
(including each preliminary prospectus and the final prospectus), the
documents, if any, incorporated by reference in the Registration
Statement or prospectus, and such other documents, as any such Seller
may reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities covered by the Registration Statement under
such other securities or blue sky laws of the states of the United
States as may be required for the issuance and sale of Registrable
Securities, to keep such registration or qualification in effect for
so long as the Registration Statement remains in effect, except that
Buyer shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction in which
it is not and would not, but for the requirements of this Section
6.13, be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent to general service
of process in any such jurisdiction;
(v) promptly notify Sellers (other than MSAP and VI), at any
time when a prospectus relating to the Registrable Securities may be
required to be delivered by any of them under the 1933 Act, upon
discovery that, or upon the happening of any event as a result of
which, the prospectus included in the Registration Statement, as then
in effect, includes or in the judgment of Buyer may include an untrue
statement of a material fact or omits or may omit to state any
material fact required to be stated in such prospectus or necessary
to make the statements in such prospectus not misleading in the light
of the circumstances in which they were made, which circumstance
requires amendment of the Registration Statement or supplementation
of the prospectus, and shall prepare and file as promptly as
reasonably possible a supplement to or an amendment of such
prospectus as may be necessary so that, as when delivered (if
required by the 1933 Act) to a purchaser of Registrable Securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated in such
prospectus or necessary to make the statements in such prospectus not
misleading in the light of the circumstances in which they were made;
(vi) otherwise use its best efforts to comply with all applicable
rules and regulations under the 1933 Act and, in its discretion, to
make available to its securities holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with the
first month of the first fiscal quarter after the effective date of
the Registration Statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the 1933 Act;
(vii) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by the Registration
Statement from and after a date not later than the effective date of
the Registration Statement; and
(viii) use its best efforts to list all Registrable Securities
covered by the Registration Statement on any national securities
exchange on which securities of the same class as the Registrable
Securities are then listed.
(3) Each Seller (other than MSAP and VI) shall furnish to
Buyer such information regarding such Seller as Buyer may from time
to time reasonably request in writing and as shall be required by the
1933 Act in connection with such registration.
(4) Buyer shall indemnify and hold harmless each Seller (other than
MSAP and VI), its directors, Affiliates and officers, and each other person, if
any, who controls such Seller within the meaning of the 1933 Act
39
against any losses, claims, damages, liabilities or expenses (including
reasonable fees and expenses of counsel), joint or several, to which such Seller
or any such director or officer or participating or controlling person may
become subject under the 1933 Act or otherwise in connection with or as a result
of a resale by such Seller of shares of Charter Common Stock issued pursuant to
this Agreement or the Exchange Agreement, insofar as such losses, claims,
damages, liabilities or expenses (or related actions or proceedings) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any preliminary
prospectus, final prospectus or summary prospectus contained in the Registration
Statement, or any amendment or supplement to the Registration Statement, or any
document incorporated by reference in the Registration Statement, or (ii) any
omission or alleged omission to state in any such document a material fact
required to be stated in any such document or necessary to make the statements
in any such document not misleading, and Buyer will reimburse such Seller and
each such director, Affiliate, officer, participating person and controlling
person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding, provided that Buyer shall not be liable in any such case
to the extent that any such loss, claim, damage, liability or expense (or action
or proceeding in respect of any such loss, claim, damage, liability or expense)
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Registration Statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to Buyer by such Seller or any such director, Affiliate, officer, participating
person or controlling person for use in the preparation of the Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Seller or any such director,
Affiliate, officer, participating person or controlling person and shall survive
the transfer of such securities by such Seller.
(5) Each Seller (other than MSAP and VI), severally and not jointly,
shall indemnify and hold harmless (in the same manner and to the same extent as
set forth in Section 6.13(a)(4)) Buyer, each director of Buyer, each officer of
Buyer who shall sign the Registration Statement and each other person, if any,
who controls Buyer within the meaning of the 1933 Act, with respect to any
untrue statement in or omission from the Registration Statement, any preliminary
prospectus, final prospectus or summary prospectus included in the Registration
Statement, or any amendment or supplement to the Registration Statement, but
only to the extent that such statement or omission was made in reliance upon and
in conformity with written information furnished to Buyer by such Seller for use
in the preparation of the Registration Statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of Buyer or any such director, officer or controlling person and shall
survive the transfer of such securities by such Seller.
(6) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in
Sections 6.13(a)(4) or (5), such indemnified party will, if a claim is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice shall not relieve the indemnifying party of its obligations under
Sections 6.13(a)(4) or (5), except to the extent that the indemnifying party is
actually materially prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment (i) a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim, or (ii) the
indemnified party has available to it reasonable defenses which are different
from or additional to those available to the indemnifying party, the
indemnifying party shall be entitled to participate in and to assume the defense
of such action, jointly with any other indemnifying party similarly notified, to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense of such action, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense of such action other than reasonable costs of investigation.
Notwithstanding the foregoing, in any such action, any indemnified party shall
have the right to retain its own counsel but the fees and disbursements of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party shall have failed to retain counsel for the indemnified
party, (ii) the indemnifying party and such indemnified party shall have
mutually agreed to the retention
40
of such counsel, or (iii) a conflict of interest arises between such indemnified
and indemnifying parties. The indemnifying party shall not, in connection with
any action or related actions in the same jurisdiction, be liable for the fees
and disbursements of more than one separate firm qualified in such jurisdiction
to act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
but if settled with such consent or if there is a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(7) If the indemnification provided for in this Section 6.13(a)(4)
and (5) is unavailable or insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages, liabilities or expenses described as
indemnifiable pursuant to Sections 6.13(a)(4) or (5), then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party, as a result of such losses,
claims, damages, liabilities or expenses in such proportion as appropriate to
reflect the relative fault of Buyer, on the one hand, or such Seller, on the
other hand, and to the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any untrue statement or
omission giving rise to such indemnification obligation. Buyer and Sellers
(other than MSAP or VI) agree that it would not be just and equitable if
contributions pursuant to this Section 6.13(a)(7) were determined by pro rata
allocation or by any other method of allocation which did not take account of
the equitable considerations referred to above in this Section 6.13(a)(7). No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.
(8) Periodic payments of amounts required to be paid pursuant to
Section 6.13(a)(4) and (5) shall be made during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred.
(9) Except as provided below, Buyer shall bear all registration
expenses incurred in connection with the performance of its obligations under
Section 6.13(a), including all expenses incurred by Buyer in complying with
Section 6.13(a), including, without limitation, all registration and filing
fees; printing expenses; fees and disbursements of counsel for Buyer; blue sky
fees and expenses; accountants' expenses, including, without limitation, any
special audits or reviews incident to any such registration; and fees of
transfer agents and registrars. Each Seller (other than MSAP and VI) shall pay
commissions upon any resale, transfer taxes and their own counsel fees, if any.
(b) Alternate Proceeding. In lieu of complying with Section 6.13(a),
if Buyer reasonably determines that the alternate proceeding described in this
Section 6.13(b) is available, Buyer shall cause the shares of Charter Common
Stock described in Section 6.13(a) to be issued pursuant to the exemption from
registration provided by Section 3(a)(10) of the 1933 Act; and, in such event,
Buyer shall (i) initiate an appropriate proceeding under applicable state law
and shall obtain all permits or other approvals necessary for the availability
of such exemption and (ii) cause the Exchange Agreement to be amended to provide
for the commencement of the Exchange Period as of the Closing Date, and the
termination of such Exchange Period on the third anniversary of the Closing
Date.
41
Section 6.14. New GSHS Shares. (a) Each Seller, severally and not
jointly, covenants and agrees with Buyer that it will take all necessary action
to cause GSHS, at or prior to Closing, to amend its Certificate of Incorporation
to increase the number of authorized shares of the common stock of GSHS to
15,000, in order that GSHS shall have authority under its Certificate of
Incorporation to issue the New GSHS Shares and the shares of the common stock of
GSHS to be issued to Buyer under the GPA Stock Exchange Agreement.
(b) Each Seller, severally and not jointly, covenants and agrees with
Buyer that it shall, by check payable to GSHS, purchase prior to the Closing,
and shall cause GSHS to sell to such Seller, such Seller's portion of the New
GSHS Shares in the amounts and for the cash purchase prices set forth below:
Seller No. of Shares Cash Purchase Price
------ ------------- -------------------
1. BCBS 86.14 $1,066,660.49
2. HCSC 86.14 $1,066,660.49
3. IBC 86.14 $1,066,660.49
4. MSAP 86.14 $1,066,660.49
5. PCMB 86.14 $1,066,660.49
6. VI 86.14 $1,066,660.49
ARTICLE 7.
CONDITIONS TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to consummate the Stock Purchase shall be subject
to the satisfaction on or prior to the Closing Date of all of the following
conditions (any of which may be waived in writing by Buyer in its sole
discretion):
Section 7.1. Representations, Warranties and Covenants of GSHS and
Sellers. Subject to the second sentence of this Section 7.1, the representations
and warranties of GSHS and Sellers in this Agreement shall be true and correct
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, except for
representations and warranties that speak as of a specific date or time other
than the Closing Date (which need only be true and correct as of such date or
time). The closing condition contained in this Section 7.1, as it relates to
representations and warranties, shall be satisfied unless the inaccuracies in
and breaches of such representations and warranties have an adverse effect on
GSHS and its Subsidiaries, taken as a whole, or on Buyer's ownership of the GSHS
shares, of $5,000,000 or more. The covenants and agreements of GSHS and Sellers
and GSHS to be performed on or before the Closing Date in accordance with this
Agreement shall have been performed in all material respects.
Section 7.2. Filings; Consents; Waiting Periods. All registrations,
filings, applications, notices, consents, approvals, waivers, authorizations,
qualifications and orders to be filed, made or obtained by Buyer, GSHS or any
Seller in order to consummate the transactions contemplated by this Agreement
and the GPA Stock Exchange Agreement and to operate the business of GSHS and the
Subsidiaries after Closing in compliance with all applicable laws and
regulations shall have been filed, made or obtained. All waiting periods
applicable under the HSR Act shall have expired or been terminated. Sellers,
GSHS and applicable Subsidiaries shall have obtained the consent of the
requisite parties to the agreements identified in Sections 3.6 and 3.16 of the
GSHS Disclosure Schedule, which consents shall be in form and substance
reasonably satisfactory to Buyer. GSHS shall have obtained written enforceable
waivers with respect to all existing breaches and any continuing breaches
(including any breaches anticipated to continue in the ordinary course of the
business of GSHS and its Subsidiaries after the Closing) of agreements with
those customers
42
identified in Section 3.16 of the GSHS Disclosure Schedule, which waivers shall
be in form and substance satisfactory to Buyer.
Section 7.3. No Injunction. There shall be no injunction, restraining
order or decree of any nature of any Governmental Authority that is in effect
that restrains, prohibits or makes illegal (i) the consummation of the Stock
Purchase, (ii) imposes conditions on the consummation of the Stock Purchase not
otherwise provided for in this Agreement, or (iii) the execution, delivery or
performance of the Exchange Agreement, the GPA Stock Exchange Agreement, or the
New Stockholders' Agreement.
Section 7.4. Closing Documents. Sellers shall have delivered or
caused to be delivered to Buyer the following documents:
(a) True and correct copies of the Certificate of
Incorporation of GSHS, certified by the Secretary of State of the State of
Delaware as of a date not more than five Business Days preceding the Closing
Date (except that Sellers shall only be required to deliver a true and correct
copy of the amendment required by Section 6.14(a)), and true and correct copies
of the bylaws of GSHS as in effect on the day prior to Closing, certified by the
Secretary of GSHS;
(b) Good standing certificates relating to GSHS and each
Subsidiary from their respective states of incorporation and each other
jurisdiction in which GSHS or any Subsidiary is qualified to do business as a
foreign corporation, and good standing certificates relating to Sellers from
their respective states of incorporation;
(c) Resolutions of the Board of Directors or a duly
authorized committee of the Board of Directors of each Seller authorizing (to
the extent such Seller is a party to the following agreements) the execution,
delivery and performance of this Agreement, the Exchange Agreement and the New
Stockholders' Agreement by such Seller, the execution, delivery and performance
of the GPA Stock Exchange Agreement by GSHS, and authorizing the termination of
the Old Shareholders' Agreement, certified by the Secretary of such Seller;
(d) A resolution of the Board of Directors of GSHS
authorizing the execution, delivery and performance of this Agreement and the
GPA Stock Exchange Agreement by GSHS, certified by the Secretary of GSHS;
(e) A certificate of the Secretary of each Seller attesting
to the incumbency of the officers of such Seller executing this Agreement and
the other certificates and agreements delivered or executed by such Seller at or
prior to the Closing;
(f) A certificate of the Secretary of GSHS attesting to the
incumbency of the officers of GSHS executing this Agreement and the GPA Stock
Exchange Agreement and the other certificates and agreements delivered by GSHS
at the Closing;
(g) A certificate of the Chairman of the Board, President or
any Vice President of each Seller attesting on behalf of such Seller to the
matters set forth in Section 7.1 with respect to such Seller;
(h) An opinion of counsel to Sellers and GSHS covering
customary matters for legal opinions in stock purchase transactions, in form and
substance reasonably satisfactory to Buyer and its counsel;
(i) A letter or letters addressed to the lenders under the
Credit Agreement attaching the certificates and opinions delivered pursuant to
subsections (a) through (h) of this Section 7.4 and authorizing such lenders to
rely thereon; and
43
(j) Each Seller shall have delivered to Buyer the
certificates representing the GSHS Shares and the certificates representing the
New GSHS Shares, in each case to be sold by such Seller pursuant to this
Agreement, free and clear of all liens, charges and encumbrances of any kind or
nature and which are not in violation of any pre-emptive rights, and such
delivery shall have been made in accordance with Section 2.3(a).
Section 7.5. Absence of Litigation. No claim, action, suit,
arbitration, investigation, inquiry or other proceeding by any Governmental
Authority with respect to this Agreement or the GPA Stock Exchange Agreement and
the transactions contemplated by such agreements shall be pending on the Closing
Date and, up to the Closing, no party to this Agreement shall have been advised
by any Governmental Authority (which advisory has not been officially withdrawn
by such Governmental Authority on or prior to the Closing Date) that such
Governmental Authority is reviewing this Agreement or the GPA Stock Exchange
Agreement or the transactions contemplated by this Agreement or the GPA Stock
Exchange Agreement to determine whether to file or commence any litigation with
respect to any aspect of this Agreement or the GPA Stock Exchange Agreement or
the transactions contemplated by such agreements.
Section 7.6. Customer Contracts. Except for the Operating Agreement
between GSHS and Gateway Health Plan, from the Balance Sheet date to the Closing
Date, neither GSHS nor the Subsidiaries shall have suffered the loss of one or
more Contracts with customers, whether by the termination or notice of
termination of Contracts or by the failure to renew Contracts upon the
expiration of such Contracts in accordance with their respective terms, which
(i) in the aggregate comprised more than one percent (1%) of the consolidated
revenue for GSHS and the Subsidiaries during the twelve-month period ended June
30, 1995; or (ii) in the case of Contracts the performance term of which began
or begins after July 1, 1994, are projected to produce in the aggregate revenue
in the twelve-month period ending June 30, 1996 of more than $1,000,000.
Section 7.7. Old Shareholders' Agreement. Sellers and GSHS shall
have terminated the Old Shareholders' Agreement, effective on or before the
Closing Date.
Section 7.8. Exchange Agreement. Sellers (except for MSAP and VI)
and Buyer shall have executed and delivered the Exchange Agreement.
Section 7.9. GPA Stock Exchange Agreement. Buyer and GSHS shall have
executed the GPA Stock Exchange Agreement on the date of this Agreement and the
transaction contemplated by such agreement shall have been closed, such closing
to include the delivery by Buyer to GSHS of certificates, duly endorsed for
transfer, representing the GPA Common Stock and the delivery by GSHS to Buyer of
a certificate representing 969.04 shares of the common stock of GSHS.
Section 7.10. New Stockholders' Agreement. Sellers (except for MSAP
and VI), Buyer and GSHS shall have executed and delivered the New Stockholders'
Agreement.
Section 7.11. Operating Agreements. Buyer shall have determined, in
its reasonable judgment, that Buyer does not anticipate that any customer
Contract in existence on the Closing Date between GSHS or a Subsidiary, on the
one hand, and a Seller or a subsidiary or Affiliate of a Seller, on the other
hand, will not be renewed, extended or replaced with a new Operating Agreement
upon the expiration or termination of the Operating Agreement in existence on
the Closing Date.
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Section 7.12. Purchase of New GSHS Shares. Sellers shall have
purchased the New GSHS Shares in accordance with Section 6.14(b).
Section 7.13. GSHS Certificate of Incorporation and Bylaws. The
Certificate of Incorporation and bylaws of GSHS shall have been amended to
remove any provisions reflecting the Old Shareholders' Agreement and to carry
out the provisions of Section 6.14(a).
Section 7.14. Agreement Among Sellers. Any agreement among Sellers,
among Sellers and any other person or among some of Sellers proposed by such
parties to be entered into before, on or after the Closing Date, relating to the
governance or operations of GSHS after the Closing Date shall be in form and
substance satisfactory to Buyer, in its sole discretion, and shall, among other
things, provide that any amendment is subject to approval by Buyer; provided,
however, that this Section 7.14 shall not apply to any agreement with respect to
which Buyer's approval is not required under Section 7.5 of the New
Stockholders' Agreement.
Section 7.15. Fairness Opinion. Buyer and its Board of Directors
shall have received an opinion of Paine Webber Incorporated or other investment
banking firm engaged by Buyer to the effect that the transactions contemplated
by this Agreement, the Exchange Agreement, the New Stockholders' Agreement and
the GPA Stock Exchange Agreement are fair to Buyer and its stockholders from a
financial point of view; and such fairness opinion shall be in form and
substance satisfactory to Buyer, in its sole discretion.
Section 7.16. Credit Agreement. The Agent (as such term is defined in
the Credit Agreement) shall have consented to the final forms of, and the
execution, delivery and performance by Buyer of, this Agreement, the Exchange
Agreement and the New Stockholders' Agreement pursuant to the amendment referred
to in Section 5.9; such amendment shall be effective on the Closing Date; and
such amendment shall be in form and substance satisfactory to Buyer, in its sole
discretion.
Section 7.17. Certain Capital Contributions. Each of VI and MSAP
shall have made a cash capital contribution to GSHS in the amount of $163,333.
Section 7.18. Board Approvals. The Boards of Directors or authorized
committees of such Boards (i) of Buyer and Sellers shall have approved this
Agreement, (ii) of Buyer and Sellers (other than MSAP and VI) shall have
approved the Exchange Agreement, the New Stockholders' Agreement and the GPA
Stock Exchange Agreement (in the case of such Sellers, in their capacities as
stockholders of GSHS), and (iii) of GSHS shall have approved the GPA Stock
Exchange Agreement and the New Stockholders' Agreement; and the Board of
Directors or an authorized committee of such Board of any Seller (other than
MSAP and VI) shall not have exercised such Seller's right of termination
pursuant to Section 10.1(d).
Section 7.19. GSHS Long-Term Compensation Plan. The GSHS Long-Term
Compensation Plan shall have been terminated or amended (to the reasonable
satisfaction of Buyer) for a cost of not more than the amount set forth in
Section 6.11 of the GSHS Disclosure Schedule.
45
Section 7.20. Section 6.13. If Buyer, pursuant to the provisions of
Section 6.13(b), complies with Section 6.13(b) in lieu of complying with Section
6.13(a), then the proceeding described in Section 6.13(b) shall have been
completed and all permits and approvals requested by Buyer pursuant to such
proceeding shall have been issued.
ARTICLE 8.
CONDITIONS TO SELLERS' OBLIGATIONS TO CLOSE
Each Seller's obligation to consummate the Stock Purchase is subject
to the satisfaction on or prior to the Closing Date of all of the following
conditions (any of which may be waived in writing by such Seller, in its sole
discretion):
Section 8.1. Representations, Warranties and Covenants of Buyer and
GSHS. The representations and warranties of Buyer and GSHS in this Agreement
shall be true and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date
except for representations and warranties that speak as of a specific date or
time other than the Closing Date (which need only be true and correct as of such
date or time), and the covenants and agreements of Buyer and GSHS to be
performed on or before the Closing Date in accordance with this Agreement shall
have been performed in all material respects.
Section 8.2. Filings; Consents; Waiting Periods. All registrations,
filings, applications, notices, consents, approvals, waivers, authorizations,
qualifications and orders to be filed, made or obtained by Buyer, GSHS or any
Seller in order to consummate the transactions contemplated by this Agreement
and the GPA Stock Exchange Agreement and to operate the business of GSHS and the
Subsidiaries after Closing in compliance with all applicable laws and
regulations shall have been filed, made or obtained, and all waiting periods
applicable under the HSR Act shall have expired or been terminated. Buyer shall
have obtained the consents identified in Section 5.3 of the Buyer Disclosure
Schedule and Section 5.14(j) of the GPA Disclosure Letter, which consents shall
be in form and substance reasonably satisfactory to Sellers.
Section 8.3. No Injunction. The condition set forth in Section 7.3
shall have been satisfied.
Section 8.4. No Material Adverse Change. There shall not have
occurred, alone or in the aggregate, a material adverse change in the business,
operations or financial condition of Buyer since June 30, 1995.
Section 8.5. Closing Documents. Buyer shall have delivered or
caused to be delivered to each Seller the following documents:
(a) A Secretary's certificate attesting to the incumbency of
the officers executing this Agreement and the GPA Stock Exchange Agreement and
the other certificates and agreements delivered by Buyer at the Closing;
(b) A certificate of the Chairman of the Board of Buyer
attesting on behalf of Buyer to the matters set forth in Section 8.1;
(c) An opinion of counsel to the Buyer covering customary
matters for legal opinions in stock purchase transactions, in form and substance
reasonably satisfactory to Seller and its counsel;
46
(d) A resolution of the Board of Directors of Buyer
authorizing the execution, delivery and performance by Buyer of this Agreement,
the Exchange Agreement, the GPA Stock Exchange Agreement and the New
Stockholders' Agreement.
(e) Good standing certificates relating to Buyer in Delaware
and Georgia; and
(f) Buyer shall have paid and delivered to each Seller the
Purchase Price payable to each Seller pursuant to this Agreement.
Section 8.6. Absence of Litigation. The condition set forth in
Section 7.5 shall have been satisfied.
Section 8.7. Execution of Other Agreements. The conditions set forth
in Sections 7.8 and 7.10 shall have been satisfied.
Section 8.8. GPA Stock Exchange; New GSHS Shares; GSHS Certificate of
Incorporation and Bylaws. The conditions set forth in Sections 7.9, 7.12 and
7.13 shall have been satisfied.
Section 8.9. Credit Agreement. The conditions set forth in Section
7.16 shall have been satisfied.
Section 8.10. Board Approvals. The conditions set forth in Section
7.18 shall have been satisfied.
Section 8.11. Fairness Opinion. Sellers and each of their respective
Boards of Directors shall have received an opinion of Dean Witter Reynolds Inc.
or other investment banking firm engaged by Sellers or GSHS to the effect that
the transactions contemplated by this Agreement, the Exchange Agreement, the New
Stockholders' Agreement and the GPA Stock Exchange Agreement are fair to Sellers
(to the extent they are parties to such agreements) and their respective
stockholders from a financial point of view; and such fairness opinion shall be
in form and substance satisfactory to Sellers, in their sole discretion.
Section 8.12. Section 6.13. If Buyer, pursuant to the provisions of
Section 6.13(b), complies with Section 6.13(b), the conditions set forth in
Section 7.20 shall have been satisfied.
ARTICLE 9.
SURVIVAL; INDEMNIFICATION
Section 9.1. Survival. The representations and warranties of GSHS,
Sellers and Buyer shall survive the Closing, as follows:
(a) indefinitely with respect to the representations and warranties
contained in Sections 3.1 (first sentence only), 3.2, 3.3, 3.4(b), 3.22, 4.1,
4.2, 4.3, 5.1 (first sentence only), 5.2, 5.5 and 5.11;
47
(b) until sixty calendar days after the expiration of all applicable
statutes of limitation (including all periods of extension or tolling, whether
automatic, permissive or contractual) with respect to matters contained in
Sections 3.14 (insofar as it relates to ERISA or the Code) and 3.15;
(c) until one year and 180 days after the Closing in the case of all
other representations and warranties.
The covenants and agreements of Sellers and Buyer shall survive the
Closing, as follows:
(a) until two years after the Closing in the case of covenants and
agreements to be performed under this Agreement on or prior to Closing; and
(b) in the case of each other covenant and agreement to be performed
under this Agreement, until 180 days after the last date on which such covenant
or agreement is to be performed in accordance with this Agreement or, if no such
date is specified, 3 years following the Closing, except that the
indemnification provided by Sections 6.13(a)(4) and 5 and Section 9.2(b)(i)(B)
shall survive indefinitely.
The survival period of any representation, warranty, covenant or
agreement that would otherwise have terminated pursuant to the preceding two
sentences shall nonetheless continue to survive if a claim under this Article 9
shall have been timely given with respect to such representation, warranty,
covenant or agreement (but only as it relates to the claim) until the claim has
been satisfied or otherwise resolved pursuant to this Article 9.
Section 9.2. Indemnification.
(a) Indemnification by Sellers. Subject to Section 9.1, each Seller
agrees, severally and not jointly, to indemnify, defend and hold Buyer, its
Subsidiaries, its Affiliates and its and their respective officers, directors
and employees harmless from any and all Indemnifiable Damages which any of them
may suffer or incur by reason of: (i) the breach or failure to perform by such
Seller or GSHS of the covenants or agreements made by such Seller or GSHS in
this Agreement to be performed at or prior to the Closing and, in the case of
Sections 6.4, 6.7, 6.11 and 6.12, to be performed in whole or in part after the
Closing; (ii) from and after the Closing: (A) the breach of or inaccuracy in any
of the representations and warranties of GSHS or such Seller contained in this
Agreement; or (B) any misrepresentation contained in any statement or
certificate furnished by GSHS or such Seller to Buyer pursuant to this
Agreement; (iii) for a period of five years after the Closing, any and all
malpractice or professional liability claims against GSHS or a Subsidiary where
the occurrence giving rise to such claim preceded or occurred on the Closing
Date (provided, however, that the indemnification obligation of each Seller
under this clause (iii) is expressly conditioned on the maintaining by GSHS
continuously for a period of five years after the Closing Date of malpractice
and professional liability insurance for occurrences through the Closing Date in
amounts and on terms that are consistent with and comparable to the malpractice
and professional liability policy or policies of GSHS in effect on the date of
this Agreement); or (iv) the asset transfer provisions set forth in Section
2.1.1 of the Operating Agreement, dated May 1, 1992, by and between GSHS and
Community Mutual Life Insurance Company, to the extent such section is deemed to
be applicable to the assets of any Person other than GSHS and its Subsidiaries
existing prior to the Closing; and (v) any obligation of GSHS and its
Subsidiaries to Blue Cross and Blue Shield of Maryland, Inc. under Section 7.13
of the Stock Purchase Agreement, dated as of March 19, 1993, by and among VI,
HCSC, GS Holding, Inc. and Blue Cross and Blue Shield of Maryland, Inc. in
excess of the amount accrued specifically for such liability on the books and
records of GSHS as of the Balance Sheet Date.
(b) Indemnification by Buyer. Subject to Section 9.1, Buyer agrees to
indemnify, defend and hold GSHS, each Seller, its Affiliates and their
respective officers, directors and employees harmless from any and all
Indemnifiable Damages which any of them may suffer or incur by reason of (i)(A)
the breach of or failure to perform by Buyer of any of the covenants or
agreements made by it in this Agreement or (B) any liability for any Tax payable
by GPA or a GPA Subsidiary with respect to Tax liability of any member of any
affiliated group of corporations filing
48
a consolidated return for Federal income tax purposes, of which GPA or any GPA
Subsidiary shall have been a member at any time prior to the Closing, including
but not limited to, any liability for Taxes of the Buyer consolidated group
for which GPA or a GPA Subsidiary might be liable under Treasury Regulation
Section 1.1502-6 (or successor regulation), except for provisions for Taxes
accrued on the books of GPA prior to Closing; or (ii) from and after the
Closing: (A) the breach of or inaccuracy in any of the representations or
warranties of Buyer contained in this Agreement; or (B) any misrepresentation
contained in any statement or certificate furnished by Buyer to any Seller,
to Sellers or to GSHS pursuant to this Agreement.
(c) Third-Party Claims. If any claim or demand is asserted against
the indemnified party by a third party with respect to any matter under the
indemnities set forth in Sections 9.2(a) or (b) (a "Third Party Claim"), the
indemnified party shall promptly give written notice and details thereof,
including copies of all pleadings and the pertinent documents, to the
indemnifying party, but the indemnifying party's obligations shall not be
affected by the failure to give such notice except to the extent that it was
materially prejudiced by such failure to give notice. Within thirty days of
receipt of such notice, the indemnifying party shall (i) pay the Third Party
Claim either in full or upon compromise agreed to by the indemnified party or
(ii) notify the indemnified party that the indemnifying party disputes the Third
Party Claim and intends to defend against it, and so defend and pay any adverse
final judgment or award or settlement amount in regard to such third party
claim. Such defense shall be controlled by the indemnifying party, and the cost
of such defense shall be borne by it, except that the indemnified party shall
have the right to participate in such defense at its own expense, and in such
event counsel selected by the indemnified party shall be required to cooperate
with such counsel of the indemnifying party in such defense. The indemnified
party agrees that it will cooperate in all reasonable respects in the defense of
any such claim or demand, including making personnel, books, and records
relevant to the claim available to the indemnifying party, without charge,
except for reimbursement of reasonable out-of-pocket expenses. The indemnifying
party shall have the right to settle or compromise any Third Party Claim of
which it has assumed the defense only upon the receipt of written consent to
such settlement or compromise from the indemnified party, which consent shall
not be unreasonably withheld. If any indemnified party unreasonably withholds
consent pursuant to a settlement or compromise of a Third Party Claim of which
the sole relief provided is monetary damages only, and such Third Party Claim is
subsequently resolved or adjudicated for an amount of consideration which
exceeds the amount of the consideration contained in such settlement or
compromise, the indemnifying party's obligation with respect to such Third Party
Claim shall not exceed the amount of the consideration contained in such
settlement or compromise. The indemnified party may, in its sole discretion,
withhold its consent to a settlement or compromise (i) if there is a finding or
admission (A) of a violation of law by the indemnified party (which finding
adversely affects the indemnified party), or (B) of a violation of the rights of
any person which is not fully remedied by the payment to be made in settlement
or (C) that would have a material adverse effect on any other claims that may be
made against the indemnified party; (ii) if the sole relief provided is not
monetary damages that are paid in full by the indemnifying party (if such
non-monetary relief would adversely affect the indemnified party); or (iii) for
any other reason which is reasonable under the circumstances.
If the indemnifying party fails to take action within thirty days as
set forth above, then the indemnified party shall have the right to pay,
compromise or defend any Third Party Claim and to assert the amount of any
payment on the Third Party Claim plus the expense of defense or settlement as an
indemnity claim. The indemnified party shall also have the right, exercisable in
good faith and upon reasonable prior notice to the indemnifying party, to take
such action as may be necessary to avoid a default prior to the assumption of
the defense of the Third Party Claim by the indemnifying party and any expenses
incurred by so acting shall be paid by the indemnifying party.
(d) Payment. Payment of Third Party Claims shall be made in
accordance with Section 9.2(c). With respect to all claims other than Third
Party Claims, the indemnifying party shall promptly pay or reimburse the
indemnified party in respect of liability for Indemnifiable Damages to which the
foregoing indemnities relate after receipt of written notice from the
indemnified party outlining with reasonable particularity the nature and amount
of the claim(s) and accompanied by a reasonable amount of relevant
documentation. All claims for indemnity must be
49
submitted by the indemnified party to the indemnifying party within the
applicable survival periods set forth above.If the indemnifying party fails
or refuses to make payment for such claims within a period of thirty days
from the date of notice to the indemnifying party, the indemnified party
shall be entitled to exercise all legal means of relief available.
(e) Access and Information. With respect to any claim for
indemnification under this Agreement, the indemnified party will give to the
indemnifying party and its counsel, accountants and other representatives
reasonable access, during normal business hours and upon the giving of
reasonable prior notice, to their books and records relating to such claims, and
to their employees, accountants, counsel and other representatives, all without
charge to the indemnifying party, except for reimbursement of reasonable
out-of-pocket expenses. In this regard, after the assertion of a claim for
indemnity, the indemnified party agrees to maintain any of its books and records
which may relate to the claim for indemnification for such period of time as may
be necessary to enable the indemnifying party to resolve such claim.
(f) Monetary Limitations on Indemnification. Sellers shall not be
obligated under this Agreement to indemnify Buyer with respect to any
liabilities, losses, claims, judgments, damages, expenses and costs as to which
Buyer is otherwise entitled to indemnification under Section 9.2(a)(ii) and
(iii) unless and until the aggregate amount of indemnification so asserted
exceeds the Basket Amount, and thereafter Buyer shall be entitled to indemnity
from Sellers under this Agreement only with respect to any amounts in excess of
the Basket Amount. Each Seller's obligation to indemnify Buyer pursuant to this
Article 9 shall be limited to Twenty-four Million Seven Hundred Sixty-six
Thousand and Six Hundred Eighty-five and 79/100 Dollars ($24,766,685.79).
Buyer's obligation to indemnify Sellers pursuant to Section 9.2(b)(ii) shall be
subject to the same limitation based on the Basket Amount, and claims of
individual Sellers shall be aggregated for purposes of determining whether the
Basket Amount has been exceeded. No losses shall be asserted with respect to any
matter which is covered by insurance to the extent that proceeds of such
insurance are received. Each Seller is individually liable for one hundred
percent of the Indemnifiable Damages relating to any breach of its own
representations, warranties and covenants, and is liable for one-sixth of the
Indemnifiable Damages relating to any breach of any representations, warranties
and covenants of GSHS and of the matters set forth in clauses (iii) through (v)
of Section 9.2(a).
(g) Appointment of Agent for Service of Process; Submission to
Jurisdiction. Any legal action or proceeding with respect to this Agreement or
any document related to this Agreement may be brought in the courts of the State
of Delaware or of the United States of America for the District of Delaware,
and, by execution and delivery of this Agreement, Buyer, and each Seller
consents, for itself and in respect of its property, to the jurisdiction of the
aforesaid courts solely for the purpose of adjudicating its rights with respect
to this Agreement or any document related to this Agreement. Each party, at or
prior to Closing, shall designate an agent as the designee, appointee and agent
of such party to receive, for and on behalf of such party, service of process in
such jurisdictions in any legal action or proceeding with respect to this
Agreement or any document related to this Agreement and such service shall, to
the extent permitted by applicable law, be deemed completed ten days after
delivery thereof to said agent. It is understood that a copy of such process
served on such agent will be promptly forwarded by mail to such party at its
address set forth in Section 11.6, but the failure of such party to receive such
copy shall not, to the extent permitted by applicable law, affect in any way the
service of such process. Buyer and each Seller irrevocably waive, to the extent
permitted by applicable law, any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any action or
proceeding in such respective jurisdictions in respect of this Agreement or any
document related to this Agreement. Nothing in this Agreement shall affect the
right of any party to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against any other party in any
other jurisdiction.
Section 9.3. Exclusive Remedy.
(a) Buyer and each Seller acknowledge and agree that its sole and
exclusive remedy with respect to any and all claims as to any breach of or
inaccuracy in the representations and warranties or breach of or failure to
perform
50
the covenants or agreements contained in this Agreement shall be
pursuant to the indemnification provisions set forth in this Article 9. In
furtherance of the preceding sentence, Buyer and each Seller waive, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action it may have against Sellers, a Seller or Buyer, as the case
may be, arising under or based upon any federal, state or local statute,
law, ordinance, rule or regulation (including, without limitation,
any such rights, claims or causes of action arising under or based upon common
law or otherwise) with respect to any breach or inaccuracy of the
representations and warranties or failure to perform the covenants or agreements
contained in this Agreement. The written waiver of a closing condition by any
party shall constitute a waiver by such party of any claim under this Section 9
against any other party with respect to the matter or matters covered by such
written waiver.
(b) Notwithstanding the foregoing subsection (a), nothing contained
in this Section 9.3 shall prevent any party from seeking and obtaining specific
performance by the other party of any of its obligations under this Agreement as
provided in Section 11.10 or from seeking and obtaining injunctive relief
against the other party's activities in breach of this Agreement.
(c) Anything to the contrary in this Agreement notwithstanding, no
breach of any representation or warranty or failure to perform a covenant or
agreement contained in this Agreement shall give rise to any right on the part
of Buyer or any Seller after the Closing to rescind this Agreement or any of the
transactions contemplated by this Agreement.
ARTICLE 10.
TERMINATION
Section 10.1. Termination. This Agreement may be terminated at any
time prior to Closing by:
(a) the mutual consent of Sellers (acting jointly) and
Buyer;
(b) Sellers (acting jointly) or Buyer if the Closing has not
occurred by the close of business on February 29, 1996, so long as the failure
to consummate the transaction on or before such date did not result from a
breach of this Agreement by the party seeking termination of this Agreement;
(c) at any time before the Closing, by any Seller or Buyer,
in the event (i) of a material breach of this Agreement hereof by any
non-terminating party if such non-terminating party fails to cure such breach
within five Business Days following notification by any one or more of the
terminating parties or (ii) upon notification to the non-terminating parties by
the terminating party that the satisfaction of any condition to the terminating
party's obligations under this Agreement has become impossible or impracticable
with the use of best efforts if the failure of such condition to be satisfied is
not caused by a breach by the terminating party (and, for purposes of (b) and
(c) only, a breach or material breach by any Seller shall constitute a breach or
material breach, as the case may be, by Sellers); or
(d) If such termination is required pursuant to any final
and nonappealable judgment or order entered in any judicial or administrative
proceeding initiated by a Governmental Antitrust Authority.
Section 10.2. Procedure and Effect of Termination. In the event of
termination of this Agreement pursuant to Section 10.1, written notice of such
termination shall promptly be given by the terminating party to the other party,
and this Agreement shall upon that notice terminate and become void and have no
effect, and the transactions contemplated by this Agreement shall be abandoned
without further action by the parties, except that the provisions of
51
the Confidentiality Agreement and Section 11.5 shall survive the termination of
this Agreement, provided, however, that such termination shall not relieve any
party of any liability for any breach by it of this Agreement.
ARTICLE 11.
MISCELLANEOUS
Section 11.1. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party. The execution and delivery
of this Agreement by all Sellers shall constitute unanimous GSHS stockholder
approval of the execution and delivery of this Agreement by GSHS.
Section 11.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to a
contract executed and performed in such state without reference to the choice of
law principles of such state.
Section 11.3. No Third Party Beneficiaries. Nothing in this Agreement
is intended, nor shall it be construed, to confer any rights or benefits upon
any Person (including, but not limited to, any employee or former employee of
GSHS or any Subsidiary) other than Sellers and Buyer (and their successors and
assigns to the extent specifically permitted by Section 11.7) and no other
Person not a party to this Agreement shall have any rights or remedies under
this Agreement, except for Persons entitled to indemnification under Article 9
(and such rights and remedies shall be limited solely to those provided by
Article 9).
Section 11.4. Entire Agreement. This Agreement, the Buyer Disclosure
Schedule, the GPA Disclosure Letter, the GSHS Disclosure Schedule, the Seller
Disclosure Schedule, the letter agreement, dated the date of this Agreement,
between Buyer and Sellers, the Exchange Agreement, the GPA Stock Exchange
Agreement and the New Stockholders' Agreement contain the entire agreement
between the parties with respect to the subject matters of this Agreement and
such other agreements, and such agreements supersede all prior drafts of such
agreements, all prior and contemporaneous agreements, representations,
negotiations, discussions, correspondence, communications, the letter of intent,
dated September 14, 1995, between Buyer and GSHS, term sheets and understandings
of the parties, except for the Confidentiality Agreement, which agreement is
ratified and remains in full force and effect. There are no agreements,
understandings, representations and warranties between the parties other than
those set forth or referred to in this Agreement and such specifically listed
above other agreements.
Section 11.5. Expenses. Except as set forth in this Agreement,
whether the Stock Purchase is or is not consummated, all legal and other costs
and expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such costs
and expenses, except that Sellers and Buyer each shall pay and be responsible
for one-half of any stock transfer taxes applicable to the sale of the GSHS
Shares.
Section 11.6. Notices. All notices under this Agreement shall be
sufficiently given for all purposes under this Agreement if in writing (a) when
delivered personally; (b) three Business Days after mailing in the United States
Postal Service; (c) one day after sending by documented overnight delivery
service; or (d) when receipt is confirmed, by telecopy, telefax or other
electronic transmission service to the appropriate address or number as set
forth below.
Notices to Sellers shall be addressed to:
52
Blue Cross and Blue Shield of New Jersey, Inc.
3 Penn Plaza East
Newark, New Jersey 07105-2200
Attention: Robert J. Pures
Telecopier: (201) 466-8288
with a copy to:
Blue Cross and Blue Shield of New Jersey, Inc.
3 Penn Plaza East
Newark, New Jersey 07105-2200
Attention: Susan S. Connor, Esq.
Telecopier: (201) 466-7759
Health Care Service Corporation
233 North Michigan Avenue
Chicago, Illinois 60601
Attention: Sherman Wolff
Telecopier: (312) 819-1220
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Attention: Robert Kinderman, Esq.
Telecopier: (312) 861-2200
Independence Blue Cross
1901 Market Street
Philadelphia, Pennsylvania 19103
Attention: Richard J. Neeson
Telecopier: (215) 241-3527
with copies to:
Independence Blue Cross
1901 Market Street
Philadelphia, Pennsylvania 19103
Attention: Patricia R. Hatler, Esq.
Telecopier: (215) 241-2426
and
Dilworth, Paxson, Kalish & Kauffman
3200 Mellon Bank Center
1735 Market Street
Philadelphia, Pennsylvania 19103-7596
Attention: Joseph P. Canuso, Esq.
53
Telecopier: (215) 575-7200
Medical Service Association of Pennsylvania, Inc.
1800 Center Street
Camp Hill, Pennsylvania 17089
Attention: Walter F. Froh
Telecopier: (717) 731-2362
with a copy to:
Buchanan Ingersoll, P.C.
One Oxford Centre
301 Grant Street, 20th Floor
Pittsburgh, Pennsylvania 15219-1410
Attention: Thomas G. Buchanan, Esq.
Telecopier: (412) 562-1041
Pierce County Medical Bureau, Inc.
1501 Market Street
P.O. Box 2354
Tacoma, Washington 98401-2354
Attention: Donald P. Sacco
Telecopier: (206) 597-7023
with a copy to:
Karr, Tuttle & Campbell
1201 Third Avenue
Suite 2900
Seattle, Washington 98101
Attention: Walt Maas, Esq.
Telecopier: (206) 682-7100
Veritus, Inc.
120 Fifth Avenue Place
Pittsburgh, Pennsylvania 15222
Attention: Neil Hollander
Telecopier: (412) 255-8550
with a copy to:
Doepken Keevican Weiss & Medved
37th Floor, USX Tower
600 Grant Street
Pittsburgh, Pennsylvania 15219
Attention: David Hirsch, Esq.
Telecopier: (412) 355-2609
and a copy of Notices to any Seller to:
54
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank and Trust Building
Two Hopkins Plaza
Baltimore, Maryland 21201
Attention: Alan D. Yarbro, Esq.
Telecopier: (410) 244-7742
or at such other address and to the attention of such other person as each
Seller may designate by written notice to Buyer. Notices to GSHS shall be
addressed to:
Green Spring Health Services, Inc.
Clark Building, Suite 500
5565 Sterret Place
Columbia, Maryland 21044-2642
Attention: Joyce N. Fitch, Esq.
Telecopier: (410) 740-2686
with a copy to:
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank and Trust Building
Two Hopkins Plaza
Baltimore, Maryland 21201
Attention: Alan D. Yarbro, Esq.
Telecopier: (410) 244-7742
or at such other address and to the attention of such other person as may
designate by written notice to Buyer. Notices to Buyer shall be addressed to:
Charter Medical Corporation
Suite 1400
3414 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Michael Catalano
Telecopier: (404) 814-5797
with copies to:
Charter Medical Corporation
3414 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Cherie M. Fuzzell, Esq.
Telecopier: (404) 814-5795
and
55
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Robert W. Miller, Esq.
Telecopier: (404) 572-5144
or to such other address and to the attention of such other
person as Buyer may designate by written notice to Sellers.
Section 11.7. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns; provided, however, except for the
right of Buyer to grant to or for the benefit of the lenders under the Credit
Agreement a security interest in its rights under this Agreement pursuant to the
Credit Agreement and the documents from time to time securing the same, no party
to this Agreement shall have the right to assign its rights or interests in or
delegate its obligations under this Agreement without the express prior written
consent of all other parties to this Agreement.
Section 11.8. Headings; Definitions. The section and article headings
contained in this Agreement are inserted for convenience and reference only and
will not affect the meaning or interpretation of this Agreement. All references
to Sections or Articles contained in this Agreement mean Sections or Articles of
this Agreement unless otherwise stated. All capitalized terms defined in this
Agreement are equally applicable to both the singular and plural forms of such
terms.
Section 11.9. Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
the party against whom enforcement of any such modification or amendment is
sought. Any party to this Agreement may, only by an instrument in writing, waive
compliance by the other party to this Agreement with any term or provision of
this Agreement. The waiver by any parties to this Agreement of a breach of any
term or provision of this Agreement shall not be construed as a waiver of any
subsequent breach.
Section 11.10. Specific Performance. Each of the parties acknowledges
that money damages would not be a sufficient remedy for any breach of this
Agreement and that irreparable harm would result if this Agreement were not
specifically enforced. Therefore, the rights and obligations of the parties
under this Agreement shall be enforceable by a decree of specific performance
issued by any court of competent jurisdiction, and appropriate injunctive relief
may be applied for and granted in connection with such decree. A party's right
to specific performance shall be in addition to all other legal or equitable
remedies available to such party.
Section 11.11. Severability of Provisions. If any provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner adverse to any party. Upon any such determination, the parties to
this Agreement shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated to this Agreement
are fulfilled to the extent possible.
56
Section 11.12. Seller Liability. Except as otherwise set forth in
this Agreement, any representations or warranties of, any obligations of, or
actions required to be taken by, Sellers set forth in this Agreement shall be
several and not joint.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the date first above written.
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.
By: /s/ Robert J. Pures
---------------------------------------------
Title: Senior Vice President -
Administration, Chief
Financial Officer and
Treasurer
HEALTH CARE SERVICE CORPORATION
By: /s/ Sherman R. Wolff
---------------------------------------------
Title: Senior Vice President
INDEPENDENCE BLUE CROSS
By: /s/ G. Fred DiBona, Jr.
--------------------------------------------
Title: President and Chief
Executive Officer
MEDICAL SERVICE ASSOCIATION OF PENNSYLVANIA
By: /s/ Samuel D. Ross
----------------------------------------------
Title: President and Chief
Executive Officer
57
PIERCE COUNTY MEDICAL BUREAU
By: /s/ Donald P. Sacco
--------------------------------------------
Title: Chairman
VERITUS, INC.
By: /s/ William M. Lowry
--------------------------------------------
Title: President and Chief
Executive Officer
CHARTER MEDICAL CORPORATION
By: /s/ E. M. Crawford
--------------------------------------------
Title: Chief Executive Officer
GREEN SPRING HEALTH SERVICES, INC.
By: /s/ Henry Harbin
--------------------------------------------
Title: President and Chief
Executive Officer
58
CONFORMED COPY
GPA STOCK EXCHANGE AGREEMENT
between
GREEN SPRING HEALTH SERVICES, INC.
and
CHARTER MEDICAL CORPORATION
dated
November 14, 1995
CONFORMED COPY
GPA STOCK EXCHANGE AGREEMENT
THIS GPA STOCK EXCHANGE AGREEMENT ("Agreement") dated as of the 14th
day of November, 1995, is made and entered into by and between Charter Medical
Corporation, a Delaware corporation ("Charter") and Green Spring Health
Services, Inc., a Delaware corporation ("GSHS");
WHEREAS, Charter owns of record and beneficially all of the currently
outstanding shares of common stock of Group Practice Affiliates, Inc., a
Delaware corporation and a wholly-owned subsidiary of Charter ("GPA"); and
WHEREAS, GSHS wishes to acquire and Charter wishes to transfer all of
the GPA Common Stock in a transaction intended to qualify as a reorganization
within the meaning of Section 368(a)(1)(B) of the Code (the exchange of such
shares is referred to in this Agreement as the "GPA Stock Exchange");
NOW THEREFORE, upon the terms and subject to the conditions set forth
in this Agreement and the Stock Purchase Agreement (as defined herein), the
parties agree as follows:
ARTICLE I.
TRANSFER OF STOCK; CLOSING
Section 1. Number of Shares. Charter agrees to transfer to GSHS all
of the GPA Common Stock representing all of the issued and outstanding shares of
common stock of GPA in exchange for an aggregate of 969.04 shares of voting
common stock of GSHS, par value $0.01 per share, to be issued at the Closing to
Charter.
Section 2. Transfer and Delivery of the GPA Common Stock and the New
GSHS Shares. At the GPA Closing, Charter shall sell, assign, transfer and
deliver to GSHS all of the GPA Common Stock by delivery to GSHS of a certificate
or certificates representing such GPA Common Stock, duly endorsed for transfer
or accompanied by duly executed stock powers. As provided for in the Stock
Purchase Agreement, GSHS shall, immediately upon the GPA Closing and the
Closing, issue to Charter a certificate or certificates, in the name of Charter,
representing the GSHS Shares and the New GSHS Shares.
Section 3. Time and Place of Closing. The closing (the "GPA
Closing") of the GPA Stock Exchange will be held at the same time and place as
the Closing.
ARTICLE II.
TERMINATION
Section 1. Termination. This Agreement may be terminated at
any time prior to the GPA Closing by either party to this Agreement upon the
termination of the Stock Purchase Agreement.
Section 2. Procedure and Effect of Termination. In the event of
termination of this Agreement pursuant to Section 1 of this Article II, written
notice of such termination shall promptly be given by the terminating party to
the other party, and this Agreement shall upon that notice terminate and become
void and have no effect, and the transactions contemplated by this Agreement
shall be abandoned without further action by the parties, except that the
provisions of the Confidentiality Agreement and Section 11.5 of the Stock
Purchase Agreement shall survive the
termination of this Agreement, provided, however, that such termination shall
not relieve any party of any liability for any breach by it of this Agreement.
ARTICLE III.
MISCELLANEOUS
Section 1. Stock Purchase Agreement. Capitalized terms used but not
otherwise defined in this Agreement shall have the definitions ascribed to such
terms in that certain Stock Purchase Agreement, dated as of the 14th day of
November, 1995, by and among Blue Cross and Blue Shield of New Jersey, Inc., a
New Jersey health service corporation, Health Care Service Corporation, an
Illinois legal mutual reserve company, Independence Blue Cross, a Pennsylvania
non-profit hospital plan corporation, Medical Service Association of
Pennsylvania, a Pennsylvania corporation, Pierce County Medical Bureau, Inc., a
Washington non-profit corporation, Veritus, Inc., a Pennsylvania non-profit
corporation, GSHS and Charter.
Section 2. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party.
Section 3. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to a
contract executed and performed in such state without reference to the choice of
law principles of such state.
Section 4. No Third Party Beneficiaries. Nothing in this Agreement is
intended, nor shall it be construed, to confer any rights or benefits upon any
Person (including, but not limited to, any employee or former employee of GSHS
or any Subsidiary) other than Charter and GSHS (and their successors and assigns
to the extent specifically permitted by Section 7 of this Article III) and no
other Person not a party to this Agreement shall have any rights or remedies
under this Agreement, except for Persons entitled to indemnification under
Article 9 of the Stock Purchase Agreement (and such rights and remedies shall be
limited solely to those provided by Article 9 of the Stock Purchase Agreement).
Section 5. Entire Agreement. This Agreement, the Buyer Disclosure
Schedule, the GPA Disclosure Letter, the GSHS Disclosure Schedule, the Seller
Disclosure Schedule, the Exchange Agreement, the Stock Purchase Agreement and
the New Stockholders' Agreement contain the entire agreement between the parties
with respect to the subject matters of this Agreement and such other agreements,
and such agreements supersede all prior and contemporaneous agreements,
representations, negotiations, discussions, correspondence, communications, term
sheets and understandings of the parties, except for the Confidentiality
Agreement, which agreement is ratified and remains in full force and effect.
There are no agreements, understandings, representations and warranties between
the parties other than those set forth or referred to in this Agreement and such
specifically listed above other agreements.
Section 6. Notices. All notices under this Agreement shall be
sufficiently given for all purposes under this Agreement if in writing (a) when
delivered personally; (b) three Business Days after mailing in the United States
Postal Service; (c) one day after sending by documented overnight delivery
service; or (d) when receipt is confirmed, by telecopy, telefax or other
electronic transmission service to the appropriate address or number as set
forth below.
Notices to GSHS shall be addressed to:
Green Spring Health Services, Inc.
Clark Building, Suite 500
5565 Sterret Place
Columbia, Maryland 21044-2642
Attention: Joyce N. Fitch, Esq.
Telecopier: (410) 740-2686
CONFORMED COPY
with a copy to:
Venable, Baetjer and Howard, LLP
1800 Mercantile Bank and Trust Building
Two Hopkins Plaza
Baltimore, Maryland 21201
Attention: Alan D. Yarbro, Esq.
Telecopier: (410) 244-7742
or at such other address and to the attention of such other person as may
designate by written notice to Charter. Notices to Charter shall be addressed
to:
Charter Medical Corporation
Suite 1400
3414 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Michael Catalano
Telecopier: (404) 814-5797
with copies to:
Charter Medical Corporation
3414 Peachtree Road, N.E.
Atlanta, Georgia 30326
Attention: Cherie M. Fuzzell, Esq.
Telecopier: (404) 814-5795
and
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Robert W. Miller, Esq.
Telecopier: (404) 572-5144
or to such other address and to the attention of such other person as Charter
may designate by written notice to GSHS.
Section 7. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns; provided, however, except for the
right of Charter to grant to or for the benefit of the lenders under the Credit
Agreement a security interest in its rights under this Agreement pursuant to the
Credit Agreement and the documents from time to time securing the same, neither
party to this Agreement shall have the right to assign its rights or interests
in or delegate its obligations under this Agreement without the express prior
written consent of the other party to this Agreement.
Section 8. Amendments and Waivers. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Any
party to this Agreement may, only by an instrument in writing, waive compliance
by the other party to this Agreement with any term or provision of this
Agreement. The waiver by any party to this Agreement of a breach of any term or
provision of this Agreement shall not be construed as a waiver of any subsequent
breach.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the date first above written.
CHARTER MEDICAL CORPORATION
By: /s/ E. M. Crawford
----------------------------------------
Title: Chief Executive Officer
GREEN SPRING HEALTH SERVICES, INC.
By: /s/ Henry Harbin
-----------------------------------------
Title:President and Chief Executive Officer
5
3-MOS
SEP-30-1996
DEC-31-1995
103,483,000
0
210,738,000
0
5,962,000
335,262,000
604,276,000
100,240,000
1,146,215,000
246,379,000
615,294,000
0
0
7,166,000
97,014,000
1,146,215,000
295,665,000
295,665,000
0
251,114,000
12,003,000
0
13,822,000
18,726,000
7,959,000
9,748,000
0
0
0
9,748,000
.35
0
