Document:

Exhibit 4.1

 

EXECUTION VERSION

 

$200,000,000
 CREDIT AGREEMENT

 

among

 

MAGELLAN PHARMACY SERVICES, INC.,
 as Borrower,

 

MAGELLAN HEALTH, INC.,
 VARIOUS LENDERS

 

and

 

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., 
 as Administrative Agent

 

 

Dated as of June 27, 2016

 

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., 
 as SOLE BOOKRUNNER,

 

SUNTRUST BANK and
 WELLS FARGO BANK, NATIONAL ASSOCIATION,
 as Co-Syndication Agents,

 

and

 

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,
  SUNTRUST ROBINSON HUMPHREY, INC. and
 WELLS FARGO SECURITIES, LLC,
 as JOINT LEAD ARRANGERS

 

 

TABLE OF CONTENTS

 

 

	
 
    	
 
    	
PAGE
    
	
 
    	
 
    	
 
    
	
Section 1.
    	
Amount and Terms of Credit
    	
1
    
	
 
    	
 
    	
 
    
	
1.01
    	
The Commitments
    	
1
    
	
1.02
    	
Minimum Amount of Each Borrowing
    	
1
    
	
1.03
    	
Notice of Borrowing
    	
1
    
	
1.04
    	
Disbursement of Funds
    	
2
    
	
1.05
    	
Notes
    	
2
    
	
1.06
    	
Conversions
    	
3
    
	
1.07
    	
Pro Rata Borrowings
    	
3
    
	
1.08
    	
Interest
    	
3
    
	
1.09
    	
Interest Periods for Eurodollar   Loans
    	
4
    
	
1.10
    	
Increased   Costs, Illegality, etc.
    	
5
    
	
1.11
    	
Compensation
    	
6
    
	
1.12
    	
Change of Lending Office
    	
7
    
	
1.13
    	
Replacement of Lenders
    	
7
    
	
 
    	
 
    	
 
    
	
Section 2.
    	
[Reserved]
    	
8
    
	
 
    	
 
    	
 
    
	
Section 3.
    	
Fees; Reductions of Commitment
    	
8
    
	
 
    	
 
    	
 
    
	
3.01
    	
Fees
    	
8
    
	
3.02
    	
[Reserved]
    	
8
    
	
3.03
    	
Mandatory Reduction of   Commitments
    	
8
    
	
 
    	
 
    	
 
    
	
Section 4.
    	
Prepayments; Payments; Taxes
    	
8
    
	
 
    	
 
    	
 
    
	
4.01
    	
Voluntary Prepayments
    	
8
    
	
4.02
    	
[Reserved]
    	
9
    
	
4.03
    	
Method and Place of Payment
    	
9
    
	
4.04
    	
Net Payments
    	
9
    
	
 
    	
 
    	
 
    
	
Section 5.
    	
Conditions Precedent to the   Effective Date
    	
13
    
	
 
    	
 
    	
 
    
	
5.01
    	
Execution of Agreement; Notes
    	
13
    
	
5.02
    	
[Reserved]
    	
13
    
	
5.03
    	
Opinion of Counsel
    	
13
    
	
5.04
    	
Corporate Documents; Proceedings;   etc.
    	
13
    
	
5.05
    	
[Reserved]
    	
13
    
	
5.06
    	
[Reserved]
    	
13
    
	
5.07
    	
[Reserved]
    	
13
    
	
5.08
    	
[Reserved]
    	
13
    
	
5.09
    	
Guaranties
    	
13
    
	
5.10
    	
[Reserved]
    	
13
    
	
5.11
    	
Financial Statements
    	
14
    
	
5.12
    	
Solvency Certificate
    	
14
    
	
5.13
    	
Fees, etc.
    	
14
    
	
5.14
    	
Patriot Act
    	
14
    

 

 

	
Section 6.
    	
Conditions Precedent to the   Borrowing on the Effective Date
    	
14
    
	
 
    	
 
    	
 
    
	
6.01
    	
No Default; Representations and   Warranties
    	
14
    
	
6.02
    	
Notice of Borrowing
    	
14
    
	
 
    	
 
    	
 
    
	
Section 7.
    	
Representations, Warranties and   Agreements
    	
14
    
	
 
    	
 
    	
 
    
	
7.01
    	
Organizational Status
    	
14
    
	
7.02
    	
Power and Authority
    	
15
    
	
7.03
    	
No Violation
    	
15
    
	
7.04
    	
Approvals
    	
15
    
	
7.05
    	
Financial Statements; No Material   Adverse Effect
    	
15
    
	
7.06
    	
Litigation
    	
16
    
	
7.07
    	
True and Complete Disclosure
    	
16
    
	
7.08
    	
Margin Regulations
    	
16
    
	
7.09
    	
Tax Returns and Payments
    	
16
    
	
7.10
    	
Compliance with ERISA
    	
17
    
	
7.11
    	
[Reserved]
    	
18
    
	
7.12
    	
Properties
    	
18
    
	
7.13
    	
[Reserved]
    	
18
    
	
7.14
    	
Subsidiaries; etc.
    	
18
    
	
7.15
    	
Compliance with   Statutes, etc.
    	
18
    
	
7.16
    	
Investment Company Act
    	
18
    
	
7.17
    	
[Reserved]
    	
18
    
	
7.18
    	
Labor Relations
    	
18
    
	
7.19
    	
[Reserved]
    	
18
    
	
7.20
    	
[Reserved]
    	
18
    
	
7.21
    	
[Reserved]
    	
19
    
	
7.22
    	
[Reserved]
    	
19
    
	
7.23
    	
Anti-Corruption Laws and   Sanctions
    	
19
    
	
 
    	
 
    	
 
    
	
Section 8.
    	
Affirmative Covenants
    	
19
    
	
 
    	
 
    	
 
    
	
8.01
    	
Information Covenants
    	
19
    
	
8.02
    	
Books, Records and Inspections;   Annual Meetings
    	
20
    
	
8.03
    	
Maintenance of Property;   Insurance
    	
21
    
	
8.04
    	
Existence; Franchises
    	
21
    
	
8.05
    	
Compliance with   Statutes, etc.
    	
21
    
	
8.06
    	
[Reserved]
    	
21
    
	
8.07
    	
ERISA
    	
21
    
	
8.08
    	
End of Fiscal Years; Fiscal   Quarters
    	
21
    
	
8.09
    	
Performance of Obligations
    	
22
    
	
8.10
    	
Payment of Taxes
    	
22
    
	
8.11
    	
Use of Proceeds
    	
22
    
	
8.12
    	
Further Assurances; etc.
    	
22
    
	
 
    	
 
    	
 
    
	
Section 9.
    	
Negative Covenants
    	
22
    
	
 
    	
 
    	
 
    
	
9.01
    	
Liens
    	
22
    
	
9.02
    	
Consolidation, Merger, Purchase   or Sale of Assets, etc.
    	
25
    

 

ii

 

	
9.03
    	
Dividends
    	
27
    
	
9.04
    	
Indebtedness
    	
28
    
	
9.05
    	
Advances, Investments and   Loans
    	
30
    
	
9.06
    	
Transactions with Affiliates
    	
32
    
	
9.07
    	
[Reserved]
    	
33
    
	
9.08
    	
Consolidated Interest Coverage   Ratio
    	
33
    
	
9.09
    	
Total Leverage Ratio
    	
33
    
	
9.10
    	
Limitations on Payments of Permitted   Subordinated Debt; Modifications of Certificate of Incorporation, By-Laws and   Documents Governing Permitted Subordinated Debt
    	
33
    
	
9.11
    	
Use of Proceeds
    	
34
    
	
9.12
    	
Business, etc.
    	
34
    
	
 
    	
 
    	
 
    
	
Section 10.
    	
Events of Default
    	
34
    
	
 
    	
 
    	
 
    
	
10.01
    	
Payments
    	
34
    
	
10.02
    	
Representations, etc.
    	
34
    
	
10.03
    	
Covenants
    	
35
    
	
10.04
    	
Default Under Other Agreements
    	
35
    
	
10.05
    	
Bankruptcy, etc.
    	
35
    
	
10.06
    	
ERISA
    	
35
    
	
10.07
    	
[Reserved]
    	
36
    
	
10.08
    	
Guaranty
    	
36
    
	
10.09
    	
Judgments
    	
36
    
	
10.10
    	
Change of Control
    	
36
    
	
 
    	
 
    	
 
    
	
Section 11.
    	
Defined Terms
    	
37
    
	
 
    	
 
    	
 
    
	
Section 12.
    	
The Administrative Agent
    	
55
    
	
 
    	
 
    	
 
    
	
12.01
    	
Appointment
    	
55
    
	
12.02
    	
Nature of Duties
    	
55
    
	
12.03
    	
Lack of Reliance on the   Administrative Agent
    	
56
    
	
12.04
    	
Certain Rights of the   Administrative Agent
    	
56
    
	
12.05
    	
Reliance
    	
56
    
	
12.06
    	
Indemnification
    	
56
    
	
12.07
    	
The Administrative Agent in its   Individual Capacity
    	
57
    
	
12.08
    	
Holders
    	
57
    
	
12.09
    	
Resignation by the Administrative   Agent
    	
57
    
	
 
    	
 
    	
 
    
	
Section 13.
    	
Miscellaneous
    	
58
    
	
 
    	
 
    	
 
    
	
13.01
    	
Payment of Expenses, etc.
    	
58
    
	
13.02
    	
Right of Setoff
    	
59
    
	
13.03
    	
Notices; Platform
    	
59
    
	
13.04
    	
Benefit of Agreement;   Assignments; Participations
    	
60
    
	
13.05
    	
No Waiver; Remedies Cumulative
    	
62
    
	
13.06
    	
Payments Pro Rata
    	
62
    
	
13.07
    	
Calculations; Computations
    	
63
    

 

iii

 

	
13.08
    	
GOVERNING LAW; SUBMISSION TO   JURISDICTION; VENUE; WAIVER OF JURY TRIAL
    	
63
    
	
13.09
    	
Counterparts
    	
64
    
	
13.10
    	
Effectiveness
    	
64
    
	
13.11
    	
Headings Descriptive
    	
64
    
	
13.12
    	
Amendment or Waiver; etc.
    	
64
    
	
13.13
    	
Survival
    	
65
    
	
13.14
    	
Domicile of Loans
    	
65
    
	
13.15
    	
Register
    	
66
    
	
13.16
    	
Confidentiality
    	
66
    
	
13.17
    	
No Fiduciary Duty
    	
67
    
	
13.18
    	
Patriot Act
    	
67
    
	
13.19
    	
Acknowledgement and Consent to   Bail-In of EEA Financial Institutions
    	
67
    

 

iv

 

SCHEDULES

 

	
SCHEDULE I
    	
—
    	
Commitments
    
	
SCHEDULE II
    	
—
    	
[Reserved]
    
	
SCHEDULE III
    	
—
    	
[Reserved]
    
	
SCHEDULE IV
    	
—
    	
[Reserved]
    
	
SCHEDULE V
    	
—
    	
Subsidiaries
    
	
SCHEDULE VI
    	
—
    	
Existing Indebtedness
    
	
SCHEDULE VII
    	
—
    	
[Reserved]
    
	
SCHEDULE VIII
    	
—
    	
Existing Liens
    
	
SCHEDULE IX
    	
—
    	
Existing Investments
    
	
SCHEDULE X
    	
—
    	
Certain Tax Matters
    
	
 
    	
 
    	
 
    
	
EXHIBITS
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
EXHIBIT A-1
    	
—
    	
Notice of Borrowing
    
	
EXHIBIT A-2
    	
—
    	
Notice of Conversion/Continuation
    
	
EXHIBIT B
    	
—
    	
Note
    
	
EXHIBIT C
    	
—
    	
[Reserved]
    
	
EXHIBIT D-1
    	
—
    	
Section 4.04(c)(ii) Certificate   (For Non-U.S. Lenders That Are Not Partnerships For U.S. Federal Income Tax   Purposes)
    
	
EXHIBIT D-2
    	
—
    	
Section 4.04(c)(ii) Certificate   (For Non-U.S. Participants That Are Not Partnerships For U.S. Federal Income   Tax Purposes)
    
	
EXHIBIT D-3
    	
—
    	
Section 4.04(c)(ii) Certificate   (For Non-U.S. Participants That Are Partnerships For U.S. Federal Income Tax   Purposes)
    
	
EXHIBIT D-4
    	
—
    	
Section 4.04(c)(ii) Certificate   (For Non-U.S. Lenders That Are Partnerships For U.S. Federal Income Tax   Purposes)
    
	
EXHIBIT E
    	
—
    	
[Reserved]
    
	
EXHIBIT F
    	
—
    	
Officers’ Certificate
    
	
EXHIBIT G
    	
—
    	
[Reserved]
    
	
EXHIBIT H
    	
—
    	
Guaranty
    
	
EXHIBIT I
    	
—
    	
[Reserved]
    
	
EXHIBIT J
    	
—
    	
Solvency Certificate
    
	
EXHIBIT K
    	
—
    	
Compliance Certificate
    
	
EXHIBIT L
    	
—
    	
Assignment and Assumption   Agreement
    

 

v

 

CREDIT AGREEMENT, dated as of June 27, 2016, among MAGELLAN PHARMACY SERVICES, INC., a Delaware corporation (the “Borrower”), MAGELLAN HEALTH, INC., a Delaware corporation (“Magellan”), the Lenders party hereto from time to time, and THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as administrative agent (in such capacity, the “Administrative Agent”).  All capitalized terms used herein and defined in Section 11 are used herein as therein defined.

 

W I T N E S S E T H:

 

WHEREAS, the Borrower has requested that the Lenders provide Commitments hereunder in an initial aggregate principal amount of $200,000,000; and

 

WHEREAS, subject to and upon the terms and conditions set forth herein, the Lenders are willing to make available to the Borrower the credit facility provided for herein;

 

NOW, THEREFORE, IT IS AGREED:

 

Section 1.                                           Amount and Terms of Credit.

 

1.01                        The Commitments.  Subject to and upon the terms and conditions set forth herein, each Lender severally agrees to make, on the Effective Date, a single term loan (each a “Loan” and, collectively, the “Loans”) to the Borrower in an aggregate principal amount not to exceed such Lender respective Commitment, which Loans (i) shall be denominated in Dollars and (ii) shall, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans; provided, that all Loans comprising the same Borrowing shall at all times be of the same Type (it being understood that multiple simultaneous Term Borrowings may be made on the same date).  Amounts repaid or prepaid in respect of Loans may not be reborrowed.

 

1.02                        Minimum Amount of Each Borrowing.  The aggregate principal amount of each Borrowing shall not be less than $1,000,000.  More than one Borrowing may occur on the same date, but at no time shall there be outstanding more than five Borrowings of Eurodollar Loans in the aggregate.

 

1.03                        Notice of Borrowing.  (a) Whenever the Borrower desires to incur (x) Eurodollar Loans hereunder, the Borrower shall give the Administrative Agent at the Notice Office at least three Business Days’ prior notice of each Eurodollar Loan to be incurred hereunder and (y) Base Rate Loans hereunder, the Borrower shall give the Administrative Agent at the Notice Office at least one Business Day’s prior notice of each Base Rate Loan to be incurred hereunder; provided, that (in each case) any such notice shall be deemed to have been given on a certain day only if given before 11:00 A.M. (New York time) on such day. Each such notice (each a “Notice of Borrowing”), except as otherwise expressly provided in Section 1.10, shall be irrevocable and shall be in writing, or by telephone promptly confirmed in writing, in the form of Exhibit A-1, appropriately completed to specify:  (i) the aggregate principal amount of the Loans to be incurred pursuant to such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), and (iii) whether the Loans being incurred pursuant to such Borrowing are to be initially maintained as Base Rate Loans or, to the extent permitted hereunder, Eurodollar Loans and, if Eurodollar Loans, the initial Interest Period to be applicable thereto.  The Administrative Agent shall promptly give each Lender notice of such proposed Borrowing, of such Lender’s proportionate share thereof and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing.

 

(b)                                 Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice of any Borrowing or prepayment of Loans, the Administrative Agent may act without liability upon the basis of telephonic notice of such Borrowing or prepayment, as the case may

 

 

be, believed by the Administrative Agent, as the case may be, in good faith to be from an Authorized Officer of the Borrower, prior to receipt of written confirmation.  In each such case, the Borrower hereby waives the right to dispute the Administrative Agent’s record of the terms of such telephonic notice of such Borrowing or prepayment of Loans, as the case may be, absent manifest error.

 

1.04                        Disbursement of Funds.  No later than 1:00 P.M. (New York time) on the date specified in each Notice of Borrowing, each applicable Lender will make available its pro rata portion (determined in accordance with Section 1.07) of each such Borrowing requested to be made on such date.  All such amounts will be made available in Dollars and in immediately available funds at the Payment Office, and the Administrative Agent will make available to the Borrower at the Payment Office the aggregate of the amounts so made available by the applicable Lenders.  Unless the Administrative Agent shall have been notified by any Lender prior to the date of Borrowing that such Lender does not intend to make available to the Administrative Agent such Lender’s portion of any Borrowing to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date of Borrowing and the Administrative Agent may (but shall not be obligated to), in reliance upon such assumption, make available to the Borrower a corresponding amount.  If such corresponding amount is not in fact made available to the Administrative Agent by such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender.  If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall promptly (but in any event within one Business Day thereafter) pay such corresponding amount to the Administrative Agent.  The Administrative Agent also shall be entitled to recover on demand from such Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower until the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (i) if recovered from such Lender, the overnight Federal Funds Rate for the first three days and at the interest rate otherwise applicable to such Loans for each day thereafter, and (ii) if recovered from the Borrower, the rate of interest applicable to the respective Borrowing, as determined pursuant to Section 1.08.  Nothing in this Section 1.04 shall be deemed to relieve any Lender from its obligation to make Loans hereunder or to prejudice any rights which the Borrower may have against any Lender as a result of any failure by such Lender to make Loans hereunder.

 

1.05                        Notes.  (a) The Borrower’s obligation to pay the principal of, and interest on, the Loans made by each Lender shall be evidenced in the Register maintained by the Administrative Agent pursuant to Section 13.15 and shall, if requested by such Lender, also be evidenced by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B, with blanks appropriately completed in conformity herewith (each a “Note” and, collectively, the “Notes”).  Each Note issued to each Lender shall (i) be executed by the Borrower, (ii) be payable to such Lender or its registered assigns and be dated the Effective Date (or, if issued after the Effective Date, be dated the date of the issuance thereof), (iii) be in a stated principal amount equal to the Loans funded by such Lender and be payable in the outstanding principal amount of the Loans evidenced thereby from time to time, (iv) mature on the Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents.

 

(b)                                 Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and prior to any transfer of any of its Notes will endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby.  Failure to make any such notation or any error in such notation shall not affect the Borrower’s obligations in respect of such Loans.

 

2

 

(c)                                  Notwithstanding anything to the contrary contained above in this Section 1.05 or elsewhere in this Agreement, Notes shall only be delivered to Lenders which at any time specifically request the delivery of such Notes.  No failure of any Lender to request or obtain a Note evidencing its Loans to the Borrower shall affect or in any manner impair the obligations of the Borrower to pay the Loans (and all related Obligations) incurred by the Borrower which would otherwise be evidenced thereby in accordance with the requirements of this Agreement, and shall not in any way affect the guaranties therefor provided pursuant to the various Credit Documents.  Any Lender which does not have a Note evidencing its outstanding Loans shall in no event be required to make the notations otherwise described in preceding clause (b).  At any time when any Lender requests the delivery of a Note to evidence any of its Loans, the Borrower shall promptly execute and deliver to the respective Lender, at the Borrower’s expense, the requested Note in the appropriate amount or amounts to evidence such Loans.

 

1.06                        Conversions.  The Borrower shall have the option to convert, on any Business Day, all or a portion equal to at least $1,000,000 of the outstanding principal amount of Loans made pursuant to one or more Borrowings of one Type into a Borrowing of another Type of Loans; provided, that (i) except as otherwise provided in Section 1.10(b), Eurodollar Loans may be converted into Base Rate Loans only on the last day of an Interest Period applicable to the Loans being converted and no such partial conversion of Eurodollar Loans shall reduce the outstanding principal amount of such Eurodollar Loans made pursuant to a single Borrowing to less than $1,000,000, (ii) Base Rate Loans may not be converted into Eurodollar Loans if (x) a Default or an Event of Default under Section 10.05 is in existence on the date of the conversion or (y) any other Default or Event of Default is in existence on the date of the conversion and the Administrative Agent has received instructions from the Required Lenders to that effect, and (iii) no conversion pursuant to this Section 1.06 shall result in a greater number of Borrowings of Eurodollar Loans than is permitted under Section 1.02.  Each such conversion shall be effected by the Borrower by giving the Administrative Agent at the Notice Office prior to 11:00 A.M. (New York time) at least three Business Days prior notice (each a “Notice of Conversion/Continuation”) in the form of Exhibit A-2, appropriately completed to specify (A) the Loans to be so converted, (B) the Borrowing or Borrowings pursuant to which such Loans were incurred and, (C) in the case of a conversion into Eurodollar Loans, the Interest Period to be initially applicable thereto.  The Administrative Agent shall give each Lender prompt notice of any such proposed conversion affecting any of its Loans.  Upon any such conversion the proceeds thereof will be deemed to be applied directly on the day of such conversion to prepay the outstanding principal amount of the Loans being converted.

 

1.07                        Pro Rata Borrowings.  All Borrowings under this Agreement shall be incurred from the Lenders pro rata on the basis of their respective Commitments.  It is understood that no Lender shall be responsible for any default by any other Lender of its obligation to make Loans hereunder and that each Lender shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder.

 

1.08                        Interest.  (a) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Base Rate Loan from the date of Borrowing thereof until the earlier of (i) the maturity thereof (whether by acceleration or otherwise) and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06 or 1.09, as applicable, at a rate per annum which shall be equal to the sum of the Applicable Margin as in effect from time to time plus the Base Rate as in effect from time to time.

 

(b)                                 The Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan from the date of Borrowing thereof until the earlier of (i) the maturity thereof (whether by acceleration or otherwise) and (ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10, as applicable, at a rate per annum which shall, during each

 

3

 

Interest Period applicable thereto, be equal to the sum of the Applicable Margin as in effect from time to time during such Interest Period plus the Eurodollar Rate for such Interest Period.

 

(c)                                  During the continuance of a Specified Default, principal and, to the extent permitted by law, overdue interest in respect of each Loan shall, in each case, bear interest at a rate per annum equal to the greater of (x) the rate which is 2% in excess of the rate then borne by such Loans and (y) the rate which is 2% in excess of the rate otherwise applicable to Base Rate Loans from time to time.  Interest that accrues under this Section 1.08(c) shall be payable on demand.

 

(d)                                 Accrued (and theretofore unpaid) interest shall be payable (i) in respect of each Base Rate Loan, (x) quarterly in arrears on each Quarterly Payment Date, (y) on the date of any repayment or prepayment in full of all outstanding Base Rate Loans, and (z) at maturity (whether by acceleration or otherwise) and, after such maturity, on demand, and (ii) in respect of each Eurodollar Loan, (x) on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period, and (y) on the date of any repayment or prepayment (on the amount repaid or prepaid), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand.

 

(e)                                  Upon each Interest Determination Date, the Administrative Agent shall determine the Eurodollar Rate for each Interest Period applicable to the respective Eurodollar Loans and shall promptly notify the Borrower and the Lenders thereof.  Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto.

 

1.09                        Interest Periods for Eurodollar Loans.  At the time the Borrower gives any Notice of Borrowing or Notice of Conversion/Continuation in respect of the making of, or conversion into, any Eurodollar Loan (in the case of the initial Interest Period applicable thereto) or prior to 11:00 A.M. (New York time) on the third Business Day prior to the expiration of an Interest Period applicable to such Eurodollar Loan (in the case of any subsequent Interest Period), the Borrower shall have the right to elect the Interest Period applicable to such Eurodollar Loan, which Interest Period shall, at the option of the Borrower, be a one, two, three or six month period (or if deposits of a corresponding maturity are available to all Lenders in the London interbank market, a one week or twelve month period); provided, that (in each case):

 

(i)                                     all Eurodollar Loans comprising a Borrowing shall at all times have the same Interest Period;

 

(ii)                                  the initial Interest Period for any Eurodollar Loan shall commence on the date of Borrowing of such Eurodollar Loan (including the date of any conversion thereto from a Base Rate Loan) and each Interest Period occurring thereafter in respect of such Eurodollar Loan shall commence on the day on which the next preceding Interest Period applicable thereto expires;

 

(iii)                               if any Interest Period for a Eurodollar Loan begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month;

 

(iv)                              if any Interest Period for a Eurodollar Loan would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period for a Eurodollar Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day;

 

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(v)                                 no Interest Period may be selected at any time when (x) a Specified Default is then in existence or (y) any other Event of Default is then in existence and the Administrative Agent has received instructions from the Required Lenders to that effect; and

 

(vi)                              no Interest Period in respect of any Borrowing of any Eurodollar Loans shall be selected which extends beyond the Maturity Date.

 

If by 11:00 A.M. (New York time) on the third Business Day prior to the expiration of any Interest Period applicable to a Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not permitted to elect, a new Interest Period to be applicable to such Eurodollar Loans as provided above, the Borrower shall be deemed to have elected to convert such Eurodollar Loans into Base Rate Loans effective as of the expiration date of such current Interest Period.

 

1.10                        Increased Costs, Illegality, etc.  (a) In the event that any Lender shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto but, with respect to clause (i) below, may be made only by the Administrative Agent):

 

(i)                                     on any Interest Determination Date that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or

 

(ii)                                  at any time, that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Loan because of (x) any Change in Law after the Effective Date, such as, but not limited to:  (A) a change in the basis of taxation of payment to any Lender of the principal of or interest on the Loans or the Notes or any other amounts payable hereunder (except for (x) taxes with respect to which additional amounts are paid pursuant to Section 4.04, (y) changes in the rate of tax on, or determined by reference to, the net income or net profits (or any franchise or similar tax imposed in lieu of a net income or net profits tax) of such Lender pursuant to the laws of the jurisdiction in which it is organized or in which its principal office or applicable lending office is located or any subdivision thereof or therein) or (z) taxes under FATCA or (B) a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate and/or (y) other circumstances arising since the Effective Date affecting such Lender, the interbank Eurodollar market or the position of such Lender in such market; or

 

(iii)                               at any time, that the making or continuance of any Eurodollar Loan has been made (x) unlawful by any law or governmental rule, regulation or order, (y) impossible by compliance by any Lender in good faith with any governmental request (whether or not having force of law) or (z) impracticable as a result of a contingency occurring after the Effective Date which materially and adversely affects the interbank Eurodollar market;

 

then, and in any such event, such Lender (or the Administrative Agent, in the case of clause (i) above) shall promptly give notice (by telephone promptly confirmed in writing) to the Borrower and, except in the case of clause (i) above, to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Lenders).  Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion/Continuation given by the Borrower with respect to Eurodollar Loans which have not yet been incurred (including by way of conversion) shall be deemed rescinded by the Borrower, (y) in the

 

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case of clause (ii) above, the Borrower agrees to pay to such Lender, upon such Lender’s written request therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its reasonable discretion shall determine) as shall be required to compensate such Lender for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing in reasonable detail the basis for the calculation thereof, submitted to the Borrower by such Lender shall, absent manifest error, be final and conclusive and binding on all the parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law.

 

(b)                                 At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii), the Borrower may, and in the case of a Eurodollar Loan affected by the circumstances described in Section 1.10(a)(iii), the Borrower shall, either (x) if the affected Eurodollar Loan is then being made initially or pursuant to a conversion, cancel such Borrowing by giving the Administrative Agent telephonic notice (confirmed in writing) on the same date that the Borrower was notified by the affected Lender or the Administrative Agent pursuant to Section 1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days’ written notice to the Administrative Agent, require the affected Lender to convert such Eurodollar Loan into a Base Rate Loan; provided, that, if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this Section 1.10(b).

 

(c)                                  If any Lender determines that any Change in Law after the date on which it became a Lender hereunder, will have the effect of increasing the amount of capital or liquidity required or expected to be maintained by such Lender or any corporation controlling such Lender based on the existence of such Lender’s Commitments or Loans hereunder or its obligations hereunder, then the Borrower agrees to pay to such Lender, upon its written demand therefor, such additional amounts as shall be required to compensate such Lender or such other corporation for the increased cost to such Lender or such other corporation or the reduction in the rate of return to such Lender or such other corporation as a result of such increase of capital or liquidity.  In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods which are reasonable; provided, that such Lender’s determination of compensation owing under this Section 1.10(c) shall, absent manifest error, be final and conclusive and binding on all the parties hereto.  Each Lender, upon determining that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower, which notice shall show in reasonable detail the basis for calculation of such additional amounts.

 

1.11                        Compensation.  The Borrower agrees to compensate each Lender, upon its written request (which request shall set forth in reasonable detail the basis for requesting such compensation), for all losses, liabilities and reasonable expenses (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Eurodollar Loans but excluding loss of anticipated profits) which such Lender may sustain:  (i) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing of, or conversion from or into, Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any prepayment or repayment (including any prepayment or repayment made pursuant to Section 4.01, Section 4.02 or as a result of an acceleration of the Loans pursuant to Section 10) or conversion of any of its Eurodollar Loans occurs on a date which is not the last day of an Interest Period with respect thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; (iv) as a consequence of (x) any other default by the Borrower to repay Eurodollar Loans when required by the terms of this Agreement or any Note held by such Lender or (y) any election made pursuant to

 

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Section 1.10(b) or (v) as a consequence of the assignment of a Eurodollar Loan as a result of the request of the Borrower pursuant to Section 1.13; provided, that this Section 1.11 shall not apply to any scheduled repayment of Loans made pursuant to Section 4.02(B). Any Lender’s determination of compensation owing to it under this Section 1.11 shall, absent manifest error, be final and conclusive and binding on all the parties hereto.

 

1.12                        Change of Lending Office.  Each Lender agrees that on the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), or Section 4.04 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans or Letters of Credit affected by such event; provided, that (x) such designation is made on such terms that such Lender and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section and (y) the Borrower hereby agrees to pay all reasonable costs and expenses (if any) incurred by any Lender in connection with such designation or assignment.  Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Lender provided in Sections 1.10, and 4.04.

 

1.13                        Replacement of Lenders.  (x) If any Lender becomes a Defaulting Lender or otherwise defaults in its obligations to make Loans, (y) upon the occurrence of an event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), or Section 4.04 with respect to any Lender which results in such Lender charging to the Borrower increased costs or (z) in the case of a refusal by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders as (and to the extent) provided in Section 13.12(b), the Borrower shall have the right, if no Default or Event of Default then exists (or, in the case of preceding clause (z), will exist immediately after giving effect to such replacement), to replace such Lender with one or more other Eligible Transferees, none of whom shall constitute a Defaulting Lender at the time of such replacement (collectively, the “Replacement Lender”) and each of whom shall be reasonably acceptable to the Administrative Agent (each such Lender which is replaced by a Replacement Lender is referred to herein as a “Replaced Lender”); provided, that:

 

(i)                                     at the time of any replacement pursuant to this Section 1.13, the Replaced Lender and the Replacement Lender shall enter into one or more Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to be paid by the Replacement Lender and/or the Replaced Lender (as may be agreed to at such time by and among the Borrower, the Replacement Lender and the Replaced Lender)) pursuant to which the Replacement Lender shall acquire the Commitment (if any) of, all outstanding Loans owing to the Replaced Lender and in connection therewith, the Replacement Lender shall pay to the Replaced Lender in respect thereof an amount equal to the sum of an amount equal to the aggregate principal of, and all accrued and unpaid interest on, all outstanding Loans of the Replaced Lender; and

 

(ii)                                  all obligations of the Borrower due and owing to the Replaced Lender at such time (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Lender concurrently with such replacement.

 

Upon receipt by the Replaced Lender of all amounts required to be paid to it pursuant to this Section 1.13, the Administrative Agent shall be entitled (but not obligated) and authorized to execute an Assignment and Assumption Agreement on behalf of such Replaced Lender, and any such Assignment and Assumption Agreement so executed by the Administrative Agent and the Replacement Lender shall be effective for purposes of this Section 1.13 and Section 13.04.  Upon the execution of the respective

 

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Assignment and Assumption Agreement, the payment of amounts referred to in clauses (i) and (ii) above, recordation of the assignment on the Register by the Administrative Agent pursuant to Section 13.15 and, if so requested by the Replacement Lender, delivery to the Replacement Lender of the appropriate Note executed by the Borrower, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.10, 1.11, 4.04, 12.06, 13.01 and 13.06), which shall survive as to such Replaced Lender.

 

Section 2.                                           [Reserved]

 

Section 3.                                           Fees; Reductions of Commitment.

 

3.01                        Fees.

 

(a)                                 The Borrower agrees to pay to the Administrative Agent (and/or its respective affiliates) and to the Joint Lead Arrangers such fees as may be agreed to in writing from time to time by the Borrower or any of its Subsidiaries and the Administrative Agent (and/or its respective affiliates) or the Joint Lead Arrangers.

 

3.02                        [Reserved].

 

3.03                        Mandatory Reduction of Commitments.  (a) The Commitments shall be automatically reduced to zero on the Effective Date (immediately after giving effect to the borrowing of Loans on such date).

 

Section 4.                                           Prepayments; Payments; Taxes.

 

4.01                        Voluntary Prepayments.  (a) The Borrower shall have the right to prepay the Loans comprising the same Borrowing, without premium or penalty, in whole or in part at any time and from time to time on the following terms and conditions:  (i) the Borrower shall give the Administrative Agent prior to 12:00 Noon (New York time) at the Notice Office (x) at least one Business Day’s prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay Base Rate Loans and (y) at least three Business Days’ prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay Eurodollar Loans, which notice (in each case) shall specify the amount of such prepayment and the Types of Loans to be prepaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which such Eurodollar Loans were made, and which notice the Administrative Agent shall promptly transmit to each of the Lenders; (ii) each partial prepayment of Loans pursuant to this Section 4.01(a) shall be in an aggregate principal amount of at least $1,000,000 (or such lesser amount as is acceptable to the Administrative Agent); provided, that if any partial prepayment of Eurodollar Loans made pursuant to any Borrowing shall reduce the outstanding principal amount of Eurodollar Loans made pursuant to such Borrowing to an amount less than $1,000,000, then such Borrowing may not be continued as a Borrowing of Eurodollar Loans (and same shall automatically be converted into a Borrowing of Base Rate Loans) and any election of an Interest Period with respect thereto given by the Borrower shall have no force or effect and (iii) each prepayment pursuant to this Section 4.01(a) in respect of any Loans shall be applied pro rata among the Loans.  Each notice delivered by the Borrower pursuant to this Section 4.01(a) shall be irrevocable; provided, that a notice of prepayment of all Loans then outstanding may state that such notice is conditioned upon the receipt of proceeds from the incurrence or issuance of Indebtedness or equity interests or the effectiveness of other credit facilities.

 

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(b)                                 In the event of a refusal by a Lender to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Lenders as (and to the extent) provided in Section 13.12(b), the Borrower may, upon five Business Days’ prior written notice to the Administrative Agent at the Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Lenders) repay all Loans of such Lender, together with accrued and unpaid interest and other amounts (including all amounts, if any, owing pursuant to Section 1.11) owing to such Lender in accordance with, and subject to the requirements of, said Section 13.12(b) so long as the consents, if any, required by Section 13.12(b) in connection with the repayment pursuant to this clause (b) shall have been obtained.

 

4.02                        [Reserved].

 

4.03                        Method and Place of Payment.  Except as otherwise specifically provided herein, all payments under this Agreement and under any Note shall be made to the Administrative Agent for the account of the Lender or Lenders entitled thereto not later than 12:00 Noon (New York time) on the date when due and shall be made in Dollars in immediately available funds at the Payment Office.  Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension.

 

4.04                        Net Payments.  (a) All payments made by any Credit Party under any Credit Document will be made without setoff, counterclaim or other defense.  Except as provided in Section 4.04(c) and 4.04(d), all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments, (but excluding, except as provided in the second succeeding sentence, (x) any tax imposed on or measured by the net income or net profits (or any franchise or similar tax imposed in lieu of a net income or net profits tax) of a Lender or the Administrative Agent (each a “Section 4.04 Indemnitee”), as the case may be, pursuant to the laws of the jurisdiction in which such Section 4.04 Indemnitee is organized or the jurisdiction in which the principal office or applicable lending office of such Section 4.04 Indemnitee is located or any subdivision thereof or therein, (y) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in any Credit Document pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Credit Documents (other than pursuant to an assignment request by the Borrower under Section 1.13) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 4.04, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed it lending office and (z) any U.S. federal withholding taxes imposed under FATCA) and all interest, penalties or similar liabilities with respect to such non excluded taxes, levies, imposts, duties, fees, assessments or other charges (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as “Taxes”).  If any Taxes are so levied or imposed, the Borrower and any other Credit Party agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any other Credit Document to any Section 4.04 Indemnitee, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such other Credit Document.  If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower and each other Credit Party jointly and severally agree to reimburse each Section 4.04 Indemnitee, upon the written request of such Section 4.04 Indemnitee, for taxes imposed on or measured by the net income or net profits (or any franchise or similar tax imposed in lieu of a net income or net profits tax) of such Section 4.04 Indemnitee pursuant to the laws of the jurisdiction in which such Section 4.04 Indemnitee is organized or in which the principal

 

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office or applicable lending office of such Section 4.04 Indemnitee is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which such Section 4.04 Indemnitee is organized or in which the principal office or applicable lending office of such Section 4.04 Indemnitee is located and for any withholding of taxes as such Section 4.04 Indemnitee shall determine are payable by, or withheld from, such Section 4.04 Indemnitee in respect of such amounts so paid to or on behalf of such Section 4.04 Indemnitee pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Section 4.04 Indemnitee pursuant to this sentence.  The Borrower will furnish to the Administrative Agent within 60 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower or the respective Credit Party reasonably satisfactory to the Administrative Agent.  The Borrower and each other Credit Party jointly and severally agree to indemnify and hold harmless each Section 4.04 Indemnitee and reimburse each such Person upon its written request, for the amount of any Taxes so levied or imposed and paid by each such Person whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority; provided, however, that the Section 4.04 Indemnitee has given notice to the Borrower prior to making such payment. A certificate as to the amount of such payment or liability delivered to any Credit Party by a Section 4.04 Indemnitee (with a copy to the Administrative Agent) shall be conclusive absent manifest error.

 

(b)                                 The Credit Parties shall timely pay to the relevant governmental authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

 

(c)                                  Each Non-U.S. Lender agrees to deliver to the Borrower and the Administrative Agent on or prior to the Effective Date or, in the case of a Non-U.S. Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 1.13 or 13.04(b) (unless the respective Non-U.S. Lender was already a Non-U.S. Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Non-U.S. Lender or, in the case of a successor Administrative Agent, the date of the appointment of such Administrative Agent, (i) two accurate and complete original signed copies of U.S. Internal Revenue Service Form W-8ECI or Form W-8BEN or W-8BEN-E, as applicable (with respect to a complete exemption from, or a reduction in, withholding under an income tax treaty) (or successor forms) certifying to such Non-U.S. Lender’s entitlement as of such date to a complete exemption from, or a reduction in, United States withholding tax with respect to payments to be made under this Agreement and under any other Credit Document, or (ii) if the Non-U.S. Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either U.S. Internal Revenue Service Form W-8ECI or Form W-8BEN or W-8BEN-E, as applicable (with respect to a complete exemption from, or a reduction in, withholding under an income tax treaty) (or any successor forms) pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit D-1 (any such certificate, a “Section 4.04(c)(ii) Certificate”) and (y) two accurate and complete original signed copies of U.S. Internal Revenue Service Form W-8BEN or W-8BEN-E, as applicable (with respect to the portfolio interest exemption) (or successor form) certifying to such Non-U.S. Lender’s entitlement as of such date to a complete exemption from, or a reduction in, United States withholding tax with respect to payments of interest to be made under this Agreement and under any other Credit Document.  Any Non-U.S. Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Non-U.S. Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made.  In addition, each Non-U.S. Lender agrees that from time to time after the date such Non-U.S. Lender becomes a party to this Agreement, when a lapse in time or

 

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change in circumstance renders the previous certification obsolete or inaccurate in any material respect, such Non-U.S. Lender will deliver to the Borrower and the Administrative Agent two new accurate and complete original signed copies of U.S. Internal Revenue Service Form W-8ECI, Form W-8BEN or W-8BEN-E, as applicable (with respect to the benefits of any income tax treaty), or Form W-8BEN or W-8BEN-E, as applicable (with respect to the portfolio interest exemption) and a Section 4.04(c)(ii) Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Non-U.S. Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any other Credit Document, or such Non-U.S. Lender shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such form or Certificate, in which case such Non-U.S. Lender shall not be required to deliver any such form or Certificate pursuant to this Section 4.04(c).  To the extent a Non-U.S. Lender is not the beneficial owner, each such Non-U.S. Lender agrees to deliver to the Borrower and the Administrative Agent executed originals of U.S. Internal Revenue Service Form W-8IMY, accompanied by Form W-8ECI, Form W-8BEN or W-8BEN-E, as applicable, a Section 4.04(c)(ii) Certificate substantially in the form of Exhibit D-2 or Exhibit D-3, Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided, that if the Non-U.S. Lender is a partnership and one or more direct or indirect partners of such Non-U.S. Lender are claiming the portfolio interest exemption, such Non-U.S. Lender may provide a Section 4.04(c)(ii) Certificate substantially in the form of Exhibit D-4 on behalf of each such direct and indirect partner.  Each U.S. Lender (other than a Lender or the Administrative Agent, as the case may be, that may be treated as an exempt recipient based on the indicators described in U.S. Treasury Regulation section 1.6049-4(c)(1)(ii)) agrees to deliver to the Borrower and the Administrative Agent on or prior to the Effective Date or, in the case of a U.S. Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 1.13 or 13.04(b) (unless the respective U.S. Lender was already a U.S. Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such U.S. Lender or, in the case of a U.S. Lender that is a successor Administrative Agent, the date of the appointment of such Administrative Agent, two accurate and complete original signed copies of U.S. Internal Revenue Service Form W-9 (or successor forms) certifying to such U.S. Lender’s entitlement as of such date to a complete exemption from, or reduction in, United States backup withholding tax with respect to payments to be made under this Agreement and under any other Credit Document.  Notwithstanding anything to the contrary contained in Section 4.04(a), but subject to Section 13.04(b) and the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income (including income taxes imposed by withholding) or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest or other amounts payable hereunder for the account of any Lender or the Administrative Agent, as the case may be, to the extent that such Lender or such Administrative Agent, as the case may be, has not provided to the Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from, or a reduction in, such deduction or withholding and (y) the Borrower shall not be obligated pursuant to Section 4.04(a) to gross-up payments to be made to, or to indemnify, a Lender or the Administrative Agent, as the case may be, in respect of income (including income taxes imposed by withholding) or similar taxes imposed by the United States if (I) such Lender or such Administrative Agent, as the case may be, has not provided to the Borrower the U.S. Internal Revenue Service Forms required to be provided to the Borrower pursuant to this Section 4.04(c) or (II) in the case of a payment, other than interest, to a Lender or the Administrative Agent, as the case may be, described in clause (ii) in the first sentence above in this Section 4.04(c), to the extent that such forms do not establish a complete exemption from, or a reduction in, withholding of such taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 4.04 and except as set forth in Section 13.04(b), the Borrower agrees to pay any additional amounts and to indemnify each Lender in the manner set forth in Section 4.04(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence (i) as a result of any changes that are effective after the date such Lender becomes a party to this Agreement or such Lender changes its lending

 

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office in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of income (including income taxes imposed by withholding) or similar taxes or (ii) to the extent such Lender is an assignee of another Lender that was entitled, at the time the assignment became effective, to receive additional amounts under this Section 4.04 (except in each case to the extent that such Lender is legally entitled to provide a form establishing exemption, or eligibility for a reduction in, from withholding of such taxes but fails to do so).

 

(d)                                 If a payment made by the Borrower or any Credit Party under this Agreement or any other Credit Document would be subject to U.S. federal withholding tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.

 

(e)                                  If the Borrower pays any additional amount under this Section 4.04 to a Section 4.04 Indemnitee, and such Section 4.04 Indemnitee determines in its sole good faith discretion that it has actually received or realized in connection therewith any refund or any reduction of, or credit against, its tax liabilities in or with respect to the taxable year in which the additional amount is paid (a “Tax Benefit”), such Section 4.04 Indemnitee shall pay to such Borrower an amount that the Section 4.04 Indemnitee shall, in its sole good faith discretion, determine is equal to the net benefit, after tax, which was obtained by such Section 4.04 Indemnitee in such year as a consequence of such Tax Benefit; provided, however, that (i) any Section 4.04 Indemnitee may determine, in its sole good faith discretion consistent with the policies of such Section 4.04 Indemnitee, whether to seek a Tax Benefit; (ii) any taxes that are imposed on a Section 4.04 Indemnitee as a result of a disallowance or reduction, (including through the expiration of any tax credit carryover or carryback of such Section 4.04 Indemnitee that otherwise would not have expired) of any Tax Benefit with respect to which such Section 4.04 Indemnitee has made a payment to the Borrower pursuant to this Section 4.04(e) shall be treated as a Tax for which the Borrower is obligated to indemnify such Section 4.04 Indemnitee pursuant to this Section 4.04 without any exclusions or defenses, (iii) nothing in this Section 4.04(e) shall require any Section 4.04 Indemnitee to disclose any confidential information to the Borrower (including, without limitation, its tax returns), and (iv) no Section 4.04 Indemnitee shall be required to pay any amounts pursuant to this Section 4.04(e) at any time that a Default or an Event of Default exists.

 

(f)                                   Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any taxes attributable to such Lender (but only to the extent that the Borrower or any Credit Party has not already indemnified the Administrative Agent for such taxes and without limiting the obligation of the Credit Parties to do so and (ii) any taxes attributable to such Lender’s failure to comply with the provisions of Section 13.04(d) relating to the maintenance of a Participant Register, and any reasonable expenses arising therefrom or with respect thereto, whether or not such taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Credit Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (f).

 

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Section 5.                                           Conditions Precedent to the Effective Date.  The occurrence of the Effective Date pursuant to Section 13.10 and the obligation of each Lender to make Loans on the Effective Date, are subject to the satisfaction of the following conditions:

 

5.01                        Execution of Agreement; Notes.  On or prior to the Effective Date, (i) this Agreement shall have been executed and delivered as provided in Section 13.10 and (ii) there shall have been delivered to the Administrative Agent for the account of each of the Lenders that has requested the same at least two Business Days prior to the Effective Date, an appropriate Note executed by the Borrower in each case in the amount, maturity and as otherwise provided herein.

 

5.02                        [Reserved].

 

5.03                        Opinion of Counsel.  On the Effective Date, the Administrative Agent shall have received from Weil, Gotshal & Manges LLP, special counsel to the Credit Parties, an opinion addressed to the Administrative Agent and each of the Lenders and dated the Effective Date, in form and substance reasonably satisfactory to the Administrative Agent.

 

5.04                        Corporate Documents; Proceedings; etc.  (a) On the Effective Date, the Administrative Agent shall have received a certificate from each Credit Party, dated the Effective Date, signed by the chairman of the board, the chief executive officer, the president, the chief financial officer or any vice president of such Credit Party, and attested to by the secretary, any assistant secretary, the general counsel or any vice president of such Credit Party, substantially in the form of Exhibit F with appropriate insertions, together with copies of the certificate or articles of incorporation and by-laws (or equivalent organizational documents), as applicable, of such Credit Party and the resolutions of such Credit Party referred to in such certificate, and each of the foregoing shall be in form and substance reasonably acceptable to the Agents.

 

(b)                                 On the Effective Date, the Administrative Agent shall have received good standing certificates (or equivalent documents) from the relevant office in each Credit Party’s jurisdiction of organization (to the extent relevant, customary and available in the jurisdiction of organization of such Credit Party) dated as of a recent date prior thereto; provided that for purposes of this condition, the “long-form” good standing certificate of Magellan Healthcare Provider Group, Inc. may be provided no later than July 1, 2016 (or such later date as the Administrative Agent shall agree in its reasonable discretion).

 

5.05                        [Reserved].

 

5.06                        [Reserved].

 

5.07                        [Reserved].

 

5.08                        [Reserved].

 

5.09                        Guaranties.  On the Effective Date, each Guarantor shall have duly authorized, executed and delivered the Guaranty in the form of Exhibit H (as amended, modified or supplemented from time to time, the “Guaranty”), and the Guaranty shall be in full force and effect.

 

5.10                        [Reserved].

 

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5.11                        Financial Statements.  On or prior to the Effective Date, the Administrative Agent shall have received true and correct copies of the historical consolidated financial statements referred to in Section 7.05(a).

 

5.12                        Solvency Certificate.  On the Effective Date, the Administrative Agent shall have received a solvency certificate from the chief financial officer of Magellan in the form of Exhibit J.

 

5.13                        Fees, etc.  On the Effective Date, all costs, fees, expenses (including, without limitation, reasonable legal fees and expenses) and other compensation contemplated hereby, payable to the Agents (and their respective Affiliates) and the Lenders or otherwise payable in respect of the Transaction shall have been paid by the Borrower to the extent due and, in the case of expenses, invoiced.

 

5.14                        Patriot Act.  The Administrative Agent shall have received, at least two Business Days prior to the Effective Date, all documentation and other information about the Credit Parties that shall have been reasonably requested by the Administrative Agent in writing at least 10 Business Days prior to the Effective Date and that the Administrative Agent reasonably determines is required by United States regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the Patriot Act.

 

Section 6.                                           Conditions Precedent to the Borrowing on the Effective Date.  The obligation of each Lender to make Loans on the Effective Date is subject as of such date (except as hereinafter indicated), to the satisfaction of the conditions set forth in Section 5 and the following additional conditions:

 

6.01                        No Default; Representations and Warranties.  As of the Effective Date and also after giving effect to the Borrowing on such date (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on the Effective Date (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date).

 

6.02                        Notice of Borrowing.  (a) Prior to the making of each Loan, the Administrative Agent shall have received a Notice of Borrowing meeting the requirements of Section 1.03(a).

 

Section 7.                                           Representations, Warranties and Agreements.  In order to induce the Lenders to enter into this Agreement and to make the Loans as provided herein, each of Magellan and the Borrower makes the following representations, warranties and agreements, in each case after giving effect to the Transaction, all of which shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans.

 

7.01                        Organizational Status.  Each of Magellan and each of its Subsidiaries (i) is a duly organized and validly existing corporation, partnership or limited liability company, as the case may be, in good standing under the laws of the jurisdiction of its organization, (ii) has the corporate, partnership or limited liability company power and authority, as the case may be, to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where the ownership, leasing or operation of its property or the conduct of its business requires such qualifications, except, in each case of clauses (i) through (iii) (other than with respect to Magellan and the Borrower) as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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7.02                        Power and Authority.  Each Credit Party has the corporate, partnership or limited liability company power and authority, as the case may be, to execute, deliver and perform the terms and provisions of each of the Credit Documents to which it is party and has taken all necessary corporate, partnership or limited liability company action, as the case may be, to authorize the execution, delivery and performance by it of each of such Credit Documents.  Each Credit Party has duly executed and delivered each of the Credit Documents to which it is party, and each of such Credit Documents constitutes its legal, valid and binding obligation enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law).

 

7.03                        No Violation.  Neither the execution, delivery or performance by any Credit Party of the Credit Documents to which it is a party, nor compliance by it with the terms and provisions thereof, (i) will contravene any provision of any law, statute, rule or regulation (including, without limitation, any Health Care Law) or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) (A) will conflict with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument, or (B) result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of any Credit Party or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument, in each case to which any Credit Party or any of its Subsidiaries is a party or by which it or any its property or assets is bound or to which it may be subject (including, without limitation, from and after the execution and delivery thereof, any Permitted Subordinated Debt Documents), or (iii) will violate any provision of the certificate or articles of incorporation, certificate of formation, limited liability company agreement or by-laws (or equivalent organizational documents), as applicable, of any Credit Party or any of its Subsidiaries, except to the extent that such contravention, conflict or violation could not reasonably be expected to result in a Material Adverse Effect.

 

7.04                        Approvals.  No order, consent, approval or authorization with, by, or from any governmental or public body or authority is required to be obtained or made by, or on behalf of, any Credit Party in connection with, (i) the execution, delivery and performance of any Credit Document or (ii) the legality, validity, binding effect or enforceability of any Credit Document, except for those that have been obtained or made and are in full force and effect.

 

7.05                        Financial Statements; No Material Adverse Effect.  (a) (i) The unaudited consolidated balance sheet of Magellan as at March 31, 2016, and the related consolidated statements of income, cash flows and retained earnings of Magellan for the fiscal quarter ended March 31, 2016 and (ii) the audited consolidated balance sheet of Magellan as at December 31, 2015, and the related audited consolidated statements of income, cash flows and retained earnings of Magellan for the fiscal year ended December 31, 2015, copies of which have been furnished to the Lenders prior to the Effective Date, present fairly in all material respects the consolidated financial position of Magellan at the respective dates of such balance sheets and the consolidated results of the operations of Magellan for the respective periods covered thereby, subject, in the case of clause (i) to the absence of footnotes and normal year-end audit adjustments.  The foregoing historical financial statements have been prepared in accordance with generally accepted accounting principles consistently applied, subject, in the case of clause (i) to the absence of footnotes and normal year-end audit adjustments.

 

(b)                                 On and as of the Effective Date and after giving effect to the Transaction and after giving effect to all Indebtedness (including the Loans) being issued, incurred or assumed by the Credit Parties in connection therewith, (i) the sum of the assets, at a fair valuation, of Magellan and its

 

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Subsidiaries taken as a whole will exceed their respective debts, (ii) Magellan and its Subsidiaries taken as a whole have not incurred and do not intend to incur, and do not believe that they will incur, debts beyond their respective ability to pay such debts as such debts mature, and (iii) Magellan and its Subsidiaries taken as a whole will have sufficient capital with which to conduct their respective  businesses.  For purposes of this Section 7.05(b), “debt” means any liability on a claim, and “claim” means (a) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (b) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured.  The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

(c)                                  [Reserved].

 

(d)                                 [Reserved].

 

(e)                                  Since March 31, 2016, there has been no event or circumstance, either individually or in the aggregate, that has had, or could reasonably be expected to have, a Material Adverse Effect.

 

7.06                        Litigation.  There are no actions, suits or proceedings pending or, to the knowledge of Magellan or the Borrower, threatened (i) with respect to any Credit Document or (ii) that could reasonably be expected, either individually or in the aggregate, to have a Material Adverse Effect.

 

7.07                        True and Complete Disclosure.  All factual information (taken as a whole) furnished by or on behalf of Magellan or the Borrower in writing to the Administrative Agent or any Lender (including, without limitation, all information contained in the Credit Documents) for purposes of or in connection with the Transaction, this Agreement and the other Credit Documents, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of Magellan or the Borrower in writing to the Administrative Agent or any Lender does not or will not, when furnished, contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements therein, taken as a whole, not materially misleading, in light of the circumstances under which such information was provided.

 

7.08                        Margin Regulations.  Except as otherwise permitted by Section 9.03, no part of the proceeds of any Loans will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock.  Neither the making of any Loan nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

 

7.09                        Tax Returns and Payments.  Each of Magellan and each of its Subsidiaries has timely filed or caused to be timely filed with the appropriate taxing authority all federal and other returns, statements, forms and reports for taxes (the “Returns”) required to be filed by, or with respect to the income, properties or operations of, Magellan and/or any of its Subsidiaries, except where the failure to timely file or cause to be timely filed such Returns could not reasonably be expected to have a Material Adverse Effect.  The Returns accurately reflect all liability for taxes of Magellan and its Subsidiaries for the periods covered thereby, except where the failure to accurately reflect a liability for taxes could not reasonably be expected to have a Material Adverse Effect.  Each of Magellan and each of its Subsidiaries has paid all taxes and assessments payable by it which have become due, other than (i) those for which the failure to pay could not reasonably be expected to have a Material Adverse Effect and (ii) those being

 

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contested in good faith and adequately disclosed and fully provided for on the financial statements of Magellan and its Subsidiaries in accordance with generally accepted accounting principles.  There is no action, suit, proceeding, investigation, audit or claim now pending or, to the best knowledge of Magellan, threatened by any authority regarding any material taxes relating to Magellan or any of its Subsidiaries.  As of the Effective Date and except as set forth on Schedule X, neither Magellan nor any of its Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of Magellan or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of Magellan or any of its Subsidiaries not to be subject to the normally applicable statute of limitations.

 

7.10                        Compliance with ERISA.  (a) Each ERISA Plan (and each related trust, insurance contract or fund) is in substantial compliance with its terms and with all applicable laws, including, without limitation, ERISA and the Code.  Except as would not reasonably be expected to have a Material Adverse Effect, each ERISA Plan (and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code has received or can otherwise rely upon a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code.  As of the Effective Date, neither Magellan nor any of its Subsidiaries or ERISA Affiliates has ever maintained or contributed to, or had any obligation to maintain or contribute to (or borne any liability with respect to) any “employee pension benefit plan,” within the meaning of Section 3(2) of ERISA, that is a “multiemployer plan,” within the meaning of Section 3(37) of ERISA, or that is subject to the minimum funding standards of Section 412 of the Code or Section 302 of ERISA or subject to Title IV of ERISA.  Except as could not reasonably expected, individually or in the aggregate, to result in a Material Adverse Effect:  all contributions required to be made with respect to an ERISA Plan have been timely made; neither Magellan nor any of its Subsidiaries nor any ERISA Affiliate has incurred any liability (including any indirect, contingent or secondary liability) to or on account of an ERISA Plan pursuant to Section 409, 502(i), 502(l), 515, 4204 or 4212 of ERISA or Section 4975 of the Code or expects to incur any such liability under any of the foregoing sections with respect to any ERISA Plan; no condition exists which presents a risk to Magellan or any of its Subsidiaries or any ERISA Affiliate of incurring a liability to or on account of an ERISA Plan pursuant to the foregoing provisions of ERISA and the Code; no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any ERISA Plan (other than routine claims for benefits) is pending, expected or threatened which, if adversely determined, could reasonably be expected to result in a liability to Magellan or any of its Subsidiaries; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of Magellan or any of its Subsidiaries or ERISA Affiliates has at all times been operated in compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on the assets of Magellan or any of its Subsidiaries or any ERISA Affiliate exists or is likely to arise on account of any ERISA Plan; and Magellan and its Subsidiaries may cease contributions to or terminate any employee benefit plan maintained by any of them.

 

(b)                                 Except as could not reasonably be expected, individually or in the aggregate, to result in a material liability of Magellan or any of its Subsidiaries:  each Foreign Pension Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities; all contributions required to be made with respect to a Foreign Pension Plan have been timely made; and neither Magellan nor any of its Subsidiaries has incurred any material obligation in connection with the termination of, or withdrawal from, any Foreign Pension Plan. The present value of the accrued benefit liabilities (whether or not vested) under each Foreign Pension Plan, determined as of the end of Magellan’s most recently ended fiscal year on the basis of actuarial

 

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assumptions, each of which is reasonable, did not exceed the current value of the assets of such Foreign Pension Plan allocable to such benefit liabilities by a material amount.

 

7.11                        [Reserved].

 

7.12                        Properties.  Each of Magellan and each of its Subsidiaries has good and marketable title to, or a validly subsisting leasehold interest in, all material properties owned or leased by it and used in the ordinary course of its business, except for such defects in title as could not reasonably be expected to have a Material Adverse Effect.

 

7.13                        [Reserved].

 

7.14                        Subsidiaries; etc.  (a) Magellan has no Subsidiaries other than (i) those Subsidiaries listed on Schedule V (which Schedule identifies (x) the direct owner of each such Subsidiary on the Effective Date and their percentage ownership therein and (y) each Wholly-Owned Specified Subsidiary) and (ii) new Subsidiaries created or acquired after the Effective Date.  Schedule V also sets forth, as of the Effective Date, the basis for which any Wholly-Owned Specified Subsidiary, pursuant to clause (c) of the definition thereof, of Magellan on the Effective Date cannot enter into any Credit Document.

 

7.15                        Compliance with Statutes, etc.  Each of Magellan and each of its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including, without limitation, applicable Health Care Laws and statutes, regulations, orders and restrictions relating to environmental standards and controls), except such noncompliances as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

7.16                        Investment Company Act.  Neither Magellan nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

 

7.17                        [Reserved].

 

7.18                        Labor Relations.  Neither Magellan nor any of its Subsidiaries is engaged in any unfair labor practice that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  There is (i) no unfair labor practice complaint pending against Magellan or any of its Subsidiaries or, to the knowledge of Magellan, threatened against any of them, before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against Magellan or any of its Subsidiaries or, to the knowledge of Magellan, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against Magellan or any of its Subsidiaries or, to the knowledge of Magellan and Magellan, threatened against Magellan or any of its Subsidiaries and (iii) no union representation question exists with respect to the employees of Magellan or any of its Subsidiaries, except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as could not reasonably be expected to have a Material Adverse Effect.

 

7.19                        [Reserved].

 

7.20                        [Reserved].

 

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7.21                        [Reserved].

 

7.22                        [Reserved].

 

7.23                        Anti-Corruption Laws and Sanctions.  The Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by Magellan and its Subsidiaries and their respective directors, officers and employees with Anti-Corruption Laws and applicable Sanctions, and Magellan, its Subsidiaries and, to the knowledge of Magellan and the Borrower, their respective officers, employees, and directors, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects.  None of (i) Magellan, any Subsidiary of Magellan or, to the knowledge of Magellan, the Borrower or such Subsidiary, any of their respective directors, officers or employees, or (ii) to the knowledge of Magellan or the Borrower, any agent of Magellan, the Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person.  No Borrowing or use of proceeds will violate Anti-Corruption Laws or applicable Sanctions.

 

Section 8.                                           Affirmative Covenants.  Magellan and the Borrower hereby covenant and agree that on and after the Effective Date and until all Commitments have terminated and the Loans and Notes (in each case together with interest thereon) and all other Obligations (other than indemnities described in Section 13.13 (and similar indemnities described in the other Credit Documents, in each case) which are not then due and payable) incurred hereunder and thereunder, are paid in full:

 

8.01                        Information Covenants.  Magellan will furnish to the Administrative Agent for distribution to each Lender:

 

(a)                                 Quarterly Financial Statements.  Within 45 days after the close of each of the first three quarterly accounting periods in each fiscal year of Magellan (commencing with the fiscal quarter ending June 30, 2016), (i) the consolidated balance sheet of Magellan and its Subsidiaries as at the end of such quarterly accounting period and the related consolidated statements of income and retained earnings and statement of cash flows for such quarterly accounting period and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period, in each case setting forth comparative figures for the corresponding quarterly accounting period in the prior fiscal year, all of which shall be certified by an Authorized Officer of Magellan that they fairly present in all material respects in accordance with generally accepted accounting principles the financial condition of Magellan and its Subsidiaries as of the dates indicated and the results of their operations for the periods indicated, subject to normal year-end audit adjustments and the absence of footnotes, and (ii) management’s discussion and analysis of the important operational and financial developments during such quarterly accounting period.

 

(b)                                 Annual Financial Statements.  Within 90 days after the close of each fiscal year of Magellan, (i) the consolidated balance sheet of Magellan and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and retained earnings and statement of cash flows for such fiscal year setting forth comparative figures for the preceding fiscal year and certified by Ernst & Young LLP or other independent certified public accountants of recognized national standing reasonably acceptable to the Administrative Agent, together with a report of such accounting firm (which report shall be without a “going concern” or like qualification or exception and without any qualification or exception as to scope of audit) and (ii) management’s discussion and analysis of the important operational and financial developments during such fiscal year.

 

(c)                                  Ratings Downgrade.  Promptly following the date (if any) on which S&P provides a corporate credit rating with respect to Magellan that is lower than BBB- (but in any event not

 

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later than the third Business Day following the date on which an Authorized Officer shall become aware thereof), written notice thereof.

 

(d)                                 [Reserved].

 

(e)                                  Officer’s Certificates.  At the time of the delivery of the financial statements provided for in Sections 8.01(a) and (b), a compliance certificate from an Authorized Officer of Magellan in the form of Exhibit K (a “Compliance Certificate”) certifying on behalf of Magellan that, to such officer’s knowledge after due inquiry, no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof, which certificate shall (i) set forth in reasonable detail the calculations required to establish whether Magellan and its Subsidiaries were in compliance with the provisions of Sections 9.08 and 9.09 at the end of such fiscal quarter or year, as the case may be and (ii) list all Wholly-Owned Specified Subsidiaries as of the end of such fiscal quarter or year, as the case may be, together with a report of the basis for which each such Wholly-Owned Specified Subsidiary, pursuant to clause (c) of the definition thereof, cannot enter into any Credit Document.

 

(f)                                   Notice of Default, Litigation and Material Adverse Effect.  Promptly, and in any event within three Business Days after any officer of Magellan or any of its Subsidiaries obtains knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or an Event of Default, (ii) any litigation or governmental investigation or proceeding pending against Magellan or any of its Subsidiaries (x) which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or (y) with respect to any Credit Document, or (iii) any other event, change or circumstance that has had, or could reasonably be expected to have, a Material Adverse Effect.

 

(g)                                  Other Reports and Filings.  Promptly after the filing or delivery thereof, copies of all financial information, proxy materials and reports, if any, which Magellan or any of its Subsidiaries shall publicly file with the Securities and Exchange Commission or any successor thereto (the “SEC”) or deliver to holders (or any trustee, agent or other representative therefor) of any Permitted Subordinated Debt or any other material Indebtedness pursuant to the terms of the documentation governing such Indebtedness; provided, that so long as Magellan is a reporting company, the posting to the SEC’s website (www.sec.gov/edgar) of financial statements or other information required by this Section 8.01 shall be deemed to satisfy the delivery requirement of such information hereunder.

 

(h)                                 [Reserved].

 

(i)                                     Other Information.  From time to time, such other information or documents (financial or otherwise) with respect to Magellan or any of its Subsidiaries as the Administrative Agent or any Required Lenders (through the Administrative Agent) may reasonably request.

 

8.02                        Books, Records and Inspections; Annual Meetings.  Each of Magellan and the Borrower will, and will cause each of its respective Subsidiaries to, keep proper books of record and accounts in which full, true and correct entries which permit the preparation of financial statements in accordance with generally accepted accounting principles and which conform to all requirements of law shall be made of all dealings and transactions in relation to its business and activities.  Each of Magellan and the Borrower will, and will cause each of its respective Subsidiaries to, permit officers and designated representatives of any Agent or the Required Lenders to visit and inspect, under guidance of officers of Magellan or such Subsidiary, any of the properties of Magellan or such Subsidiary, and to examine the books of account of Magellan or such Subsidiary and discuss the affairs, finances and accounts of Magellan or such Subsidiary with, and be advised as to the same by, its and their officers and independent accountants, all upon reasonable prior notice and at such reasonable times and intervals and to such

 

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reasonable extent as any Agent or the Required Lenders may reasonably request; provided, however, so long as no Event of Default exists, such visits shall be limited to one such visit in any fiscal year of Magellan.

 

8.03                        Maintenance of Property; Insurance.  Each of Magellan and the Borrower will, and will cause each of its respective Subsidiaries to, (i) keep all property necessary to the business of Magellan and its Subsidiaries in good working order and condition, ordinary wear and tear excepted and (ii) maintain with financially sound and reputable insurance companies insurance on all such property and against all such risks as is consistent and in accordance with industry practice for companies similarly situated owning similar properties and engaged in similar businesses as Magellan and its Subsidiaries.

 

8.04                        Existence; Franchises.  Each of Magellan and the Borrower will, and will cause each of its respective Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses, permits, copyrights, trademarks and patents; provided, however, that nothing in this Section 8.04 shall prevent (i) sales of assets and other transactions by Magellan or any of its Subsidiaries in accordance with Section 9.02 or (ii) the withdrawal by Magellan or any of its Subsidiaries of its qualification as a foreign corporation, partnership or limited liability company, as the case may be, in any jurisdiction if such withdrawal could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

8.05                        Compliance with Statutes, etc.  Each of Magellan and the Borrower will, and will cause each of its respective Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to Health Care Laws and environmental standards and controls), except such noncompliances as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  Each of Magellan and the Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by Magellan, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.

 

8.06                        [Reserved].

 

8.07                        ERISA.  Each of Magellan and the Borrower will, and will cause each of its respective Subsidiaries to, (a) except as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, comply in all material respects with the provisions of ERISA and the Code applicable to ERISA Plans and the laws applicable to any Foreign Pension Plan, (b) furnish to each Lender as soon as possible after, and in any event within ten (10) days after any responsible officer of Magellan, any of its Subsidiaries or any ERISA Affiliate knows or has reason to know that any event described in Section 10.06 has occurred or is reasonably expected to occur that, alone or together with any other event described therein that has occurred or is reasonably expected to occur, could reasonably be expected to result in a material liability of Magellan, any of its Subsidiaries or any ERISA Affiliate, a statement of the chief financial officer of Magellan setting forth details as to such event and the action, if any, that Magellan, or any of its Subsidiaries proposes to take with respect thereto and (c) promptly and in any event within ten (10) days after the filing thereof with the (x) United States Department of Labor, furnish to the Administrative Agent copies of each Schedule SB (Actuarial Information) to the Annual Report (Form 5500 Series) and (y) PBGC, furnish to the Administrative Agent copies of material correspondence with respect to any of the events referred to in clause (b) above, in each case with respect to each ERISA Plan.

 

8.08                        End of Fiscal Years; Fiscal Quarters.  Magellan will cause (i) each of its, and each of its Subsidiaries, fiscal years to end on December 31 of each year and (ii) each of its, each of its

 

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Subsidiaries, fiscal quarters to end on March 31, June 30, September 30 and December 31 of each year; provided, however, (x) one or more of the Subsidiaries of Magellan existing on the Effective Date may have a fiscal year that ends on September 30, (y) one or more of such Subsidiaries may elect to change their fiscal year end to December 31 and (z) one or more of the Subsidiaries of Magellan acquired pursuant to a Permitted Acquisition after the Effective Date may have a fiscal year that ends on a date other than December 31 of each year and may have fiscal quarters that end on dates other than March 31, June 30, September 30 and December 31 of each year.

 

8.09                        Performance of Obligations.  Each of Magellan and the Borrower will, and will cause each of its respective Subsidiaries to, perform all of its obligations under the terms of each mortgage, indenture, security agreement, loan agreement or credit agreement and each other agreement, lease, contract or instrument by which it is bound, except such non-performances as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

8.10                        Payment of Taxes.  Each of Magellan and the Borrower will pay and discharge, and will cause each of its respective Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any properties belonging to it, in each case on a timely basis, and all lawful claims which, if unpaid, might become a Lien or charge upon any properties of Magellan or any of its Subsidiaries not otherwise permitted under Section 9.01(i); provided, that neither Magellan nor any of its Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which (i) could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or (ii) is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with generally accepted accounting principles.

 

8.11                        Use of Proceeds.  The Borrower will use all proceeds of the Loans for the working capital and general corporate purposes of Magellan and its Subsidiaries, including to finance each of the CDMI Earn-out Payment and the AFSC Acquisition (including any earn-out payments in respect thereof) and to pay the fees and expenses incurred in connection with the Transaction, for Dividends (including share repurchases) permitted under Section 9.03, Investments permitted under Section 9.05 (including Permitted Acquisitions) and/or any other purposes not prohibited by this Agreement.

 

8.12                        Further Assurances; etc.  Magellan will cause each Wholly-Owned Domestic Subsidiary of Magellan (whether existing on the Effective Date or thereafter created, established or acquired) that is not a Wholly-Owned Specified Subsidiary and has not entered into the Guaranty to, within 30 days (or such later date as the Administrative Agent shall agree in its reasonable discretion) of (x) such Subsidiary ceasing to be a Wholly-Owned Specified Subsidiary or (y) the formation or acquisition of such Subsidiary, execute and deliver to the Administrative Agent counterparts of the Guaranty, together with all other relevant documentation (including resolutions and officers’ certificates) of the type described in Section 5.04 as such Subsidiary would have had to deliver if it executed the Guaranty on the Effective Date.

 

Section 9.                                           Negative Covenants.  Each of Magellan and the Borrower hereby covenants and agrees that on and after the Effective Date and until all Commitments have terminated and the Loans and Notes (in each case, together with interest thereon) and all other Obligations (other than any indemnities described in Section 13.13 which are not then due and payable) incurred hereunder and thereunder, are paid in full:

 

9.01                        Liens.  Neither Magellan nor the Borrower will, nor will they permit any of their respective Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any

 

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property or assets (real or personal, tangible or intangible) of Magellan or any of its Subsidiaries, whether now owned or hereafter acquired; provided, that the provisions of this Section 9.01 shall not prevent the creation, incurrence, assumption or existence of the following (Liens described below are herein referred to as “Permitted Liens”):

 

(i)                                     inchoate Liens for taxes, assessments or governmental charges or levies not yet due or Liens for taxes, assessments or governmental charges or levies that are immaterial in amount or are being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles;

 

(ii)                                  Liens in respect of property or assets of Magellan or any of its Subsidiaries imposed by law, which were incurred in the ordinary course of business and do not secure Indebtedness for borrowed money, such as carriers’, warehousemen’s, materialmen’s, repairmen’s, supplier’s and mechanics’ liens and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of Magellan’s and its Subsidiaries’ property or assets taken as a whole or materially impair the use thereof in the operation of the business of Magellan and its Subsidiaries taken as a whole or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien;

 

(iii)                               Liens in existence on the Effective Date which are listed, and the property subject thereto described, in Schedule VIII, but only to the respective date, if any, set forth in such Schedule VIII for the removal, replacement and termination of any such Liens, plus renewals, replacements and extensions of such Liens to the extent set forth on such Schedule VIII; provided, that (x) the aggregate principal amount of the Indebtedness, if any, secured by such Liens does not increase from that amount outstanding at the time of any such renewal, replacement or extension and (y) any such renewal, replacement or extension does not encumber any additional assets or properties of Magellan or any of its Subsidiaries;

 

(iv)                              Liens attaching to pharmaceutical products in the ordinary course of business to secure purchase obligations (other than Indebtedness) owing to suppliers and manufacturers in respect of such products;

 

(v)                                 licenses, sublicenses, leases or subleases granted to other Persons not materially interfering with the conduct of the business of Magellan or any of its Subsidiaries;

 

(vi)                              Liens upon assets of Magellan or any of its Subsidiaries subject to Capitalized Lease Obligations to the extent such Capitalized Lease Obligations are permitted by Section 9.04(v); provided, that (x) such Liens only serve to secure the payment of Indebtedness arising under such Capitalized Lease Obligation and (y) the Lien encumbering the asset giving rise to the Capitalized Lease Obligation does not encumber any other asset of Magellan or any Subsidiary;

 

(vii)                           purchase money security interests in Real Property acquired after the Effective Date or with respect to improvements thereto, and Liens placed upon equipment acquired after the Effective Date and used in the ordinary course of business of Magellan or any of its Subsidiaries and (in each case) placed at the time of the acquisition (or construction) thereof by Magellan or such Subsidiary or within 270 days thereafter to secure Indebtedness incurred to pay all or a portion of the purchase (or construction) price thereof or to secure Indebtedness incurred solely for the purpose of financing the acquisition (or construction) of any such Real Property (or improvements thereto) or equipment or extensions, renewals or replacements of any of the

 

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foregoing for the same or a lesser amount; provided, that (x) the Indebtedness secured by such Liens is permitted by Section 9.04(v) and (y) in all events, the Lien encumbering the Real Property (or improvements thereto) or equipment so acquired (or constructed) does not encumber any other asset of Magellan or any of its Subsidiaries;

 

(viii)                        easements, rights-of-way, restrictions, encroachments and other similar charges or encumbrances, and minor title deficiencies, in each case not securing Indebtedness and not materially interfering with the conduct of the business of Magellan or any of its Subsidiaries;

 

(ix)                              Liens arising from precautionary UCC financing statement filings regarding operating leases or sales of accounts, payment intangibles, chattel paper or instruments entered into in the ordinary course of business;

 

(x)                                 Liens arising out of the existence of judgments or awards in respect of which Magellan or any of its Subsidiaries shall be contesting in good faith, so long as such judgments or awards do not constitute an Event of Default hereunder;

 

(xi)                              statutory and common law landlords’ liens under leases to which Magellan or any of its Subsidiaries is a party;

 

(xii)                           Liens (other than Liens imposed under ERISA) incurred in the ordinary course of business in connection with workers compensation claims, unemployment insurance, social security benefits and other similar forms of governmental insurance benefits and (y) deposits securing the performance of bids, tenders, leases (other than Capitalized Lease Obligations) and contracts (other than Indebtedness) in the ordinary course of business, statutory obligations, surety bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money);

 

(xiii)                        Liens on property or assets of Magellan or any of its Subsidiaries in favor of any Credit Party;

 

(xiv)                       (A) Liens on property or assets acquired pursuant to a Permitted Acquisition, or on property or assets of a Subsidiary of Magellan in existence at the time such Subsidiary is acquired pursuant to a Permitted Acquisition; provided, that (x) any Indebtedness that is secured by such Liens is permitted to exist under Section 9.04(ix), and (y) such Liens are not incurred in connection with, or in contemplation or anticipation of, such Permitted Acquisition and do not attach to any other asset of Magellan or any of its Subsidiaries; and (B) renewals, replacements and extensions of such Liens; provided, that (x) the aggregate principal amount of the Indebtedness, if any, secured by such Liens does not increase from that amount outstanding at the time of any such renewal, replacement or extension and (y) any such renewal, replacement or extension does not encumber any additional assets or properties of Magellan or any of its Subsidiaries;

 

(xv)                          customary Liens in favor of banking institutions encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business;

 

(xvi)                       Liens solely in the nature of restrictions imposed on certain Subsidiaries of Magellan by governmental authorities to maintain certain levels of capital or net worth requirements due to the regulated nature of such Subsidiaries’ operations;

 

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(xvii)                    deposit, escrow or similar accounts held by customers of Magellan or any of its Subsidiaries as security for the obligations of Magellan or any of its Subsidiaries under customer contracts entered into in the ordinary course of business on a basis consistent with past practices;

 

(xviii)                 fiduciary or similar accounts held by Magellan or any of its Subsidiaries for their respective customers and for which Magellan or its respective Subsidiaries process claims on an ASO basis, in each case so long as such accounts are funded with cash provided to Magellan or its respective Subsidiaries by their respective customers;

 

(xix)                       Liens on cash deposits pledged as collateral to secure Indebtedness permitted under Section 9.04(xii) so long as the aggregate amount of cash pledged as collateral at any time outstanding does not exceed $50,000,000;

 

(xx)                          Liens on cash collateral provided under the terms of the Existing Credit Agreement (as in effect on the Effective Date); and

 

(xxi)                       Liens not otherwise permitted by clauses (i) through (xix) of this Section 9.01 on property or assets with an aggregate fair value not in excess of, and securing liabilities not in excess of, the greater of (A) $40,000,000 and (B) 2.25% of Consolidated Total Assets in the aggregate at any time outstanding.

 

9.02                        Consolidation, Merger, Purchase or Sale of Assets, etc.  Neither Magellan nor the Borrower will, nor will they permit any of their respective Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any partnership, joint venture, or transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of all or any part of its property or assets, except that:

 

(i)                                     [Reserved].

 

(ii)                                  each of Magellan and its Subsidiaries may make sales of inventory in the ordinary course of business;

 

(iii)                               Investments may be made to the extent permitted by Section 9.05;

 

(iv)                              each of Magellan and its Subsidiaries may sell or otherwise dispose of obsolete, uneconomic or worn-out equipment in the ordinary course of business;

 

(v)                                 Magellan and its Subsidiaries may sell assets (other than (A) the capital stock or other equity interests of the Borrower, (B) the capital stock or other equity interests of any other Subsidiary of Magellan unless all of the capital stock and other equity interests of such other Subsidiary then owned by Magellan and its Subsidiaries are sold in a sale permitted by this clause (v) or (C) all or substantially all of the assets of Magellan and its Subsidiaries taken as a whole), so long as (a) no Default or Event of Default then exists or would result therefrom, (b) each such sale is in an arm’s-length transaction and Magellan or the respective Subsidiary receives at least fair market value (as determined in good faith by Magellan or such Subsidiary, as the case may be) and (c) the consideration received by Magellan or such Subsidiary consists of at least 75% cash and is paid at the time of the closing of such sale;

 

(vi)                              each of Magellan and its Subsidiaries may lease (as lessee) or license (as licensee) real or personal property (so long as any such lease or license does not create a Capitalized Lease Obligation except to the extent permitted by Section 9.04(v));

 

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(vii)                           each of Magellan and its Subsidiaries may sell or discount, in each case without recourse and in the ordinary course of business, accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof and not as part of any financing transaction or bulk sale;

 

(viii)                        each of Magellan and its Subsidiaries may grant licenses, sublicenses, leases or subleases to other Persons not materially interfering with the conduct of the business of Magellan or any of its Subsidiaries;

 

(ix)                              any Subsidiary of Magellan may merge with and into, or be dissolved or liquidated into, or transfer any of its assets to, Magellan, the Borrower or a Subsidiary Guarantor so long as (i) in the case of any such merger, dissolution or liquidation involving the Borrower, the Borrower is the surviving corporation of any such transfer, merger, dissolution or liquidation, (ii) in all other cases, Magellan or a Subsidiary Guarantor is the surviving corporation of any such merger, dissolution or liquidation and (iii) in the case of any such transaction pursuant to which any consideration is paid to a Person that is not a Wholly-Owned Subsidiary of Magellan, such consideration shall be permitted to be paid at such time only to the extent that it could otherwise have been paid pursuant to (and Magellan shall be required to satisfy the provisions of) Section 9.05(xi), 9.05(xiv) or 9.05(xv), as applicable;

 

(x)                                 any Foreign Subsidiary of Magellan may merge with and into, or be dissolved or liquidated into, or transfer any of its assets to, any Foreign Subsidiary of Magellan so long as (i) in the case of any such transfer, merger, dissolution or liquidation involving a Wholly-Owned Foreign Subsidiary, a Wholly-Owned Foreign Subsidiary of Magellan is the surviving corporation of any such merger, dissolution or liquidation, and (ii) in the case of any such transaction pursuant to which any consideration is paid to a Person that is not a Wholly-Owned Subsidiary of Magellan, such consideration shall be permitted to be paid at such time only to the extent that it could otherwise have been paid pursuant to (and Magellan shall be required to satisfy the provisions of) Section 9.05(xi), 9.05(xiv) or 9.05(xv), as applicable;

 

(xi)                              the Borrower or any other Subsidiary of Magellan may merge with any other Person in order to effect an Investment permitted by Section 9.05; provided, that (x) if such merger involves the Borrower (i) the Borrower shall be the continuing or surviving Person or, in the case of a merger where the Borrower is not the continuing or surviving Person, the Person formed by or surviving any such merger shall be an entity organized or existing under the laws of the United States, any state thereof, the District of Columbia or any territory thereof (the Borrower or such Person, as the case may be, being herein referred to as the “Successor Borrower”) and (ii) the Successor Borrower (if other than the Borrower) shall expressly assume all the obligations of the Borrower under this Agreement and the other Credit Documents pursuant to a supplement hereto or thereto in form reasonably satisfactory to the Administrative Agent, (y) if such merger involves a Subsidiary Guarantor (and does not involve the Borrower), the continuing or surviving entity shall be a Subsidiary Guarantor and (z) in all cases, a Wholly-Owned Subsidiary shall be the continuing or surviving entity; and

 

(xii)                           (A) any Subsidiary of Magellan (other than the Borrower) that has no assets or liabilities (other than immaterial assets or liabilities) may be dissolved or liquidated and (B) any Subsidiary of Magellan that is not a Credit Party may merge with and into, or be dissolved or liquidated into, or transfer any or all of its assets to, a Subsidiary of Magellan that is not a Credit Party so long as (i) in the case of any such transfer, merger, dissolution or liquidation involving a Wholly-Owned Subsidiary, a Wholly-Owned Subsidiary of Magellan is the surviving entity of any such transaction and (ii) in the case of any such transaction pursuant to which any

 

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consideration is paid to a Person that is neither Magellan nor a Wholly-Owned Subsidiary thereof, such consideration shall be permitted to be paid at such time only to the extent that it  could otherwise have been paid pursuant to (and Magellan shall be required to satisfy the provisions of) Section 9.05(xi), 9.05(xiv) or 9.05(xv), as applicable.

 

9.03                        Dividends.  Neither Magellan nor the Borrower will, nor will they permit any of their respective Subsidiaries to, authorize, declare or pay any Dividends with respect to Magellan or any of its Subsidiaries, except that:

 

(i)                                     any Subsidiary of Magellan may (x) pay Dividends to Magellan or to any Wholly-Owned Subsidiary of Magellan and (y) if such Subsidiary is not a Wholly-Owned Subsidiary of Magellan, pay Dividends to its shareholders, partners or members generally so long as Magellan or its respective Subsidiary which owns the equity interest or interests in the Subsidiary paying such Dividends receives at least its proportionate share thereof (based upon its relative holdings of equity interests in the Subsidiary paying such Dividends and taking into account that the relative preferences, if any, of the various classes of equity interests in such Subsidiary);

 

(ii)                                  so long as there shall exist no Default or Event of Default (both before and after giving effect to the payment thereof), Magellan may repurchase outstanding shares of its capital stock (or options to purchase such capital stock) following the death, disability, retirement or termination of employment of employees, officers or directors of Magellan or any of its Subsidiaries; provided, that the aggregate amount of all Dividends paid by Magellan pursuant to this clause (ii) shall not exceed $5,000,000 in any fiscal year of Magellan;

 

(iii)                               Magellan may pay or make Dividends (including to repurchase shares of its capital stock) so long as (a) no Default or Event of Default then exists or would result therefrom, (b) calculations are made by Magellan with respect to the financial covenants contained in Sections 9.08 and 9.09 for the respective Calculation Period on Pro Forma Basis as if the respective Dividend (as well as all other Dividends theretofore paid or made after the first day of such Calculation Period) had occurred on the first day of such Calculation Period, and such calculations shall show (x) in the case of Section 9.08, that such financial covenant would have been complied with as of the last day of such Calculation Period and (y) in the case of Section 9.09, that the Total Leverage Ratio would have been no greater than 2.00:1.00 as of the last day of such Calculation Period, (c) immediately after giving effect to such proposed Dividend, the sum of the Total Unutilized Revolving Loan Commitment plus the aggregate amount of all Unrestricted cash and Cash Equivalents of Magellan and its Subsidiaries at such time shall equal or exceed $50,000,000 and (d) in connection with the payment or making of cash Dividends to holders of its capital stock (but not including, for the purposes of this sub-clause (d) only, the repurchase of shares of Magellan’s capital stock), Magellan shall have delivered to the Administrative Agent (with copies for each Lender) a certificate executed by one of its Authorized Officers certifying compliance with the requirements of preceding clauses (a) through (c), inclusive, and containing the calculations (in reasonable detail) required by preceding clauses (c) and (d);

 

(iv)                              so long as no Default or Event of Default then exists or would result therefrom, Magellan may pay or make additional Dividends (including to repurchase shares of its capital stock) in an aggregate amount not to exceed $10,000,000 in any fiscal year of Magellan;

 

(v)                                 (i) Magellan may redeem in whole or in part any of its capital stock for another class of its capital stock (other than Disqualified Stock) or rights to acquire its capital stock (other

 

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than Disqualified Stock) and (ii) Magellan may declare and make Dividends solely in its capital stock (other than Disqualified Stock);

 

(vi)                              Magellan may pay any Dividend within 30 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of this Agreement; and

 

(vii)                           Magellan may (a) pay cash in lieu of fractional shares in connection with any Dividend, split or combination thereof and (b) honor any conversion request by a holder of convertible Indebtedness and make cash payments in lieu of fractional shares in connection with any such conversion.

 

9.04                        Indebtedness.  Neither Magellan nor the Borrower will, nor will they permit any of their respective Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except:

 

(i)                                     Indebtedness incurred pursuant to this Agreement and the other Credit Documents;

 

(ii)                                  Indebtedness outstanding on the Effective Date and listed on Schedule VI (as reduced by any permanent repayments of principal thereof), including any subsequent extension, renewal or refinancing thereof (except to the extent set forth on Schedule VI); provided, that the aggregate principal amount of the Indebtedness to be extended, renewed or refinanced does not increase from that amount outstanding at the time of any such extension, renewal or refinancing;

 

(iii)                               Indebtedness of Magellan or any of its Subsidiaries under Interest Rate Protection Agreements entered into with respect to other Indebtedness permitted under this Section 9.04 so long as the entering into of such Interest Rate Protection Agreements are bona fide hedging activities and are not for speculative purposes;

 

(iv)                              Indebtedness of Magellan or any of its Subsidiaries under Other Hedging Agreements providing protection to Magellan and its Subsidiaries against fluctuations in currency values in connection with Magellan’s or any of its Subsidiaries’ foreign operations so long as the entering into of such Other Hedging Agreements are bona fide hedging activities and are not for speculative purposes;

 

(v)                                 Indebtedness of Magellan and its Subsidiaries evidenced by Capitalized Lease Obligations and purchase money Indebtedness described in Section 9.01(vii); provided, that in no event shall the sum of the aggregate principal amount of all Capitalized Lease Obligations and purchase money Indebtedness permitted by this clause (v) exceed $15,000,000 at any time outstanding;

 

(vi)                              intercompany Indebtedness among Magellan and its Subsidiaries to the extent permitted by Sections 9.05(viii) or (xiv);

 

(vii)                           to the extent that same constitutes Indebtedness, obligations in respect of earn-out arrangements permitted pursuant to a Permitted Acquisition;

 

(viii)                        Indebtedness consisting of guaranties by the Credit Parties of each other’s Indebtedness permitted under this Agreement;

 

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(ix)                              (A) Indebtedness of a Subsidiary of Magellan acquired pursuant to a Permitted Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition of an asset securing such Indebtedness); provided, that (x) such Indebtedness was not incurred in connection with, or in anticipation or contemplation of, such Permitted Acquisition, (y) such Indebtedness does not constitute debt for borrowed money, it being understood and agreed that Capitalized Lease Obligations and purchase money Indebtedness shall not constitute debt for borrowed money for purposes of this clause (y) and (z) the aggregate principal amount of all Indebtedness permitted by this clause (ix) shall not exceed $25,000,000 at any one time outstanding and (B) any subsequent extension, renewal or refinancing of such Indebtedness; provided, that the aggregate principal amount of the Indebtedness to be extended, renewed or refinanced does not increase from that amount outstanding at the time of any such extension, renewal or refinancing;

 

(x)                                 Indebtedness in respect of overdrafts and related liabilities arising from treasury, depository, credit or debit card, purchasing card, or cash management services (including any automated clearing house transfers of funds netting services, automatic clearinghouse arrangements, overdraft protections and similar arrangements) in each case in connection with deposit accounts incurred in the ordinary course of business;

 

(xi)                              Indebtedness of Magellan or any of its Subsidiaries which may be deemed to exist in connection with agreements providing for indemnification, purchase price adjustments and similar obligations in connection with the acquisition or disposition of assets in accordance with the requirements of this Agreement so long as any such obligations are those of the Person making the respective acquisition or sale, and are not guaranteed by any other Person except as permitted by Section 9.04(viii);

 

(xii)                           so long as no Default or Event of Default then exists or would result therefrom, Indebtedness of Magellan or any of its Subsidiaries in respect of letters of credit issued for the account of Magellan or any of its Subsidiaries in the ordinary course of business and supporting L/C Supportable Obligations (as defined in the Existing Credit Agreement) so long as the aggregate stated amount of all such Indebtedness (including all unreimbursed drawings thereunder) does not exceed $50,000,000 at any time outstanding;

 

(xiii)                        Permitted Subordinated Debt of Magellan, and unsecured subordinated guaranties thereof by the Borrower and the Subsidiary Guarantors, so long as (i) all such Indebtedness is incurred in accordance with the requirements of the definition of Permitted Subordinated Debt, (ii) no Default or Event of Default exists at the time of incurrence thereof or would result therefrom, (iii) the Net Debt Proceeds therefrom are used to effect a Permitted Acquisition in accordance with the requirements of Section 9.05(xi), (iv) calculations are made by Magellan with respect to the financial covenants contained in Sections 9.08 and 9.09 for the respective Calculation Period on a Pro Forma Basis as if such Permitted Subordinated Debt (as well as all other Permitted Subordinated Debt theretofore incurred after the first day of such Calculation Period) had been incurred on the first day of such Calculation Period, and such calculations shall show that such financial covenants would have been complied with as of the last day of such Calculation Period and (v) Magellan shall have delivered to the Administrative Agent (with copies for each Lender) a certificate executed by one of its Authorized Officers certifying compliance with the requirements of preceding clauses (i) through (iv), inclusive, and containing the calculations (in reasonable detail) required by preceding clause (iv);

 

(xiv)                       additional Indebtedness of Magellan and its Subsidiaries so long as (x) no Default or Event of Default then exists or would result therefrom and (y) calculations are made by Magellan with respect to the financial covenants contained in Sections 9.08 and 9.09 for the

 

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respective Calculation Period on a Pro Forma Basis as if the respective incurrence of Indebtedness (as well as all other Indebtedness theretofore incurred after the first day of such Calculation Period) had occurred on the first day of such Calculation Period, and such calculations shall show that such financial covenants would have been complied with as of the last day of such Calculation Period (without netting the proceeds of the applicable incurrence);

 

(xv)                          Indebtedness consisting of the financing of insurance premiums in the ordinary course of business;

 

(xvi)                       Indebtedness representing deferred compensation to employees of a Magellan or any of its Subsidiaries incurred in the ordinary course of business;

 

(xvii)                    Indebtedness supported by a letter of credit in a principal amount not to exceed the face amount of such letter of credit; and

 

(xviii)                 unsecured Indebtedness outstanding under the Existing Credit Agreement in an aggregate principal amount not to exceed $700,000,000 at any time outstanding.

 

9.05                        Advances, Investments and Loans.  Neither Magellan nor the Borrower will, nor will they permit any of their respective Subsidiaries to, directly or indirectly, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or hold any cash or Cash Equivalents (each of the foregoing an “Investment” and, collectively, “Investments”), except that the following shall be permitted:

 

(i)                                     Magellan and its Subsidiaries may acquire and hold accounts receivable owing to any of them, if created or acquired in the ordinary course of business;

 

(ii)                                  Magellan and its Subsidiaries may acquire and hold cash and Cash Equivalents;

 

(iii)                               Magellan and its Subsidiaries may hold the Investments held by them on the Effective Date and described on Schedule IX; provided, that any additional Investments made with respect thereto shall be permitted only if permitted under the other provisions of this Section 9.05;

 

(iv)                              Magellan and its Subsidiaries may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in good faith settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;

 

(v)                                 Magellan and its Subsidiaries may make loans and advances to their officers and employees in the ordinary course of business (including for the exercise of stock options and similar rights) of Magellan and its Subsidiaries in an aggregate amount not to exceed $5,000,000 at any time outstanding (determined without regard to any write-downs or write-offs of such loans and advances);

 

(vi)                              Magellan and its Subsidiaries may enter into Interest Rate Protection Agreements to the extent permitted by Section 9.04(iii);

 

30

 

(vii)                           Magellan and its Subsidiaries may enter into Other Hedging Agreements to the extent permitted by Section 9.04(iv);

 

(viii)                        Magellan and its Wholly-Owned Subsidiaries may make intercompany Investments between and among one another;

 

(ix)                              [Reserved];

 

(x)                                 [Reserved];

 

(xi)                              (A) Subject to the provisions of this clause (xi), Magellan, the Borrower and each of Magellan’s other Wholly-Owned Subsidiaries may from time to time effect Permitted Acquisitions, so long as (in each case except to the extent the Required Lenders otherwise specifically agree in writing in the case of a specific Permitted Acquisition):  (1) no Default or Event of Default shall have occurred and be continuing at the time of the consummation of the proposed Permitted Acquisition or immediately after giving effect thereto; (2) calculations are made by Magellan with respect to the financial covenants contained in Sections 9.08 and 9.09 for the respective Calculation Period on a Pro Forma Basis as if the respective Permitted Acquisition (as well as all other Permitted Acquisitions theretofore consummated after the first day of such Calculation Period) had occurred on the first day of such Calculation Period, and such calculations shall show that such financial covenants would have been complied with as of the last day of such Calculation Period; (3) all of the representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Permitted Acquisition (both before and after giving effect thereto), unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date; (4) after giving effect to such proposed Permitted Acquisition and the payment of all amounts (including fees and expenses) owing in connection therewith, the sum of the Total Unutilized Revolving Loan Commitment plus the aggregate amount of all Unrestricted cash and Cash Equivalents of Magellan and its Subsidiaries at such time shall equal or exceed the sum of (I) $50,000,000 plus (II) an amount equal to the aggregate amount reasonably likely to be payable within the 12 months following such Permitted Acquisition in respect of all post-closing purchase price adjustments, earn-out payments, non-compete payments and/or deferred purchase payments (or similar payments), in each case required or which will be required in connection with such Permitted Acquisition (and all other Permitted Acquisitions for which such purchase price adjustments and other payments may be required to be made) as determined by Magellan in good faith on the date of such acquisition; and (5) Magellan shall have delivered to the Administrative Agent within five (5) Business Days of such Permitted Acquisition a certificate executed by one of its Authorized Officers certifying compliance with the requirements of preceding clauses (1) through (5), inclusive (to the extent applicable), and containing the calculations (in reasonable detail) required by preceding clauses (2) and (4).

 

(B)                               Magellan will cause each Wholly-Owned Domestic Subsidiary, which is formed to effect, or is acquired pursuant to, a Permitted Acquisition to comply with, and to execute and deliver all of the documentation as and to the extent required by, Section 8.12.

 

(xii)                           Magellan may acquire and hold obligations of one or more officers, directors or other employees of Magellan or any of its Subsidiaries in connection with such officers’, directors’ or employees’ acquisition of shares of capital stock of Magellan so long as no cash is

 

31

 

paid by Magellan or any of its Subsidiaries to such officers, directors or employees in connection with the acquisition of any such obligations;

 

(xiii)                        Magellan and its Subsidiaries may acquire and hold promissory notes and other non-cash consideration issued by the purchaser of assets in connection with a sale of such assets to the extent permitted by Section 9.02(v);

 

(xiv)                       Magellan and its Subsidiaries may make Investments so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) calculations are made by Magellan with respect to the financial covenants contained in Sections 9.08 and 9.09 for the respective Calculation Period on Pro Forma Basis as if the respective Investment (as well as other Investments theretofore consummated after the first day of such Calculation Period) had occurred on the first day of such Calculation Period, and such calculations shall show that financial covenants would have been complied with as of the last day of such Calculation Period, (iii) immediately after giving effect to such proposed Investment, the sum of the Total Unutilized Revolving Loan Commitment plus the aggregate amount of all Unrestricted cash and Cash Equivalents of Magellan and its Subsidiaries at such time shall equal or exceed $50,000,000 and (iv) Magellan shall have delivered to the Administrative Agent (with copies for each Lender) a certificate executed by one of its Authorized Officers certifying compliance with the requirements of preceding clauses (i) through (iii), inclusive, and containing the calculations (in reasonable detail) required by preceding clauses (ii) and (iii);

 

(xv)                          so long as no Default or Event of Default then exists or would result therefrom, Magellan and its Subsidiaries may make Investments not otherwise permitted by clauses (i) through (xiv) of this Section 9.05 in an aggregate amount not to exceed $25,000,000 at any time outstanding (determined without regard to any write downs or write-offs of such Investments); and

 

(xvi)                       Magellan and its Subsidiaries may make Investments in joint ventures and non-Wholly-Owned Subsidiaries in an aggregate amount not to exceed $25,000,000 in any fiscal year.

 

9.06                        Transactions with Affiliates.  Neither Magellan nor the Borrower will, nor will they permit any of their respective Subsidiaries to, enter into any transaction or series of related transactions with any Affiliate of Magellan or any of its Subsidiaries involving aggregate consideration in excess of $5,000,000, other than in the ordinary course of business and on terms and conditions substantially as favorable to Magellan or such Subsidiary as would reasonably be obtained by Magellan or such Subsidiary at that time in a comparable arm’s length transaction with a Person other than an Affiliate, except that:

 

(i)                                     Dividends may be paid to the extent provided in Section 9.03;

 

(ii)                                  loans may be made and other transactions may be entered into by Magellan and its Subsidiaries to the extent permitted by Sections 9.02, 9.04 and 9.05;

 

(iii)                               customary fees, indemnities and reimbursements may be paid to officers and directors of Magellan and its Subsidiaries;

 

(iv)                              Magellan and its Subsidiaries may enter into, and may make payments under, employment agreements, employee benefits plans, stock option plans, indemnification provisions, severance arrangements, and other similar compensatory arrangements with officers, employees and directors of Magellan and its Subsidiaries in the ordinary course of business;

 

32

 

(v)                                 periodic allocations of operating and overhead expenses among Magellan and its Subsidiaries may be made;

 

(vi)                              Magellan or any Subsidiary of Magellan may pay to any Credit Party management, consulting or similar fees on a basis consistent with past practices;

 

(vii)                           Magellan and its Subsidiaries may enter into transactions that are approved by a majority of the Disinterested Directors; and

 

(viii)                        each Credit Party may enter into transactions with one or more other Credit Parties.

 

Notwithstanding anything to the contrary contained in this Agreement, Magellan will not, and will not permit any of its Subsidiaries to, pay any management, consulting or similar fees to any of their respective Affiliates other than as permitted by clause (vi) above.

 

9.07                        [Reserved].

 

9.08                        Consolidated Interest Coverage Ratio.  Magellan and the Borrower will not permit the Consolidated Interest Coverage Ratio for any Test Period ending on the last day of any fiscal quarter of Magellan to be less than 3.00:1.00.

 

9.09                        Total Leverage Ratio.  Magellan and the Borrower will not permit the Total Leverage Ratio for any Test Period ending on the last day of any fiscal quarter of Magellan to be greater than 2.50:1.00.

 

9.10                        Limitations on Payments of Permitted Subordinated Debt; Modifications of Certificate of Incorporation, By-Laws and Documents Governing Permitted Subordinated Debt.  Neither Magellan nor the Borrower will, nor will they permit any of their respective Subsidiaries to:

 

(i)                                     make (or give any notice in respect of) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or any prepayment or redemption as a result of any asset sale, change of control or similar event of (including, in each case without limitation, by way of depositing with the trustee with respect thereto, or with any other Person, money or securities before due for the purpose of paying when due), any Permitted Subordinated Debt; provided, however, that (A) so long as no Default or Event of Default then exists or would result therefrom, Magellan may redeem or repurchase outstanding Permitted Subordinated Debt so long as the aggregate amount expended in respect of all such redemptions and repurchases does not exceed $10,000,000 in any fiscal year of Magellan and (B) Magellan may effect additional redemptions or repurchases of outstanding Permitted Subordinated Debt so long as (i) no Default or Event of Default then exists or would result therefrom, (ii) calculations are made by Magellan with respect to the financial covenants contained in Sections 9.08 and 9.09 for the respective Calculation Period on Pro Forma Basis as if the respective redemption or repurchase (as well as all other redemptions and repurchases theretofore consummated after the first day of such Calculation Period) had occurred on the first day of such Calculation Period, and such calculations shall show (x) in the case of Section 9.08, that such financial covenant would have been complied with as of the last day of such Calculation Period and (y) in the case of Section 9.09, that the Total Leverage Ratio would have been no greater than 2.00:1.00 as of the last day of such Calculation Period, (iii) immediately after giving effect to such proposed redemption or repurchase, the sum of the Total Unutilized Revolving Loan Commitment plus the aggregate amount of all Unrestricted cash and Cash Equivalents of Magellan and its Subsidiaries

 

33

 

at such time shall equal or exceed $50,000,000 and (iv) Magellan shall have delivered to the Administrative Agent (with copies for each Lender) a certificate executed by one of its Authorized Officers certifying compliance with the requirements of preceding clauses (i) through (iii), inclusive and containing the calculations (in reasonable detail) required by preceding clauses (ii) and (iii);

 

(ii)                                  on and after the execution and delivery of any Permitted Subordinated Debt Document, amend or modify (or permit the amendment or modification of) any Permitted Subordinated Debt Document, other than any such amendment or modification that (i) makes the provisions thereof less restrictive on Magellan and its Subsidiaries (including with respect to any representation, warranty, covenant, default or event of default), (ii) reduces interest rates, commissions or fees paid (or to be paid) by Magellan or any of its Subsidiaries in connection therewith, (iii) extends the stated maturity of any Indebtedness thereunder, (iv) reduces or eliminates any prepayment premiums or (v) is otherwise not adverse to the Lenders in any material respect (in the reasonable opinion of the Administrative Agent); provided, that no amendment or modification may be made to the subordination provisions contained in any Permitted Subordinated Debt Document without the prior written consent of the Administrative Agent; and

 

(iii)                               amend, modify or change its certificate or articles of incorporation (including, without limitation, by the filing or modification of any certificate or articles of designation), certificate of formation, limited liability company agreement or by-laws (or the equivalent organizational documents), as applicable, or any agreement entered into by it with respect to its capital stock or other equity interests (including any Shareholders’ Agreement), or enter into any new agreement with respect to its capital stock or other equity interests, unless such amendment, modification, change or other action contemplated by this clause (iii) could not reasonably be expected to be adverse to the interests of the Lenders in any material respect.

 

9.11                        Use of Proceeds.  The Borrower will not request any Borrowing and the Borrower shall not directly, or, to its knowledge, indirectly use the proceeds of any Borrowing (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, (c) in any manner that would result in the violation of any Sanctions applicable to any party hereto or (d) in violation of Section 7.08.

 

9.12                        Business, etc.  Neither Magellan nor the Borrower will, nor will they permit any of their respective Subsidiaries to, engage in any business other than the businesses engaged in by Magellan and its Subsidiaries as of the Effective Date and reasonable extensions thereof and businesses ancillary or complementary thereto.

 

Section 10.                                    Events of Default.  Upon the occurrence of any of the following specified events (each an “Event of Default”):

 

10.01                 Payments.  The Borrower shall (i) default in the payment when due of any principal of any Loan or any Note or (ii) default, and such default shall continue unremedied for three or more Business Days, in the payment when due of any interest on any Loan or Note or any other amounts owing hereunder or under any other Credit Document; or

 

10.02                 Representations, etc.  Any representation, warranty or statement made or deemed made by any Credit Party herein or in any other Credit Document or in any certificate delivered to the

 

34

 

Administrative Agent or any Lender pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or

 

10.03                 Covenants.  Magellan or any of its Subsidiaries shall (i) default in the due performance or observance by it of any term, covenant or agreement contained in Section 8.01(f)(i), 8.04 (solely with respect to the Borrower and Magellan), 8.08, 8.11 or Section 9 or (ii) default in the due performance or observance by it of any other term, covenant or agreement contained in this Agreement or in any other Credit Document (other than those set forth in Sections 10.01 and 10.02) and such default pursuant to this sub clause (ii) shall continue unremedied for a period of 30 days after written notice thereof to the defaulting party by the Administrative Agent or the Required Lenders; or

 

10.04                 Default Under Other Agreements.  (i) Magellan or any of its Subsidiaries shall (x) default in any payment of any Indebtedness (other than the Obligations) beyond the period of grace, if any, provided in an instrument or agreement under which such Indebtedness was created or (y) default in the observance or performance of any agreement or condition relating to any Indebtedness (other than the Obligations) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice is required), any such Indebtedness to become due prior to its stated maturity, or (ii) any Indebtedness (other than the Obligations) of Magellan or any of its Subsidiaries shall be declared to be (or shall become) due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; provided, that it shall not be a Default or an Event of Default under this Section 10.04 unless the aggregate principal amount of all Indebtedness as described in preceding clauses (i) and (ii) is at least $25,000,000; or

 

10.05                 Bankruptcy, etc.  Magellan or any of its Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto (the “Bankruptcy Code”); or an involuntary case is commenced against Magellan or any of its Subsidiaries, and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of Magellan or any of its Subsidiaries which custodian is not dismissed within 60 days after the date of such appointment or the date such custodian takes charge, or Magellan or any of its Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to Magellan or any of its Subsidiaries, or there is commenced against Magellan or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days, or Magellan or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or Magellan or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or Magellan or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any corporate, limited liability company or similar action is taken by Magellan or any of its Subsidiaries for the purpose of effecting any of the foregoing; or

 

10.06                 ERISA.  (a) Any ERISA Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of an ERISA Plan subject to Title IV of ERISA shall be subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to

 

35

 

subparagraph (b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur with respect to such ERISA Plan within the following 30 days, any ERISA Plan which is subject to Title IV of ERISA shall have had or is likely to have a trustee appointed to administer such ERISA Plan, any ERISA Plan which is subject to Title IV of ERISA is, shall have been or is likely to be terminated or to be the subject of termination proceedings under ERISA, any ERISA Plan shall have an Unfunded Current Liability, a contribution required to be made with respect to an ERISA Plan or a Foreign Pension Plan has not been timely made, Magellan or any of its Subsidiaries or any ERISA Affiliate has incurred or is likely to incur any liability to or on account of an ERISA Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 436(f), 4971 or 4975 of the Code or on account of a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or Magellan or any of its Subsidiaries has incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that provide benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or ERISA Plans or Foreign Pension Plans, a “default” within the meaning of Section 4219(c)(5) of ERISA shall occur with respect to any ERISA Plan, any Change in Law, or, as a result of a Change in Law, an event occurs following a Change in Law, with respect to or otherwise affecting any ERISA Plan; (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) such lien, security interest or liability, either individually and/or in the aggregate, has had, or could reasonably be expected to have, in the opinion of the Required Lenders, a Material Adverse Effect; or

 

10.07                 [Reserved].

 

10.08                 Guaranty.  The Guaranty or any provision thereof shall cease to be in full force or effect as to any Guarantor (other than any Subsidiary Guarantor that shall have been released from its obligations pursuant to Section 17 of the Guaranty), or any Guarantor or any Person acting for or on behalf of such Guarantor shall deny or disaffirm such Guarantor’s obligations under the Guaranty or any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the Guaranty; or

 

10.09                 Judgments.  One or more judgments or decrees shall be entered against Magellan or any of its Subsidiaries involving in the aggregate for Magellan and its Subsidiaries a liability (not paid or fully covered by a reputable and solvent insurance company) and such judgments and decrees either shall be final and non-appealable or shall not be vacated, discharged or stayed or bonded pending appeal for any period of 30 consecutive days, and the aggregate amount of all such judgments equals or exceeds $25,000,000; or

 

10.10                 Change of Control.  A Change of Control shall occur;

 

then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent, upon the written request of the Required Lenders, shall by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of the Administrative Agent, any Lender or the holder of any Note to enforce its claims against any Credit Party (provided, that, if an Event of Default specified in Section 10.05 shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Administrative Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice):  (i) declare the Commitments terminated, whereupon the Commitment of each Lender shall forthwith terminate immediately and (ii) declare the principal of and any accrued interest in respect of all Loans and the Notes and all other Obligations owing hereunder and thereunder to be, whereupon the same shall become,

 

36

 

forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Credit Party.

 

Section 11.                                    Defined Terms.  As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

 

“Acquired Entity or Business” shall mean either (x) the assets constituting a business, division or product line of any Person not already a Subsidiary of Magellan or (y) 100% of the capital stock of any such Person, which Person shall, as a result of such stock acquisition, become a Wholly-Owned Subsidiary of Magellan (or shall be merged with and into Magellan or a Wholly-Owned Subsidiary of Magellan, with Magellan or such Wholly-Owned Subsidiary being the surviving Person).

 

“Administrative Agent” shall mean The Bank of Tokyo-Mitsubishi UFJ, Ltd., in its capacity as Administrative Agent for the Lenders hereunder, and shall include any successor to the Administrative Agent appointed pursuant to Section 12.09.

 

“Administrative Questionnaire” shall mean an administrative questionnaire in a form approved by the Administrative Agent.

 

“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling (including, but not limited to, all directors and officers of such Person), controlled by, or under direct or indirect common control with, such Person.  A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise; provided, however, that neither the Administrative Agent nor any Affiliate thereof shall be considered an Affiliate of Magellan or any Subsidiary thereof.

 

“AFSC Acquisition” shall mean the acquisition pursuant to the Share Purchase Agreement among Magellan, the Borrower and Armed Forces Services Corporation, dated as of May 15, 2016.

 

“Agent” shall mean and include each of the Administrative Agent, the Co-Syndication Agents, the Co-Documentation Agents and their respective affiliates.

 

“Agreement” shall mean this Credit Agreement, as modified, supplemented, amended, restated (including any amendment and restatement hereof), extended or renewed from time to time.

 

“Anti-Corruption Laws” shall mean the United States Foreign Corrupt Practices Act of 1977 and the UK Bribery Act, in each case, as amended.

 

“Applicable Margin” shall mean, (i) until the delivery of financial statements and the related Compliance Certificate for the first full fiscal quarter ending after the Effective Date, the percentage set forth below for a Category B Period and (ii) thereafter, the percentage set forth below opposite the Applicable Period then in effect:

 

37

 

	
 
    	
 
    	
Applicable Margin
    	
 
    
	
Applicable Period
    	
 
    	
Eurodollar Loans
    	
 
    	
Base Rate Loans
    	
 
    
	
Category A Period
    	
 
    	
1.25
    	
%
    	
0.25
    	
%
    
	
Category B Period
    	
 
    	
1.375
    	
%
    	
0.375
    	
%
    
	
Category C Period
    	
 
    	
1.50
    	
%
    	
0.50
    	
%
    
	
Category D Period
    	
 
    	
1.75
    	
%
    	
0.75
    	
%
    

 

; provided, that at any time that Magellan has a corporate credit rating from S&P of lower than BBB-, each Applicable Margin set forth in the table above shall be increased by 0.125%.

 

Any increase or decrease in the Applicable Margin pursuant to the preceding clause (ii) resulting from a change in the Total Leverage Ratio and an attendant change in the Applicable Period shall become effective as of the first Business Day immediately following the date on which the applicable Compliance Certificate is delivered pursuant to Section 8.01(e).

 

For purposes of the foregoing, if the corporate credit rating established by S&P shall be changed, such change shall be effective as of the third Business Day following the date on which an Authorized Officer shall become aware of such change (or, if earlier, the date on which the Administrative Agent shall become aware of such change).  If the rating system of S&P shall change, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system and, pending the effectiveness of any such amendment, the Applicable Margin shall be determined by reference to the rating most recently in effect prior to such change.

 

“Applicable Period” shall mean, on any day, the period set forth below then in effect on such day:

 

	
Applicable Period
    	
 
    	
Criteria
    
	
Category A Period
    	
 
    	
The Total Leverage Ratio is less than 1.00:1.00.
    
	
Category B Period
    	
 
    	
The Total Leverage Ratio is greater than or equal to 1.00:1.00   but less than 1.50:1.00.
    
	
Category C Period
    	
 
    	
The Total Leverage Ratio is greater than or equal to 1.50:1.00   but less than 2.00:1.00.
    
	
Category D Period
    	
 
    	
The Total Leverage Ratio is greater than or equal to 2.00:1.00.
    

 

Notwithstanding anything to the contrary set forth above, (x) in the event that there is an Event of Default that is continuing, the Applicable Period shall be a Category D Period and (y) at the option of the Required Lenders, the Applicable Period shall be a Category D Period as of the first Business Day after the date on which a Compliance Certificate was required to have been delivered but was not delivered, and shall continue to so apply to and including the date on which such Compliance Certificate is so delivered (and thereafter the pricing level otherwise determined in accordance with the definition of “Applicable Margin” shall apply).

 

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“Asset Sale” shall mean any sale, transfer or other disposition by Magellan or any of its Subsidiaries to any Person (including by way of redemption by such Person) other than to Magellan or a Wholly-Owned Subsidiary of Magellan of any asset (including, without limitation, any capital stock or other securities of, or equity interests in, another Person) other than sales of assets pursuant to Sections 9.02(ii), (iv), (vii) and (viii).

 

“Assignment and Assumption Agreement” shall mean an Assignment and Assumption Agreement substantially in the form of Exhibit L (appropriately completed).

 

“Attributable Debt” shall mean, as of any date of determination thereof, without duplication, (i) in connection with a Sale and Leaseback Transaction, the net present value (discounted according to generally accepted accounting principles at the cost of debt implied in the lease) of the obligations of the lessee for rental payments during the then remaining term of any applicable lease, and (ii) the principal balance outstanding under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing (including an off-balance sheet receivables financing) product to which such Person is a party.

 

“Authorized Officer” shall mean, with respect to (i) delivering Notices of Borrowing, Notices of Conversion/Continuation and similar notices, any person or persons that has or have been authorized by the board of directors of the Borrower to deliver such notices pursuant to this Agreement and that has or have appropriate signature cards or incumbency certificates on file with the Administrative Agent, (ii) delivering financial information and officer’s certificates pursuant to this Agreement, the chief financial officer, the treasurer or the principal accounting officer of Magellan or the Borrower, as applicable, and (iii) any other matter in connection with this Agreement or any other Credit Document, any officer (or a person or persons so designated by any two officers) of Magellan or the Borrower, as applicable.

 

“Bail-In Action” shall mean the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

 

“Bail-In Legislation” shall mean, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

 

“Bankruptcy Code” shall have the meaning provided in Section 10.05.

 

“Base Rate” shall mean, for any day, a rate per annum equal to the highest of (i) the Prime Lending Rate in effect on such day, (ii) 1/2 of 1% in excess of the overnight Federal Funds Rate in effect on such day and (iii) the Eurodollar Rate for an Interest Period of one month commencing on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%.

 

“Base Rate Loan” shall mean each Loan designated or deemed designated as such by the Borrower at the time of the incurrence thereof or conversion thereto.

 

“Board of Directors” shall mean, as to any Person, the board of directors or other governing body of such Person, or if such person is owned or managed by a single entity, the board of directors or other governing body of such entity.

 

“Borrower” shall have the meaning provided in the first paragraph of this Agreement.

 

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“Borrowing” shall mean a borrowing consisting of simultaneous Loans of the same Type made by all the Lenders on the Effective Date (or resulting from a conversion or conversions on a given date) having in the case of Eurodollar Loans the same Interest Period; provided, that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of the related Borrowing of Eurodollar Loan.

 

“Business Day” shall mean (i) for all purposes other than as covered by clause (ii) below, any day except Saturday, Sunday and any day which shall be in New York, New York, a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) above and which is also a day for trading by and between banks in U.S. dollar deposits in the interbank Eurodollar market.

 

“Calculation Period” shall mean, in the case of any Permitted Acquisition or any other event expressly required to be calculated on a Pro Forma Basis pursuant to the terms of this Agreement, the Test Period most recently ended prior to the date of any such Permitted Acquisition or other event for which financial statements have been delivered to the Lenders pursuant to this Agreement.

 

“Capital Expenditures” shall mean, with respect to any Person, all expenditures by such Person which should be capitalized in accordance with generally accepted accounting principles and, without duplication, the amount of Capitalized Lease Obligations incurred by such Person.

 

“Capitalized Lease Obligations” shall mean, with respect to any Person, all rental obligations of such Person which, under generally accepted accounting principles, are or will be required to be capitalized on the books of such Person, in each case taken at the amount thereof accounted for as indebtedness in accordance with such principles.

 

“Cash Equivalents” shall mean, as to any Person, (i) securities issued or directly and fully guaranteed or insured by the United States or any agency, instrumentality or sponsored corporation thereof and backed by the full faith and credit of the United States, and in each case having maturities of not more than two years from the date of acquisition, (ii) Dollar denominated time deposits, certificates of deposit, overnight bank deposits and bankers’ acceptances with any Lender or any commercial bank of recognized standing, having capital and surplus in excess of $250,000,000 and the commercial paper of the holding company of which, at the time of acquisition thereof, is rated at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody’s (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), or, if no such commercial paper rating is available, a long-term debt rating, at the time of acquisition thereof, of at least A or the equivalent thereof by S&P or at least A-2 or the equivalent thereof by Moody’s (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), (iii) repurchase obligations with a term of not more than 92 days for underlying securities of the types described in clause (i) above and entered into with any commercial bank meeting the qualifications specified in clause (ii) above, (iv) other investment instruments offered or sponsored by financial institutions having capital and surplus in excess of $250,000,000 and the commercial paper of the holding company of which, at the time of acquisition thereof, is rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody’s (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), or, if no such commercial paper rating is available, a long-term debt rating, at the time of acquisition thereof, of at least A+ or the equivalent thereof by S&P or at least A-1 or the equivalent thereof by Moody’s (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), (v) readily marketable direct obligations issued by any state of the United States or any political subdivision thereof having, at the time of acquisition thereof, one of the two highest rating categories obtainable from either Moody’s or S&P (or if at such time neither is issuing ratings, then a comparable rating of another

 

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nationally recognized rating agency), (vi) commercial paper or corporate bonds rated, at the time of acquisition thereof, at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody’s (or if at such time neither is issuing ratings, then a comparable rating of another nationally recognized rating agency), in each case maturing within two years after the date of acquisition, (vii) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (i) through (vi) above, and (viii) in the case of any Foreign Subsidiary of the Borrower, (x) certificates of deposit (or comparable instruments) of any bank with which such Foreign Subsidiary regularly transacts business and with maturities of not more than six months from the date of acquisition by such Foreign Subsidiary, (y) overnight deposits and demand deposit accounts maintained with any bank that such Foreign Subsidiary regularly transacts business and (z) securities of the type and maturity described in clause (i) above but issued by the principal governmental authority in which such Foreign Subsidiary is organized so long as such security has the highest rating available from either S&P or Moody’s.

 

“CDMI Earn-out Payment” shall mean a payment of up to $100,000,000 in respect of the contingent amount owing pursuant to the Purchase Agreement, attached as Exhibit 2.1 to Magellan’s Current Report on Form 8-K filed with the Securities Exchange Commission on April 1, 2014 and Amendment No. 1 thereto, attached as Exhibit 2.2 to Magellan’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2014 in connection with the acquisition of CDMI, LLC.

 

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as the same has been amended and may hereafter be amended from time to time, 42 U.S.C. § 9601 et seq.

 

“Change of Control” shall mean (i) any “Person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act as in effect on the Effective Date), (A) is or shall become the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act as in effect on the Effective Date), directly or indirectly, of 35% or more of the outstanding total Voting Power of Magellan’s capital stock (determined on a fully diluted basis) or (B) shall have obtained the power (whether or not exercised) to elect a majority of Magellan’s directors, (ii) at any time the Board of Directors of Magellan shall cease to consist of a majority of Continuing Directors, (iii) a “change of control” (or similar event) shall occur as provided any Permitted Subordinated Debt Document or (iv) Magellan shall at any time fail to directly own, beneficially and of record, 100% of the Borrower’s capital stock.

 

“Change in Law” shall mean the occurrence of any of the following: (i) the adoption or taking effect of any law, rule, regulation or treaty, (ii) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority, or (iii) the making or issuance of any request, rules, guideline, requirement or directive (whether or not having the force of law) by any Governmental Authority; provided however, that notwithstanding anything herein to the contrary, (a) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder, issued in connection therewith or in implementation thereof, and (b) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law” after the Effective Date regardless of the date enacted, adopted, issued or implemented.

 

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“Co-Syndication Agents” shall mean SunTrust Bank and Wells Fargo Bank, National Association, in their respective capacities as co-syndication agents for the credit facilities provided for under this Agreement.

 

“Code” shall mean the U.S. Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder.  Section references to the Code are to the Code as in effect at the date of this Agreement and any subsequent provisions of the Code amendatory thereof, supplemental thereto or substituted therefor.

 

“Commitment” shall mean, for each Lender, the amount set forth opposite such Lender’s name in Schedule I directly below the column entitled “Commitment,” as the same may be (x) reduced from time to time or terminated pursuant to Sections 3.02  3.03 and/or 10, as applicable, or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 1.13 or 13.04(b).

 

“Communications” shall have the meaning provided in Section 13.03(b).

 

“Compliance Certificate” shall have the meaning provided in Section 8.01(e).

 

“Consolidated EBITDA” shall mean, for any period, Consolidated Net Income for such period adjusted by (x) adding thereto, without duplication and to the extent deducted in arriving at Consolidated Net Income for such period:  (a) Consolidated Interest Expense; (b) provision for taxes based on income; (c) the amount of all amortization of intangibles and depreciation; (d) non-cash charges for the impairment of goodwill or other intangibles or the write-off of goodwill, intangibles or other assets; (e) the amortization or write-off of deferred financing, legal and accounting costs with respect to the Transaction or any Permitted Acquisition; and (f) the amount of all other non-cash charges or non-cash losses, and (y) deducting therefrom, the amount of all cash payments during such period that are associated with any non-cash charges or non-cash losses that were added back to Consolidated Net Income in a previous period pursuant to preceding clause (x)(f); and, in each case, without giving effect to (i) any extraordinary gains, (ii) any gains or losses from sales of assets other than from sales of inventory in the ordinary course of business and (iii) any non-cash income; it being understood that in determining the Total Leverage Ratio, Consolidated EBITDA for any period shall be calculated on a Pro Forma Basis to give effect to any Acquired Entity or Business acquired during such period pursuant to a Permitted Acquisition and not subsequently sold or otherwise disposed of by Magellan or any of its Subsidiaries during such period.

 

“Consolidated Indebtedness” shall mean, at any time, the remainder of (A) the sum of, without duplication, (i) the aggregate principal amount of all Indebtedness (or, if greater, the aggregate face amount of any Indebtedness issued at a discount) of Magellan and its Subsidiaries at such time (including, without limitation, all Loans, letters of credit (including Letters of Credit), Capitalized Lease Obligations and guaranties of other Indebtedness) and (ii) the aggregate outstanding amount of all Attributable Debt of Magellan and its Subsidiaries at such time; provided, that for purposes of this definition, the amount of Indebtedness in respect of Interest Rate Protection Agreements and Other Hedging Agreements shall be at any time the unrealized net loss position, if any, of Magellan and/or its Subsidiaries thereunder on a marked-to-market basis determined no more than one month prior to such time, minus (B) the aggregate amount of all Unrestricted cash and Cash Equivalents of Magellan and its Subsidiaries at such time in excess of $50,000,000.

 

“Consolidated Interest Coverage Ratio” shall mean, for any period, the ratio of Consolidated EBITDA to Consolidated Interest Expense for such period.

 

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“Consolidated Interest Expense” shall mean, for any period, the sum of the total consolidated interest expense of Magellan and its Subsidiaries for such period (calculated without regard to any limitations on the payment thereof) plus, without duplication, (i) that portion of Capitalized Lease Obligations of Magellan and its Subsidiaries representing the interest factor for such period, (ii) all fees accrued during such period pursuant to Sections 3.01(a), (b) and (c) of the Existing Credit Agreement, (iii) all interest expense during such period as set forth in Section 2.05(a) of the Existing Credit Agreement and (iv) the interest component (or imputed interest) of any lease payment or other off balance sheet financing under Attributable Debt transactions paid by Magellan and its Subsidiaries for such period; provided, that the amortization or write-off of deferred financing, legal and accounting costs with respect to the Transaction or any Permitted Acquisition in each case shall be excluded from Consolidated Interest Expense to the extent same would otherwise have been included therein.

 

“Consolidated Net Income” shall mean, for any period, the net income (or loss) of Magellan and its Subsidiaries for such period, determined on a consolidated basis (after any deduction for minority interests); provided, that (i) in determining Consolidated Net Income, the net income of any other Person which is not a Subsidiary of Magellan or is accounted for by Magellan by the equity method of accounting shall be included only to the extent of the payment of cash dividends or cash distributions by such other Person to Magellan or a Subsidiary thereof during such period, (ii) the net income of any Subsidiary of Magellan shall be excluded to the extent that the declaration or payment of cash dividends or similar cash distributions by that Subsidiary of that net income is not at the date of determination permitted by operation of its charter or any agreement, instrument or law applicable to such Subsidiary, and (iii) except for determinations expressly required to be made on a Pro Forma Basis, the net income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Magellan or all or substantially all of the property or assets of such Person are acquired by Magellan or a Subsidiary of Magellan shall be excluded.

 

“Consolidated Total Assets” shall mean, as of any date, the total assets of Magellan and its Subsidiaries on a consolidated basis, as set forth on most recent balance sheet of Magellan included in the financial statements delivered pursuant to Section 8.01(a) or 8.01(b), or, for any date prior to the date on which the first such financial statements are required to be delivered, as set forth on the balance sheet of Magellan included in Magellan’s consolidated financial statements as of and for the period ending March 31, 2014 filed with the Securities and Exchange Commission on Form 10-Q.

 

“Contingent Obligation” shall mean, as to any Person, any obligation of such Person as a result of such Person being a general partner of any other Person, unless the underlying obligation is expressly made non-recourse as to such general partner, and any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business.  The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or

 

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determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.

 

“Continuing Directors” shall mean the directors of Magellan on the Effective Date and each other director, if such director’s nomination for election to the Board of Directors of Magellan is recommended by a majority of then Continuing Directors.

 

“Credit Documents” shall mean this Agreement, each Note and the Guaranty.

 

“Credit Party” shall mean the Borrower and each Guarantor.

 

“Default” shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.

 

“Defaulting Lender” shall mean any Lender with respect to which a Lender Default is in effect.

 

“Disinterested Director” shall mean, with respect to any Person and transaction, a member of the Board of Directors of such Person who does not have any material direct or indirect financial interest in or with respect to such transaction.

 

“Disqualified Stock” shall mean any capital stock that, by its terms (or by the terms of any security or other capital stock into which it is convertible or for which it is exchangeable) or upon the happening of any event or condition, (a) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, other than solely as a result of a change of control, asset sale or similar event so long as any rights of the holders thereof upon the occurrence of a change of control, asset sale or similar event shall be subject to the prior repayment in full of the Loans and all other Obligations and the termination of the Commitments, (b) is redeemable or exchangeable at the option of the holder thereof, other than as a result of a change of control, asset sale or similar event so long as any rights of the holders thereof upon the occurrence of a change of control, asset sale or similar event shall be subject to the prior repayment in full of the Loans and all other Obligations and the termination of the Commitments or (c) provides for the scheduled payment of dividends in cash, in each case prior to the date that is ninety-one (91) days after the Maturity Date.

 

“Dividend” shall mean, with respect to any Person, that such Person has declared or paid a dividend, distribution or returned any equity capital to its stockholders, partners or members or authorized or made any other distribution, payment or delivery of property (other than common equity of such Person) or cash to its stockholders, partners or members as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for a consideration any shares of any class of its capital stock or any partnership or membership interests outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock or other equity interests), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock or any partnership or membership interests of such Person outstanding on or after the Effective Date (or any options or warrants issued by such Person with respect to its capital stock or other equity interests).  Without limiting the foregoing, “Dividends” with respect to any Person shall also include all payments made or required to be made by such Person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes.

 

“Dollars” and the sign “$” shall each mean freely transferable lawful money of the United States.

 

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“Domestic Subsidiary” shall mean each Subsidiary of Magellan incorporated or organized in the United States, any State thereof or the District of Columbia other than one substantially all of whose assets are controlled foreign subsidiaries within the meaning of Section 956 of the Code.

 

“EEA Financial Institution” shall mean (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

 

“EEA Member Country” shall mean any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

“EEA Resolution Authority” shall mean any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

“Effective Date” shall have the meaning provided in Section 13.10.

 

“Eligible Transferee” shall mean and include a commercial bank, an insurance company, a finance company, a financial institution, any fund that invests in loans or any other “accredited investor” (as defined in Regulation D of the Securities Act), but in any event excluding (x) Magellan and its Subsidiaries and Affiliates, (y) natural persons and (z) any Defaulting Lender.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.  Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

 

“ERISA Affiliate” shall mean each person (as defined in Section 3(9) of ERISA) which together with Magellan or a Subsidiary of Magellan would be deemed to be a “single employer” (i) within the meaning of Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of Magellan or a Subsidiary of Magellan being or having been a general partner of such person.

 

“ERISA Plan” shall mean any pension plan as defined in Section 3(2) of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) Magellan or a Subsidiary of Magellan or an ERISA Affiliate on or after the Effective Date, and each such plan for the five year period immediately following the latest date (whether before or after the Effective Date) on which Magellan, a Subsidiary of Magellan or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan.

 

“EU Bail-In Legislation Schedule” shall mean the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

 

“Eurodollar Loan” shall mean each Loan designated as such by the Borrower at the time of the incurrence thereof or conversion thereto.

 

“Eurodollar Rate” shall mean, with respect to any Eurodollar Loan for any Interest Period, the rate appearing on the LIBOR01 page of the Intercontinental Exchange Benchmark Administrative Ltd (ICE) (or on any successor or substitute page of such service) at approximately 11:00 

 

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a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for deposits in Dollars with a maturity comparable to such Interest Period.  In the event that such rate is not available at such time for any reason, then the “Eurodollar Rate” with respect to such Borrowing of Eurodollar Loans for such Interest Period shall be the rate at which dollar deposits of $10,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent to prime banks in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. Notwithstanding for foregoing, if any of the aforesaid rates shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

 

“Event of Default” shall have the meaning provided in Section 10.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Existing Credit Agreement” shall mean the Credit Agreement, dated as of July 23, 2014 (as amended by Consent and Amendment No. 1 to Credit Agreement, dated as of December 2, 2015, and as otherwise amended, restated, amended and restated, supplemented or modified from time to time), among the Borrower, Magellan, the Lenders (as defined therein) party thereto from time to time and Citibank, N.A., as Administrative Agent (as defined therein).

 

“Existing Revolving Credit Facility” shall mean the revolving credit facility made available to the Borrower under the Existing Credit Agreement.

 

“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable) and any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471.

 

“Federal Funds Rate” shall mean, for any period, a fluctuating interest rate equal for each day during such period to the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent; provided, that, if any of the aforesaid rates shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

 

“Foreign Pension Plan” shall mean each employee benefit plan, employment, bonus, incentive, stock purchase and stock option plan, program, agreement or arrangement; and each severance, termination pay, salary continuation, retention, accrued leave, vacation, sick pay, sick leave, medical, life insurance, disability, accident, profit-sharing, fringe benefit, pension, deferred compensation or other retirement or superannuation plan, fund, program, agreement, commitment or arrangement sponsored, established, maintained or contributed to, or required to be contributed to, or with respect to which any liability is borne, outside the fifty states of the United States of America, by Magellan or any of its Subsidiaries, including, without limitation, any such plan, fund, program, agreement or arrangement sponsored by a government or governmental entity.

 

“Foreign Subsidiary” shall mean each Subsidiary of Magellan that is not a Domestic Subsidiary.

 

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“Governmental Authority” shall mean the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantors” shall mean Magellan and the Subsidiary Guarantors.

 

“Guaranty” shall have the meaning provided in Section 5.09.

 

“Health Care Laws” shall mean any and all applicable current and future laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions or binding agreements issued, promulgated or entered into by the Food and Drug Administration, the Health Care Financing Administration, the Department of Health and Human Services (“HHS”), the Office of Inspector General of HHS, the Drug Enforcement Administration or any other governmental authority, including any state and/or local professional licensing laws, certificate of need laws and state reimbursement laws, relating in any way to the conduct of the business of Magellan or any Subsidiary thereof and the provision of health care services generally.

 

“Indebtedness” shall mean, as to any Person, without duplication, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (ii) the maximum amount available to be drawn or paid under all letters of credit, bankers’ acceptances, bank guaranties and similar obligations issued for the account of such Person and all unpaid drawings in respect of such letters of credit, bankers’ acceptances and similar obligations, (iii) all Indebtedness of the types described in clause (i), (ii), (iv), (v), (vi), (vii) or (viii) of this definition secured by any Lien on any property owned by such Person, whether or not such Indebtedness has been assumed by such Person (provided, that, if the Person has not assumed or otherwise become liable in respect of such Indebtedness, such Indebtedness shall be deemed to be in an amount equal to the fair market value of the property to which such Lien relates as determined in good faith by such Person), (iv) the aggregate amount of all Capitalized Lease Obligations of such Person, (v) all obligations of such Person to pay a specified purchase price for goods or services, whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent Obligations of such Person, (vii) all obligations under any Interest Rate Protection Agreement, any Other Hedging Agreement or under any similar type of agreement, and (viii) all Attributable Debt of such Person.  Notwithstanding the foregoing, Indebtedness shall not include trade payables and accrued expenses incurred by any Person in accordance with customary practices and in the ordinary course of business of such Person (including pursuant to customer service contracts).

 

“Interest Determination Date” shall mean, with respect to any Eurodollar Loan, the second Business Day prior to the commencement of any Interest Period relating to such Eurodollar Loan.

 

“Interest Period” shall mean, as to any Borrowing of Eurodollar Loans, the interest period applicable to such Borrowing of Eurodollar Loans selected pursuant to, and otherwise subject to the provisions of, Section 1.09.

 

“Interest Rate Protection Agreement” shall mean any interest rate swap agreement, interest rate cap agreement, interest collar agreement, interest rate hedging agreement or other similar agreement or arrangement.

 

“Investments” shall have the meaning provided in Section 9.05.

 

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“Joint Lead Arrangers” shall mean, collectively, The Bank of Tokyo-Mitsubishi UFJ, Ltd., SunTrust Robinson Humphrey, Inc. and Wells Fargo Securities, LLC, in their respective capacities as joint lead arrangers for the credit facilities provided for under this Agreement.

 

“Leaseholds” of any Person shall mean all the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures.

 

“Lender” shall mean each financial institution listed on Schedule I, as well as any Person that becomes a “Lender” hereunder pursuant to Section 1.13, or 13.04(b).

 

“Lender Default” shall mean, as to any Lender, as reasonably determined by the Administrative Agent, that such Lender has (a) wrongfully refused (which has not been retracted) or failed to make available its portion of any Borrowing within two Business Days of the date such funding was required to be made, (b) been deemed (or whose parent company has been deemed) insolvent or become (or whose parent company has been become) the subject of a bankruptcy or insolvency proceeding, a Bail-in Action or a takeover by a regulatory authority, or (c) notified the Administrative Agent and/or any Credit Party (x) that it does not intend to comply with its obligations under Section 1.01(a) in circumstances where such non-compliance would constitute a breach of such Lender’s obligations under such Section or (y) of the events described in preceding clause (b); provided, that a Lender Default shall not have be deemed to have occurred solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Lender by a Governmental Authority or instrumentality thereof; provided, further, that such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Lender.

 

“Lien” shall mean any mortgage, pledge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing).

 

“Loan” shall have the meaning provided in Section 1.01.

 

“Margin Stock” shall have the meaning provided in Regulation U.

 

“Material Adverse Effect” shall mean (i) a material adverse effect on the business, operations, property or financial condition of Magellan and its Subsidiaries, taken as a whole (except as a result of any event or circumstance disclosed in any of Magellan’s public filings on Form 8-K made following March 31, 2016 and prior to the Effective Date, (ii) a material adverse effect on the ability of the Credit Parties, taken as a whole, to perform their obligations hereunder or under any other Credit Document or (iii) a material adverse effect on the rights and remedies of the Lenders hereunder or under any other Credit Document.

 

“Maturity Date” shall mean December 29, 2017 (subject to the last sentence of Section 4.03).

 

“Moody’s” shall mean Moody’s Investors Service, Inc., or any successor corporation thereto.

 

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“Net Debt Proceeds” shall mean, with respect to any incurrence or issuance of Indebtedness for borrowed money, the cash proceeds (net of underwriting discounts and commissions and other reasonable fees, expenses and costs associated therewith including, without limitation, those of attorneys, accountants and other professionals) received by the respective Person from the respective incurrence of such Indebtedness for borrowed money.

 

“Non-Defaulting Lender” shall mean and include each Lender other than a Defaulting Lender.

 

“Non-U.S. Lender” shall mean each Lender or the Administrative Agent in each case to the extent that any such Person is not a “United States person” (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes.

 

“Note” shall have the meaning provided in Section 1.05(a).

 

“Notice of Borrowing” shall have the meaning provided in Section 1.03(a).

 

“Notice of Conversion/Continuation” shall have the meaning provided in Section 1.06.

 

“Notice Office” shall mean the office of the Administrative Agent located at 1221 Avenue of the Americas, New York, NY 10020, Attention: Lawrence Blat with a copy to Nicholas Lukenovich and E-mail Address: Agencydesk@us.mufg.jp with a copy to Lblat@us.mufg.jp, Telephone numbers: 212-782-4310 and 212-782-6687 or such other office or person as the Administrative Agent may hereafter designate in writing as such to the other parties hereto.

 

“Obligations” shall mean all amounts owing to the Administrative Agent or any Lender pursuant to the terms of this Agreement or any other Credit Document, including, without limitation, all amounts in respect of any principal, interest (including any interest accruing subsequent to the filing of a petition in bankruptcy, reorganization or similar proceeding at the rate provided for in this Agreement, whether or not such interest is an allowed claim under any such proceeding or under applicable state, federal or foreign law), penalties, fees, expenses, indemnifications, reimbursements, damages and other liabilities, and guarantees of the foregoing amounts.

 

“Other Hedging Agreements” shall mean any foreign exchange contracts, currency swap agreements, commodity agreements or other similar arrangements, or arrangements designed to protect against fluctuations in currency values or commodity prices.

 

“Other Taxes” shall mean all present or future stamp, court or documentary, intangible, recording, filing or similar taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt perfection of a security interest under, or otherwise with respect to, any Credit Document.

 

“Participant Register” shall have the meaning provided in Section 13.04(c).

 

“Patriot Act” shall have the meaning provided in Section 13.18.

 

“Payment Office” shall mean the office of the Administrative Agent located at 1221 Avenue of the Americas, New York, NY 10020, Attention: Lawrence Blat with a copy to Nicholas Lukenovich and E-mail Address: Agencydesk@us.mufg.jp with a copy to Lblat@us.mufg.jp or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto.

 

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“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto.

 

“Permitted Acquisition” shall mean the acquisition by Magellan or a Wholly-Owned Subsidiary of Magellan of an Acquired Entity or Business (including by way of merger of such Acquired Entity or Business with and into Magellan (so long as Magellan is the surviving corporation) or a Wholly-Owned Subsidiary of Magellan (so long as such Wholly-Owned Subsidiary is the surviving corporation)); provided, that (in each case) (A) in the case of the acquisition of 100% of the capital stock or other equity interests of any Person (including way of merger), such Person shall own no capital stock or other equity interests of any other Person (excluding de minimis amounts) unless either (x) such Person and/or its Wholly-Owned Subsidiaries own 100% of the capital stock or other equity interests of such other Person or (y) (1) such Person and/or its Wholly-Owned Subsidiaries own at least 90% of the consolidated assets of such Person and its Subsidiaries and (2) any non-Wholly-Owned Subsidiary of such Person was non-Wholly Owned prior to the date of such Permitted Acquisition of such Person, (B) the Acquired Entity or Business acquired pursuant to the respective Permitted Acquisition is in a business permitted by Section 9.12 and (C) all applicable requirements of Sections 9.02 applicable to Permitted Acquisitions are satisfied.  Notwithstanding anything to the contrary contained in the immediately preceding sentence, an acquisition which does not otherwise meet the requirements set forth above in the definition of “Permitted Acquisition” shall constitute a Permitted Acquisition if, and to the extent, the Required Lenders agree in writing, prior to the consummation thereof, that such acquisition shall constitute a Permitted Acquisition for purposes of this Agreement.

 

“Permitted Liens” shall have the meaning provided in Section 9.01.

 

“Permitted Restructuring Effective Date” shall mean December 4, 2015.

 

“Permitted Subordinated Debt” shall mean any subordinated Indebtedness of Magellan incurred in connection with, and to finance, a Permitted Acquisition, which Indebtedness may be guaranteed on a subordinated basis by the Borrower and/or one or more Subsidiary Guarantors and all of the terms and conditions of which (including, without limitation, with respect to interest rate, amortization, redemption provisions, maturities, covenants, defaults, remedies, guaranties, standstill provisions, cash pay limitations and subordination provisions) and the documentation therefor are reasonably satisfactory to the Administrative Agent, as such Indebtedness may be amended, modified and/or supplemented from time to time in accordance with the terms hereof and thereof; provided, that in any event, unless the Required Lenders otherwise expressly consent in writing prior to the issuance thereof, (i) no such Indebtedness shall be secured by any asset of Magellan or any of its Subsidiaries, (ii) no such Indebtedness shall be guaranteed by any Person other than a Credit Party, (iii) no such Indebtedness shall be subject to scheduled amortization, redemption, sinking fund, mandatory prepayments (other than pursuant to a customary “change of control” provision that is subject to the prior repayment of the Obligations and termination of the Commitments) or similar payment or have a final maturity, in either case prior to the date occurring one year following the Maturity Date, (iv) the documentation governing such Indebtedness shall not include any financial maintenance covenants, and (v) the subordination provisions contained therein shall provide for a permanent block on payments with respect to such Indebtedness upon the occurrence and continuation of a payment default with respect to “senior debt” and cover all obligations under Interest Rate Protection Agreements and Other Hedging Agreements.  The incurrence of Permitted Subordinated Debt shall be deemed to be a representation and warranty by Magellan that all conditions thereto have been satisfied in all material respects and that the incurrence of such Permitted Subordinated Debt is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 7 and 10.

 

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“Permitted Subordinated Debt Documents” shall mean, on and after the execution and delivery thereof, each note, instrument, agreement, guaranty and other documents relating to each incurrence of Permitted Subordinated Debt, as the same may be amended, modified and/or supplemented from time to time in accordance with the terms hereof and thereof.

 

“Person” shall mean any individual, partnership, joint venture, firm, corporation, association, limited liability company, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof.

 

“Platform” shall have the meaning provided in Section 13.03(b).

 

“Prime Lending Rate” shall mean the rate of interest per annum which the Administrative Agent publicly announces from time to time as its base rate in effect at its principal office in New York City.  Any change in such rate shall take effect on the day specified in the public announcement of such change.

 

“Pro Forma Basis” shall mean, in connection with any calculation of compliance with any financial covenant or financial term, the calculation thereof after giving effect on a pro forma basis to (w) the incurrence of any Indebtedness (other than revolving Indebtedness, except to the extent same is incurred to refinance other outstanding Indebtedness or to finance a Permitted Acquisition, a Dividend pursuant to Section 9.03(iii), an Investment pursuant to Section 9.05(xiv) or a redemption or repurchase pursuant to Section 9.10(i)(B)) after the first day of the relevant Calculation Period as if such Indebtedness had been incurred (and the proceeds thereof applied) on the first day of the relevant Calculation Period, (x) the permanent repayment of any Indebtedness (other than revolving Indebtedness except to the extent accompanied by a corresponding permanent commitment reduction) after the first day of the relevant Calculation Period as if such Indebtedness had been retired or redeemed on the first day of the relevant Calculation Period, (y) any Asset Sale consummated after the first day of the relevant Calculation Period as if such Asset Sale (and the application of the proceeds therefrom) had occurred (and the proceeds therefrom had been applied) on the first day of the relevant Calculation Period, and/or (z) the Permitted Acquisition, if any, then being consummated as well as any other Permitted Acquisition consummated after the first day of the relevant Calculation Period and on or prior to the date of the respective Permitted Acquisition then being effected, as the case may be, with the following rules to apply in connection therewith:

 

(i)                                     all Indebtedness (x) (other than revolving Indebtedness, except to the extent same is incurred to refinance other outstanding Indebtedness or to finance a Permitted Acquisition, a Dividend pursuant to Section 9.03(iii), an Investment pursuant to Section 9.05(xiv) or a redemption or repurchase pursuant to Section 9.10(i)(B)) incurred or issued after the first day of the relevant Calculation Period (whether incurred to finance a Permitted Acquisition, to refinance Indebtedness or otherwise) shall be deemed to have been incurred or issued (and the proceeds thereof applied) on the first day of the respective Calculation Period and remain outstanding through the date of determination and (y) (other than revolving Indebtedness except to the extent accompanied by a corresponding permanent commitment reduction) permanently retired or redeemed after the first day of the relevant Calculation Period shall be deemed to have been retired or redeemed on the first day of the respective Calculation Period and remain retired through the date of determination;

 

(ii)                                  all Indebtedness assumed to be outstanding pursuant to preceding clause (i) shall be deemed to have borne interest at (x) the rate applicable thereto, in the case of fixed rate indebtedness, or (y) at the rate which would have been applicable thereto on the last day of the respective Calculation Period, in the case of floating rate Indebtedness (although interest expense 

 

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with respect to any Indebtedness for periods while same was actually outstanding during the respective period shall be calculated using the actual rates applicable thereto while same was actually outstanding); and

 

(iii)                               in making any determination of Consolidated EBITDA, pro forma effect shall be given to any Asset Sale or Permitted Acquisition consummated during the periods described above, with such Consolidated EBITDA to be determined as if such Asset Sale or Permitted Acquisition was consummated on the first day of the relevant Calculation Period, and, in the case of any Permitted Acquisition, taking into account factually supportable and identifiable cost savings and expenses directly attributable to any such Permitted Acquisition which would otherwise be accounted for as an adjustment pursuant to Article 11 of Regulation S-X under the Securities Act, as if such cost savings or expenses were realized on the first day of the respective period.

 

“Quarterly Payment Date” shall mean the last Business Day of each December, March, June and September occurring after the Effective Date, commencing on September 30, 2016.

 

“Real Property” of any Person shall mean all the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds.

 

“Register” shall have the meaning provided in Section 13.15.

 

“Regulation D” shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements.

 

“Regulation T” shall mean Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof.

 

“Regulation U” shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof.

 

“Regulation X” shall mean Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof.

 

“Release” shall mean actively or passively disposing, discharging, injecting, spilling, pumping, leaking, leaching, dumping, emitting, escaping, emptying, pouring, seeping, migrating or the like, into or upon any land or water or air, or otherwise entering into the environment.

 

“Replaced Lender” shall have the meaning provided in Section 1.13.

 

“Replacement Lender” shall have the meaning provided in Section 1.13.

 

“Reportable Event” shall mean an event described in Section 4043(c) of ERISA with respect to an ERISA Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.

 

“Required Lenders” shall mean, at any time, Lenders holding more than 50% of the aggregate amount of the Commitments (or, following the Effective Date, the aggregate principal amount of all outstanding Loans) at such time; provided, that for purposes of the foregoing, the Commitments and Loans of Defaulting Lenders shall be disregarded.

 

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“Restricted” shall mean, when referring to cash or Cash Equivalents of Magellan or any of its Subsidiaries, that such cash or Cash Equivalents (i) appears (or would be required to appear) as “restricted” on a consolidated balance sheet of the Borrower or of any such Subsidiary, (ii) are subject to any Lien in favor of any Person or (iii) are not otherwise generally available for use by Magellan or any of its Subsidiaries.

 

“Returns” shall have the meaning provided in Section 7.09.

 

“S&P” shall mean Standard & Poor’s Rating Services, a subsidiary of S&P Global Inc., or any successor thereto.

 

“Sale and Leaseback Transaction” shall mean any arrangement, directly or indirectly, whereby a seller or transferor shall sell or otherwise transfer any real or personal property and then or thereafter lease, or repurchase under an extended purchase contract, conditional sales or other title retention agreement, the same or similar property.

 

“Sanctioned Country” shall mean, at any time, a country or territory which is the subject or target of any comprehensive territorial Sanctions.

 

“Sanctioned Person” shall mean, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the European Union, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person controlled by any such Person or Persons.

 

“Sanctions” shall mean economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, (b) the European Union or (c) Her Majesty’s Treasury of the United Kingdom.

 

“SEC” shall have the meaning provided in Section 8.01(g).

 

“Section 4.04 Indemnitee” shall have the meaning provided in Section 4.04(a).

 

“Section 4.04(c)(ii) Certificate” shall have the meaning provided in Section 4.04(c)(ii).

 

“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Specified Default” shall mean any Default under Section 10.01 or 10.05.

 

“Subsidiary” shall mean, as to any Person, (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time.

 

“Subsidiary Guarantor” shall mean each Wholly-Owned Domestic Subsidiary of Magellan (other than the Borrower) other than, in each case, any such Wholly-Owned Subsidiary that is (but only for so long as it is) a Wholly-Owned Specified Subsidiary.

 

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“Taxes” shall have the meaning provided in Section 4.04(a).

 

“Test Period” shall mean each period of four consecutive fiscal quarters of Magellan then last ended (in each case taken as one accounting period).

 

“Total Leverage Ratio” shall mean, at any time, the ratio of Consolidated Indebtedness at such time to Consolidated EBITDA for the Test Period then most recently ended.

 

“Total Unutilized Revolving Loan Commitment” shall mean, at any time, the aggregate amount available to be drawn under the Existing Revolving Credit Facility at such time.

 

“Transaction” shall mean (i) the entering into of the Credit Documents and the incurrence of Loans on the Effective Date, and (ii) the payment of all fees and expenses in connection with the foregoing.

 

“Type” shall mean the type of Loan determined with regard to the interest option applicable thereto, i.e., whether a Base Rate Loan or a Eurodollar Loan.

 

“UCC” shall mean the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction.

 

“Unfunded Current Liability” of any ERISA Plan shall mean the amount, if any, by which the value of the accumulated plan benefits under the ERISA Plan determined on a plan termination basis in accordance with actuarial assumptions at such time consistent with those prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds the fair market value of all plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contribution).

 

“United States” and “U.S.” shall each mean the United States of America.

 

“Unrestricted” shall mean, when referring to cash or Cash Equivalents of Magellan or any of its Subsidiaries, that such cash or Cash Equivalents are not Restricted.

 

“U.S. Lender” shall mean each Lender or the Administrative Agent that is a “United States person” (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes.

 

“Voting Power” shall mean, with respect to any class or classes of capital stock of Magellan (or any class or classes of capital stock then convertible into such capital stock at the option of the holders thereof), the voting power entitled to vote in the election of directors of Magellan.

 

“Wholly-Owned Domestic Subsidiary” shall mean, as to any Person, any Wholly Owned Subsidiary of such Person which is also a Domestic Subsidiary of such Person.

 

“Wholly-Owned Foreign Subsidiary” shall mean, as to any Person, any Wholly Owned Subsidiary of such Person which is also a Foreign Subsidiary of such Person.

 

“Wholly-Owned Specified Subsidiary” shall mean (A) Magellan Rx Management, Inc., (B) any Wholly-Owned Subsidiary of Magellan Rx Management, Inc. (other than any such Person that was a Subsidiary of Magellan Rx Management, Inc. on the Permitted Restructuring Effective Date) and (C) any Wholly-Owned Subsidiary of Magellan that is prohibited from entering into any Credit Document because to do so either (x) would violate a law, regulation, rule, order, approval, license or 

 

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other restriction applicable to such Wholly-Owned Subsidiary due to the regulated nature of such Wholly-Owned Subsidiary’s operations and issued or imposed by any governmental authority having jurisdiction over such Wholly-Owned Subsidiary or (y) would reasonably be expected to cause such Wholly-Owned Subsidiary to fail to satisfy a net worth, net equity or capital requirement or similar calculation or  requirement imposed on such Wholly-Owned Subsidiary by any governmental authority having jurisdiction over such Wholly-Owned Subsidiary due to the regulated nature of such Wholly-Owned Subsidiary’s operations; provided, that in no event shall the Borrower be a Wholly-Owned Specified Subsidiary.

 

“Wholly-Owned Subsidiary” shall mean, as to any Person, (i) any corporation 100% of whose capital stock is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time.

 

“Write-Down and Conversion Powers” shall mean, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

 

Section 12.                                    The Administrative Agent.

 

12.01                 Appointment.  The Lenders hereby irrevocably designate and appoint The Bank of Tokyo-Mitsubishi UFJ, Ltd. as Administrative Agent to act as specified herein and in the other Credit Documents.  Each Lender hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, the Administrative Agent to take such action on its behalf under the provisions of this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto.  The Administrative Agent may perform any of its respective duties hereunder by or through its officers, directors, agents, employees or affiliates.

 

12.02                 Nature of Duties.  (a) The Administrative Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement and in the other Credit Documents.  Neither the Administrative Agent nor any of its officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by it or them hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by its or their gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision).  The duties of the Administrative Agent shall be mechanical and administrative in nature; the Administrative Agent shall not have by reason of this Agreement or any other Credit Document a fiduciary relationship in respect of any Lender or the holder of any Note; and nothing in this Agreement or in any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon the Administrative Agent any obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein or therein.

 

(b)                                 Notwithstanding any other provision of this Agreement or any provision of any other Credit Document, (i) The Bank of Tokyo-Mitsubishi UFJ, Ltd., SunTrust Robinson Humphrey, Inc. and Wells Fargo Securities, LLC are named as Joint Lead Arrangers for recognition purposes only, (ii) SunTrust Bank and Wells Fargo Bank, National Association are named as Co-Syndication Agents for recognition purposes only and (iii) The Bank of Tokyo-Mitsubishi UFJ, Ltd. is named as Sole Bookrunner for recognition purposes only, and in their respective capacities as such shall have no powers, 

 

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duties, responsibilities or liabilities with respect to this Agreement or the other Credit Documents or the transactions contemplated hereby and thereby; it being understood and agreed that The Bank of Tokyo-Mitsubishi UFJ, Ltd., SunTrust Bank, SunTrust Robinson Humphrey, Inc., Wells Fargo Bank, National Association and Wells Fargo Securities, LLC in such capacities shall be entitled to all indemnification and reimbursement rights in favor of the Administrative Agent as, and to the extent, provided for under Sections 12.06 and 13.01.  Without limitation of the foregoing, none of The Bank of Tokyo-Mitsubishi UFJ, Ltd., SunTrust Bank, SunTrust Robinson Humphrey, Inc., Wells Fargo Bank, National Association and Wells Fargo Securities, LLC, in such respective capacities shall have, solely by reason of this  Agreement or any other Credit Documents, any fiduciary relationship in respect of any Lender or any other Person.

 

12.03                 Lack of Reliance on the Administrative Agent.  Independently and without reliance upon the Administrative Agent, each Lender and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of Magellan and its Subsidiaries in connection with the making and the continuance of the Loans and Letters of Credit and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of Magellan and its Subsidiaries and, except as expressly provided in this Agreement, the Administrative Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Lender or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter.  The Administrative Agent shall not be responsible to any Lender or the holder of any Note for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectability, priority or sufficiency of this Agreement or any other Credit Document or the financial condition of Magellan or any of its Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, or the financial condition of Magellan or any of its Subsidiaries or the existence or possible existence of any Default or Event of Default.

 

12.04                 Certain Rights of the Administrative Agent.  If the Administrative Agent requests instructions from the Required Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, the Administrative Agent shall be entitled to refrain from such act or taking such action unless and until the Administrative Agent shall have received instructions from the Required Lenders; and the Administrative Agent shall not incur liability to any Lender by reason of so refraining.  Without limiting the foregoing, neither any Lender nor the holder of any Note shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Lenders.

 

12.05                 Reliance.  The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or fax message, cablegram, radiogram, order or other document or telephone message signed, sent or made by any Person that the Administrative Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by the Administrative Agent.

 

12.06                 Indemnification.  To the extent the Administrative Agent (or any affiliate thereof) is not reimbursed and indemnified by the Borrower, the Lenders severally will reimburse and indemnify the Administrative Agent (and any affiliate thereof) in proportion to their respective “percentage” as used in determining the Required Lenders (determined as if there were no Defaulting Lenders) for and against 

 

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any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by the Administrative Agent (or any affiliate thereof) in performing its duties hereunder or under any other Credit Document or in any way relating to or arising out of this Agreement or any other Credit Document; provided, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent’s (or such affiliate’s) gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision).

 

12.07                 The Administrative Agent in its Individual Capacity.  With respect to its obligation to make Loans, under this Agreement, the Administrative Agent shall have the rights and powers specified herein for a “Lender” and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term “Lender,”, “Required Lenders,” “holders of Notes” or any similar terms shall, unless the context clearly indicates otherwise, include the Administrative Agent in its respective individual capacities.  The Administrative Agent and its affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, investment banking, trust or other business with, or provide debt financing, equity capital or other services (including financial advisory services) to any Credit Party or any Affiliate of any Credit Party (or any Person engaged in a similar business with any Credit Party or any Affiliate thereof) as if they were not performing the duties specified herein, and may accept fees and other consideration from any Credit Party or any Affiliate of any Credit Party for services in connection with this Agreement and otherwise without having to account for the same to the Lenders.

 

12.08                 Holders.  The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent.  Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor.

 

12.09                 Resignation by the Administrative Agent.  (a) The Administrative Agent may resign from the performance of all its respective functions and duties hereunder and/or under the other Credit Documents at any time by giving 15 Business Days’ prior written notice to the Lenders and, unless a Default or an Event of Default under Section 10.05 then exists, the Borrower.  Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below.

 

(b)                                 Upon any such notice of resignation by the Administrative Agent, the Required Lenders shall appoint a successor Administrative Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower, which acceptance shall not be unreasonably withheld or delayed (provided, that the Borrower’s approval shall not be required if an Event of Default then exists).

 

(c)                                  If a successor Administrative Agent shall not have been so appointed within such 15 Business Day period, the Administrative Agent, with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed; provided, that the Borrower’s consent shall not be required if an Event of Default then exists), shall then appoint a successor Administrative Agent who shall serve as Administrative Agent hereunder or thereunder until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above.

 

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(d)                                 If no successor Administrative Agent has been appointed pursuant to clause (b) or (c) above by the 20th Business Day after the date such notice of resignation was given by the Administrative Agent, the Administrative Agent’s resignation shall become effective and the Required Lenders shall thereafter perform all the duties of the Administrative Agent hereunder and/or under any other Credit Document until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above.

 

(e)                                  Upon a resignation of the Administrative Agent pursuant to this Section 12.09, the Administrative Agent shall remain indemnified to the extent provided in this Agreement and the other Credit Documents and the provisions of this Section 12 shall continue in effect for the benefit of the Administrative Agent for all of its actions and inactions while serving as the Administrative Agent.

 

Section 13.                                    Miscellaneous.

 

13.01                 Payment of Expenses, etc.  The Borrower hereby agrees to:  (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Agents and their respective affiliates (including, without limitation, the reasonable fees and disbursements of Davis Polk & Wardwell LLP and the Agents’ other counsel and consultants) in connection with the preparation, execution, delivery and administration of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein and any amendment, waiver or consent relating hereto or thereto, of the Agents in connection with their syndication efforts with respect to this Agreement and of the Agents and, after the occurrence of an Event of Default, each of the Lenders in connection with the enforcement of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a “work-out” or pursuant to any insolvency or bankruptcy proceedings (including, in each case without limitation, the reasonable fees and disbursements of counsel and consultants for the Agents and, after the occurrence of an Event of Default, counsel for each of the Lenders); (ii) pay and hold the Administrative Agent and each of the Lenders harmless from and against any and all present and future stamp, excise and other similar documentary taxes with respect to the foregoing matters and save the Administrative Agent and each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to the Administrative Agent or such Lender) to pay such taxes; and (iii) indemnify the Administrative Agent, each Lender, and each of their respective officers, directors, employees, representatives, agents, affiliates, trustees and investment advisors (each such Person, an “Indemnified Person”) from and hold each of them harmless against any and all liabilities, obligations (including removal or remedial actions), losses, damages, penalties, claims, actions, judgments, suits, costs, expenses and disbursements (including reasonable attorneys’ and consultants’ fees and disbursements) incurred by, imposed on or assessed against any of them as a result of, or arising out of, or in any way related to, or by reason of (a) any investigation, litigation or other proceeding (whether or not the Administrative Agent, or any Lender is a party thereto and whether or not such investigation, litigation or other proceeding is brought by or on behalf of any Credit Party) related to the entering into and/or performance of this Agreement or any other Credit Document or (b) the use of the proceeds of any Loans hereunder or the consummation of the Transaction or any other transactions contemplated herein or in any other Credit Document or the exercise of any of their rights or remedies provided herein or in the other Credit Documents.  To the extent that the undertaking to indemnify, pay or hold harmless any Indemnified Person set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Magellan shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law.  No Indemnified Person shall be liable for any damages arising from the use by others of any information or other materials obtained through the Platform or other similar information transmission systems in connection with this Agreement other than for direct or actual damages resulting from the gross 

 

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negligence or willful misconduct on the part of such Indemnified Person (as determined by a court of competent jurisdiction in a final and non-appealable decision).  To the fullest extent permitted by applicable law, no Indemnified Person shall have any liability for any special, punitive, indirect or consequential damages relating to this Agreement or any other Credit Documents or arising out of its activities in connection herewith or therewith (whether before or after the Effective Date).

 

13.02                 Right of Setoff.  In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent, and each Lender and each of their respective Affiliates, to the fullest extent permitted by applicable law, is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to any Credit Party or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by the Administrative Agent, or such Lender (including, without limitation, by branches and agencies of the Administrative Agent, or such Lender wherever located) to or for the credit or the account of Magellan or any of its Subsidiaries against and on account of the Obligations and liabilities of the Credit Parties to the Administrative Agent, or such Lender under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations purchased by such Lender pursuant to Section 13.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not the Administrative Agent, or such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured.

 

13.03                 Notices; Platform.  (a) Except as otherwise expressly provided herein (including in Section 13.03(c)), all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, fax or cable communication) and mailed, telegraphed, telexed, faxed, cabled or delivered:  if to any Credit Party, at the address specified opposite its signature below or in the other relevant Credit Documents; if to any Lender at its address specified in its Administrative Questionnaire; and if to the Administrative Agent, at the Notice Office; or, as to any Credit Party or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties hereto and, as to each Lender, at such other address as shall be designated by such Lender in a written notice to the Borrower and the Administrative Agent.  All such notices and communications shall, when mailed, telegraphed, telexed, faxed, or cabled or sent by overnight courier, be effective when deposited in the mails, delivered to the telegraph company, cable company or overnight courier, as the case may be, or sent by telex or fax, except that notices and communications to the Administrative Agent, Magellan and the Borrower shall not be effective until received by the Administrative Agent, Magellan or the Borrower, as the case may be, during normal business hours.

 

(b)                                 Magellan and the Borrower agree that the Administrative Agent may, but shall not be obligated to, make any notices, written information, documents, instruments and other material relating to Magellan, the Borrower, any of their Subsidiaries or any other materials or matters relating to this Agreement, the Notes or any of the transactions contemplated hereby (collectively, the “Communications”) available to the Lenders by posting such notices on Intralinks, DebtDomain or a substantially similar electronic system (the “Platform”). Magellan and the Borrower acknowledge that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided “as is” and “as available” and (iii) neither the Administrative Agent nor any of its affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular 

 

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purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Administrative Agent or any of its affiliates in connection with the Platform.

 

(c)                                  Each Lender agrees that notice to it (as provided in the next sentence) specifying that any Communications have been posted to the Platform shall constitute effective delivery of such information, documents or other materials to such Lender for purposes of this Agreement; provided, that if requested by any Lender, the Administrative Agent shall deliver a copy of the Communications to such Lender by email or fax. Each Lender agrees (i) to notify the Administrative Agent in writing of such Lender’s e-mail address to which a notice may be sent by electronic transmission (including by electronic communication) on or before the date such Lender becomes a party to this Agreement (and from time to time thereafter to ensure that the Administrative Agent has on record an effective e-mail address for such Lender) and (ii) that any notice may be sent to such e-mail address.

 

13.04                 Benefit of Agreement; Assignments; Participations.  (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, the Borrower may not assign or transfer any of its rights, obligations or interest hereunder without the prior written consent of the Lenders; provided, further, that, although any Lender may transfer, assign or grant participations in its rights hereunder without the need for notice to, or consent of, the Borrower or the Administrative Agent, such Lender shall remain a “Lender” for all purposes hereunder (and may not transfer or assign all or any portion of its Loans or Commitments hereunder except as provided in Sections 1.13, and 13.04(b)) and the participant shall not constitute a “Lender” hereunder; provided, further, that no Lender shall transfer or grant any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan or Note in which such participant is participating, or reduce the rate or extend the time of payment of interest thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce or forgive the principal amount thereof or reduce or forgive any interest, fees or other amounts payable hereunder (it being understood that any amendment or modification to the financial definitions in this Agreement or to Section 13.07(a) or to the proviso following the table in the definition of “Applicable Margin” the effect of which would be to limit the applicability thereof, shall not constitute a reduction in the rate of interest payable hereunder), or increase the amount of the participant’s participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default shall not constitute a change in the terms of such participation, and that an increase in a Commitment (or the available portion thereof) or Loan shall be permitted without the consent of any participant if the participant’s participation is not increased as a result thereof) or (ii) consent to the assignment or transfer by the Borrower or Magellan of any of its rights and obligations under this Agreement. In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant’s rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation.

 

(b)                                 Notwithstanding the foregoing, any Lender (or any Lender together with one or more other Lenders) may (x) assign all or a portion of its Commitments or outstanding Loans hereunder to (i)(A) its parent company and/or any affiliate of such Lender which is at least 50% owned by such Lender or its parent company or (B) to one or more other Lenders or any affiliate of any such other Lender which is at least 50% owned by such other Lender or its parent company (provided, that any fund that invests in loans and is managed by the same investment advisor of another fund which is a Lender (or by an Affiliate of such investment advisor) shall be treated as an affiliate of such other Lender for the purposes of this sub-clause (x)(i)(B)), or (ii) in the case of any Lender that is a fund that invests in loans, any other fund that invests in loans and is managed by the same investment advisor of any Lender or by

 

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an Affiliate of such investment advisor or (y) assign all, or if less than all, a portion equal to at least $1,000,000 in the aggregate for the assigning Lender or assigning Lenders of such Commitments or outstanding Loans hereunder to one or more Eligible Transferees (treating any fund that invests in loans and any other fund that invests in loans and is managed or advised by the same investment advisor of such fund or by an Affiliate of such investment advisor as a single Eligible Transferee), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Assumption Agreement; provided, that (i) at such time, Schedule I shall be deemed modified to reflect the Commitments and/or outstanding Loans, as the case may be, of such new Lender and of the existing Lenders, (ii) upon the surrender of the relevant Note by the assigning Lender (or, upon such assigning Lender’s indemnifying the Borrower for any lost Note pursuant to a customary indemnification agreement) new Notes will be issued, at the Borrower’s expense, to such new Lender and to the assigning Lender upon the request of such new Lender or assigning Lender, such new Notes to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the revised Commitments and/or outstanding Loans, as the case may be, (iii) the consent of the Administrative Agent and, so long as no Specified Default then exists, the consent of the Borrower shall be required in connection with any such assignment pursuant to clause (y) above (each of which consents shall not be unreasonably withheld or delayed and in the case of the Borrower, consent shall be deemed to have been given if the Borrower has not responded within ten Business Days of a request for such consent), (iv) the Administrative Agent shall receive at the time of each such assignment, from the assigning or assignee Lender, the payment of a non-refundable assignment fee of $3,500, unless waived by the Administrative Agent in its sole discretion and (v) no such transfer or assignment will be effective until recorded by the Administrative Agent on the Register pursuant to Section 13.15.  To the extent of any assignment pursuant to this Section 13.04(b), the assigning Lender shall be relieved of its obligations hereunder with respect to its assigned Commitment and/or outstanding Loans.  At the time of each assignment pursuant to this Section 13.04(b) to a Person which is not already a Lender hereunder, the respective assignee Lender shall (A) to the extent legally entitled to do so, provide to the Borrower the appropriate Internal Revenue Service Forms (and, if applicable, a Section 4.04(c)(ii) Certificate) described in Section 4.04(c) and (B) deliver to the Administrative Agent an Administrative Questionnaire.  To the extent that an assignment of all or any portion of a Lender’s Commitment, Loans and related outstanding Obligations pursuant to Section 1.13 or this Section 13.04(b) would, at the time of such assignment, result in increased costs under Section 1.10, or 4.04 from those being charged by the respective assigning Lender prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower, in accordance with and pursuant to the other provisions of this Agreement, shall be obligated to pay any other increased costs of the type described above resulting from any Change in Law after the date of the respective assignment).

 

(c)                                  Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in obligations under the Credit Documents (the “Participant Register”); provided, that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant’s interest in any commitments, loans, or its other obligations under any Credit Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

 

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(d)                                 Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans and Notes hereunder as security for the obligations of such Lender, including (i) to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank and (ii) with prior notification to the Administrative Agent (but without the consent of the Administrative Agent or the Borrower), in the case of any Lender which is a fund, to its trustee or to a collateral agent providing credit or credit support to such Lender in support of its obligations to such trustee, such collateral agent or a holder of such obligations, as the case may be.  No pledge pursuant to this clause (d) shall release the transferor Lender from any of its obligations hereunder.

 

13.05                 No Waiver; Remedies Cumulative.  No failure or delay on the part of the Administrative Agent, or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower or any other Credit Party and the Administrative Agent, or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder.  The rights, powers and remedies herein or in any other Credit Document expressly provided are cumulative and not exclusive of any rights, powers or remedies which the Administrative Agent, or any Lender would otherwise have.  No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent, or any Lender to any other or further action in any circumstances without notice or demand.

 

13.06                 Payments Pro Rata.  (a) Except as otherwise provided in this Agreement, the Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any Obligations hereunder, the Administrative Agent shall distribute such payment to the Lenders entitled thereto (other than any Lender that has consented in writing to waive its pro rata share of any such payment) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received.

 

(b)                                 Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker’s lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise), which is applicable to the payment of the principal of, or interest on, the Loans, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the respective Credit Party to such Lenders in such amount as shall result in a proportional participation by all the Lenders in such amount; provided, that if all or any portion of such excess amount is thereafter recovered from such Lenders, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest provided further, the provisions of this Section 13.06(b) shall not be construed to apply to any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant other than Magellan, the Borrower or any Affiliate thereof.

 

(c)                                  Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 13.06(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders.

 

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13.07                 Calculations; Computations.  (a) The financial statements to be furnished to the Lenders pursuant hereto shall be made and prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by Magellan to the Lenders); provided, that, (i) except as otherwise specifically provided herein, all computations and all definitions (including accounting terms) used in determining compliance with Sections 9.03(iii), 9.05(xi), 9.05(xiv), 9.08, 9.09 and 9.10(i)(B) shall utilize generally accepted accounting principles and policies in conformity with those used to prepare the audited historical financial statements of Magellan referred to in Section 7.05(a) and (ii) to the extent expressly provided herein, certain calculations shall be made on a Pro Forma Basis.

 

(b)                                 All computations of interest shall be made on the basis of a year of 360 days (except for interest calculated by reference to the Prime Lending Rate, which shall be based on a year of 365 or 366 days, as applicable) for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest are payable.

 

13.08                 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL.  (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT SHALL, EXCEPT AS TO ANY OTHER CREDIT DOCUMENT AS EXPRESSLY SET FORTH THEREIN, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, IN EACH CASE WHICH ARE LOCATED IN THE COUNTY OF NEW YORK.  EACH PARTY HERETO HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HERETO HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENTS BROUGHT IN ANY OF THE AFOREMENTIONED COURTS, THAT SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  EACH PARTY HERETO FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SPECIFIED IN SECTION 13.03, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

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(b)                                 EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

(c)                                  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

(d)                                 MAGELLAN HEREBY IRREVOCABLY ACCEPTS THE APPOINTMENT TO RECEIVE SERVICE OF PROCESS FOR EACH SUBSIDIARY GUARANTOR (IF ANY) THAT IS A FOREIGN SUBSIDIARY OF MAGELLAN AS PROVIDED IN SECTION 16(a) OF THE GUARANTY.

 

13.09                 Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent.

 

13.10                 Effectiveness.  This Agreement shall become effective on the date (the “Effective Date”) on which (i) Magellan, the Borrower, the Administrative Agent and each of the Lenders shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same to the Administrative Agent at the Notice Office or, in the case of the Lenders, shall have given to the Administrative Agent telephonic (confirmed in writing), written or telex notice (actually received) at such office that the same has been signed and mailed to it and (ii) the conditions contained in Section 5 are met to the satisfaction of the Agents and the Required Lenders.  Unless the Administrative Agent has received actual notice from any Lender that the conditions described in clause (ii) of the preceding sentence have not been met to its satisfaction, upon the satisfaction of the condition described in clause (i) of the immediately preceding sentence and upon the Administrative Agent’s good faith determination that the conditions described in clause (ii) of the immediately preceding sentence have been met, then the Effective Date shall have deemed to have occurred.  The Administrative Agent will give Magellan, the Borrower and each Lender prompt written notice of the occurrence of the Effective Date.

 

13.11                 Headings Descriptive.  The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

 

13.12                 Amendment or Waiver; etc.

 

(a)                                 Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Credit Parties party hereto or thereto and the Required Lenders (although additional parties may be added to (and annexes may be modified to reflect such additions), and Subsidiaries of the Borrower may be released from, the Guaranty in accordance with the provisions hereof and thereof without the consent of the other Credit Parties party thereto or the Required 

 

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Lenders); provided, that no such change, waiver, discharge or termination shall, without the consent of each Lender directly affected thereby (other than a Defaulting Lender), (i) (x) extend the final scheduled maturity of any Loan or Note in respect of the Loans, or (y) with respect to clause (x), reduce the rate or extend the time of payment of interest thereon (except in connection with the waiver of applicability of any post-default increase in interest rates), or reduce or forgive the principal amount thereof or reduce or forgive any interest, fees or other amounts payable hereunder (it being understood that any amendment or modification to the financial definitions in this Agreement, to Section 13.07(a) or to the proviso following the table in the definition of “Applicable Margin” the effect of which would be to limit the applicability thereof, shall not constitute a reduction in the rate of interest for the purposes of this clause (i)), (ii) release all or substantially all of the aggregate value of the Guaranty of all of the Guarantors (except as expressly provided in the Credit Documents), (iii) amend, modify or waive any provision of this Section 13.12(a) (except for technical amendments with respect to additional extensions of credit pursuant to this Agreement which afford the protections to such additional extensions of credit of the type provided on the Effective Date) (iv) reduce the percentage specified in the definition of Required Lenders (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as on the Effective Date), (v) consent to the assignment or transfer by the Borrower or Magellan of any of its rights and obligations under this Agreement or (vi) amend Section 13.06 in a manner that would alter the pro rata sharing of amounts required thereby; provided further, that no such change, waiver, discharge or termination shall (1) increase the Commitment of any Lender over the amount thereof then in effect without the consent of such Lender (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in any Commitments pursuant to Section 3.03 shall not constitute an increase of the Commitment of any Lender, and that an increase in the available portion of the Commitment of any Lender shall not constitute an increase of the Commitment of such Lender), or (2) without the consent of the Administrative Agent, amend, modify or waive any provision of Section 12 or any other provision of this Agreement as same relates to the rights or obligations of the Administrative Agent.

 

(b)                                 If, in connection with any proposed change, waiver, discharge or termination of any of the provisions of this Agreement as contemplated by clauses (i) through (v), inclusive, of the first proviso to Section 13.12(a), the consent of the Required Lenders is obtained but the consent of one or more of such other Lenders whose consent is required is not obtained, then the Borrower shall have the right, so long as all non-consenting Lenders whose individual consent is required are treated as described in either clause A below, to (A) replace each such non-consenting Lender or Lenders with one or more Replacement Lenders pursuant to Section 1.13 so long as at the time of such replacement, each such Replacement Lender consents to the proposed change, waiver, discharge or termination; provided further, that the Borrower shall not have the right to replace a Lender, terminate its Commitment or repay its Loans solely as a result of the exercise of such Lender’s rights (and the withholding of any required consent by such Lender) pursuant to the second proviso to Section 13.12(a).  Upon the effectiveness of any such replacement or termination, such replaced or terminated Lender shall no longer constitute a “Lender” for purposes of this Agreement, except with respect to indemnifications under this Agreement (including, without limitation, Sections 1.10, 1.11, 4.04, 12.06 and 13.01), which shall survive as to such Lender.

 

13.13                 Survival.  All indemnities set forth herein including, without limitation, in Sections 1.10, 1.11, 4.04, 12.06 and 13.01 shall survive the execution, delivery and termination of this Agreement and the Notes and the making and repayment of the Obligations.

 

13.14                 Domicile of Loans.  Each Lender may transfer and carry its Loans at, to or for the account of any office, Subsidiary or Affiliate of such Lender.  Notwithstanding anything to the contrary contained herein, to the extent that a transfer of Loans pursuant to this Section 13.14 would, at the time of 

 

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such transfer, result in increased costs under Section 1.10, 1.11, or 4.04 from those being charged by the respective Lender prior to such transfer, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from any Change in Law after the date of the respective transfer).

 

13.15                 Register.  The Borrower hereby designates the Administrative Agent to serve as its agent, solely for purposes of this Section 13.15, to maintain a register (the “Register”) on which it will record, the Loans made by each of the Lenders, the amount of any principal or interest due and payable with respect to such Loans and each repayment in respect of the principal amount, and related interest amounts of the Loans of each Lender.  Failure to make any such recordation, or any error in such recordation, shall not affect the Borrower’s obligations in respect of such Loans.  The transfer of the Loans of any Lender and the rights to the principal of, and interest on, any Loan shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Loans and prior to such recordation all amounts owing to the transferor with respect to such Loans shall remain owing to the transferor.  The registration of assignment or transfer of all or part of the Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 13.04(b).  Coincident with the delivery of such an Assignment and Assumption Agreement to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the Note (if any) evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Lender and/or the new Lender at the request of any such Lender.  Each of Magellan and the Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 13.15 except to the extent resulting from the Administrative Agent’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision).  In addition, the Borrower shall have the right, upon its written request to the Administrative Agent, to review a copy of the Register at any reasonable time.

 

13.16                 Confidentiality.  (a) Subject to the provisions of clause (b) of this Section 13.16, each Lender agrees that it will use its reasonable efforts not to disclose without the prior consent of Magellan (other than to its employees, auditors, advisors, Affiliates or counsel or to another Lender if such Lender or such Lender’s holding or parent company in its reasonable discretion determines that any such party should have access to such information; provided, that such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Lender) any information with respect to Magellan or any of its Subsidiaries which is now or in the future furnished pursuant to this Agreement or any other Credit Document and which is designated as confidential by the Borrower; provided, that any Lender may disclose any such information (i) as has become generally available to the public other than by virtue of a breach of this Section 13.16(a) by the respective Lender or becomes available to the Administrative Agent, any Lender or any of their respective Affiliates from a source other than the Borrower that does not owe the Borrower a fiduciary duty, (ii) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (iii) as may be required or appropriate in respect to any summons or subpoena or in connection with any litigation, (iv) in order to comply with any law, order, regulation or ruling applicable to such Lender, (v) to any other party hereto, (vi) to any actual or prospective direct or indirect contractual counterparty in any swap, hedge or similar agreement (or to any such contractual counterparty’s professional advisor), so long as such contractual counterparty (or such professional advisor) agrees to be bound by an agreement containing provisions substantially the same as those of this Section 13.16, (vii) 

 

66

 

to any prospective or actual transferee or participant in connection with any contemplated transfer or participation of any of the Notes, Loans, or Commitments or any interest therein by such Lender; provided, that such prospective transferee agrees to be bound by an agreement containing provisions substantially the same as those of this Section 13.16 and (viii) in connection with the exercise of remedies hereunder or under any other Credit Document or any action or proceeding relating to this Agreement or any other Credit Document or the enforcement of rights hereunder or thereunder.

 

(b)                                 Magellan hereby acknowledges and agrees that each Lender may share with any of its affiliates, and such affiliates may share with such Lender, any information related to Magellan or any of its Subsidiaries (including, without limitation, any non-public customer information regarding the creditworthiness of Magellan and its Subsidiaries); provided, that such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Lender.

 

13.17                 No Fiduciary Duty.  The Administrative Agent, each Lender and their Affiliates (collectively, solely for purposes of this paragraph, the “Lenders”), may have economic interests that conflict with those of the Credit Parties, their stockholders and/or their affiliates.  Each of Magellan and the Borrower agrees that nothing in the Credit Documents will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any Lender, on the one hand, and such Obligor, its stockholders or its affiliates on the other.  Each of Magellan and the Borrower acknowledges and agrees that (i) the transactions contemplated by the Credit Documents (including the exercise of rights and remedies hereunder and thereunder) are arm’s-length commercial transactions between the Lenders, on the one hand, and the Credit Parties, on the other, and (ii) in connection therewith and with the process leading thereto, (x) no Lender has assumed an advisory or fiduciary responsibility in favor of any Credit Party, its stockholders or its affiliates with respect to the transactions contemplated hereby (or the exercise of rights or remedies with respect thereto) or the process leading thereto (irrespective of whether any Lender has advised, is currently advising or will advise any Credit Party, its stockholders or its Affiliates on other matters) or any other obligation to any Credit Party except the obligations expressly set forth in the Credit Documents and (y) each Lender is acting solely as principal and not as the agent or fiduciary of any Credit Party, its management, stockholders, creditors or any other Person.  Each of Magellan and the Borrower acknowledges and agrees that it has consulted its own legal and financial advisors to the extent it deemed appropriate and that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto.

 

13.18                 Patriot Act.  Each Lender that is subject to the Patriot Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the Patriot Act (Title III of Pub. L. 107 56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies each Credit Party, which information includes the name and address of each Credit Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Credit Party in accordance with the Patriot Act.

 

13.19                 Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Credit Document or in any other agreement, arrangement or understanding among the parties thereto, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Credit Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(a)                                 the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

 

67

 

(b)                                 the effects of any Bail-in Action on any such liability, including, if applicable:

 

(i)                                     a reduction in full or in part or cancellation of any such liability;

 

(ii)                                  a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Credit Document; or

 

(iii)                               the variation of the terms of such liability  in connection with the exercise of the Write-Down and Conversion Powers of any EEA Resolution Authority.

 

[Remainder of Page Intentionally Left Blank]

 

68

 

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written.

 

	
Address:
    	
MAGELLAN PHARMACY SERVICES, INC., as Borrower
    
	
 
    	
 
    
	
55 Nod Road
    	
 
    	
 
    
	
Avon, CT 06001
    	
 
    	
 
    
	
Attention: Chief Financial Officer
    	
By:
    	
/s/ Linton Newlin
    
	
Tel. No.: (860) 507-1900
    	
 
    	
Name: Linton Newlin
    
	
Fax No.: (860) 507-1990
    	
 
    	
Title:   Vice   President
    
	
 
    	
 
    	
 
    
	
With a copy to:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
55 Nod Road 
    	
 
    	
 
    
	
Avon, CT 06001
    	
 
    	
 
    
	
Attention: General Counsel
    	
 
    	
 
    
	
Tel. No.: (860) 507-1906
    	
 
    	
 
    
	
Fax No.: (860) 507-1990
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Address:
    	
MAGELLAN HEALTH, INC.
    
	
 
    	
 
    	
 
    
	
55 Nod Road
    	
 
    	
 
    
	
Avon, CT 06001
    	
By:
    	
/s/ Jonathan Rubin
    
	
Attention: Chief Financial Officer
    	
 
    	
Name: Jonathan Rubin
    
	
Tel. No.: (860) 507-1900 
    	
 
    	
Title:   Chief   Financial Officer
    
	
Fax No.: (860) 507-1990
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
With a copy to:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
55 Nod Road 
    	
 
    	
 
    
	
Avon, CT 06001
    	
 
    	
 
    
	
Attention: General Counsel 
    	
 
    	
 
    
	
Tel. No.: (860) 507-1906
    	
 
    	
 
    
	
Fax No.: (860) 507-1990
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

[SIGNATURE PAGE TO CREDIT AGREEMENT]

 

 

 

	
 
    	
THE BANK OF TOKYO MITSUBISHI
    
	
 
    	
UFJ, LTD., as Administrative Agent and
    
	
 
    	
Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Lawrence Blat
    
	
 
    	
 
    	
Name: Lawrence Blat
    
	
 
    	
 
    	
Title:   Authorized   Signatory
    

 

[SIGNATURE PAGE TO CREDIT AGREEMENT]

 

 

	
 
    	
CREDIT SUISSE AG, Cayman Islands 
    
	
 
    	
Branch, as Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ William O’Daly
    
	
 
    	
 
    	
Name: William O’Daly
    
	
 
    	
 
    	
Title:   Authorized   Signatory
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Karim Rahimtoola
    
	
 
    	
 
    	
Name: Karim Rahimtoola
    
	
 
    	
 
    	
Title:   Authorized   Signatory
    
	
 
    	
 
    	
 
    

 

[SIGNATURE PAGE TO CREDIT AGREEMENT]

 

 

	
 
    	
SUNTRUST BANK, as Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Katherine Bass
    
	
 
    	
 
    	
Name: Katherine Bass
    
	
 
    	
 
    	
Title:   Director
    

 

[SIGNATURE PAGE TO CREDIT AGREEMENT]

 

 

	
 
    	
U.S. BANK NATIONAL ASSOCIATION, as 
    
	
 
    	
Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jennifer Hwang
    
	
 
    	
 
    	
Name: Jennifer Hwang
    
	
 
    	
 
    	
Title:   Senior Vice President
    

 

[SIGNATURE PAGE TO CREDIT AGREEMENT]

 

 

	
 
    	
WELLS FARGO BANK, N.A., as Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Joe Ellerbrock
    
	
 
    	
 
    	
Name: Joe Ellerbrock
    
	
 
    	
 
    	
Title:   Vice   President
    

 

[SIGNATURE PAGE TO CREDIT AGREEMENT]

 

 

	
 
    	
JPMORGAN CHASE BANK, N.A., as 
    
	
 
    	
Lender
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ John Kushnerick
    
	
 
    	
 
    	
Name: John Kushnerick
    
	
 
    	
 
    	
Title:   Executive   Director
    

 

[SIGNATURE PAGE TO CREDIT AGREEMENT]Exhibit 10.1

 

EXECUTION VERSION

 

***Confidential Information has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to this omitted information.

 

 

SHARE PURCHASE AGREEMENT

 

BY AND AMONG

 

MAGELLAN HEALTHCARE, INC.,

 

ARMED FORCES SERVICES CORPORATION,

 

THE SHAREHOLDERS OF

ARMED FORCES SERVICES CORPORATION,

 

AND

 

MAGELLAN HEALTH, INC.

(SOLELY FOR PURPOSES OF ARTICLE XI HEREUNDER)

 

DATED MAY 15, 2016

 

 

 

	
ARTICLE I   - DEFINITIONS
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.1.
    	
Definitions
    	
1
    
	
Section 1.2.
    	
Construction
    	
15
    
	
Section 1.3.
    	
Knowledge
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE II   - PURCHASE AND SALE CLOSING
    	
17
    
	
 
    	
 
    	
 
    
	
Section 2.1.
    	
Purchase and Sale
    	
17
    
	
Section 2.2.
    	
Purchase Price; Closing   Estimate
    	
17
    
	
Section 2.3.
    	
Closing
    	
17
    
	
Section 2.4.
    	
Closing Deliveries to   Buyer
    	
18
    
	
Section 2.5.
    	
Closing Deliveries by   Buyer to Sellers
    	
18
    
	
Section 2.6.
    	
Post-Closing Adjustment
    	
19
    
	
Section 2.7.
    	
Holdback Payment
    	
22
    
	
Section 2.8.
    	
Remainder Payments
    	
22
    
	
Section 2.9.
    	
Tax Treatment of   Payments
    	
23
    
	
Section 2.10.
    	
Withholding
    	
23
    
	
 
    	
 
    	
 
    
	
ARTICLE III   - REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS
    	
24
    
	
 
    	
 
    	
 
    
	
Section 3.1.
    	
Organization;   Authorization
    	
24
    
	
Section 3.2.
    	
Conflicts; Consents
    	
24
    
	
Section 3.3.
    	
Title to Shares
    	
25
    
	
Section 3.4.
    	
Litigation
    	
25
    
	
Section 3.5.
    	
Brokers and Finders
    	
25
    
	
 
    	
 
    	
 
    
	
ARTICLE IV   - REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
    	
25
    
	
 
    	
 
    	
 
    
	
Section 4.1.
    	
Corporate Status
    	
25
    
	
Section 4.2.
    	
Capitalization
    	
26
    
	
Section 4.3.
    	
Conflicts; Consents
    	
27
    
	
Section 4.4.
    	
Financial Statements
    	
27
    
	
Section 4.5.
    	
Absence of Undisclosed   Liabilities
    	
28
    
	
Section 4.6.
    	
Events Subsequent to   Latest Financial Statements
    	
28
    
	
Section 4.7.
    	
Tax Matters
    	
30
    
	
Section 4.8.
    	
Litigation
    	
32
    
	
Section 4.9.
    	
Compliance with Laws
    	
32
    
	
Section 4.10.
    	
Employee Benefits
    	
33
    
	
Section 4.11.
    	
Permits
    	
34
    

 

i

 

Table of Contents

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
Section 4.12.
    	
Leased Real Property
    	
34
    
	
Section 4.13.
    	
Personal Property
    	
35
    
	
Section 4.14.
    	
Intellectual Property
    	
35
    
	
Section 4.15.
    	
Contracts
    	
38
    
	
Section 4.16.
    	
Insurance
    	
39
    
	
Section 4.17.
    	
Environmental Matters
    	
40
    
	
Section 4.18.
    	
Employees; Labor   Matters
    	
41
    
	
Section 4.19.
    	
Affiliate Transactions
    	
41
    
	
Section 4.20.
    	
Accounts and Notes Receivable
    	
42
    
	
Section 4.21.
    	
Books and Records
    	
42
    
	
Section 4.22.
    	
Certain Payments
    	
42
    
	
Section 4.23.
    	
Customers and Suppliers
    	
43
    
	
Section 4.24.
    	
Government Contracts
    	
43
    
	
Section 4.25.
    	
National Security
    	
45
    
	
Section 4.26.
    	
Brokers and Finders
    	
46
    
	
Section 4.27.
    	
Sales Personnel
    	
46
    
	
Section 4.28.
    	
Predecessors
    	
46
    
	
Section 4.29.
    	
Exclusivity of   Representations
    	
46
    
	
 
    	
 
    	
 
    
	
ARTICLE V   - REPRESENTATIONS AND WARRANTIES OF BUYER
    	
46
    
	
 
    	
 
    	
 
    
	
Section   5.1.
    	
Corporate Status
    	
46
    
	
Section 5.2.
    	
Conflicts; Consents
    	
47
    
	
Section 5.3.
    	
Brokers and Finders
    	
47
    
	
Section 5.4.
    	
Sufficient Funds
    	
47
    
	
Section 5.5.
    	
Solvency
    	
48
    
	
Section 5.6.
    	
Litigation
    	
48
    
	
Section 5.7.
    	
Investigation by Buyer;   Sellers’ and Company’s Liability
    	
48
    
	
Section 5.8.
    	
Purchase for Investment
    	
48
    
	
Section 5.9.
    	
Exclusivity of Representations
    	
48
    
	
 
    	
 
    	
 
    
	
ARTICLE VI   - COVENANTS
    	
49
    
	
 
    	
 
    	
 
    
	
Section 6.1.
    	
Access to Information   Concerning Properties and Records
    	
49
    
	
Section 6.2.
    	
Confidentiality
    	
49
    
	
Section 6.3.
    	
Conduct of the Business   of the Company Pending the Closing Date
    	
49
    
	
Section 6.4.
    	
Supplemental Disclosure
    	
52
    
	
Section 6.5.
    	
Efforts; Governmental   Approvals; Third Party Consents
    	
53
    
	
Section 6.6.
    	
Exclusive Dealing
    	
56
    
	
Section 6.7.
    	
Employee Benefits
    	
56
    
	
Section 6.8.
    	
Compliance with WARN   Act and Similar Statutes
    	
57
    
	
Section 6.9.
    	
Indemnity; Directors’   and Officers’ Insurance
    	
57
    

 

ii

 

Table of Contents

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
Section 6.10.
    	
Resignation of Officers   and Directors
    	
58
    
	
Section 6.11.
    	
Public Announcements
    	
58
    
	
Section 6.12.
    	
Transfer Taxes
    	
58
    
	
Section 6.13.
    	
Preservation of Records
    	
58
    
	
Section 6.14.
    	
Conflicts; Privileges
    	
59
    
	
Section 6.15.
    	
Repayment of   Indebtedness
    	
60
    
	
Section 6.16.
    	
Security Clearances
    	
60
    
	
Section 6.17.
    	
Termination of   Stockholders’ Agreement
    	
61
    
	
Section 6.18.
    	
Section 280G
    	
61
    
	
Section 6.19.
    	
Tax Matters
    	
61
    
	
 
    	
 
    	
 
    
	
ARTICLE VII   - CONDITIONS PRECEDENT
    	
64
    
	
 
    	
 
    	
 
    
	
Section 7.1.
    	
Conditions to the   Obligations of Each Party
    	
64
    
	
Section 7.2.
    	
Conditions to the   Obligations of Buyer
    	
65
    
	
Section 7.3.
    	
Conditions to the Obligations   of the Sellers
    	
66
    
	
Section 7.4.
    	
Frustration of Closing   Conditions
    	
67
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII   - TERMINATION AND ABANDONMENT
    	
67
    
	
 
    	
 
    	
 
    
	
Section 8.1.
    	
Termination
    	
67
    
	
Section 8.2.
    	
Effect of Termination
    	
68
    
	
 
    	
 
    	
 
    
	
ARTICLE IX   - SURVIVAL; INDEMNIFICATION
    	
68
    
	
 
    	
 
    	
 
    
	
Section 9.1.
    	
Survival of   Representations and Warranties
    	
68
    
	
Section 9.2.
    	
Indemnification
    	
69
    
	
Section 9.3.
    	
Limitation on   Indemnification, Mitigation
    	
69
    
	
Section 9.4.
    	
Losses Net of   Insurance, Etc
    	
70
    
	
Section 9.5.
    	
Indemnification   Procedure
    	
71
    
	
Section 9.6.
    	
Sole Remedy/Waiver
    	
73
    
	
Section 9.7.
    	
Tax Treatment of   Indemnity Payments
    	
73
    
	
 
    	
 
    	
 
    
	
ARTICLE X   - MISCELLANEOUS
    	
73
    
	
 
    	
 
    	
 
    
	
Section 10.1.
    	
Fees and Expenses
    	
73
    
	
Section 10.2.
    	
Extension; Waiver
    	
73
    
	
Section 10.3.
    	
Notices
    	
74
    
	
Section 10.4.
    	
Entire Agreement
    	
75
    
	
Section 10.5.
    	
Release; Disclaimer
    	
75
    
	
Section 10.6.
    	
Binding Effect;   Benefit; Assignment
    	
76
    
	
Section 10.7.
    	
Shareholders’   Representative
    	
76
    
	
Section 10.8.
    	
Amendment and   Modification
    	
78
    

 

iii

 

Table of Contents

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
Section 10.9.
    	
Counterparts
    	
78
    
	
Section 10.10.
    	
Applicable Law
    	
78
    
	
Section 10.11.
    	
Severability
    	
79
    
	
Section 10.12.
    	
Specific Enforcement
    	
79
    
	
Section 10.13.
    	
Waiver of Jury Trial
    	
79
    
	
Section 10.14.
    	
Headings
    	
79
    
	
Section 10.15.
    	
Time is of the Essence
    	
80
    
	
Section 10.16.
    	
Incorporation of   Company Disclosure Letter
    	
80
    
	
 
    	
 
    	
 
    
	
ARTICLE XI   - GUARANTY
    	
80
    
	
 
    	
 
    	
 
    
	
Section 11.1.
    	
Parent Guaranty
    	
80
    
	
Section 11.2.
    	
Representations and   Warranties of the Ultimate Parent
    	
82
    

 

Annexes

Annex A — Working Capital Calculation Policies and Principles

Annex B — Certain Definitions

 

Exhibits

Exhibit 7.2(g)(i) — Form of Employment Agreement

Exhibit 7.2(g)(ii) — Form of Non-Compete Agreement

Exhibit 7.2(g)(iii) — Form of Subscription Agreement

Exhibit 7.2(i) — Form of Resignation and Release

 

Schedule

Schedule 7.2(g)(iii)

 

iv

 

SHARE PURCHASE AGREEMENT

 

This SHARE PURCHASE AGREEMENT, dated as of May 15, 2016, is entered into by and among MAGELLAN HEALTHCARE, INC. (“Buyer”), a corporation organized under the laws of Delaware, ARMED FORCES SERVICES CORPORATION (the “Company”), a corporation organized under the laws of Virginia, the sellers listed as such on the signature pages hereto (each, a “Seller” and, collectively, the “Sellers”), and, solely for purposes of Article XI, MAGELLAN HEALTH, INC. (the “Ultimate Parent”), a corporation organized under the laws of Delaware.

 

W I T N E S S E T H:

 

WHEREAS, the Sellers collectively own 7,281 shares (the “Shares”) of common stock, par value $1.00 per share, of the Company (the “Company Common Stock”), representing 100% of the issued and outstanding Company Common Stock as of the date hereof; and

 

WHEREAS, the Sellers wish to sell the Shares to Buyer, and Buyer wishes to purchase the Shares from the Sellers, on the terms and conditions and for the consideration set forth in this Agreement; and

 

WHEREAS, Buyer is a wholly-owned subsidiary of Ultimate Parent; and

 

WHEREAS, certain employees of the Company have, as a condition and inducement to Buyer and Ultimate Parent entering into this Agreement, concurrently with the execution and delivery of this Agreement, entered into the Employment Agreements (as hereinafter defined) with Ultimate Parent; and

 

WHEREAS, the Sellers have, as a condition and inducement to Buyer and Ultimate Parent entering into this Agreement, concurrently with the execution and delivery of this Agreement, entered into the Non-Compete Agreements (as hereinafter defined) with Ultimate Parent; and

 

WHEREAS, certain shareholders of the Company have, as a condition and inducement to Buyer entering into this Agreement, concurrently with the execution and delivery of this Agreement, entered into the Subscription Agreements (as hereinafter defined) with Ultimate Parent.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I — DEFINITIONS

 

Section 1.1.        Definitions.  When used in this Agreement, the following terms shall have the respective meanings ascribed thereto in this Section 1.1.

 

“280G Approval” shall have the meaning set forth in Section 6.18.

 

 

“280G Waiver” shall have the meaning set forth in Section 6.18.

 

“Accounting Principles” shall mean GAAP applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Company Audited Financial Statements.

 

“Action” shall mean any action, proceeding, complaint, claim, petition, suit, arbitration, litigation or investigation, whether civil or criminal, at law or in equity, before any Governmental Entity.

 

“Additional Purchase Price” shall have the meaning set forth in Section 2.6(e).

 

“Adjustment Amount” shall have the meaning set forth in Section 2.6(e).

 

“Affiliate” of any Person shall mean any other Person, directly or indirectly, controlling, controlled by or under common control with, such Person; provided that, for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by Contract or otherwise.

 

“Agreement” shall mean this Share Purchase Agreement, together with all Annexes and Exhibits hereto and the Company Disclosure Letter.

 

“Ancillary Agreements” shall mean the Closing Certificates, the Escrow Agreement, the Employment Agreements, the Non-Compete Agreements, the Subscription Agreements and the other documents and agreements to be delivered pursuant to this Agreement.

 

“Base Purchase Price” shall have the meaning set forth in Section 2.2(a).

 

“Board” shall mean the board of directors of the Company.

 

“Business Day” shall mean any day except a Saturday, a Sunday or any other day on which commercial banks are required or authorized to close in New York, New York.

 

“Buyer” shall have the meaning set forth in the preamble to this Agreement.

 

“Buyer Disclosure Letter” shall have the meaning set forth in Article V.

 

“Buyer Indemnitees” shall have the meaning set forth in Section 9.2(a).

 

“Buyer Releasee” shall have the meaning set forth in Section 10.5(b).

 

“Buyer Releasor” shall have the meaning set forth in Section 10.5(a).

 

“Buyer’s Submission” shall have the meaning set forth in Section 2.6(c).

 

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“Cash and Cash Equivalents” shall mean cash, checks, money orders, marketable securities, short-term instruments and other cash equivalents.  For the avoidance of doubt, Cash and Cash Equivalents shall (a) include checks and drafts deposited and cleared for the account of the Company, but not yet reflected as available proceeds in the accounts of the Company and (b) be reduced for outstanding checks and drafts that have not been submitted for payment.

 

“Claim Notice” shall mean the written notification pursuant to Section 9.5(a) of a Third Party Claim as to which indemnity under Article IX is sought by an Indemnified Party, enclosing a copy of all papers served, if any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party’s claim against the Indemnifying Party under Section 9.5(a).

 

“Closing” shall have the meaning set forth in Section 2.3.

 

“Closing Cash” shall mean the aggregate Cash and Cash Equivalents of the Company on a consolidated basis, calculated in accordance with the Accounting Principles, as of 11:59 P.M. on the Business Day immediately prior to the Closing Date.

 

“Closing Date” shall have the meaning set forth in Section 2.3.

 

“Closing Estimate Statement” shall have the meaning set forth in Section 2.2(b).

 

“Closing Indebtedness” shall mean the aggregate amount of all Indebtedness of the Company, including in respect of the Credit Agreement, on a consolidated basis as of 11:59 P.M. on the Business Day immediately prior to the Closing Date.

 

“Closing Working Capital” shall mean the Working Capital as of 11:59 P.M. on the Business Day immediately prior to the Closing Date.

 

“Code” shall mean the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated and the rulings issued thereunder.

 

“Collateral Source” shall have the meaning set forth in Section 9.4.

 

“Company” shall have the meaning set forth in the preamble to this Agreement.

 

“Company Audited Financial Statements” shall have the meaning set forth in Section 4.4(a).

 

“Company Common Stock” shall have the meaning set forth in the recitals to this Agreement.

 

“Company Disclosure Letter” shall have the meaning set forth in Article III.

 

“Company Employees” shall have the meaning set forth in Section 6.7(a).

 

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“Company Intellectual Property” shall have the meaning set forth in Section 4.14(b).

 

“Company Interim Financial Statements” shall have the meaning set forth in Section 4.4(a).

 

“Company Taxes” shall have the meaning set forth in Section 4.7(a).

 

“Company Technology” shall have the meaning set forth in Section 4.14(a)(i).

 

“Company Transaction Expenses” shall mean all expenses of the Company incurred prior to and through the Closing Date in connection with the negotiation, preparation and execution of this Agreement and the consummation of the transactions contemplated hereby, including: (a) the fees and expenses of J.P. Morgan Securities LLC for investment banking services; (b) the fees and expenses of Milbank; (c) the fees and expenses of McGuireWoods LLP; (d) all bonuses or other similar amounts payable by or on behalf of the Company payable solely as a result of the consummation of the Transactions (including the Transaction Bonus Payments and any other sale, retention, change in control or similar bonuses, payments or benefits); and (e) the employer portion of any payroll, social security, unemployment or other Taxes required to be paid by the Company in connection with (and which have not otherwise been included in) any of the items referred to in clause (d); in each case payable by the Company prior to, on or after the Closing and which have not been paid as of the Closing Date.  For the avoidance of doubt, Company Transaction Expenses shall not be included as a current liability in the calculation of the Closing Working Capital.

 

“Competition Laws” shall mean the HSR Act, the Clayton Act, as amended, the Sherman Act, as amended, the Federal Trade Commission Act, as amended, and all other Federal, state and foreign statutes, rules, regulations, orders, decrees, administrative and judicial doctrines and other Laws that are designed or intended to prohibit, restrict or regulate (a) foreign investment or (b) actions having the purpose or effect of monopolization or restraint of trade or lessening of competition.

 

“Computer Systems” shall have the meaning set forth in Section 4.14(k).

 

“Conclusive Cash” shall mean the Cash and Cash Equivalents set forth on the Conclusive Statement.

 

“Conclusive Closing Indebtedness” shall mean the Closing Indebtedness set forth on the Conclusive Statement.

 

“Conclusive Company Transaction Expenses” shall mean the Company Transaction Expenses set forth on the Conclusive Statement.

 

“Conclusive Date” shall have the meaning set forth in Section 2.6(c).

 

“Conclusive Purchase Price” shall have the meaning set forth in Section 2.6(d).

 

“Conclusive Statement” shall have the meaning set forth in Section 2.6(c).

 

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“Confidentiality Agreement” shall have the meaning set forth in Section 6.2.

 

“Contract” shall mean any legally binding agreement, contract, lease, license or instrument, together with all amendments, modifications or supplements thereto.

 

“Copyrights” shall have the meaning set forth in Section 4.14(a)(ii).

 

“Cost Accounting Standards” shall mean the cost accounting standards and regulations promulgated by the Cost Accounting Standards Board, as set forth in Title 48, Chapter 99 of the Code of Federal Regulations.

 

“Credit Agreement” shall mean that certain Second Restated Credit Agreement, dated September 30, 2012, by and between the Company and Wells Fargo Bank, National Association, as amended, restated and supplemented from time to time.

 

“Current Assets” shall mean subject to the Accounting Principles, the current assets of the Company, which current assets shall include only the line items set forth on Annex A under the heading “Current Assets” and no other assets.

 

“Current Government Bid” shall have the meaning set forth in Section 4.24(b).

 

“Current Government Contract” shall have the meaning set forth in Section 4.24(b).

 

“Current Holdback Contract” shall have the meaning set forth in Annex B.

 

“Current Liabilities” shall mean, subject to the Accounting Principles, the current liabilities of the Company, which current liabilities shall include only the line items set forth on Annex A under the heading “Current Liabilities” and no other liabilities.

 

“Deductible” shall have the meaning set forth in Annex B.

 

“Dispute Notice” shall have the meaning set forth in Section 2.6(b).

 

“DSS” shall have the meaning set forth in Section 4.25(a).

 

“Due Diligence Materials” shall have the meaning set forth in Section 5.7.

 

“Employment Agreements” shall mean each employment agreement, dated as of the date hereof and effective subject to and as of the Closing, in substantially the form set forth on Exhibit 7.2(g)(i) hereto, between Ultimate Parent and each individual party thereto.

 

“Employment and Withholding Taxes” shall mean any federal, state, provincial, local, foreign or other employment, unemployment insurance, social security, disability, workers’ compensation, payroll, health care or other similar tax, duty or other governmental charge or assessment or deficiencies thereof payable by the Company and all Taxes required to be withheld by or on behalf of the Company in connection with amounts paid or owing to any employee, independent contractor, creditor or other party, in each case, on or in respect of the

 

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business or assets thereof.  Any Employment and Withholding Tax is also included in the definition of Tax wherever the term Tax is used.

 

“End Date” shall have the meaning set forth in Section 8.1(b)(ii).

 

“Environmental Law” shall mean any applicable Law relating to pollution, the protection of the environment or natural resources, the protection of human health and safety from environmental concerns, or the use, refinement, handling, treatment, removal, storage, production, manufacture, transportation, release or threatened release of hazardous materials, Hazardous Substances and toxic substances.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Company, is or has ever been under common control, or which is or has ever been treated as a single employer, under Section 414(b), (c), (m) or (o) of the Code.

 

“Escrow Agent” shall mean Citibank, National Association.

 

“Escrow Agreement” shall mean that certain escrow agreement, by and among the Shareholders’ Representative, Buyer and the Escrow Agent, in the form of the Escrow Agent’s standard escrow agreement, with such changes thereto as shall be reasonably mutually agreed in good faith by the Shareholders’ Representative, Buyer and the Escrow Agent after the date hereof and prior to the Closing.

 

“Escrow Amount” shall have the meaning set forth in Annex B.

 

“Escrow Fund” shall have the meaning set forth in Section 2.5(b).

 

“Escrow Release Amount” shall have the meaning set forth in Section 2.8(a).

 

“Escrow Release Date” shall have the meaning set forth in Annex B.

 

“Estimated Closing Payment Per Share” shall mean the quotient obtained by dividing the Estimated Purchase Price minus the Holdback Amount by the aggregate number of Shares held by all of the Sellers at the Closing.

 

“Estimated Company Transaction Expenses” shall have the meaning set forth in Section 2.2(b).

 

“Estimated Purchase Price” shall have the meaning set forth in Section 2.2(b).

 

“Estimated Working Capital” shall have the meaning set forth in Section 2.2(b).

 

“Estimated Working Capital Adjustment” shall have the meaning set forth in Section 2.2(b).

 

“Excess Amount” shall have the meaning set forth in Section 2.6(e).

 

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“Excluded Taxes” shall mean any Taxes of the Company (or for which the Company is liable) (i) for any Pre-Closing Tax Period (determined as provided in Section 6.19(d) in the case of the pre-Closing portion of any Overlap Period) or (ii) payable by reason of any Contract entered into on or prior to the Closing Date, Treasury Regulation section 1.1502-6(a) (or any similar provision of Law) as a result of the Company being included in any consolidated, affiliated, combined or unitary group on or prior to the Closing Date, or any assumption, successor or transferee liability, operation of Law, or otherwise, arising on or prior to the Closing Date, except in the case of each of clauses (i) and (ii) to the extent taken into account in Closing Working Capital as set forth in the Conclusive Statement or the Conclusive Company Transaction Expenses.

 

“Expense Holdback Amount” shall mean an amount determined by resolution of the Board prior to delivery of the Closing Estimate Statement to be delivered to the Shareholders’ Representative at Closing to satisfy any expenses incurred by the Shareholders’ Representative in connection with (a) the settlement of the Adjustment Amount in accordance with Section 2.6, (b) the defense or settlement of any indemnification claims in accordance Article IX and (c) the performance of any other duties or obligations of the Shareholders’ Representative under this Agreement.

 

“Extension Amount” shall mean the amount obtained by multiplying $10,000,000 by the applicable Extension Factor; provided, that the aggregate Extension Amounts payable pursuant to this Agreement shall not exceed $10,000,000.

 

“Extension Factor” shall mean, for each extension of the ordering period under the Current Holdback Contract, the quotient obtained by dividing the number of additional months by which the ordering period thereunder is extended by 60.

 

“Final Closing Letter” shall mean the letter delivered to Buyer by the Secretary of the Company prior to Closing, which shall set forth the number of shares of Company Common Stock that are held by each Seller as of the Closing.

 

“Financial Statements” shall have the meaning set forth in Section 4.4(a).

 

“Fundamental Representations” shall mean the representations and warranties of (a) the Company set forth in the first sentence of Section 4.1(a) (Corporate Status-Organization), Section 4.1(c) (Corporate Status-Authorization), Section 4.2 (Capitalization), Section 4.7 (Tax Matters) and Section 4.26 (Brokers and Finders) and (b) the Sellers set forth in Section 3.1 (Organization; Authorization), Section 3.3 (Title to Shares) and Section 3.5 (Brokers and Finders).

 

“GAAP” shall mean generally accepted accounting principles of the United States of America.

 

“Government Bid” shall mean any bid, quotation, proposal or other offer to sell or provide goods or services made or offered by the Company or any Subsidiary of the Company prior to the Closing Date which, if accepted, would reasonably be expected to result in a Government Contract.

 

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“Government Contract” shall mean any prime contract, subcontract, teaming agreement or arrangement, joint venture, basic ordering agreement, pricing agreement, letter contract, order, grant, cooperative agreement or other similar arrangement of any kind which was performed or is being performed, in whole or in part, at any time during the period beginning January 1, 2012 through the date hereof, between the Company or any Subsidiary of the Company, on the one hand, and either (i) any Governmental Entity, (ii) any prime contractor of a Governmental Entity in its capacity as a prime contractor, or (iii) any subcontractor at any tier with respect to a contract with a Governmental Entity if such subcontractor is acting in its capacity as a subcontractor.  A task, purchase or delivery order under a Government Contract shall not constitute a separate Government Contract, for purposes of this definition, but shall be part of the Government Contract to which it relates.

 

“Governmental Entity” shall mean any domestic or foreign (a) court, tribunal, administrative agency, commission, authority, regulatory agency, department, board, bureau, agency or instrumentality, self-regulatory organization or arbitral or similar forum, (b) any subdivision or authority of any of the foregoing, or (c) any quasi-governmental or private body exercising, or entitled to exercise, any regulatory, administrative, executive, judicial, legislative, police, expropriation or taxing authority under or for the account of any of the foregoing, including the United States Government.

 

“Guaranteed Obligations” shall have the meaning set forth in Section 11.1(a).

 

“Hazardous Substance” shall mean materials, substances or wastes defined by or listed, regulated, classified or characterized under any Environmental Law as a hazardous waste, hazardous material, hazardous substance, extremely hazardous waste, restricted hazardous waste, contaminant, pollutant, toxic waste, or toxic substance, including, any petroleum or petroleum products, radioactive materials, asbestos and polychlorinated biphenyls (PCBs).

 

“Holdback Amount” shall mean an amount equal to $10,000,000.

 

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as may be amended, modified, supplemented or replaced from time to time, and the rules and regulations promulgated thereunder.

 

“Indebtedness” of any Person shall mean (a) indebtedness for borrowed money or indebtedness issued or incurred in substitution or exchange for indebtedness for borrowed money, (b) indebtedness evidenced by any note, bond, debenture, mortgage or other debt instrument or debt security, (c) all obligations of such Person for the reimbursement of any obligor on any letter of credit, (d) all indebtedness for the deferred purchase price of property or services (including earn-outs), (e) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by any such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (f) all indebtedness secured by a purchase money mortgage or other Lien to secure all or part of the purchase price of the property subject to such mortgage or Lien, (g) all obligations under leases which shall have been or must be, in accordance with GAAP, recorded as capital leases in respect of which any such Person is liable as lessee, (h) all interest, fees and other expenses owed with respect to the indebtedness

 

8

 

referred to above, and (i) all indebtedness referred to above which is directly or indirectly guaranteed by any such Person or which any such Person has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a creditor against loss; provided that Indebtedness shall not include accounts payable to trade creditors, accrued expenses arising in the ordinary course of business consistent with past practice, and the endorsement of negotiable instruments for collection in the ordinary course of business.

 

“Indemnified Party” shall mean any Person asserting a claim for indemnification under any provision of Article IV.

 

“Indemnified Persons” shall have the meaning set forth in Section 6.9(a).

 

“Indemnifying Party” shall mean any Person against whom a claim for indemnification is being asserted under any provision of Article IX.

 

“Indemnity Cap” shall have the meaning set forth in Section 9.3(a).

 

“Indemnity Notice” shall mean a written notification pursuant to Section 9.5(b) of a claim for payment or indemnity under Article IX by an Indemnified Party, specifying, in reasonably sufficient detail, the nature of and basis for such claim.

 

“In-License” shall have the meaning set forth in Section 4.14(b).

 

“Industrial Security Regulations” shall have the meaning set forth in Section 6.16.

 

“Initial Statement” shall have the meaning set forth in Section 2.6(a).

 

“IRS” shall have the meaning set forth in Section 4.7(b).

 

“Knowledge of Buyer” shall have the meaning set forth in Section 1.3(b).

 

“Knowledge of the Company” shall have the meaning set forth in Section 1.3(a).

 

“Knowledge of such Seller” shall have the meaning set forth in Section 1.3(c).

 

“Law” shall mean any statute, ordinance, rule, regulation, code, rule of law (including common law), official published guidance or Order of any Governmental Entity.

 

“Leased Real Property” shall have the meaning set forth in Section 4.12.

 

“Leases” shall have the meaning set forth in Section 4.12.

 

“Liabilities” shall mean any and all debts, liabilities and obligations (whether direct or indirect, known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due, and whether in contract, tort, strict liability or otherwise).

 

“Licenses” shall have the meaning set forth in Section 4.14(b).

 

9

 

“Liens” shall mean any lien, security interest, mortgage, encumbrance, pledge, easement or charge of any kind.

 

“Loss” or “Losses” shall mean with regard to any breach or violation of a representation or warranty or covenant or any third-party claim or investigation or other matter in respect of which a Person is entitled to indemnity hereunder, any and all judgments, awards, fines, penalties, damages and reasonably foreseeable losses (which could include lost profits), costs and expenses, including reasonable and documented out of pocket attorneys’ fees and expenses; sustained by such Person (including as a consequence of any injunction issued or other equitable relief granted against such Person) as a result of or in connection with such matter.

 

“Material Adverse Effect” shall mean any change, effect, condition, occurrence or development that has, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, results of operations or financial condition of the Company; provided, however, that a Material Adverse Effect shall not include, individually or in the aggregate, changes, events, effects, developments or occurrences resulting from or arising out of: (a) changes in global, national or regional political conditions or global or national financial, banking or securities markets; (b) changes in Laws or Orders or interpretations thereof, including those affecting industries or markets in which the Company conducts its business; (c) changes in GAAP or other accounting standards or interpretations thereof; (d) changes affecting industries or markets in which the Company conducts its business, including changes in industry specific economic, business, political or market conditions; (e) any natural disaster; (f) any acts of terrorism, sabotage, military action, armed hostilities (whether foreign or domestic), acts of violence (whether foreign or domestic), war (whether or not declared) or casualties, or any escalation or worsening thereof, whether or not occurring or commenced before, on or after the date hereof; (g) any failure by the Company to meet any internal projections or forecasts (provided, that the facts or occurrences giving rise or contributing to such failure that are not otherwise excluded from the definition of “Material Adverse Effect” may be taken into account in determining whether there has been a Material Adverse Effect); (h) any event, condition or other matter disclosed in the Company Disclosure Letter, to the extent such disclosure would be adequate to reasonably convey the impact of such event, condition or other matter on the business, results of operations or financial condition on the Company; (i) the announcement or pendency of the transactions contemplated by this Agreement; or (j) any action expressly required to be taken pursuant to this Agreement; except, in the case of clauses (a)-(f), to the extent those matters have a disproportionate effect on the Company relative to other similarly situated participants in the industries in which the Company participates.

 

“Material Contract” shall have the meaning set forth in Section 4.15(b).

 

“Milbank” shall mean Milbank, Tweed, Hadley & McCloy LLP.

 

“Neutral Auditor” shall have the meaning set forth in Section 2.6(c).

 

“NISP” shall have the meaning set forth in Section 6.16.

 

“NISPOM” shall have the meaning set forth in Section 6.16.

 

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“Non-Compete Agreements” shall mean each non-competition and non-solicitation agreement, dated as of the date hereof and effective subject to and as of the Closing, in substantially the form set forth on Exhibit 7.2(g)(ii), between Ultimate Parent and each individual party thereto.

 

“Notified Party” shall have the meaning set forth in Section 6.19(e).

 

“OCI” shall have the meaning set forth in Section 4.24(h).

 

“Order” shall mean any judgment, order, ruling, injunction, decree or writ of any Governmental Entity.

 

“Organizational Documents” shall mean (a) with respect to any corporation, its articles or certificate of incorporation and by-laws, (b) with respect to any partnership, its partnership agreement, (c) with respect to any trust, its trust agreement and (d) with respect to any limited liability company, its limited liability agreement or operating agreement.

 

“Out-License” shall have the meaning set forth in Section 4.14(b).

 

“Overlap Period” shall mean any taxable year or other taxable period beginning on or before and ending after the Closing Date.

 

“Owned Intellectual Property” shall have the meaning set forth in Section 4.14(a).

 

“Parent Shares” means shares of common stock of Magellan Health, Inc.

 

“Patents” shall have the meaning set forth in Section 4.14(a)(iii).

 

“Payout Percentage” of any Seller shall mean the quotient obtained by dividing the number of Shares held by such Seller at the Closing by the aggregate amount of Shares held by all of the Sellers at the Closing.

 

“Pending Claims” shall have the meaning set forth in Section 2.8(a).

 

“Performance Demand” shall have the meaning set forth in Section 11.1(a).

 

“Permits” shall have the meaning set forth in Section 4.11.

 

“Permitted Liens” shall mean (a) statutory Liens or other Liens arising by operation of Law securing payments not yet due or which are being contested in good faith and by appropriate proceedings, including Liens of warehouseman, mechanics, suppliers, materialmen and repairmen, (b) Liens for Taxes not yet due and payable or for current Taxes that may thereafter be paid without penalty or which are being contested in good faith and by appropriate proceedings, provided that adequate reserves have been established therefor in accordance with GAAP, (c) Liens as would not reasonably be expected to be, individually or in the aggregate, material to the Company, (d) Liens created by licenses granted in the ordinary course of business in or to any Owned Intellectual Property, (e) any other Liens not described in

 

11

 

clauses (a) through (d) above created by this Agreement or the actions of Buyer or any of its Affiliates or otherwise connected with the transactions contemplated hereby and (e) Liens listed on Schedule 1.1(a) of the Company Disclosure Letter.

 

“Person” shall mean and include an individual, a partnership, a limited liability partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization, a group and a Governmental Entity.

 

“Plans” shall have the meaning set forth in Section 4.10(a).

 

“Policies” shall have the meaning set forth in Section 4.16.

 

“Post-Closing Payment” shall have the meaning set forth in Section 2.6(f)(iii).

 

“Post-Closing Period” shall mean any taxable year or other taxable period beginning after the Closing Date and the portion of any Overlap Period beginning after the Closing Date.

 

“Pre-Closing Covenant” shall have the meaning set forth in Section 9.1(a).

 

“Pre-Closing Period” shall have the meaning set forth in Section 6.1(a).

 

“Pre-Closing Tax Period” shall mean any taxable year or other taxable period ending on or before the Closing Date and the portion of any Overlap Period beginning on or before and ending on the Closing Date.

 

“Preferential Bidding Status” shall have the meaning set forth in Section 4.24(b).

 

“Publicly Available Software” shall have the meaning set forth in Section 4.14(a)(iv).

 

“Purchase Price” shall have the meaning set forth in Section 2.2(a).

 

“Qualifying Loss” shall have the meaning set forth in Annex B.

 

“Reference Date” shall mean January 1, 2012.

 

“Related Persons” shall have the meaning set forth in Section 4.19.

 

“Release” shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment.

 

“Remainder Payments” shall mean the aggregate amount of all payments made to the Sellers from the Remaining Escrow Balance and the Remaining Expense Holdback Balance.

 

“Remaining Escrow Balance” shall mean all amounts released to the Sellers pursuant to Section 2.8(a).

 

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“Remaining Expense Holdback Balance” shall have the meaning set forth in Section 2.8(b).

 

“Representatives” of any Person shall mean such Person’s directors, managers, officers, employees, agents, attorneys, consultants, advisors or other representatives.

 

“Required Competition Consents” shall have the meaning set forth in Section 6.5(b).

 

“Requisite Regulatory Approvals” shall have the meaning set forth in Section 7.1(b).

 

“Resolution Period” shall have the meaning set forth in Section 2.6(b).

 

“Retention Contract” shall have the meaning set forth in Annex B.

 

“Satisfaction Date” shall have the meaning set forth in Section 2.3.

 

“SCI Caveat” shall have the meaning set forth in Section 6.16.

 

“Securities Act” shall have the meaning set forth in Section 5.8.

 

“Seller Contract” shall have the meaning set forth in Section 3.2(a).

 

“Seller Releasee” shall have the meaning set forth in Section 10.5(a).

 

“Seller Releasor” shall have the meaning set forth in Section 10.5(b).

 

“Shareholders’ Representative” shall mean the Person appointed as Shareholders’ Representative by resolution of the Board prior to the date on which the Closing Estimate Statement must be delivered to Buyer pursuant to Section 2.2(b) and who has executed a joinder to this Agreement in a form reasonably satisfactory to the Company and Buyer.

 

“Shareholders’ Representative’s Submission” shall have the meaning set forth in Section 2.6(c).

 

“Shares” shall have the meaning set forth in the recitals to this Agreement.

 

“Software” shall have the meaning set forth in Section 4.14(a)(v).

 

“Solvent” shall mean, with respect to any Person, that (a) the property of such Person, at a present fair saleable valuation, exceeds the sum of its Liabilities (including unliquidated Liabilities), (b) the present fair saleable value of the property of such Person exceeds the amount that will be required to pay such Person’s probable liability on its existing Liabilities as they become absolute and matured, (c) such Person has adequate capital to carry on its business, and (d) such Person does not intend or believe it will incur Indebtedness beyond its ability to pay as such Indebtedness matures.  In computing the amount of contingent or unliquidated Liabilities at any time, such Liabilities will be computed at the amount which, in

 

13

 

light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become actual or matured Liabilities.

 

“Subscription Agreement” shall mean each Subscription Agreement, dated as of the date hereof and substantially in the form set forth on Exhibit 7.2(g)(iii) hereto, between Ultimate Parent and each of the Persons identified on Schedule 7.2(g)(iii) of the Company Disclosure Letter, providing for the purchase by such Persons of the restricted Parent Shares described on such Schedule 7.2(g)(iii) simultaneously with the Closing and governing the terms on which such Parent Shares shall be held.

 

“Subsidiary” of any Person shall mean (a) any corporation more than fifty percent (50%) of whose shares of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time shares of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is owned by such Person directly or indirectly through one or more subsidiaries of such Person and (b) any partnership, association, joint venture or other entity in which such Person directly or indirectly through one or more subsidiaries of such Person has more than a fifty percent (50%) equity interest.

 

“Survival Expiration Date” shall have the meaning set forth in Annex B.

 

“Tail Policy” shall have the meaning set forth in Section 6.9(b).

 

“Target Working Capital” shall mean an amount equal to $13,000,000.

 

“Tax Claim” shall have the meaning set forth in Section 6.19(e).

 

“Tax Return” shall mean any return, report, declaration, form, claim for refund or information return or statement relating to Taxes (filed or required to be filed), including any schedule or attachment thereto and including any amendment thereof that relates to the Company.

 

“Taxes” shall mean (a) all taxes, assessments, charges, duties, fees, levies or other governmental charges including all United States federal, state, local, foreign and other income, franchise, profits, capital gains, capital stock, transfer, sales, use, value added, occupation, property, excise, severance, windfall profits, stamp, license, payroll, withholding and other taxes, assessments, charges, duties, fees, levies or other governmental charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return) and (b) all estimated taxes, deficiency assessments, additions to tax, penalties and interest imposed by a Governmental Entity relating thereto.

 

“Technology” shall have the meaning set forth in Section 4.14(a)(vi).

 

“Third Party Claim” shall have the meaning set forth in Section 9.5(a).

 

“Total Consideration” shall mean, collectively, the Purchase Price and the Remainder Payments.

 

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“Trade Secrets” shall have the meaning set forth in Section 4.14(a)(vii).

 

“Transaction Bonus Payments” shall mean the amounts payable in connection with the Closing pursuant to the agreements or arrangements listed or described on Schedule 1.1(b) of the Company Disclosure Letter.

 

“Transactions” shall mean (i) the purchase and sale of the Shares on the terms and conditions in this Agreement and the Ancillary Agreements, (ii) the purchase and sale of the Parent Shares on the terms and conditions in this Agreement and the Subscription Agreements and (iii) the performance by Buyer, Sellers or the Shareholders’ Representative, as applicable, of their respective obligations under this Agreement and the Ancillary Agreements.

 

“Transfer Taxes” shall have the meaning set forth in Section 6.12.

 

“Ultimate Parent” shall have the meaning set forth in the preamble to this Agreement.

 

“United States Government” shall have the meaning set forth in Section 4.24(c).

 

“Waived 280G Benefits” shall have the meaning set forth in Section 6.18.

 

“WARN Act” shall have the meaning set forth in Section 6.8.

 

“Working Capital” shall mean Current Assets minus Current Liabilities, as determined in accordance with the Accounting Principles and the policies, procedures and principles set forth in the illustrative calculation thereof on Annex A.

 

“Working Capital Adjustment” shall mean the amount, if any, by which the Target Working Capital differs from the Closing Working Capital, which amount will either be a positive number (if the Closing Working Capital exceeds the Target Working Capital) or a negative number (if the Closing Working Capital is less than the Target Working Capital).

 

Section 1.2.       Construction.  In this Agreement, unless the context otherwise requires:

 

(a)       references in this Agreement to “writing” or comparable expressions include a reference to transmission by facsimile or electronic mail in “.pdf” form;

 

(b)       the phrases “delivered” or “made available”, when used in this Agreement, shall mean that the information referred to has been physically delivered to the relevant parties (including, in the case of “made available” to Buyer, material that has been posted, retained and thereby made available to Buyer through the on-line virtual data room established by the Company prior to the date of this Agreement);

 

(c)       words expressed in the singular number shall include the plural and vice versa; words expressed in the masculine shall include the feminine and neuter gender and vice versa;

 

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(d)       references to Articles, Sections, Annexes, Exhibits, the preamble and recitals are references to articles, sections, annexes, exhibits, the preamble and recitals of this Agreement unless otherwise specified, and the descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement;

 

(e)       references to statutes or regulations are to be construed as including all statutory or regulatory provisions consolidating, amending or replacing the statute or regulation referred to and shall include any interpretations thereof by the applicable regulatory authority;

 

(f)        references to “day” or “days” are to calendar days;

 

(g)       references to “the date hereof” shall mean as of the date of this Agreement;

 

(h)       the words “hereof”, “herein”, “hereto” and “hereunder”, and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any provision of this Agreement;

 

(i)        this “Agreement” or any other agreement or document shall be construed as a reference to this Agreement or, as the case may be, such other agreement or document as the same may have been, or may from time to time be, amended, varied, novated or supplemented;

 

(j)        “include,” “includes,” and “including” are deemed to be followed by “without limitation,” whether or not they are in fact followed by such words or words of similar import;

 

(k)        references to dollars or “$” are to United States of America dollars; and

 

(l)        each party acknowledges that it and its attorneys have been given an equal opportunity to negotiate the terms and conditions of this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party or any similar rule operating against the drafter of an agreement are not applicable to the construction or interpretation of this Agreement.

 

Section 1.3.       Knowledge.

 

(a)       When any representation, warranty, covenant or agreement contained in this Agreement is expressly qualified by reference to the “Knowledge of the Company” or words of similar import, it shall mean the actual knowledge of the individuals set forth on Schedule 1.3(a) of the Company Disclosure Letter, after such inquiry as such individuals would normally conduct in the ordinary course of their duties to the Company.

 

(b)       When any representation, warranty, covenant or agreement contained in this Agreement is expressly qualified by reference to the “Knowledge of Buyer” or words of similar import, it shall mean the current, actual knowledge of the individuals set forth on Schedule 1.3(b) of the Buyer Disclosure Letter, after such inquiry as such individuals would normally conduct in the ordinary course of their duties to Buyer.

 

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(c)       When any representation, warranty, covenant or agreement contained in this Agreement is expressly qualified by reference to the “Knowledge of such Seller” or words of similar import, it shall mean the actual knowledge of the relevant Seller, after such inquiry as such individual would normally conduct in the ordinary course.

 

ARTICLE II - PURCHASE AND SALE CLOSING

 

Section 2.1.       Purchase and Sale.  On the terms and subject to the conditions set forth in this Agreement, at the Closing, Buyer agrees to purchase from each Seller and each Seller agrees to sell to Buyer, all of the Shares held by such Seller at the Closing, as set forth in the Final Closing Letter, free and clear of all Liens (other than those described in Schedule 3.3 of the Company Disclosure Letter).

 

Section 2.2.       Purchase Price; Closing Estimate.

 

(a)       The purchase price (the “Purchase Price”) for the purchase and sale described in Section 2.1 shall be, subject to Section 2.7, an amount in cash equal to: (i) $127,500,000 (the “Base Purchase Price”), (ii) plus the amount of Closing Cash, (iii) minus the amount of the Closing Indebtedness, (iv) plus or minus, as the case may be, the Working Capital Adjustment, (v) minus the Escrow Amount, (vi) minus the Expense Holdback Amount and (vii) minus the Company Transaction Expenses; which sum shall be subject to adjustment pursuant to Section 2.6.  The parties agree that for the avoidance of doubt, the Base Purchase Price includes the Holdback Amount and the Base Purchase Price will be deemed reduced by the amount by which $10,000,000 exceeds the aggregate amounts due and owing to the Sellers pursuant to Section 2.7.  Buyer shall not fund any portion of the Purchase Price with the Company’s cash on hand.  However, the foregoing sentence shall not apply to any Holdback Amount or Extension Amount that may be due and owing to the Sellers pursuant to Section 2.7.

 

(b)       No later than three (3) Business Days prior to the Closing Date, the Company shall prepare in good faith and deliver to Buyer a statement (the “Closing Estimate Statement”), which statement shall be prepared in accordance with the Accounting Principles, setting forth its estimates of (i) the amount of Closing Cash, (ii) the Closing Indebtedness, (iii) the Closing Working Capital (the “Estimated Working Capital”), (iv) the amount, if any, by which the Target Working Capital differs from the Estimated Working Capital, which amount will either be a positive number (if the Estimated Working Capital exceeds the Target Working Capital) or a negative number (if the Estimated Working Capital is less than the Target Working Capital) (the “Estimated Working Capital Adjustment”), (v) the Company Transaction Expenses (the “Estimated Company Transaction Expenses”) and (vi) the Company’s calculation of the Purchase Price based thereon (the “Estimated Purchase Price”).  The Company shall make its Representatives reasonably available to Buyer during the three (3) Business Days referenced in the first sentence of this subsection (b) to respond to any questions or reasonable requests that Buyer may have with respect to the Closing Estimate Statement.

 

Section 2.3.      Closing.  Unless this Agreement shall have been terminated and the transactions contemplated hereby shall have been abandoned pursuant to Article VIII, and subject to the satisfaction or waiver of all of the conditions set forth in Article VII, the closing of the Transactions (the “Closing”) shall take place at the offices of Milbank, 28 Liberty Street,

 

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New York, New York 10005, or by telephonic or electronic delivery or release of documents, at 10:00 A.M. local time, on the third (3rd) Business Day after the last of the conditions set forth in Section 7.1(b) and Section 7.2(f) are satisfied or waived, but subject to the fulfillment or waiver of the other conditions set forth in Article VII (the third (3rd) Business Day after the date of such satisfaction of such conditions, the “Satisfaction Date”) or (b) such other date, time or place as the parties hereto shall agree in writing.  Notwithstanding the foregoing sentence, at Buyer’s option, by written notice delivered to the Shareholders’ Representative on or prior to the Business Day immediately preceding the Satisfaction Date, Buyer may elect to cause the Closing to occur not on the Satisfaction Date but on the first (1st) Business Day of the month following the month during which the Satisfaction Date occurs. The date on which the Closing is held pursuant to this Section 2.3 is herein referred to as the “Closing Date”.  All actions listed in Section 2.4 or 2.5 that occur on the Closing Date shall be deemed to occur simultaneously at the Closing.  The Closing will be effective as of 12:00:01 A.M. Eastern Prevailing Time on the Closing Date.

 

Section 2.4.      Closing Deliveries to Buyer.  At the Closing, (a) the Company shall deliver, or shall cause to be delivered, to Buyer, to the extent required pursuant to Section 4.24(a), an amended Schedule 4.24(a) of the Company Disclosure Letter, (b) the Shareholders’ Representative shall deliver, or shall cause to be delivered, to Buyer a counterpart duly executed by each of the Sellers, the Shareholders’ Representative, the directors, officers and certain employees of the Company, as applicable, of each Ancillary Agreement and the other documents and instruments to be executed and delivered at the Closing to which any of such Persons is a party and (c) each Seller shall deliver, or shall cause to be delivered, to Buyer all duly issued and authorized share certificates of the Company and a stock power form evidencing the transfer thereof.

 

Section 2.5.       Closing Deliveries by Buyer to Sellers.  At the Closing, the Buyer shall:

 

(a)       pay to each Seller, by wire transfers of immediately available funds to such account or accounts as designated by the Shareholders’ Representative or the applicable Seller at least two (2) Business Days prior to the Closing Date, an amount equal to the product obtained by multiplying (i) the Estimated Closing Payment Per Share and (ii) the number of Shares held by such Seller at the Closing, as set forth in the Final Closing Letter;

 

(b)       cause a wire transfer of immediately available funds to be made to such account as designated by the Escrow Agent at least two (2) Business Days prior to the Closing Date, in an amount equal to the Escrow Amount, such amount, together with all interest and income thereon resulting from investments of such amounts in accordance with the terms of the Escrow Agreement, to constitute the escrow fund (the “Escrow Fund”).  The Escrow Fund shall be governed by the terms of the Escrow Agreement and this Agreement. The Escrow Fund shall be held in escrow and shall be released in accordance with Section 2.6(f) and 2.8(a), Article IX and the Escrow Agreement;

 

(c)       cause a wire transfer of immediately available funds to be made to such account as designated by the Shareholders’ Representative at least two (2) Business Days prior to the Closing Date, in an amount equal to the Expense Holdback Amount.  The Expense Holdback

 

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Amount shall be held in escrow by the Shareholders’ Representative and shall be released in accordance with Section 2.8(b);

 

(d)       subject to the receipt of customary payoff letters, to the extent the Company has not previously made such payment on or prior to the Closing, cause wire transfers of immediately available funds to be made to such account or accounts as designated by the requisite lenders under the Credit Agreement at least two (2) Business Days prior to the Closing Date, in an amount equal to the total borrowings under the Credit Agreement, together with all other amounts then due and payable thereunder in connection with the termination thereof;

 

(e)       to the extent the Company has not previously made such payment on or prior to the Closing, cause wire transfers of immediately available funds to be made to such account or accounts as designated by the Company at least two (2) Business Days prior to the Closing Date, in an aggregate amount equal to the Transaction Bonus Payments, subject to applicable withholding requirements, for payment by the Company’s payroll provider to recipients of the Transaction Bonus Payments through the Company’s payroll system; and

 

(f)        deliver to the Shareholders’ Representative a counterpart duly executed by Buyer of each Ancillary Agreement to which Buyer is a party.

 

Section 2.6.       Post-Closing Adjustment.

 

(a)       Initial Statement.  As promptly as practicable, but in no event later than one hundred and eighty (180) calendar days after the Closing Date, Buyer shall prepare in good faith and deliver, or cause to be prepared in good faith and delivered, to the Shareholders’ Representative a written statement (the “Initial Statement”), which statement shall be prepared in accordance with the Accounting Principles, setting forth Buyer’s calculation of each of the: (i) Closing Cash, (ii) Closing Indebtedness, (iii) Closing Working Capital, (iv) amount, if any, by which the Target Working Capital differs from the Closing Working Capital, (v) Company Transaction Expenses and (vi) Buyer’s calculation of the Purchase Price based thereon, together with reasonably detailed supporting documentation.

 

(b)       Review and Dispute of Initial Statement.  Following the delivery of the Initial Statement, Buyer agrees to provide, or cause its employees (and the employees of the Company) to provide, the Shareholders’ Representative and its Representatives with reasonable access to Buyer’s and its Representatives’ working papers and any working papers of Buyer’s independent accountants related to the preparation of the Initial Statement (subject to execution of a customary independent accountant access letter, if requested by Buyer’s independent accountants with respect to such work papers), as well as to books and records and other relevant information of the Company, and Buyer shall make reasonably available its or the Company’s employees, if any, directly responsible for and knowledgeable about the information used in, and the preparation of the Initial Statement.  The Shareholders’ Representative may dispute the Initial Statement by delivery of written notice thereof to the Buyer (a “Dispute Notice”) within thirty (30) calendar days following the receipt by the Shareholders’ Representative of the Initial Statement.  The Dispute Notice shall set forth in reasonable detail all items disputed by the Shareholders’ Representative, the basis for such dispute, the amounts involved and the Shareholders’ Representative’s proposed changes thereto, with reasonably detailed supporting

 

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documentation.  If (i) by written notice to Buyer, the Shareholders’ Representative accepts the Initial Statement or (ii) the Shareholders’ Representative fails to deliver a Dispute Notice within the prescribed thirty (30) calendar day period (which failure shall result in the Shareholders’ Representative being deemed to have accepted and agreed to the Initial Statement delivered by Buyer), the Initial Statement delivered by Buyer shall become final and binding on the Sellers as of the date on which the earlier of the foregoing events occurs.  If a Dispute Notice is timely delivered to Buyer, then the Shareholders’ Representative and Buyer shall, during the thirty (30) calendar days immediately following receipt of the Dispute Notice by Buyer (the “Resolution Period”), cooperate and negotiate in good faith to resolve their differences with respect to the Initial Statement or any element thereof.  Any resolution by the Shareholders’ Representative and Buyer during the Resolution Period as to any disputed amounts will be final, binding and conclusive.

 

(c)       Dispute Resolution.  If the Shareholders’ Representative and Buyer do not resolve all disputed items on the Initial Statement by the end of the Resolution Period, the Shareholders’ Representative and Buyer shall submit all items remaining in dispute with respect to the Dispute Notice (along with a copy of the Initial Statement marked to indicate those line items which are in dispute, including each party’s proposed determination of such amounts (the “Buyer’s Submission” and the “Shareholders’ Representative’s Submission,” as the case may be) and reasonably detailed supporting documentation) within thirty (30) calendar days after the expiration of the Resolution Period to KPMG LLP (or, if such firm is unable or unwilling to act, another internationally recognized independent public accounting firm as shall be agreed upon in writing by the Shareholders’ Representative and Buyer, or, if such parties cannot agree, as selected by the American Arbitration Association) (the “Neutral Auditor”) for resolution.  The Neutral Auditor shall act as an expert and not an arbitrator and shall determine only those items in dispute.  Each party shall (i) cooperate with the Neutral Auditor, (ii) have the opportunity to make presentations and provide supporting material to the Neutral Auditor in defense of their positions and (iii) subject to customary confidentiality and indemnity agreements, provide the Neutral Auditor with access to their respective books, records, personnel and Representatives and such other information as the Neutral Auditor may require in order to render its determination.  The Neutral Auditor will deliver to the Shareholders’ Representative and Buyer a written determination (such determination to include a worksheet setting forth all material calculations used in arriving at such determination and to be based solely on information provided to the Neutral Auditor by the Shareholders’ Representative and Buyer) of the disputed items within forty-five (45) calendar days of receipt of the disputed items, which determination will be final, binding and conclusive.  Notwithstanding the foregoing, the Neutral Auditor shall not be permitted or authorized to determine an amount with respect to any disputed item that is outside of the range between the amounts of such disputed item as proposed by the Shareholders’ Representative in the Shareholders’ Representative’s Submission, on the one hand, and Buyer in the Buyer’s Submission, on the other hand.  All fees and expenses relating to the work, if any, to be performed by the Neutral Auditor will be allocated between Buyer, on the one hand, and the Shareholders’ Representative, on the other hand, in the same proportion that the aggregate amount of the disputed items so submitted to the Neutral Auditor that is unsuccessfully disputed by each such party (as finally determined by the Neutral Auditor) bears to the total disputed amount of such items so submitted.  For the avoidance of doubt and solely as an illustration of the methodology set forth in the preceding sentence, if (i) the Shareholders’ Representative’s Submission delivered by the Shareholders’ Representative assigns values to the disputed items

 

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such that the aggregate Purchase Price set forth in the Initial Statement would be increased by $1,000,000, (ii) the Buyer’s Submission maintains that the Purchase Price set forth in the Initial Statement is correct and (iii) the Neutral Auditor’s final resolution of the disputed items in accordance with this Section 2.6(c) is that the Purchase Price is increased from the amount set forth in the Buyer’s Submission by $600,000 (i.e., sixty percent (60%) of the amount in dispute is resolved in favor of the Shareholders’ Representative), then the Shareholders’ Representative shall be responsible for 40% of such fees and expenses of the Neutral Auditor and Buyer shall be responsible for 60% of such fees and expenses of the Neutral Auditor.  In the event that either the Shareholders’ Representative or Buyer fail to submit a statement regarding any items remaining in dispute within the time determined by the Neutral Auditor, then the Neutral Auditor shall render a decision based solely on the evidence timely submitted to the Neutral Auditor by the Shareholders’ Representative (which shall constitute the Shareholders’ Representative’s Submission) and Buyer (which shall constitute the Buyer’s Submission).  The final, binding and conclusive statement of Closing Cash, Closing Indebtedness, Closing Working Capital and Company Transaction Expenses which either are (i) undisputed, (ii) finally agreed upon by the Shareholders’ Representative and Buyer in accordance with Section 2.6(b) or (iii) delivered by the Neutral Auditor in accordance with this Section 2.6(c), will be the “Conclusive Statement”, respectively.  The date on which the Shareholders’ Representative and Buyer agree to, or the Neutral Auditor delivers, the Conclusive Statement shall be the “Conclusive Date”.

 

(d)       Conclusive Purchase Price.  The final Purchase Price to be paid by Buyer in respect of the Transactions after taking into account all adjustments pursuant to this Section 2.6(d) (the “Conclusive Purchase Price”) shall be, subject to Section 2.7, an amount in cash equal to: (i) the Base Purchase Price, (ii) plus the Conclusive Cash, if any, (iii) minus the Conclusive Closing Indebtedness, (iv) plus the amount by which the Closing Working Capital set forth in the Conclusive Statement exceeds the Target Working Capital or minus the amount by which the Target Working Capital exceeds the Closing Working Capital set forth in the Conclusive Statement, (v) minus the Escrow Amount, (vi) minus the Expense Holdback Amount and (vii) minus the Conclusive Company Transaction Expenses.

 

(e)       Adjustment Amount.  The “Adjustment Amount” shall be the difference, if any, between the Conclusive Purchase Price and the Estimated Purchase Price.  The Adjustment Amount (if any) shall be (i) the “Additional Purchase Price” if the Conclusive Purchase Price is more than the Estimated Purchase Price or (ii) the “Excess Amount” if the Conclusive Purchase Price is less than the Estimated Purchase Price.

 

(f)        Post-Closing Payments.

 

(i)          If the Additional Purchase Price is determined to be due in accordance with this Section 2.6, then, within five (5) Business Days after the Conclusive Date, Buyer shall promptly pay to each Seller, by wire transfers of immediately available funds to such account or accounts as designated by the Shareholders’ Representative or the applicable Seller at least two (2) Business Days prior to the date of such payment, an amount equal to such Seller’s Payout Percentage of the Additional Purchase Price.

 

(ii)         If there is an Excess Amount determined to be due in accordance with this Section 2.6, then, within five (5) Business Days after the Conclusive Date, the parties

 

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shall provide a joint written instruction to the Escrow Agent to deliver promptly from the Escrow Fund by wire transfer to Buyer, the Excess Amount.  If the Excess Amount exceeds the Escrow Amount, then within such five (5) Business Day-period, each Seller shall pay to Buyer by wire transfer an amount equal to such Seller’s Payout Percentage of such excess.

 

(iii)        All amounts, if any, payable to the Sellers pursuant to this Section 2.6(f) shall be paid in cash, without interest, and the aggregate amount of all such payments shall be referred to in this Agreement as the “Post-Closing Payment”.

 

Section 2.7.       Holdback Payment.

 

(a)       If the Company or any of its Affiliates is confirmed as a successful bidder and is awarded the Retention Contract, then an amount (if greater than zero) equal to the Holdback Amount minus the aggregate Extension Amounts paid by Buyer pursuant to Section 2.7(b) shall be due and payable within five (5) Business Days of Buyer’s receipt of such confirmation in writing and a copy of the written definitive Retention Contract executed and delivered by both the Company (or its Affiliate) and the applicable Governmental Entity; provided, however, that if there is a bid protest challenge to the award of the Retention Contract, such payment shall not become due and payable until the resolution of such challenge and the reconfirmation of the Retention Contract award.

 

(b)       In the event that the ordering period under the Current Holdback Contract is extended from time to time after the date of this Agreement, then an Extension Amount shall be due and payable within five (5) Business Days of Buyer’s receipt of such confirmation in writing.  An Extension Amount shall be due and payable upon each extension of the Current Holdback Contract from the date hereof until the aggregate of such payments shall equal $10,000,000.

 

(c)       If the Holdback Amount or Extension Amount is due in accordance with Section 2.7(a) or (b), then Buyer shall pay to each Seller by wire transfers of immediately available funds to such account or accounts as designated by the Shareholders’ Representative or the applicable Seller at least two (2) Business Days prior to the date on which such payment is required to be made, an amount equal to such Seller’s Payout Percentage of the Holdback Amount or Extension Amount, as applicable.

 

(d)       Subsequent to the Closing, Buyer and the Company shall not, directly or indirectly, take any actions that would have the purpose of avoiding, reducing or frustrating the achievement of conditions that would trigger payment of the Holdback Amount or Extension Amount, as applicable.  Notwithstanding the foregoing, from the Closing until the date on which the Retention Contract is awarded to a Person other than the Company or any of its Affiliates (after expiration or termination of any protests thereof) Buyer shall cause the Company to operate, and the Company shall operate, in the ordinary course in a manner consistent with the Company’s past practices including (i) making available the services of personnel similarly experienced and qualified to pursue the Retention Contract and (ii) bidding on the Retention Contract on terms that are consistent with the Company’s past practices.

 

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Section 2.8.       Remainder Payments.

 

(a)        Release and Payment of Escrow Amount Remainder.  The Escrow Agreement shall specify that any amounts remaining in the Escrow Fund after giving effect to all payments made pursuant to Section 2.6(f), and Article IX (the “Escrow Release Amount”) shall be released to Sellers on the Escrow Release Date by wire transfers of immediately available funds to such account or accounts as designated by the Shareholders’ Representative or the applicable Seller at least two (2) Business Days prior to the date of such payment, in an amount equal to such Seller’s Payout Percentage of the Escrow Release Amount; provided, however, that if any claim for indemnification by any Indemnified Party under Article IX shall have been properly asserted by Buyer in accordance with this Agreement on or prior to the Survival Expiration Date that remains pending on the Escrow Release Date (such claims, the “Pending Claims”), (i) the Escrow Release Amount released to the Sellers on the Escrow Release Date shall be reduced by the aggregate amount of all such Pending Claims (as set forth in the Claim Notice or Indemnity Notice in respect of each such Pending Claim) and (ii) any amounts remaining in the Escrow Fund following the Escrow Release Date in respect of any such Pending Claim shall be released to Sellers promptly upon resolution or (if applicable) satisfaction of such Pending Claim.

 

(b)       Release and Payment of Expense Holdback Amount Remainder.  Promptly following the latest to occur of (i) the settlement of all disputes in connection with the defense or settlement of indemnification claims made under Article IX, (ii) the expiration of the time period during which any party is entitled to bring a claim for indemnification under Article IX and the settlement of all indemnification claims timely made in accordance therewith and (iii) such time as the Shareholders’ Representative reasonably believes that no matters or disputes with respect to this Agreement and the transactions contemplated hereby remain or could arise which would require the Shareholders’ Representative to act in its capacity as such, the Shareholders’ Representative shall release to the Sellers any remaining amounts in respect of the Expense Holdback Amount (the “Remaining Expense Holdback Balance”).  The Shareholders’ Representative shall promptly pay to each Seller (without interest), by wire transfers of immediately available funds to such account or accounts as designated by such Seller at least two (2) Business Days prior to the date of such payment, an amount equal to such Seller’s Payout Percentage of the Remaining Expense Holdback Balance.

 

Section 2.9.      Tax Treatment of Payments.  Any payments made with respect to adjustments made pursuant to Section 2.6, Section 2.7 and Section 2.8 shall be deemed to be, and each of the Sellers, Buyer and the Company shall treat, and shall cause each of their Subsidiaries (as applicable) to treat, such payments as an adjustment to the Purchase Price for federal, state, local and foreign income Tax purposes except to the extent treated as interest under applicable Law and except as otherwise required by applicable Law.

 

Section 2.10.     Withholding.  Each of Buyer and the Escrow Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as it is required to deduct and withhold under applicable Law with respect to the making of such payment, and such withheld amounts shall be remitted by Buyer or the Escrow Agent (as applicable) to the applicable Governmental Entity within the time and in the manner required by applicable Law and shall be treated for all purposes of this Agreement as having been paid to the party in respect of whom such deduction and withholding was made.

 

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ARTICLE III - REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS

 

Except as set forth in the letter (the “Company Disclosure Letter”) delivered by the Sellers and the Company to Buyer and Ultimate Parent concurrently with the execution of this Agreement (it being understood and agreed that references herein to a “Schedule” thereto shall constitute references to the particular schedule; provided that the disclosures in any schedule shall qualify other sections or subsections of Article III or Article IV to the extent a cross-reference to the applicable schedule is included therein or its applicability to such other section or subsection is readily apparent), each Seller, as to itself, severally and not jointly, hereby represents and warrants as of the date hereof (unless another date is specified, in which case, then as of such specified date) to Buyer and Ultimate Parent as follows:

 

Section 3.1.       Organization; Authorization.

 

(a)       Organization.  Such Seller is (i) an individual or (ii) a trust duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization.

 

(b)       Such Seller has full power and authority to enter into this Agreement and to perform its obligations hereunder.  The execution and delivery by such Seller of this Agreement and the consummation by such Seller of the transactions contemplated hereby have been duly authorized and approved by such Seller.  This Agreement has been duly executed and delivered by such Seller and, assuming that this Agreement constitutes a valid and binding obligation of the other parties hereto, constitutes a valid and binding obligation of such Seller enforceable against such Seller in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

 

Section 3.2.       Conflicts; Consents.

 

(a)       Conflicts.  Except as set forth in Schedule 3.2(a) of the Company Disclosure Letter, the execution and delivery of this Agreement by such Seller, and the consummation by such Seller of the transactions contemplated hereby, will not (i) conflict with or result in a violation or breach of any of the terms, conditions or provisions of such Seller’s trust agreement, if applicable, or (ii) conflict with, or result in any material violation of or default under (or any event that, with notice or lapse of time or both, would constitute a material default under), or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a benefit under or result in or give rise to any additional rights or entitlement to increased, additional, accelerated or guaranteed payments to any Person under, or result in the creation or imposition of any Lien upon such Seller or the Shares owned by such Seller or any other assets and properties of such Seller, pursuant to any provision of any Contract to which such Seller is a party or by which such Seller or the Shares owned by such Seller may be bound (each, a “Seller Contract”), or any Order or Law applicable to such Seller or the Shares owned by such Seller.  Without limiting the generality of the immediately preceding sentence, such Seller does not have any unsatisfied obligation under any Seller Contract to notify any Person of such Seller’s entering into, or having intended to enter into, this Agreement before doing so or to negotiate with any Person regarding a possible alternative to the Transactions.

 

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(b)       Consents.  Except as (i) set forth in Schedule 3.2(b) of the Company Disclosure Letter, (ii) may be required under the Competition Laws set forth in Schedule 3.2(c) of the Company Disclosure Letter or (iii) would not, if not made or obtained, reasonably be expected to have, individually or in the aggregate, a materially adverse impact on the ability of such Seller to consummate the transactions contemplated hereby, no consent of, or filing with, any court, Governmental Entity or third party is required to be obtained by such Seller in connection with the execution and delivery of this Agreement by such Seller or the consummation by such Seller of the transactions contemplated hereby.

 

Section 3.3.      Title to Shares.  At the Closing, such Seller will own beneficially and of record the Shares set forth opposite such Seller’s name in the Final Closing Letter, free and clear of any Liens, other than (a) Liens created by this Agreement or the actions of Buyer or any of its Affiliates or otherwise connected with the Transactions, (b) as set forth on Schedule 3.3 of the Company Disclosure Letter and (c) Liens on transfer imposed under applicable securities Laws.  Upon the delivery of and payment for the Shares and completion of the Closing as provided in this Agreement, such Seller shall have transferred to Buyer good and valid title to such Seller’s Shares, free and clear of any Liens other than any Lien arising as a result of the regulatory status of Buyer or pursuant to applicable securities Laws.

 

Section 3.4.       Litigation.  Except as set forth in Schedule 3.4 of the Company Disclosure Letter, there is no Action pending or, to the Knowledge of such Seller, threatened in writing against such Seller or any Affiliate of such Seller before any Governmental Entity which seek to prevent, enjoin or otherwise delay the consummation of the transactions contemplated by this Agreement.

 

Section 3.5.      Brokers and Finders.  Except for J.P. Morgan Securities LLC, such Seller has not employed any broker, investment banker, financial advisor, finder or other Person who will be entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission, or the reimbursement of expenses or indemnification or contribution, in connection with the transactions contemplated by this Agreement.

 

ARTICLE IV - REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

 

Except as set forth in the Company Disclosure Letter delivered by the Sellers and the Company to Buyer and Ultimate Parent concurrently with the execution of this Agreement (it being understood and agreed that references herein to a “Schedule” thereto shall constitute references to the particular schedule; provided that the disclosures in any schedule shall qualify other sections or subsections of Article III or Article IV to the extent a cross-reference to the applicable schedule is included therein or its applicability to such other section or subsection is readily apparent), each Seller, jointly and severally, hereby represents and warrants as of the date hereof (unless another date is specified, in which case, then as of such specified date) to Buyer and Ultimate Parent as follows:

 

Section 4.1.       Corporate Status.

 

(a)       Organization.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia, and has full

 

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corporate power and authority to own, lease and operate its properties and assets now owned, leased and operated by it and to carry on its business as presently conducted.  The name of each director and officer of the Company is listed on Schedule 4.1(a) of the Company Disclosure Letter.  The Company has delivered to Buyer complete and correct copies of its Organizational Documents, each as in effect on the date hereof.  The Organizational Documents of the Company are in full force and effect and the Company is not in default under or in violation of any of the provisions of its Organizational Documents.  The Company has made available to Buyer and its representatives correct and complete copies of the minutes (or, in the case of minutes that have not yet been finalized, drafts thereof) of all meetings, consents or actions of the Sellers, as shareholders, and the Board held, given or taken since January 1, 2011.

 

(b)       Qualification.  The Company is duly qualified to do business and in good standing as a foreign corporation in all jurisdictions in which the nature of its business or the properties or assets owned, leased or operated by it makes such qualification necessary, except as would not reasonably be expected to be, individually or in the aggregate, material to the Company.

 

(c)        Authorization.  The Company has full power and authority to enter into this Agreement and to perform its obligations hereunder.  The execution and delivery by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of the Company.  This Agreement has been duly executed and delivered by the Company and, assuming that this Agreement constitutes a valid and binding obligation of the other parties hereto, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

 

Section 4.2.       Capitalization.

 

(a)        The Company.  As of the date hereof, the authorized capital stock of the Company consists solely of (i) 10,000 shares of Company Common Stock, par value $1.00 per share, of which 7,281 shares of Company Common Stock are issued and outstanding and (ii) 7,018 shares of preferred stock, par value $100.00 per share, none of which are issued and outstanding.  All of the issued and outstanding shares of Company Common Stock have been duly authorized, validly issued and are fully paid and nonassessable.  None of the shares of Company Common Stock has been issued in violation of any purchase or call option, the rights of first refusal, preemptive rights or other comparable rights of any Person.  The Company Common Stock has been issued in compliance with applicable state and federal securities laws.

 

(b)       Agreements with Respect to Capital Stock.  Except as set forth in Schedule 4.2(b) of the Company Disclosure Letter, there are no (i) preemptive, rights of first refusal, registration or similar rights on the part of any holders of any class of securities of the Company, (ii) subscriptions, options, warrants, conversion, exchange or other rights, agreements or commitments of any kind obligating the Company to issue or sell, or cause to be issued and sold, any shares of capital stock of the Company or any securities convertible into or exchangeable for any such shares, (iii) stockholder agreements, voting trusts or other agreements

 

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or understandings to which the Company is a party or to which the Company is bound relating to the voting, purchase, redemption or other acquisition of any shares of the capital stock of the Company or (iv) outstanding dividends, whether current or accumulated, due or payable on any of the capital stock of the Company.

 

(c)        Equity Interests.  Schedule 4.2(c) of the Company Disclosure Letter sets forth a true and complete list of all capital stock of or other equity securities or interests held by the Company in any Person detailing the percentage owned by the Company and, to the Knowledge of the Company, the other holders of such capital stock or other equity securities or interests.  To the Knowledge of the Company, all issued and outstanding shares of capital stock or other equity interests of such entities held by the Company have been duly authorized and validly issued, are fully paid and nonassessable.  All such shares or equity interests are owned, beneficially and of record, by the Company free and clear of any Liens other than as set forth on Schedule 4.2(c) of the Company Disclosure Letter. The Company does not have any Subsidiaries.

 

Section 4.3.        Conflicts; Consents.

 

(a)       Conflicts.  Except as set forth in Schedule 4.3(a) of the Company Disclosure Letter, the execution and delivery of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby, will not conflict with, or result in any violation of or default under (or any event that, with notice or lapse of time or both, would constitute a default under), or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a benefit under or result in or give rise to any additional rights or entitlement to increased, additional, accelerated or guaranteed payments to any Person under, or result in the creation or imposition of any Lien (other than Permitted Liens) upon the Company or any of its assets and properties, pursuant to any provision of (i) the Organizational Documents of the Company or (ii) any Contract to which the Company is a party or by which the Company or any of its properties are assets may be bound or affected, or any Order or Law applicable to the Company.  Without limiting the generality of the immediately preceding sentence, the Company does not have any unsatisfied obligation under any Contract to notify any Person of the Company’s entering into, or having intended to enter into, this Agreement before doing so or to negotiate with any Person regarding a possible alternative to the transactions contemplated hereby.

 

(b)       Consents.  Except as (i) set forth in Schedule 4.3(b) of the Company Disclosure Letter, (ii) may be required under the Competition Laws set forth in Schedule 4.3(c) of the Company Disclosure Letter or (iii) would not, if not made or obtained, reasonably be expected to be, individually or in the aggregate, material to the Company, no consent of, filing with or notification to any court, Governmental Entity or third party, including a prime contractor or subcontract with respect to a Government Contract, is required to be obtained by the Company in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the Transactions.

 

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Section 4.4.       Financial Statements.

 

(a)        The Company has made available prior to the date hereof (i) the audited statements of operations and cash flows, and changes in shareholders’ equity (deficit) of the Company for the fiscal years ended December 31, 2015 and December 31, 2014, and the audited balance sheet of the Company as of such dates, together with the notes thereto and the reports of Renner & Company (the “Company Audited Financial Statements”) and (ii) the unaudited statement of operations and cash flows of the Company for the fiscal quarter ended March 31, 2016, and the unaudited balance sheet of the Company as of such date (the “Company Interim Financial Statements” and, together with the Company Audited Financial Statements, the “Financial Statements”).

 

(b)       Each of the Financial Statements is complete and has been prepared in accordance with GAAP consistently applied, without modification of the Accounting Principles used in the preparation thereof (except as may be indicated in the notes thereto) throughout the periods indicated, and presents fairly, in all material respects, the financial position, results of operations and cash flows of the Company as at the dates and for the respective periods indicated therein, except in the case of the Company Interim Financial Statements for the absence of any footnotes and any normal year-end adjustments.

 

Section 4.5.       Absence of Undisclosed Liabilities.  The Company does not have any Liabilities other than (i) Liabilities reflected or reserved against in the Financial Statements or disclosed in the notes thereto, (ii) Liabilities set forth on Schedule 4.5 of the Company Disclosure Letter or any other Schedule thereto or (iii) Liabilities that were incurred after December 31, 2015 in the ordinary course of business consistent with past practice.

 

Section 4.6.       Events Subsequent to Latest Financial Statements.

 

(a)       Except as set forth on Schedule 4.6(a) of the Company Disclosure Letter, since December 31, 2015 through the date hereof, other than in connection with the Transactions, (x) the Company has conducted its business in the ordinary course consistent with past practice and (y) there has been no Material Adverse Effect, nor has there been any event or development which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(b)       Without limiting the foregoing, except as set forth on Schedule 4.6(b) of the Company Disclosure Letter, since December 31, 2015 through the date hereof, the Company has not:

 

(i)          declared, set aside or paid any dividend or other distribution with respect to the capital stock of the Company, or any direct or indirect redemption, purchase or other acquisition by the Company of any such capital stock or any option with respect to the Company;

 

(ii)         made any authorization, issuance, sale or other disposition by the Company of any shares of Company Common Stock, or any material modification or amendment of any right of any holder of any outstanding shares of Company Common Stock;

 

(iii)       other than pursuant to the Credit Agreement, incurred any Indebtedness with respect to which the obligations of the Company that exceeds $100,000;

 

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(iv)       made any loan, advance or capital contribution to or investment in any Person, by the Company;

 

(v)        voluntarily purchased, canceled, pre-paid or completely or partially discharged in advance of a scheduled payment date with respect to, or waived any right of the Company under any material Indebtedness of or owing to the Company;

 

(vi)        (x) other than in the ordinary course of business as conducted on the date hereof, increased the salary, wages or other compensation of any director, officer or employee having a base salary in excess of $100,000 per year by an amount greater than 10% per annum; or (y) adopted, entered into or become bound by any benefit plan, employment-related Contract or collective bargaining agreement, amendment or modification of any benefit plan, employment-related Contract or collective bargaining agreement;

 

(vii)      other than in the ordinary course of business as conducted on the date hereof, amended, modified or changed any accounting policy of the Company, any method of calculating any bad debt, contingency or other reserve of the Company, or any change in the fiscal year of the Company;

 

(viii)      (x) made any material amendment to its Organizational Documents, (y) recapitalized, reorganized, liquidated or dissolved the Company, or taken any action in contemplation of the foregoing or (z) merged or consummated any other business combination transaction involving the Company;

 

(ix)        changed any material annual Tax accounting period except as required by applicable Law, adopted or changed any material method of Tax accounting except as required by applicable Law, made or changed any material Tax election except as required by applicable Law, entered into any Tax closing agreement, surrendered any right to claim a refund of Taxes, requested or obtained any Tax ruling, filed any material Tax Return unless such Tax Return was prepared consistent with past practice (except as required by applicable Law), or settled any Tax claim, audit or assessment in excess of $100,000;

 

(x)         mortgaged, pledged or subjected to any material Lien any of its properties or assets, except for Permitted Liens and Liens incurred in the ordinary course of business consistent with past practice;

 

(xi)        sold, leased or otherwise disposed of any of its fixed assets having a value in excess of $100,000 in any individual case or $250,000 in the aggregate;

 

(xii)       made capital expenditures or commitments for additions to property, plant or equipment constituting capital assets in excess of $100,000 in the aggregate;

 

(xiii)      suffered any damage, destruction or other casualty loss with respect to any asset or property owned, leased or otherwise used by the Company, whether or not covered by insurance, in an amount exceeding $100,000 individually or $250,000 in the aggregate;

 

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(xiv)      made any write-off or write-down of or any determination to write off or write down any of the assets and properties of the Company in an aggregate amount exceeding $100,000 in any individual case;

 

(xv)       settled any Action, threatened or pending, against the Company for an amount exceeding $100,000 individually or $250,000 in the aggregate; or

 

(xvi)      entered into any agreement to do or engage in any of the foregoing after the date hereof.

 

Section 4.7.       Tax Matters.  Except as set forth in Schedules 4.7(a) to 4.7(l) of the Company Disclosure Letter:

 

(a)       Filing of Tax Returns and Payment of Taxes.  All material Tax Returns required to be filed on or before the Closing Date by the Company have (or by the Closing Date will have) been duly filed and timely filed (after giving effect to valid extensions).  The following Taxes (collectively, “Company Taxes”) have (or by the Closing Date will have) been duly paid: (i) all Taxes shown to be due on Tax Returns filed or required to be filed on or before the Closing Date and (ii) all material Taxes due and payable on or before the Closing Date by the Company (whether or not shown on any Tax Return).  All material Employment and Withholding Taxes required to be withheld and paid on or before the Closing Date have (or by the Closing Date will have) been duly paid to the proper Governmental Entity or properly set aside in accounts for such purpose. There are no Liens for Taxes (other than Permitted Liens) upon any of the assets of the Company. The Company does not have any material liability under any escheat or unclaimed property statute.

 

(b)       Extensions.  No written agreement or other document extending or waiving, or having the effect of extending or waiving, the period of assessment or collection of any material Company Taxes or material Employment and Withholding Taxes has been executed or filed with the Internal Revenue Service (“IRS”) or any other taxing authority other than extensions that have expired or pursuant to extensions of time to file Tax Returns obtained in the ordinary course of business.

 

(c)       Audits; etc.  No material Company Taxes or material Employment and Withholding Taxes have been asserted or threatened in writing by any Governmental Entity to be due which Taxes have not been paid or such assertion has not been settled or withdrawn, (ii) no revenue agent’s report or written assessment for Taxes has been issued by any Governmental Entity in the course of any audit that has been completed with respect to material Company Taxes or material Employment and Withholding Taxes which assessment has not been paid, settled or withdrawn and (iii) no audit or administrative or court proceeding with respect to income or other material Taxes of the Company is in progress or pending.  The Company has not granted any Person any power of attorney that is currently in force with respect to any material Tax matter.

 

(d)       Other Jurisdictions.  Since the Reference Date, no jurisdiction (whether within or without the United States) in which the Company has not filed a Tax Return has

 

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asserted in writing that the Company is or may be required to file such Tax Return in such jurisdiction.

 

(e)        Tax Rulings, etc.  The Company (i) has not received or requested any written ruling of a taxing authority relating to Taxes, or any other written and legally binding agreement with a taxing authority relating to Taxes, in each case that is still in force (if received) or pending (if requested), (ii) is not a party to any tax sharing, allocation, indemnity or similar agreement or arrangement (whether or not written) pursuant to which the Company will have any obligation to make any payments after the Closing (other than customary commercial agreements or arrangements entered into in the ordinary course of the Company’s business the primary purpose of which does not relate to Taxes), (iii) does not have any liability for the Taxes of any Person by reason of Treasury Regulations section 1.1502-6 (or any analogous provision of Law), Contract, assumption, transferee or successor liability, operation of Law or otherwise and (iv) has never been a member of an affiliated, consolidated, combined or unitary group filing for federal or state income Tax purposes.

 

(f)        Distributing Corporation, etc.  The Company has not been a “distributing corporation” or a “controlled corporation” within the meaning of Code section 355 within the last two years or otherwise as part of a “plan” with the transactions contemplated by this Agreement.

 

(g)       Accounting Method.  The Company has not agreed to and is not required to include in income any adjustment pursuant to Code section 481(a).

 

(h)       USRPHC.  The Company is not, has not been during the past five years and will not be on the Closing Date a United States real property holding corporation within the meaning of Code section 897(c)(2).

 

(i)         Reportable Transactions.  The Company is not and has not been a party to any “reportable transaction” (other than a “loss transaction”) as defined in Treasury Regulation section 1.6011-4(b).

 

(j)        Section 108(i) Election.  The Company will not be required to include any item of income in taxable income for any Post-Closing Period as a result of any election under Code section 108(i).

 

(k)        Tax Returns.  The Company has made available to Buyer correct and complete copies of (i) all U.S. federal income Tax Returns of the Company for the preceding taxable years ending in 2010, 2011, 2012, 2013 and 2014 and all U.S. state net income Tax Returns and all other material U.S. state Tax Returns of the Company for the preceding taxable years ending in 2011, 2012, 2013 and 2014 and (ii) any audit report issued within the last three (3) years (or otherwise with respect to any audit or proceeding in progress) relating to Taxes of the Company.

 

(l)         Post-Closing Taxes.  The Company will not be required to include any item of income in, or exclude any deduction in calculating, taxable income for any Post-Closing Period, as a result of any (i) “closing agreement” as described in Code section 7121 (or any corresponding or similar provision of state, local or foreign Tax law) executed on or prior to the

 

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Closing Date or (ii) installment sale or open transaction disposition made or pre-paid amount received on or prior to the Closing Date.

 

(m)      No Post-Closing Reliance.  The representations and warranties made in Section 4.6(b)(ix) and this Section 4.7 (other than the penultimate sentence of Section 4.7(a) and Sections 4.7(e), 4.7(g), 4.7(j) and 4.7(l)) refer only to the past activities of the Company and are not intended to serve as representations to, or a guarantee of, nor can they be relied upon with respect to, Taxes attributable to any Post-Closing Period.

 

Section 4.8.       Litigation.

 

(a)       Schedule 4.8 of the Company Disclosure Letter sets forth any Action that is pending or, to the Knowledge of the Company, threatened against the Company before any Governmental Entity as of the date hereof.  Except as set forth on Schedule 4.8 of the Company Disclosure Letter, there is no Action pending or, to the Knowledge of the Company, threatened against the Company before any Governmental Entity that would, if decided in a manner adverse to the Company, (i) reasonably be expected to be, individually or in the aggregate, material to the Company, or reasonably be expected to have a materially adverse impact on the ability of the Company to consummate the transactions contemplated by this Agreement or (ii) reasonably be expected to result in (x) any injunction or other equitable relief against the Company that would interfere in any material respect with its business or operations or (y) Losses by the Company in excess of $250,000, individually or in the aggregate with other similar Actions.

 

(b)       There are no material Orders outstanding as of the date hereof against the Company.

 

(c)        This Section 4.8 does not relate to environmental matters, the sole representations with respect to which are set forth in Section 4.17.

 

Section 4.9.       Compliance with Laws.  Except as set forth in Schedule 4.9 of the Company Disclosure Letter, since the Reference Date, the Company has been in compliance in all material respects with all Laws applicable to the Company, any of its properties or other assets or any of its businesses or operations.  Since the Reference Date, (i) the business of the Company has not been, and is not being, conducted in violation of its internal policies and procedures, except for possible violations which would not reasonably be expected to be, individually or in the aggregate, material to the Company, (ii) the Company has not been charged with the violation of any applicable Law or Order, and (iii) the Company has not received written notice to the effect that a Governmental Entity claimed or alleged that the Company was not in compliance with all Laws applicable to the Company, any of its properties or other assets or any of its business or operations.  This Section 4.9 does not relate to tax matters, the sole representations with respect to which are set forth in Section 4.6(b)(ix), Section 4.7 and Section 4.10, employee benefits matters, the sole representations with respect to which are set forth in Section 4.10, environmental matters, the sole representations with respect to which are set forth in Section 4.17, or labor and employment matters, the sole representations with respect to which are set forth in Section 4.18.

 

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Section 4.10.     Employee Benefits.

 

(a)       Schedule 4.10(a) of the Company Disclosure Letter contains a complete and accurate list of all “employee benefit plans,” within the meaning of section 3(3) of ERISA, and all employment, consulting, bonus, incentive or deferred compensation, change in control, retention, pension, retirement, profit sharing, savings, severance, fringe, stock option or other equity-based agreements, plans and arrangements that are sponsored or maintained by the Company or to which the Company is currently obligated to contribute or with respect to which the Company has any current or contingent liabilities (collectively, the “Plans”).

 

(b)       Each Plan has been maintained, operated and administered in accordance with its terms and in material compliance with applicable Law, including, ERISA and the Code, where applicable.  Each Plan which is an “employee pension benefit plan” within the meaning of section 3(2) of ERISA and which is intended to be qualified under section 401(a) of the Code is established pursuant to IRS-approved prototype or volume submitter documents or has received a favorable determination letter from the IRS or an application for a determination letter is currently pending with the IRS, and the Company is not aware of any circumstances likely to result in the revocation of any such favorable determination letter.

 

(c)       Except as set forth in Schedule 4.10(c) of the Company Disclosure Letter, (i) there is no pending or, to the Knowledge of the Company, threatened legal Action relating to the Plans (other than routine claims for benefits) and (ii) to the Knowledge of the Company, no facts or circumstances exist that could reasonably be expected to give rise to any legal Action relating to the Plans.  No event has occurred, and to the Knowledge of the Company, no condition exists that would, by reason of the Company’s affiliation with any of its ERISA Affiliates, subject the Company to any material tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other Laws.

 

(d)       Each Plan which is a “nonqualified deferred compensation plan” (within the meaning of section 409A of the Code) that the Company is a party to has been operated and administered in material compliance with section 409A of the Code.

 

(e)       Neither the Company nor its ERISA Affiliates have, in the last six (6) years, contributed to or been obligated to contribute to any “employee pension benefit plan” (as defined in section 3(2) of ERISA), subject to title IV of ERISA or section 412 of the Code, including any “multiemployer plan,” within the meaning of section 3(37) of ERISA.  None of the Plans provides for post-retiree health, welfare or life insurance benefits or coverage for any participant or any beneficiary of a participant, except as may be required under COBRA or similar state Law and at the sole expense of such participant or the participant’s beneficiary.

 

(f)        With respect to each Plan, the Company has provided or made available to Buyer true and complete copies of the following documents, to the extent applicable: (i) the most recent Plan document and all amendments thereto; (ii) the most recent Form 5500 filed with the IRS; (iii) the most recent summary plan description; and (iv) the most recent determination letter issued by the IRS.

 

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(g)       Other than the Transaction Bonus Payments and as otherwise set forth on Schedule 4.10(g) of the Company Disclosure Letter or otherwise provided by this Agreement, the consummation of the transactions contemplated by this Agreement, either alone or in connection with any other event (i) will not result in any payment or benefit becoming due to any current or former employee, contractor or director of the Company or under any Plan; (ii) will not increase any amount of compensation or benefits otherwise payable to any current or former employee, contractor or director of the Company or under any Plan; (iii) will not result in the acceleration of the vesting or timing of payment of any compensation or benefits payable under any Plan to or in respect of any current or former employee, contractor or director of the Company; or (iv) will not limit the right to merge, amend or terminate any Plan (except any limitations imposed by applicable Law, if any).

 

(h)       Except as set forth in Schedule 4.10(h) of the Company Disclosure Letter, the consummation of the transactions contemplated by this Agreement, either alone or in connection with any other event, will not give rise to any “excess parachute payment” as defined in section 280G(b)(1) of the Code, any excise tax owing under section 4999 of the Code or any other amount that would not be deductible under section 280G of the Code.

 

Section 4.11.    Permits.  Schedule 4.11 of the Company Disclosure Letter lists all governmental or regulatory permits, licenses, accreditations, franchises, consents or approvals, waivers and authorizations held by the Company and necessary to conduct its operations as presently conducted (collectively, “Permits”).  Each such Permit is in full force and effect in all material respects. To the Knowledge of the Company each officer, employee, agent and contractor of the Company possesses all material Permits necessary for the lawful conduct of his or her duties and obligations in the operation of the business of the Company as currently conducted.  The Company has all material Permits other than any (a) Permits the failure of which to have would not reasonably be expected to be, individually or in the aggregate, material to the Company or (b) Permits required by Buyer after the Closing under the applicable laws of its jurisdiction of incorporation and place of business. Since the Reference Date, no event has occurred or other fact exists with respect to the Permits that (i) allows, or after notice or lapse of time or both would allow, revocation or termination of any of the Permits, (ii) would have an adverse impact on the ability of the Company to conduct its business as currently conducted or (iii) would result in any other impairment of the rights of the holder of any of the Permits that would reasonably be expected to be, individually or in the aggregate, material to the Company.  There is not pending or, to the Knowledge of the Company, threatened, any application, notice, petition, objection or other pleading with any Governmental Entity that challenges or questions the validity of or any rights of the holder under any Permit, which if resolved adversely would have an adverse impact on the ability of the Company to conduct its business as currently conducted.  There has been no decision by the Company to not maintain or renew any Permit currently held for the operation of its business. This Section 4.11 does not relate to environmental matters, the sole representations with respect to which are set forth in Section 4.17.

 

Section 4.12.    Leased Real Property.  The Company does not own any real property.  Schedule 4.12 of the Company Disclosure Letter sets forth a list of all real property leases relating to the real property interests leased by the Company (the “Leased Real Property”) to which the Company is a party or is bound (the “Leases”).  The Company has made available to

 

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Buyer copies of the Leases.  Except as disclosed in Schedule 4.12 of the Company Disclosure Letter, (i) each of the Leases is in full force and effect and, to the Knowledge of the Company, is enforceable against the landlord which is party thereto in accordance with its terms, (ii) there is no, and to the Knowledge of the Company, the Company has not received written notice of any default by the Company (or any condition or event which, after notice or lapse of time or both, would constitute a default) under any Lease and (iii) to the Knowledge of the Company, no other party is in, or has received notice of, any default under any Lease, except in the case of clause (i), as such enforceability may be limited by bankruptcy, insolvency, reorganization and similar laws affecting creditors generally and by the availability of equitable remedies.  The Company enjoys peaceful and undisturbed possession under all such Leases in all material respects.

 

Section 4.13.     Personal Property.  Except (i) as set forth in Schedule 4.13 of the Company Disclosure Letter or (ii) for intangible assets which are the subject of Section 4.14, the Company is in possession of and has good title to, or a valid leasehold interest in, all personal properties and assets that are material to the conduct of the business and operations of the Company.

 

Section 4.14.     Intellectual Property.

 

(a)       Schedule 4.14(a) of the Company Disclosure Letter sets forth a complete and correct list, as of the date hereof, of all Owned Intellectual Property.  The term “Owned Intellectual Property” means all material intellectual property rights, including, trademarks, service marks, trade names (whether registered or unregistered), service names, industrial designs, brand names, brand marks, trade dress rights, Internet domain names, identifying symbols, logos, emblems, signs or insignia, Copyrights, Software (other than commercially available Software), Trade Secrets, and Patents, including registrations and applications to register or renew the registration of any of the foregoing and including all goodwill associated with the foregoing, that are owned by the Company and are used in or necessary for the conduct of the business of the Company as currently conducted.  The Company owns and has good title to the Owned Intellectual Property. For purposes of this Agreement:

 

(i)          “Company Technology” means all Technology used in or necessary for the conduct of the business of the Company, or owned or held for use by the Company.

 

(ii)         “Copyrights” means copyrights, whether registered or unregistered (including copyrights in computer software programs), mask work rights, database rights, works of authorship and other rights corresponding thereto.

 

(iii)        “Patents” means patents, provisional patents and utility models and applications therefor, any reissues, reexaminations, divisionals, continuations, continuations-in-part and extensions thereof, and equivalent or similar rights anywhere in the world in inventions and discoveries, including invention disclosures, invention certificates, and the like.

 

(iv)        “Publicly Available Software” means any open source or free Software (including any Software licensed pursuant to a GNU public license) or other Software that requires as a condition of use, modification or distribution that other Software incorporated

 

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into, derived from or distributed with such Software be disclosed or distributed in source code form.

 

(v)        “Software” means computer programs, including any and all software implementations of algorithms, models and methodologies whether in source code, object code or other form, databases and compilations, including any and all data and collections of data, descriptions, flow-charts and other documentation used in the ordinary course of business in the use thereof

 

(vi)        “Technology” means, collectively, all information, technical data, programs, designs, formulas, algorithms, procedures, processes, specifications, techniques, ideas, know-how, Software (whether in source code, object code or human readable form), databases and data collections, Internet websites and web content, tools, inventions (whether patentable or unpatentable and whether or not reduced to practice), invention disclosures, developments, creations, improvements, works of authorship, other similar materials and all recordings, graphs, drawings, reports, analyses, other writings and any other embodiment of the above, in any form or media, whether or not specifically listed herein.

 

(vii)       “Trade Secrets” means confidential and proprietary information, or non-public processes, designs, specifications, technology, know-how, techniques, formulas, inventions, concepts, trade secrets, discoveries, ideas and technical data and information, in each case excluding any rights in respect of any of the foregoing that comprise or are protected by Copyrights or Patents.

 

(b)       Schedule 4.14(b) of the Company Disclosure Letter sets forth a complete and correct list, as of the date hereof, of all Licenses.  The term “Licenses” means all material written licenses to which the Company is a party, pursuant to which (i) the Company grants any Person a right to use any of the Owned Intellectual Property (each, an “Out-License”) or (ii) any Person or entity grants the Company the right to use any trademarks, service marks, trade names, Copyrights, Software (other than commercially available Software), Patents or other intellectual property right(s) not owned by the Company that are used in or necessary for the conduct of the business of the Company as currently conducted (each, an “In-License”).  The Company has furnished or made available to Buyer complete and correct copies of the Licenses listed in Schedule 4.14(b).  Except for such defaults and failures as would not reasonably be expected to be, individually or in the aggregate, material to the Company, neither the Company nor, to the Knowledge of the Company, any other party thereto, is in default under any License, and each License is legal, binding and enforceable and in full force and effect as to the Company, and to the Knowledge of the Company, as to each other party thereto. The Owned Intellectual Property and the In-Licenses are collectively referred to herein as the “Company Intellectual Property.”

 

(c)       To the Knowledge of the Company, (A) there are no overdue filings or unpaid filing, maintenance or renewal fees currently overdue with respect to any Company Intellectual Property and (B) no material Company Intellectual Property has lapsed or been cancelled or expired other than in the reasonable business judgment of the Company in the ordinary course of business.

 

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(d)       Except as set forth in Schedule 4.14(d) of the Company Disclosure Letter, the Company is the sole and exclusive owner of, or has valid and continuing rights to use all of the Company Intellectual Property and Company Technology, in each case, owned or purported to be owned by or licensed to the Company, free and clear of any Liens, other than non-exclusive licenses.

 

(e)       Except as set forth in Schedule 4.14(e) of the Company Disclosure Letter, to the Knowledge of the Company, the use of the Company Intellectual Property or Company Technology by the Company as currently used does not infringe on the rights of any third party and there is no claim of any Person that challenges the rights of the Company in respect of any Company Intellectual Property or Company Technology.

 

(f)        To the Knowledge of the Company, no Person (including employees and former employees of the Company) is infringing, violating, misappropriating or otherwise misusing any Company Intellectual Property, and the Company has not made any such claims against any Person (including employees and former employees of the Company).

 

(g)       The Company has taken reasonably necessary and appropriate steps to protect and preserve the confidentiality of all Trade Secrets and any other non-public, proprietary or confidential information of the Company or any Person to whom the Company has a confidentiality obligation.

 

(h)       Except with respect to (i) licenses of off-the-shelf Software or (ii) any payments required of the Company under any Material Contract, the Company is not required, obligated or under any liability whatsoever to make any payments by way of royalties, fees or otherwise to any Person with respect to the use of any Company Intellectual Property or Company Technology in the conduct of the business as currently conducted.

 

(i)        Schedule 4.14(i) of the Company Disclosure Schedule sets forth a correct and complete list of all Software that is (i) owned exclusively by the Company or (ii) used by the Company in its businesses and not exclusively owned by the Company or commercially available on reasonable terms.

 

(j)        Except as set forth in Schedule 4.14(j) of the Company Disclosure Schedule, no Publicly Available Software (including, all derivative works thereof) (i) was used in connection with the development or modification of any Software used by the Company, (ii) forms part of the Technology owned by the Company, (iii) is, in whole or in part, embodied or incorporated into any of the Company’s products or (iv) was or is used in connection with the development of any Technology owned by the Company or any of the Company’s products.

 

(k)        The Company owns, leases or licenses all Software, hardware, databases, computer equipment and other information technology (collectively, “Computer Systems”) that are necessary for the operations of the Company’s business.  The Computer Systems as a whole are adequate for the Company’s businesses.  The Company has taken reasonable steps in accordance with industry standards to preserve the availability, security and integrity of the Computer Systems and the data and information stored on the Computer Systems.  The

 

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Company maintains documentation regarding all Computer Systems, their methods of operation, and their support and maintenance.

 

Section 4.15.     Contracts.

 

(a)       Schedule 4.15(a) of the Company Disclosure Letter contains a complete and correct list, as of the date hereof, of all of the following types of Contracts (true and complete copies or, if none, reasonably complete and accurate written descriptions of which, together with all amendments and supplements thereto and material “side letters” and similar documentation relating thereto, have been delivered to Buyer prior to the execution of this Agreement) to which the Company is a party, excluding any Leases or Licenses and any Plans disclosed on Schedule 4.10(a) of the Company Disclosure Letter:

 

(i)          all Contracts with current officers, other employees, consultants, advisors, sales representatives of the Company, other than (x) Contracts that by their terms may be terminated or canceled by the Company with notice of not more than the greater of 120 days and the period of notice required under applicable Law, in each case, without penalty or (y) Contracts relating to severance payments not in excess of $50,000;

 

(ii)         any Contract providing for retention or change in control payments;

 

(iii)        all collective bargaining Contracts with any labor union currently representing employees of the Company;

 

(iv)        all mortgages, indentures, security Contracts, notes, loan Contracts, guarantees of the obligations of a third party or other Contract granting a Lien on any property or assets of the Company, other than Permitted Liens;

 

(v)         joint venture agreements, operating agreements, limited liability company and partnership Contracts;

 

(vi)        Contracts (excluding individual purchase orders) for the purchase by the Company of materials, supplies, products, equipment or services, and Contracts (excluding individual purchase orders) for the sale or provision by the Company of materials, supplies, products, equipment or services, in each case, not terminable on notice of 120 days or less without penalty, and under which the amount that would reasonably be expected to be paid or received by the Company exceeds $100,000 per annum;

 

(vii)       any Contract or series of related Contracts, including any option agreement, relating to the acquisition or disposition of any business, a material amount of stock or assets of any other Person or any material real property (whether by merger, purchase or sale of stock, membership interests, assets or otherwise) since January 1, 2014;

 

(viii)      any agreement that (x) limits the freedom of the Company to compete in any geographic area or line of business or (y) contains exclusivity obligations or restrictions binding on the Company;

 

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(ix)        any Contract relating to any interest rate, derivatives or hedging transaction;

 

(x)         any “standstill” or similar agreement;

 

(xi)        any Contract granting a right of first refusal or first negotiation;

 

(xii)       any loan or credit agreement, mortgage, indenture, note or other Contract or instrument evidencing Indebtedness of the Company or any Contract or instrument pursuant to which Indebtedness may be incurred or is guaranteed by the Company;

 

(xiii)      any Contract entered into other than in the ordinary course of business involving aggregate payments in excess of $100,000, to be made by or to the Company after the date hereof;

 

(xiv)      stockholder agreements, voting trusts or other agreements or understandings to which the Company is a party or to which the Company is bound relating to the transfer or voting, purchase, redemption or other acquisition of any shares of the capital stock of the Company; and

 

(xv)       commitments or agreements to enter into any of the foregoing.

 

(b)       Each of the Contracts and other documents required to be listed on Schedule 4.15(a) of the Company Disclosure Letter, together with each other Contract of such type entered into in accordance with Section 6.3, is a “Material Contract.”  Except as set forth on Schedule 4.15(b) of the Company Disclosure Letter, neither the Company nor, to the Knowledge of the Company, any other party thereto, is in default under any Material Contract, and each Material Contract is valid, binding and in full force and effect and is enforceable in accordance with its terms by the Company, and to the Knowledge of the Company, as to each other party thereto, except for such defaults and failures to be so in full force and effect as would not reasonably be expected to be, individually or in the aggregate, material to the Company.

 

(c)       The Company has not received any notice of termination or cancellation under any Material Contract, received any notice of breach or default under any Material Contract which breach has not been cured, or granted to any third party any rights, adverse or otherwise, that would constitute a breach of any Material Contract.

 

(d)       The Company has satisfied all performance standards under any Material Contract where it is required to do so in order to receive any fees, bonuses, rebates, incentives, or other payments at the levels at which it has received fees or payments under such Material Contract in the last or the current fiscal year and is not required to return any fees or payments received by it or to provide credits against any future fees or payment that would otherwise be due to it under any Material Contract, nor is it subject to any penalties under any such Material Contract, by reason of its failure to satisfy any performance standard contained in such Material Contract.

 

Section 4.16.     Insurance.  Schedule 4.16 of the Company Disclosure Letter sets forth a list and description of all of the policies of insurance carried by the Company on the date of this

 

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Agreement for the benefit of or, in connection with, the business of the Company and the applicable termination or renewal dates of such policies in effect as of the date hereof (the “Policies”).  Except as (a) disclosed in Schedule 4.16 of the Company Disclosure Letter or (b) would not reasonably be expected to be, individually or in the aggregate, material to the Company, (i) each Policy is in full force and effect and no notice of termination or cancellation of any such Policy has been received by the Company (ii) there is no breach by the Company or, to the Knowledge of the Company, by any other party of any term or condition of any Policy and (iii) all premiums due and payable prior to the Closing with respect to such Policies have been or will be (on or prior to the Closing Date) paid up to and through the Closing. The Policies (i) have been issued by insurers or reinsurers which, to the Knowledge of the Company, are reputable and financially sound, (ii) provide coverage for the operations conducted by the Company of a scope and coverage consistent with customary practice in the industries in which the Company operates and (iii) are in full force and effect.  The consummation of the Transactions will not, in and of itself, cause the revocation, cancellation or termination of any Policy.  All appropriate insurers under the Policies have been timely notified of all potentially insurable material losses known to the Company and pending litigation, and all appropriate actions have been taken to timely file all claims in respect of such insurable matters.

 

Section 4.17.     Environmental Matters.

 

(a)        Except as disclosed in Schedule 4.17 of the Company Disclosure Letter or as would not reasonably be expected to be, individually or in the aggregate, material to the Company:

 

(i)          Since the Reference Date, the Company has been in compliance with all applicable Environmental Laws;

 

(ii)         The Company has obtained, and is in compliance with, all Permits required under all applicable Environmental Laws;

 

(iii)        No judicial proceeding or governmental action, including any written notice of violation, is pending or, to the Knowledge of the Company, threatened under any applicable Environmental Law against the Company with respect to its operations or the Leased Real Property;

 

(iv)        To the Knowledge of the Company, no Hazardous Substances have been Released on, under, at or from the Leased Real Property that have given rise to an investigatory, corrective or remedial obligation of the Company pursuant to any Environmental Law; and

 

(v)         All material written environmental site assessments and similar environmental reports with respect to the Leased Real Property which are in their possession, custody or control have been made available to Buyer.

 

(b)       The representations and warranties in this Section 4.17 are the sole and exclusive representations and warranties of the Company concerning environmental matters.

 

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Section 4.18.     Employees; Labor Matters.

 

(a)        The Company has provided Buyer with a true and complete list of the name of each officer of the Company as of the date of this Agreement, including such person’s date of hire, annual base salary and any incentive or bonus arrangement.

 

(b)       Except as set forth in Schedule 4.18(b) of the Company Disclosure Letter:

 

(i)          none of the employees of the Company is represented in his or her capacity as an employee of the Company by any labor organization;

 

(ii)         the Company has not recognized any labor organization, nor has any labor organization been elected as the collective bargaining agent of any employees, nor has the Company entered into any collective bargaining agreement or union contract recognizing any labor organization as the bargaining agent of any employees;

 

(iii)        there are no labor strikes, slowdowns, work stoppages, lockouts or material labor disputes currently pending or, to the Knowledge of the Company, threatened and, since the Reference Date, the Company has not experienced any labor strike or material concerted labor dispute, and there are no pending or, to the Knowledge of the Company threatened, organizing activities or applications for certification of a collective bargaining unit with respect to the Company;

 

(iv)        the Company has materially complied, and is now in material compliance, with all applicable labor and employment Laws in connection with the employment of their respective employees including all such Laws relating to wages, hours, the Fair Labor Standards Act, the WARN Act and any similar state or local “mass layoff” or “plant closing” law, collective bargaining, discrimination, civil rights, safety and health, workers’ compensation and the collection and payment of withholding and/or social security taxes and any similar tax;

 

(v)         there has been no “mass layoff” or “plant closing” as defined by WARN Act with respect to the Company within the six (6) months prior to Closing; and

 

(vi)        there is not presently pending, existing, or, to the Knowledge of the Company, threatened, (A) any material proceeding against or affecting the Company relating to the alleged violation of any Law pertaining to labor relations or employment matters or (B) material labor grievance, arbitration or employment related Action against the Company.

 

Section 4.19.     Affiliate Transactions.

 

(a)        Except for employment relationships and the payment of compensation and benefits in the ordinary course of business consistent with past practice and except as otherwise set forth in Schedule 4.19(a) of the Company Disclosure Letter, the Company is not a party to any material agreement with (i) any of its respective directors or officers, any Seller, or, to the Knowledge of the Company, any member of any such Person’s immediate family or any of their respective Affiliates (“Related Persons”) or (ii) any Affiliate of the Company.  To the Knowledge of the Company, no Related Person has any claim or cause of action against the Company or owns any direct or indirect interest of any kind in, or controls or is a director,

 

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manager, officer, employee or partner of, or consultant to, or lender to or borrower from or has the right to participate in the profits of, any Person which is a competitor of the Company.

 

(b)       Schedule 4.19(b) of the Company Disclosure Letter sets forth a list of all services provided by any Related Person to the Company other than services provided to the Company in the ordinary course of business consistent with past practice and on an arm’s-length basis.

 

Section 4.20.     Accounts and Notes Receivable.  Except as set forth in Schedule 4.20 of the Company Disclosure Letter, the accounts and notes receivable of the Company reflected on the balance sheet included in the Company Interim Financial Statements, and all accounts receivable arising subsequent to March 31, 2016 (a) are valid and collectible in the ordinary course of business, subject to normal and customary trade discounts, less any applicable reserves for doubtful accounts reflected in the balance sheets included in the Company Interim Financial Statements, which reserves are adequate and were calculated in a manner consistent with past practice and in accordance with GAAP consistently applied (b) other than as permitted by the Company in the ordinary course of business consistent with past practice, are not subject to any valid set off or counterclaim and (c) do not represent obligations for goods sold or services provided on consignment, on approval or on a sale or return basis or subject to any other repurchase, return, refund or rebate arrangement.

 

Section 4.21.    Books and Records.  (a) The minute books and other similar records of the Company as made available to Buyer prior to the execution of this Agreement contain a true and complete record, in all material respects, of all actions taken at all meetings and by all written consents in lieu of meetings of the shareholders and the Board for the periods covered by such minute books since the Reference Date and (b) the stock transfer ledgers and other similar records of the Company as made available to Buyer prior to the execution of this Agreement accurately reflect all record transfers prior to the execution of this Agreement in the capital stock of the Company during the periods covered by such ledgers since the Reference Date. All books, records and accounts of the Company are maintained in all material respects in accordance with good business practice and all applicable Laws.  The Company maintains systems of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the actual levels at reasonable intervals and appropriate action is taken with respect to any differences.

 

Section 4.22.     Certain Payments.  None of the Company or any Seller, nor any director, officer, agent, employee (whether full time or contract) or other Person associated with or acting on behalf of any of them has, in the course of its actions for, or on behalf of, any of them (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee (whether full time or contract) from corporate funds; or (c) made any unlawful contribution, gift, bribe, rebate, payoff, influence payment, kickback or

 

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other unlawful payment to any foreign or domestic government official or employee (whether full time or contract), regardless of form, whether in money, property, or services.

 

Section 4.23.      Customers and Suppliers.  Schedule 4.23(a) of the Company Disclosure Letter lists the ten (10) largest customers of the Company, on the basis of revenues for goods sold or services provided for the most recently-completed fiscal year.  Schedule 4.23(b) of the Company Disclosure Letter lists the ten (10) largest suppliers of the Company, on the basis of cost of supplies, products, equipment or services purchased for the most recently-completed fiscal year.  Except as disclosed in Schedule 4.23(c) of the Company Disclosure Letter, no such customer or supplier has ceased or materially reduced its purchases from, use of the services of, or sales or provision of services to the Company since the Reference Date, or to the Knowledge of the Company or the Sellers, has threatened or intends to cease or materially reduce such purchases, use, sales or provision of services after the date hereof and there is no existing fact, circumstance or condition that could be expected to give rise to the foregoing.  Except as disclosed in Schedule 4.23(d) of the Company Disclosure Letter, to the Knowledge of the Company, no such customer or supplier is threatened with bankruptcy or insolvency.

 

Section 4.24.     Government Contracts.

 

(a)        A true and correct list of (i) each Government Contract providing for aggregate payments in excess of $1,000,000 per year (A) which is in effect as of the date of this Agreement or (B) which has been completed within the last five (5) years and (ii) each outstanding Government Bid is set forth in Schedule 4.24(a) of the Company Disclosure Letter to the extent such disclosure is permitted by applicable Law.  The Company has made available to Buyer a complete and accurate copy of each Current Government Contract and Current Government Bid prior to the date hereof.  If between the date of this Agreement and the Closing Date the Company enters into a Government Contract or submits a Government Bid, the Shareholders’ Representative shall deliver to Buyer at the Closing an amended Schedule 4.24(a) of the Company Disclosure Letter to include a true and correct list of each such Government Contract and Government Bid to the extent such disclosure is permitted by applicable Law.

 

(b)       Except as set forth in Schedule 4.24(b) of the Company Disclosure Letter, (i) there are no Government Contracts in effect as of the date of this Agreement (each, “Current Government Contract”) or outstanding Government Bids (each, a “Current Government Bid”) in connection with which the Company has represented itself as having 8(a), small business, small disadvantaged business, historically underutilized business zone small business, women-owned small business, veteran-owned small business or service-disabled veteran-owned small business status and/or other preferential status (each, “Preferential Bidding Status”), (ii) no Current Government Contracts were awarded pursuant to a procurement process that was limited to Persons having a Preferential Bidding Status and (iii) no Current Government Contracts and Current Government Bids require the Company to maintain a Preferential Bidding Status. The Company has not assigned any of its claims, rights to receive revenues or other interests under any Current Government Contract or any Current Government Bid. No Current Government Contract is subject to the requirements of the Cost Accounting Standards. No Current Government Bid, if accepted, would reasonably be expected to result in a Government Contract that would be subject to the requirements of the Cost Accounting Standards.

 

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(c)        Except as set forth in Schedule 4.24(c) of the Company Disclosure Letter, (i) the Company has complied, in all material respects, with the terms and conditions of each Government Contract and Government Bid including clauses, provisions and requirements incorporated by reference or by operation of Law therein; (ii) the Company has complied, in all material respects, with all requirements of any Law pertaining to such Government Contract or Government Bid including with respect to bidding for or obtaining such Government Contract or Government Bid; (iii) all representations and certifications, including those concerning certified cost or pricing data, made by the Company with respect to such Government Contract or Government Bid were accurate, current and complete in all material respects as of their effective date, and the Company has complied with all such representations and certifications in all material respects; (iv) the Company is not, and has not been, in violation, or currently alleged to be in violation, in any material respect, of the False Statements Act, as amended, the False Claims Act, as amended, or any other requirement relating to the communication of false statements or submission of false claims to the United States Government or other Governmental Entity; (v) no termination or default notice, cure notice, show cause notice, letter of concern, corrective action request or stop or suspension of work notice has been issued to the Company and remains unresolved, and to the Knowledge of the Company, there has been no plan or proposal of any Person to issue any such notice; (vi) to the Knowledge of the Company, no Governmental Entity nor any prime contractor, subcontractor or other Person has asserted any claim or any other action for relief relating to such Government Contract or Government Bid; (vii) no money due to the Company pertaining to such Government Contract has been withheld or offset, nor, to the Knowledge of the Company, has any claim been made to withhold or offset money; and (viii) the written past performance evaluations received by the Company in relation to such Government Contract have been satisfactory or better.  For purposes hereof, the term “United States Government” includes all departments and agencies of any branch of the United States Government, all independent establishments within the United States Government, and United States Government corporations.

 

(d)       None of the Company, any of its affiliates, directors, managers or officers or to the Knowledge of the Company, any current or former employees (whether full time or contract) is, or at any time during the last four (4) years has been suspended, debarred, proposed for suspension or proposed for debarment from doing business with, or receiving contracts or financial assistance from, a Governmental Entity. During the last four (4) years, the Company (i) has not been convicted of, or had a civil judgment rendered against it for, violating any Law and (ii) has not been indicted for, or otherwise criminally or civilly charged with, violation of any Law.  None of the Company’s employees, consultants or agents is under administrative, civil or criminal indictment or, to the Knowledge of the Company, investigation by any Governmental Entity with respect to the conduct of the business of the Company, including any Government Contract or Government Bid.

 

(e)       Schedule 4.24(e) of the Company Disclosure Letter sets forth a true and correct list of all unresolved or planned audits or investigations of the Company by a Governmental Entity arising under or relating to any Government Contract or Government Bid, including for this purpose any audit or investigation by the Defense Contract Audit Agency, the Defense Contract Management Agency, an Inspector General, the Government Accountability Office, or an auditor working on behalf of a Governmental Entity. For any such audit or investigation, Schedule 4.24(e) of the Company Disclosure Letter includes a summary of the

 

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matter, reference to any written reports or findings issued in connection with the matter, and a summary of any adverse findings to date. Since the Reference Date, (i) no costs incurred by the Company in excess of $10,000 have been disallowed or questioned in connection with a Government Contract or Government Bid, and (ii) the Company has not been under any administrative, civil, or criminal investigation, indictment, or audit or made any disclosure to a Governmental Entity with respect to any alleged irregularity, misstatement, overpayment, omission, or misconduct arising under or relating to any Government Contract or Government Bid.

 

(f)        The contractor business systems used by the Company during performance of such Government Contract are in compliance with applicable requirements of each Government Contract and applicable Law. Since the Reference Date no Governmental Entity or higher-tier contractor has notified the Company of a significant weakness or deficiency with any such business system.

 

(g)       Since the Reference Date no Governmental Entity, or any prime contractor or subcontractor working on behalf of a Governmental Entity, has loaned, bailed or otherwise furnished to the Company any personal property, equipment or fixtures under or in connection with any Government Contract or any Government Bid.

 

(h)       The Company has not engaged in any work under the Government Contracts that would reasonably be expected to result in an Organizational Conflict of Interest (“OCI”) as defined in the Federal Acquisition Regulation Subpart 9.5 and other Law. The Company does not have any active OCI mitigation plans with a Governmental Entity.

 

Section 4.25.     National Security.

 

(a)       Schedule 4.25(a) of the Company Disclosure Letter sets forth all active facility security clearances held by the Company. For each such facility security clearance, the Company holds at least a “satisfactory” rating from the Defense Security Service (“DSS”) or any other cognizant Governmental Entity with respect to the NISPOM or any other Industrial Security Regulations that may apply to each facility security clearance, and with respect to the business of the Company, there are no obligations relating to or arising from any prior failure which may have occurred to maintain at least a “satisfactory” rating from DSS or any other applicable Governmental Entity.

 

(b)       The Company and its employees, as applicable, possess all necessary security clearances for the execution of their obligations under the Government Contracts.

 

(c)       With respect to the business of the Company, the Company is and has been in compliance in all material respects with all applicable national security obligations, including those specified in the NISPOM or other applicable Industrial Security Regulations.

 

(d)       To the Knowledge of the Company no facts currently exist which are reasonably likely to give rise to the revocation of any facility security clearance held by the Company.

 

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Section 4.26.     Brokers and Finders.  Except for J.P. Morgan Securities LLC, the Company has not employed any broker, investment banker, financial advisor, finder or other Person who will be entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission, or the reimbursement of expenses or indemnification or contribution, in connection with the transactions contemplated by this Agreement.

 

Section 4.27.     Sales Personnel.  Each sales agent employed with the Company is properly licensed and appointed to sell the products and services of the Company.  The compensation payable by the Company to such employees materially complies with applicable Laws.

 

Section 4.28.     Predecessors.  For purposes hereof, all references to the Company shall be deemed to include each predecessor thereof.

 

Section 4.29.     Exclusivity of Representations.  The representations and warranties made by the Sellers in Article III and Article IV are the exclusive representations and warranties made by the Sellers with respect to the Sellers and the Company, including the assets of the Company.  The Sellers hereby disclaim any other express or implied representations or warranties with respect to themselves or the Company.  Except as expressly set forth herein, the condition of the assets of the Company shall be “as is” and “where is” and the Sellers make no warranty of merchantability, suitability, fitness for a particular purpose or quality with respect to any of the tangible assets of the Company or as to the condition or workmanship thereof or the absence of any defects therein, whether latent or patent.  The Company is not, directly or indirectly, making any representations or warranties regarding any pro forma financial information, forecasts, financial projections or other forward-looking statements of the Company.  It is understood that any Due Diligence Materials made available to Buyer or its Affiliates or Representatives do not, directly or indirectly, and shall not be deemed to, directly or indirectly, contain representations or warranties of the Company or its Affiliates or their respective Representatives.

 

ARTICLE V - REPRESENTATIONS AND WARRANTIES OF BUYER

 

Except as set forth in the letter (the “Buyer Disclosure Letter”) delivered by Buyer to Sellers concurrently with the execution of this Agreement (it being understood and agreed that references herein to a “Schedule” thereto shall constitute references to the particular schedule; provided that the disclosures in any schedule shall qualify other sections or subsections of this Article V to the extent a cross-reference to the applicable schedule is included therein or its applicability to such other section or subsection is readily apparent), Buyer hereby represents and warrants to Sellers as follows:

 

Section 5.1.       Corporate Status.

 

(a)       Organization.  Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware, and has full corporate power and authority to own, lease and operate its properties and to carry on its business as presently conducted.  Buyer has delivered prior to the date hereof to Sellers copies of its Organizational Documents, as amended and in full force and effect as of the date hereof.  Buyer is not in violation of any of the provisions of its Organizational Documents.

 

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(b)       Qualification.  Buyer is duly qualified to do business and in good standing as a foreign corporation in each jurisdiction in which the nature of its business or the properties or assets owned, leased or operated by it makes such qualification necessary.

 

(c)        Authorization.  Buyer has full power and authority to enter into this Agreement and to perform its obligations hereunder.  The execution and delivery by Buyer of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of Buyer.  This Agreement has been duly executed and delivered by Buyer and constitutes the legal, valid and binding obligations of Buyer enforceable against Buyer in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

 

Section 5.2.       Conflicts; Consents.

 

(a)       Conflicts.  The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement will not, (i) conflict with any of the provisions of the Organizational Documents of Buyer, as amended to the date hereof, (ii) conflict with, result in a breach of or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a benefit under, or result in the creation of any Lien upon any of the properties or assets of Buyer under, any contract, agreement, indenture, mortgage, deed of trust, lease or other instrument to which Buyer is a party or by which Buyer or any of its assets is bound or subject or (iii) subject to the consents, approvals, authorizations, declarations, filings and notices referred to in Section 5.2(b), contravene any domestic or foreign Law or any Order currently in effect.

 

(b)       Consents.  Except as (i) set forth in Schedule 5.2(b) of the Buyer Disclosure Letter, (ii) as required under the Competition Laws set forth in Schedule 5.2(c) of the Buyer Disclosure Letter or (iii) would not reasonably be expected to be, individually or in the aggregate, material to Buyer, no consent of or filing with any Governmental Entity or any other third party, which has not been received or made, is necessary or required by or with respect to Buyer in connection with the execution and delivery of this Agreement by Buyer or the consummation by Buyer of any of the transactions contemplated by this Agreement.

 

Section 5.3.      Brokers and Finders.  Except for KippsDeSanto & Co., the Buyer has not employed any broker, investment banker, financial advisor, finder or other Person who will be entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission, or the reimbursement of expenses or indemnification or contribution, in connection with the transactions contemplated by this Agreement.

 

Section 5.4.      Sufficient Funds.  Buyer has sufficient funds to pay the Estimated Purchase Price, Escrow Amount, Expense Holdback Amount, Closing Indebtedness and Transaction Bonus Payments, together with all other amounts to be paid or repaid by Buyer under this Agreement (whether payable on or after the Closing), and all of Buyer’s and its Affiliates’ fees and expenses associated with the transactions contemplated in this Agreement.

 

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Section 5.5.       Solvency.  Buyer is not entering the transactions contemplated hereby with actual intent to hinder, delay or defraud either present or future creditors.  Immediately after giving effect to the transactions contemplated hereby, Buyer, Buyer’s Subsidiaries and the Company will be Solvent and will have adequate capital to carry on their respective businesses in the ordinary course.

 

Section 5.6.       Litigation.  There is no Action or any administrative or other proceeding by or before any Governmental Entity pending or, to the Knowledge of Buyer, threatened, against Buyer that would reasonably be expected to, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated hereby or otherwise prevent or materially delay performance by Buyer of any closing condition set forth in Section 7.2 or of its material obligations under this Agreement.

 

Section 5.7.       Investigation by Buyer; Sellers’ and Company’s Liability.  Buyer has conducted its own independent investigation, verification, review and analysis of the business, operations, assets, liabilities, results of operations, financial condition, technology and prospects of the Company, which investigation, review and analysis was conducted by Buyer and its Affiliates and, to the extent Buyer deemed appropriate, by Buyer’s Representatives.  Buyer acknowledges that it and its Representatives have been provided adequate access to the personnel, properties, premises and records of the Company for such purpose.  In entering into this Agreement, Buyer acknowledges that it has relied solely upon the aforementioned investigation, review and analysis and not on any factual representations or opinions of Sellers, the Company or any of their respective Representatives (except for the specific representations and warranties of Sellers and the Company set forth in Article III and Article IV), and Buyer acknowledges and agrees, to the fullest extent permitted by Law, that none of the Sellers, the Company or any of their respective shareholders, members, Affiliates, controlling Persons, or Representatives makes or has made any oral or written representation or warranty, either express or implied, as to the accuracy or completeness of (i) any of the information set forth in management presentations relating to the Company made available to Buyer, its Affiliates or its Representatives, in materials made available in any “data room” (virtual or otherwise), including any cost estimates delivered or made available, financial projections or other projections, in presentations by the management of the Company, in “break-out” discussions, in responses to questions submitted by or on behalf of Buyer, its Affiliates or its Representatives, whether orally or in writing, in materials prepared by or on behalf of the Company, or in any other form (such information, collectively, “Due Diligence Materials”), (ii) any information delivered or made available pursuant to Section 6.1(a) or (iii) the pro forma financial information, projections or other forward-looking statements of the Company, in each case in expectation or furtherance of the transactions contemplated by this Agreement.

 

Section 5.8.       Purchase for Investment.  Buyer is acquiring the Shares for its own account for investment and not with a view toward any resale or distribution thereof except in compliance with the Securities Act of 1933, as amended (the “Securities Act”).  Buyer acknowledges receipt of advice from the Company to the effect that the Shares have not been registered under the Securities Act or any state securities Laws.

 

Section 5.9.       Exclusivity of Representations.  The representations and warranties made by Buyer in this Article V are the exclusive representations and warranties made by Buyer.

 

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Buyer hereby disclaims any other express or implied representations or warranties with respect to itself.

 

ARTICLE VI - COVENANTS

 

Section 6.1.       Access to Information Concerning Properties and Records.

 

(a)        Subject to Section 6.16, during the period commencing on the date hereof and ending on the earlier of (i) the Closing Date and (ii) the date on which this Agreement is terminated pursuant to Section 8.1 (the “Pre-Closing Period”), the Company shall (x) upon reasonable notice, afford Buyer and its Representatives, reasonable access during normal business hours to the officers, directors, employees, accountants, legal counsel, properties, books and records of the Company and (y) furnish reasonably promptly to Buyer all information concerning its business, properties and personnel as Buyer may reasonably request; provided that the Company may restrict the foregoing access to the extent that in the reasonable judgment of the Company, any Law applicable to the Company requires it to restrict access to any of their respective businesses, properties, information or personnel; provided, further, that such access shall be granted during normal business hours and shall not unreasonably disrupt the business or operations of the Company.  Notwithstanding anything to the contrary contained in this Agreement, the Company shall not be required to provide any information or access that the Company reasonably believes could violate applicable Law or the terms of any confidentiality agreement or cause forfeiture of attorney/client privilege.

 

(b)       Nothing contained in this Agreement shall be construed to give to Buyer, directly or indirectly, rights to control or direct the Company’s operations prior to the Closing.  Prior to the Closing, the Company shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision of its operations.

 

(c)       Buyer hereby agrees that, except as otherwise provided in the Confidentiality Agreement, it is not authorized to and shall not (and shall not permit any of its employees, counsel, accountants, consultants and other authorized Representatives to) contact any competitor, supplier, distributor, customer, or Representative of the Company prior to the Closing (other than contacts with Affiliates of Buyer made in the ordinary course of business without reference to the Company) without the prior written consent of the Company.

 

Section 6.2.       Confidentiality.  Information obtained by Buyer and its Representatives in connection with the transactions contemplated by this Agreement shall be subject to the provisions of the Letter Agreement by and between the Company and Magellan Health, Inc., dated as of November 16, 2015 (the “Confidentiality Agreement”).  The terms of the Confidentiality Agreement shall survive the termination of this Agreement and continue in full force and effect thereafter and the Confidentiality Agreement shall not be modified, waived or amended without the written consent of the Company.

 

Section 6.3.       Conduct of the Business of the Company Pending the Closing Date.

 

(a)       Sellers shall cause the Company not to take any actions outside the ordinary course of business that would affect Closing Cash, Closing Indebtedness or Closing

 

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Working Capital from the respective amounts thereof as of 11:59 P.M. on the Business Day immediately prior to the Closing Date to the time of the Closing.

 

(b)       Except as (x) set forth on Schedule 6.3(b) of the Company Disclosure Letter, (y) may be required or not otherwise prohibited by this Agreement or (z) required by any Law, any Order, any Governmental Entity or any Contract to which the Company is a party, during the Pre-Closing Period the Company shall:

 

(i)          conduct its operations in the ordinary course of business consistent with past practice;

 

(ii)         comply in all material respects with all applicable Law and the requirements of all Material Contracts;

 

(iii)        use commercially reasonable efforts to maintain and preserve intact its business organization, keep available the services of its officers and employees and maintain satisfactory relationships with licensors, suppliers, distributors, clients and others having business relationships with the Company, in each case, to the end that its goodwill and ongoing business shall be unimpaired at the Closing; and

 

(iv)        keep in full force and effect all material Policies maintained by the Company, other than changes to such Policies made in the ordinary course of business.

 

(c)       Except as (x) set forth on Schedule 6.3(c) of the Company Disclosure Letter, (y) may be required or not otherwise prohibited by this Agreement or (z) required by any Law, any Order, any Governmental Entity or any Contract to which the Company is a party, during the Pre-Closing Period, the Company shall not take any of the following actions without the prior written consent of Buyer:

 

(i)          make any change in, or amendment to, its Organizational Documents;

 

(ii)         issue or sell, grant, or authorize any issuance or sale of, pledge or otherwise encumber any shares of its capital stock or any other ownership interests, as applicable, or issue or sell, or authorize any issuance or sale of, any securities convertible into or exchangeable for, or options, warrants or rights to purchase or subscribe for, or enter into any Contract with respect to the issuance or sale of, any shares of its capital stock or any other ownership interests, as applicable;

 

(iii)        split, combine, redeem or reclassify, or purchase or otherwise acquire, any shares of its capital stock or its other securities, as applicable;

 

(iv)        other than in the ordinary course of business consistent with past practice, acquire, assign, license, transfer, sell, lease or otherwise dispose of any of its properties or assets that are material to the business of the Company;

 

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(v)         enter into, modify or terminate any labor or collective bargaining agreement of the Company or, through negotiation or otherwise, make any commitment or incur any liability to any labor organization with respect to the Company;

 

(vi)        (A) incur or guarantee any Indebtedness, other than (1) short-term Indebtedness or letters of credit incurred in the ordinary course of business or (2) borrowings under the Credit Agreement or (B) make any loans or advances to any other Person, other than loans and advances to employees or intercompany loans, in each case, consistent with past practice;

 

(vii)       grant or agree to grant to any officer or employee of the Company any increase in wages or bonus, severance, profit sharing, retirement, insurance or other compensation or benefits, or establish any new compensation or benefit plans or arrangements, or amend or agree to amend any existing employee benefit plans or hire or terminate any officer or employee, except (A) pursuant to the employee benefit plans or collective bargaining agreements of the Company in effect on the date hereof that are disclosed on Schedule 4.10(a) of the Company Disclosure Letter, (B) in the ordinary course of business consistent with past practice with respect to any non-officer employee, (C) as required in order to comply with the requirements of the Code, ERISA or other Law, or (D) any other one-time bonus payments not to exceed $50,000 in the aggregate to all such Persons;

 

(viii)      change any material annual Tax accounting period except as required by applicable Law, adopt or change any material method of Tax accounting except as required by applicable Law, make or change any material Tax election except as required by applicable Law, enter into any Tax closing agreement, surrender any right to claim a refund of Taxes, request or obtain any Tax ruling, file any income or other material Tax Return unless such Tax Return was prepared consistent with past practice (except as required by applicable Law), or settle any Tax claim, audit or assessment in excess of $100,000;

 

(ix)        except as may be required under GAAP, make any change in its methods, principles and practices of financial accounting;

 

(x)         adopt a plan or agreement of complete or partial liquidation, dissolution, restructuring, recapitalization, merger, consolidation or other reorganization;

 

(xi)        settle any legal proceedings other than a settlement agreement providing solely for the payment of monetary damages in an amount not to exceed $100,000 individually or $250,000 in the aggregate;

 

(xii)       issue any broadly distributed communication of a general nature to employees (including general communications relating to benefits and compensation) or customers or clients without the prior written approval of Buyer, except for communications in the ordinary course of business that do not relate to the Transactions and do not provide to any Person any information regarding the Company that might be considered material non-public information (within the meaning of Regulation FD under the Exchange Act) if the Company’s securities were registered under Section 12(b) of the Exchange Act;

 

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(xiii)      make or agree to make any capital expenditure, except in the ordinary course of business and in an amount for capital expenditures that do not exceed $100,000 in the aggregate for the Company taken as a whole during any three consecutive month period;

 

(xiv)      directly or indirectly acquire any interest in any corporation, association, joint venture, partnership, limited liability company or other business entity or division thereof; provided that no such acquisition in the ordinary course of business of any assets that, individually, have a purchase price in excess of $10,000 or any group of related assets that, in the aggregate, have a purchase price in excess of $50,000, shall be made without reasonable prior notice to Buyer and shall not be made without Buyer’s prior written consent;

 

(xv)       make any investment (by contribution to capital, property transfers, purchase of securities or otherwise) in, or loan or advance (other than travel and similar advances to its employees in the ordinary course of business) to, any Person other than in the ordinary course of business;

 

(xvi)      (i) enter into, terminate or amend any Material Contract, or make any proposal to enter into, terminate, or amend any Material Contract, or, other than in the ordinary course of business, any other Contract that is material to the Company, (ii) enter into any Contract that would be breached by, or require the consent of any third party in order to continue in full force and effect following consummation of the Transactions, or (iii) release any Person from, or modify or waive any provision of, any confidentiality, standstill or similar agreement or fail to take all action necessary to enforce each such confidentiality, standstill and similar agreement (in each case, other than any such agreement with Buyer); or

 

(xvii)     authorize, commit or agree to take, any of the foregoing actions to the extent restricted by the provisions of this Section 6.3(c) or take any action or agree, in writing or otherwise, to take any action which would (i) cause any of the representations or warranties of the Company set forth in this Agreement to be untrue in any material respect or (ii) in any material respect impede or delay the ability of the parties to satisfy any of the conditions to the Transactions set forth in this Agreement.

 

(d)       Notwithstanding anything to the contrary contained in this Agreement, the Company shall be permitted to maintain through the Closing Date the cash management systems of the Company, maintain the cash management procedures as currently conducted by the Company, and periodically settle intercompany balances consistent with past practices (including through dividends and capital contributions and all such intercompany balances shall be settled at the Closing in accordance with their terms).

 

Section 6.4.      Supplemental Disclosure.  The Sellers and the Company shall from time to time prior to the Closing supplement or amend the Company Disclosure Letter 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 Company Disclosure Letter.  However, such supplemental or amended disclosure shall not be deemed to have cured any breach of representation or warranty made in this Agreement and shall not be deemed to have been disclosed as of the date of this Agreement, the Satisfaction Date or as of the Closing

 

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Date for purposes of determining whether or not the conditions set forth in Article VII of this Agreement have been satisfied.

 

Section 6.5.       Efforts; Governmental Approvals; Third Party Consents.

 

(a)       Subject to the terms and conditions set forth herein and to applicable legal requirements, each of the Sellers, the Company, and Buyer shall cooperate and use their respective commercially reasonable efforts to take, or cause to be taken, all appropriate action, and do, or cause to be done, and assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Closing, including the satisfaction of the respective conditions set forth in Article VII.

 

(b)       Subject to Section 6.5(c) and Section 6.5(d) and the other terms and conditions set forth in this Agreement, each of Buyer, the Sellers and the Company shall cooperate with the other and use, and shall cause each of its respective Subsidiaries to use, their respective reasonable best efforts to (i) prepare and file as promptly as practicable, and in any event within the time prescribed by any applicable Law or Competition Laws, all documentation to effect all necessary notices, reports and other filings and to obtain as promptly as practicable all consents, registrations, clearances, approvals, permits and authorizations necessary or advisable to be obtained from, or renewed with, any Governmental Entity (including the consents and approvals set forth on Schedule 3.2(b), 3.2(c), 4.3(b) and 4.3(c) of the Company Disclosure Letter and Schedule 5.2(b) and 5.2(c) of the Buyer Disclosure Letter), in each case in order to consummate as promptly as practicable the transactions contemplated by this Agreement, (ii) furnish as promptly as practicable all information to any Governmental Entity as may be required by such Governmental Entity in connection with the foregoing and (iii) obtain all consents, registrations, clearances, approvals, permits and authorizations necessary, proper or advisable to be obtained from, or renewed with, any other Person (including the consents and approvals set forth on Schedule 3.2(b), 3.2(c), 4.3(b) and 4.3(c) of the Company Disclosure Letter and Schedule 5.2(b) and 5.2(c) of the Buyer Disclosure Letter), in each case in order to consummate as promptly as practicable the transactions contemplated by this Agreement; provided that under no circumstances shall the Sellers or the Company be required to make any payment to any Person to secure such Person’s consent; provided, further, that, except as set forth in Section 7.2(e), for the avoidance of doubt, the failure to obtain any of the consents, registrations, clearances, approvals, permits or authorizations referenced above (other than any approvals required pursuant to Section 7.1(b)) shall not be a condition to the obligation of either party to consummate the transactions contemplated by this Agreement.  Notwithstanding the foregoing and without limiting the generality thereof, the parties shall (x) prepare and file a notification with respect to the transactions contemplated by this Agreement as required pursuant to the Competition Laws set forth on Schedule 3.2(c) and 4.3(c) of the Company Disclosure Letter and Schedule 5.2(c) of the Buyer Disclosure Letter (collectively, the “Required Competition Consents”) and (y) in the case of the HSR Act, at Buyer’s sole cost and expense, (A) prepare and file a notification with respect to the transactions contemplated by this Agreement pursuant to the HSR Act with the Federal Trade Commission and the Antitrust Division of the Department of Justice within ten (10) Business Days from the date hereof (which associated fees shall be borne by Buyer) and (B) seek early termination of any waiting periods under the HSR Act.

 

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(c)       Each party shall furnish to the other such necessary information and assistance as the other party may reasonably request in connection with the preparation of any necessary filings or submissions for any Governmental Entity.  Except as required by applicable Law and subject to Section 6.5(d), each party or its attorneys shall provide the other party or its attorneys the opportunity to review and make copies of all correspondence, filings, communications or memoranda setting forth the substance thereof between such party or its Representatives, on the one hand, and any Governmental Entity, on the other hand, with respect to this Agreement or the transactions contemplated in this Agreement (omitting any information that constitutes a competitively sensitive business secret of either party).  Buyer shall pay all filing fees pursuant to any filings in connection with approvals of Governmental Entities to the transactions contemplated hereby.

 

(d)       Notwithstanding anything to the contrary contained in this Agreement and subject to the terms and conditions set forth in this Agreement, including Section 6.5(e) below, without in any way limiting the generality of the undertakings under this Section 6.5, each of the Company and Buyer shall:

 

(i)          promptly provide to each and every Governmental Entity with jurisdiction over the transactions contemplated by this Agreement such information and documents as may be requested by such Governmental Entity or that are necessary, proper or advisable to permit consummation of the transactions contemplated by this Agreement;

 

(ii)         promptly take any and all actions necessary to avoid or eliminate each and every impediment under any Law so as to enable the consummation of the Closing to occur as soon as reasonably possible (and in any event no later than the date this Agreement is terminated in accordance with Section 8.1);

 

(iii)        promptly take any and all actions necessary to avoid or overcome the entry of any Order, including any legislative, administrative or judicial action, injunction or other order, decree, decision, determination or judgment (in each case, whether temporary, preliminary or permanent), that would delay, restrain, restrict, prevent, enjoin or otherwise prohibit the consummation of the transactions contemplated by this Agreement on or prior to the date this Agreement is terminated in accordance with Section 8.1, including the defense through litigation on the merits of any claim asserted in any court, agency or other proceeding by any Person, including any Governmental Entity, seeking to delay, restrain, prevent, enjoin or otherwise prohibit consummation of such transactions; and

 

(iv)        promptly take, in the event that any permanent, preliminary or temporary Order is entered or issued, or becomes reasonably foreseeable to be entered or issued, in any proceeding or inquiry of any kind that would make consummation of the transactions contemplated by this Agreement in accordance with the terms hereof unlawful or that would delay, restrain, prevent, enjoin or otherwise prohibit consummation of the transactions contemplated hereby, any and all steps (including the appeal thereof or the posting of a bond) necessary to resist, vacate, modify, reverse, suspend, prevent, eliminate or remove such actual, anticipated or threatened Order so as to permit the consummation of the transactions contemplated by this Agreement in accordance with the terms hereof as soon as reasonably

 

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possible and, in any event, prior to the date this Agreement is terminated in accordance with Section 8.1.

 

(e)       Notwithstanding anything herein to the contrary, Buyer shall not be required by the provisions of this Section 6.5 (or any other provision of this Agreement) to offer or consent to (i) any sale, lease, license, disposal or holding separate of, or restriction or limitation on, any assets, operations, rights, product lines, licenses, categories of assets or business or other interests therein, of Buyer and its Subsidiaries or the Company and its Subsidiaries, (ii) the entering into agreements with, and submitting to orders of, the relevant Governmental Entity giving effect to the foregoing matters in clause (i) or (iii) any conduct restrictions relating to the Company’s or Buyer’s respective businesses, in either case that would be reasonably likely to result, in the aggregate, in a material and adverse effect on either the Company or on Buyer, or its Subsidiaries.

 

(f)        Subject to applicable Law, applicable Orders and all privileges, including attorney-client privileges, each party shall keep the other apprised of the status of matters relating to the completion of the transactions contemplated by this Agreement, including: (i) prior to submitting any document or information (whether formally or informally, in draft form or final form) to any Governmental Entity, sending reasonably in advance to the other party a copy of such document or information (omitting any information that constitutes a competitively sensitive business secret of the other party except as such information is included in a substantive filing with a Governmental Entity pursuant to the terms hereof); (ii) not, without the prior consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed), submitting any document or information (whether formally or informally, in draft form or final form) to any Governmental Entity; (iii) not, without the prior consent of the other party, withdraw and re-file the HSR Act notification or any other notification required for the Required Competition Consents, enter into a timing agreement or any comparable agreement with any Governmental Entity that would delay the consummation of the transactions contemplated by this Agreement; (iv) promptly sending to the other party a copy of all documents, information, correspondence or other communications relating to this Agreement sent to, or received by the party (or its Representatives) from, any third-party or Governmental Entity relating to the transactions contemplated by this Agreement; (v) promptly informing the other party of any communications, conversations or telephonic calls received from any Governmental Entity applicable to this Agreement, and not initiating any of the foregoing without the prior consent of the other party; (vi) sending reasonably in advance to the other party any undertaking or agreement (whether oral or written) that it or any of its Subsidiaries proposes to make or enter into with any Governmental Entity with respect to the transactions contemplated by this Agreement; and (vii) allowing the other party and its Representatives to attend and participate at any meeting with, or hearing organized by, any Governmental Entity relating to the transactions contemplated by this Agreement, to the extent permitted by such Governmental Entity and to the extent reasonably practicable.  A party hereto may request entry into a joint defense agreement as a condition to providing any materials. Upon receipt of any such request, the parties shall work in good faith to enter into a joint defense agreement to create and preserve attorney-client privilege in a form and substance mutually acceptable to the parties.

 

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Section 6.6.       Exclusive Dealing.  During the Pre-Closing Period, the Sellers and the Company shall not, and shall direct its Affiliates and its and their respective Representatives to refrain from taking any action to, directly or indirectly, knowingly encourage, initiate, solicit or engage in negotiations with, or provide any confidential information of the Company to, any Person, other than Buyer (and its Affiliates and Representatives), concerning any purchase of any capital stock or any material asset of the Company (other than in connection with (i) the sale of Company Common Stock by any Seller to another Seller, or (ii) the exercise of any warrants outstanding on the date hereof) or any merger, recapitalization or similar transaction involving the Company.

 

Section 6.7.       Employee Benefits.

 

(a)        For at least one (1) year following the Closing Date, Buyer shall provide or cause the Company to provide to all employees of the Company immediately prior to the Closing (“Company Employees”) (i) a salary or wage level and annual cash bonus opportunity (expressed as a percentage of base salary) at least equal to the salary or wage level and annual cash bonus opportunity to which they were entitled immediately prior to the Closing and (ii) employee benefits that are substantially comparable in the aggregate to the employee benefits that they were entitled to receive immediately prior to the Closing (including benefits pursuant to qualified and non-qualified retirement and savings plans, medical, dental and pharmaceutical plans and programs, severance plans and policies); provided that, none of the foregoing shall apply to (x) any equity, equity-based, retention, change in control or long term incentive compensation, and (y) any Company Employees who are covered by a collective bargaining agreement to which the Company is bound, in which case compensation and benefits will be determined in accordance with such collective bargaining agreement.

 

(b)       Following the Closing, (i) Buyer shall cause the Company to ensure that no limitations or exclusions as to pre-existing conditions, evidence of insurability or good health, waiting periods or actively-at-work exclusions or other limitations or restrictions on coverage are applicable to any Company Employees or their dependents or beneficiaries under any welfare benefit plans in which such employees may be eligible to participate (other than any such limitations, exclusions, waiting periods or restrictions that are in effect or have not been satisfied by the applicable Company Employee immediately prior to the Closing) and (ii) Buyer shall use commercially reasonable efforts to cause the Company to provide that any costs or expenses incurred by Company Employees (and their dependents or beneficiaries) up to (and including) the Closing shall be taken into account for purposes of satisfying applicable deductible, co-payment, coinsurance, maximum out-of-pocket provisions and like adjustments or limitations on coverage under any such welfare benefit plans for the plan year in which the Closing occurs.

 

(c)       With respect to each employee benefit plan, policy or practice, including severance, vacation and paid time off plans, policies or practices, sponsored or maintained by the Company or its Affiliates, Buyer shall cause the Company to grant or cause to be granted, and the Company immediately following the Closing agrees to grant, or cause to be granted, to all Company Employees from and after the Closing credit for all service with the Company, and their respective predecessors, prior to the Closing for all purposes (including eligibility to participate, vesting credit, eligibility to commence benefits, benefit accrual, early retirement

 

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subsidies and severance), other than for purposes of benefit accrual under any defined benefit plan; provided that no such service credit shall result in a duplication of benefits.

 

(d)       The provisions of this Section 6.7 are for the sole benefit of the parties to this Agreement and nothing herein, express or implied, is intended or shall be construed to (i) constitute an amendment to any Plan or other compensation and benefits plans maintained for or provided to Company Employees or any other Persons prior to or following the Closing, (ii) confer upon or give to any Person (including, for the avoidance of doubt, any Company Employee or any current or former employees, directors, or independent contractors of the Company), other than the parties hereto, any legal or equitable or other rights or remedies with respect to the matters provided for in this Section 6.7 under or by reason of any provision of this Agreement or (iii) limit or interfere with the right of Buyer and the Company to terminate the employment of any Company Employee at any time after the Closing.

 

Section 6.8.      Compliance with WARN Act and Similar Statutes.  Buyer shall not, at any time within ninety (90) days after the Closing Date, effectuate or cause to be effectuated (a) a “plant closing” (as defined in the Worker Adjustment and Retraining Notification Act of 1988 (the “WARN Act”) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company or (b) a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of the Company; and/or, in the case of clauses (a) and (b), any similar action under any comparable Law requiring notice to employees in the event of a plant closing, mass layoff or other action triggering statutory notice requirements.  Buyer shall indemnify and hold harmless the Sellers with respect to any liability under the WARN Act (and any comparable Law requiring notice to employees) arising or resulting, in whole or in part, from any actions taken by Buyer on or after the Closing Date.

 

Section 6.9.       Indemnity; Directors’ and Officers’ Insurance.

 

(a)       Buyer agrees to cause the Company to ensure, and the Company immediately following the Closing shall ensure, that all rights to indemnification now existing in favor of any individual who, at or prior to the Closing, (i) was a director or officer of the Company or (ii) at the request of the Company, served as a director, officer, member, trustee or fiduciary of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise (collectively, with such individual’s heirs, executors or administrators, the “Indemnified Persons”) as provided in the respective governing documents and indemnification agreements set forth on Schedule 6.9(a) of the Company Disclosure Letter, shall survive the Closing and shall continue in full force and effect for a period of not less than six (6) years from the Closing Date and the provisions with respect to indemnification and limitations on liability set forth in such charters, by-laws and indemnification agreements (in each case, now in effect) shall not be amended, repealed or otherwise modified; provided that in the event any claim or claims are asserted or made within such six (6) year period, all rights to indemnification in respect of any such claim or claims shall continue until final disposition of any and all such claims.

 

(b)       Prior to the Closing, the Company may purchase (at the Company’s sole cost and expense) and if purchased, Buyer shall cause the Company to maintain in effect in accordance with its terms, a tail policy or tail policies (collectively, the “Tail Policy”) to the

 

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current policies of directors’ and officers’ liability insurance and employment practices insurance maintained by the Company. The cost of any such Tail Policy shall be a Company Transaction Expense.

 

(c)       Notwithstanding anything to the contrary contained in this Agreement, the obligations of Buyer and the Company contained in this Section 6.9 shall be binding upon the successors and assigns of Buyer and the Company.  In the event Buyer or the Company, or any of their respective successors or assigns, (i) consolidates with or merges into any other Person or (ii) transfers all or substantially all of its properties or assets to any Person, then, and in each case, proper provision shall be made so that the successors and assigns of Buyer or the Company, as the case may be, honor the indemnification and other obligations set forth in this Section 6.9.

 

(d)       The obligations of Buyer and the Company under this Section 6.9 shall survive the Closing and shall not be terminated or modified in such a manner as to affect adversely any Indemnified Person to whom this Section 6.9 applies without the consent of such affected Indemnified Person (it being expressly agreed that the Indemnified Persons to whom this Section 6.9 applies shall be third-party beneficiaries of this Section 6.9, each of whom may enforce the provisions of this Section 6.9).

 

Section 6.10.     Resignation of Officers and Directors.  At the written request of Buyer (which request shall be delivered at least five (5) Business Days prior to the Closing), the Sellers shall cause any so requested member of the Board to tender his or her resignation from such position effective as of the Closing.  No such requested resignation of a member of the Board shall be deemed a voluntary resignation for purposes of any employment agreements and will not terminate, reduce or modify any severance or other rights thereunder.

 

Section 6.11.     Public Announcements.  Buyer, the Shareholders’ Representative and the Company each agree to (a) consult with each other before issuing any press release with respect to the transactions contemplated by this Agreement, (b) provide to the other party for review a copy of any such press release and (c) not issue any such press release prior to such consultation and review and the receipt of the prior written consent of the other parties to this Agreement, such consent not to be unreasonably withheld, conditioned or delayed, unless required by applicable Law or agreement with a national securities exchange on which Buyer’s shares of capital stock are listed and traded.

 

Section 6.12.     Transfer Taxes.  All stamp, transfer, documentary, sales and use, value added, registration and other such Taxes and fees incurred in connection with the Transactions (collectively, the “Transfer Taxes”) shall be borne equally by Buyer, on the one hand, and the Sellers, on the other hand. Buyer shall file on a timely basis all necessary Tax Returns with respect to any of the Transfer Taxes.

 

Section 6.13.     Preservation of Records.

 

(a)       For a period of seven (7) years after the Closing Date or such other longer period as required by applicable Law, Buyer shall preserve and retain all corporate, accounting, legal, auditing, human resources and other books and records of the Company (including (i) any documents relating to any governmental or non-governmental Action and (ii) all Tax Returns,

 

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schedules, work papers and other material records or other documents relating to Taxes of the Company) relating to the conduct of the business and operations of the Company prior to the Closing Date.  If at any time after such seven (7)-year period Buyer intends to dispose of any such books and records, Buyer shall not do so without first offering such books and records to the Shareholders’ Representative.  Notwithstanding anything to the contrary contained in this Agreement, the obligations of Buyer and the Company contained in this Section 6.13 shall be binding upon the successors and assigns of Buyer and the Company.  In the event Buyer or the Company, or any of their respective successors or assigns, (x) consolidates with or merges into any other Person or (y) transfers all or substantially all of its properties or assets to any Person, then, and in each case, proper provision shall be made so that the successors and assigns of Buyer or the Company, as the case may be, honor the preservation of records and other obligations set forth in this Section 6.13.

 

(b)       In the event and for so long as Buyer, the Company or the Shareholders’ Representative are actively contesting or defending against any Action, hearing, charge or demand in connection with any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Company, each of the other parties shall reasonably cooperate with it and its counsel in the defense or contest, make available their personnel, and provide such access to their books and records as shall be reasonably requested in connection with the defense or contest, all at the sole cost and expense of the contesting or defending party.

 

(c)       Any request for information or documents pursuant to this Section 6.13 shall be made by the requesting party in writing.  The other party hereto shall as promptly as practicable provide the requested information. The requesting party shall indemnify the other party for any out-of-pocket expenses incurred by such party in connection with providing any information or documentation pursuant to this Section 6.13. Any information obtained under this Section 6.13 shall be kept confidential, except as otherwise reasonably may be necessary in connection with the filing of Tax Returns or claims for refund or in conducting any Tax audit, dispute or contest.  Notwithstanding anything to the contrary contained in this Section 6.13, if the parties are in an adversarial relationship in any Action, the provisions of this Section 6.13 shall not apply and the furnishing of information, documents or records in accordance with any provision of this Section 6.13 shall be subject to applicable rules relating to discovery.

 

Section 6.14.    Conflicts; Privileges.  It is acknowledged by each of the parties hereto that the Company has retained Milbank to act as counsel to the Company and the Sellers in connection with the Transactions and that Milbank has not acted as counsel for any other Person in connection with the Transactions and that no other party to this Agreement has the status of a client of Milbank for conflict of interest or any other purposes as a result thereof.  Buyer hereby agrees that, in the event that a dispute arises subsequent to the Closing between Buyer or any of its Affiliates (including, after the Closing, the Company), on the one hand, and any Seller or any of their Affiliates (including the Shareholders’ Representative, on their behalf and, prior to the Closing, the Company), on the other hand, Milbank may represent such Seller or any such Affiliate (including the Shareholders’ Representative) in such dispute even though the interests of such Seller or such Affiliate may be directly adverse to Buyer or any of its Affiliates (including, after the Closing, the Company), and even though Milbank may have represented the Company in a matter substantially related to such dispute, or may be handling ongoing matters

 

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for Buyer or for the Company, Buyer and the Company hereby (i) waive, on behalf of themselves and each of their Affiliates, any claim they have or may have that Milbank has a conflict of interest in connection with or is otherwise prohibited from engaging in such representation, (ii) agree that, in the event that a dispute arises after the Closing between Buyer or any of its Affiliates (including, after the Closing, the Company) on the one hand and any Seller or the Shareholders’ Representative on the other hand, Milbank may represent any such party in such dispute even though the interest of such party may be directly adverse to Buyer or any of its Affiliates (including, after the Closing, the Company), and even though Milbank may have represented the Company in a matter substantially related to such dispute, or may be handling ongoing matters for Buyer or for the Company.  Buyer further agrees that, as to all communications among Milbank, the Company, any Seller and/or the Shareholders’ Representative that relate in any way to the transactions contemplated by this Agreement, the attorney-client privilege, the expectation of client confidence and all other rights to any evidentiary privilege belong to such Seller and/or the Shareholders’ Representative and may be controlled by such Seller and/or the Shareholders’ Representative and shall not pass to or be claimed by Buyer or the Company.  Notwithstanding the foregoing, if a dispute arises between Buyer or the Company and a third party other than a party to this Agreement after the Closing, the Company may assert the attorney-client privilege to prevent disclosure of confidential communication by Milbank to such third party.  Buyer agrees to take, and to cause its Affiliates to take, all steps necessary to implement the intent of this Section 6.14.  The Sellers, Buyer, the Company and the Shareholders’ Representative further agree that Milbank and its respective partners and employees are third-party beneficiaries of this Section 6.14.

 

Section 6.15.    Repayment of Indebtedness.  At the Closing, subject to the receipt of customary “payoff letters” and instructions, Buyer shall have provided for the repayment of all borrowings under the Credit Agreement outstanding (after giving effect to any prepayments by the Company made in connection with, and conditioned on, the Closing) immediately prior to, or as of, the Closing Date, the payment of all other amounts then due and payable thereunder and the termination of the Credit Agreement and all related Liens.

 

Section 6.16.     Security Clearances.  Buyer hereby acknowledges and agrees that the nature of the business of the Company requires compliance with the Department of Defense National Industrial Security Program (“NISP”) and National Industrial Security Program Operating Manual (Department of Defense Regulation 5220.22-M, with applicable changes) (“NISPOM”), and all other United States Government industrial security regulations (collectively, the “Industrial Security Regulations”), which, inter alia, obligate the Company to obtain facility security clearances, limit the degree of foreign ownership or control of, or foreign influence over, the Company, require recertification by the Company regarding the degree of foreign ownership, influence and control to which the Company is subject that results from a change in ownership of the Company, require that certain officers and management personnel and members of the Board obtain Department of Defense personnel security clearances and Sensitive Compartmented Information clearance caveats (an “SCI Caveat”), as necessary, in order to gain access to certain information, and may require that Buyer and the officers and directors of Buyer (that are not officers of the Company) obtain personnel security clearances with the SCI Caveat.  As a result, no Seller nor the Company will provide any information about, or access to, the Company except (i) in accordance with, and as permitted by, the Industrial Security Regulations, or (ii) after delivery by Buyer to the Shareholders’ Representative and the

 

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Company of evidence satisfactory to the Shareholders’ Representative and the Company of Buyer’s compliance with, and as to the permissibility of providing such access or information under, the NISP.  Buyer further acknowledges and agrees that, as applicable, consummation of the transactions contemplated hereby will require approval of Buyer under, and compliance by Buyer with, the Industrial Security Regulations, including, without limitation, the provisions relating to foreign ownership, influence and control, facility clearances, personnel security clearances and SCI Caveats, as required.  As a result, prior to Closing, Buyer and the Company shall cooperate to accomplish all things reasonably necessary to comply with the Industrial Security Regulations, and to cause the officers and directors of Buyer and any persons who shall become officers, directors or management personnel of the Company to comply with, and obtain all required approvals under, the NISP.

 

Section 6.17.     Termination of Stockholders’ Agreement.  The Company and the Sellers hereby acknowledge and agree that, effective upon the Closing, that certain Amended and Restated Stockholders’ Agreement, dated September 19, 2015, by and among the Company and the Sellers shall terminate and be of no further force or effect.

 

Section 6.18.     Section 280G.  If required to avoid the imposition of Taxes under Section 4999 of the Code or the loss of deduction under Section 280G of the Code with respect to any payment or benefit in connection with the transactions contemplated by this Agreement, the Company will (a) no later than five (5) days prior to the Closing Date, solicit from each “disqualified individual” (as defined in Section 280G(c) of the Code) who has received or may receive any payment or benefits that would constitute a “parachute payment” (within the meaning of Section 280G(b)(2)(A) of the Code) a waiver of such disqualified individual’s rights to some or all of such payments or benefits (the “Waived 280G Benefits” and, each such waiver, a “280G Waiver”) so that all remaining payments and/or benefits, if any, shall not be “excess parachute payments” (within the meaning of Section 280G of the Code) and (b) no later than three (3) days prior to the Closing Date, with respect to each individual who provides a duly executed 280G Waiver, submit to a vote of the stockholders and/or such other Persons entitled to vote (in a manner which satisfies all applicable requirements of Section 280G(b)(5)(B) of the Code and Q&A-7 of Section 1.280G-1 of such Treasury Regulations) the rights of any such “disqualified individual” to receive the Waived 280G Benefits.  No later than five (5) days prior to soliciting 280G Waivers from the “disqualified individuals,” the Company shall provide Buyer a reasonable opportunity to review, comment and approve drafts of such waivers and disclosure materials (which approval shall not be unreasonably withheld, conditioned or delayed).  If any of the Waived 280G Benefits fail to be approved by the stockholders as contemplated above, such Waived 280G Benefits shall not be made or provided.  Prior to the Closing, the Company shall deliver to Buyer evidence reasonably satisfactory to Buyer that a vote of the stockholders was solicited in accordance with the foregoing provisions of this Section 6.18 and that with respect to any Waived 280G Benefits either (i) the requisite number of votes of the stockholders was obtained (the “280G Approval”) or (ii) the 280G Approval was not obtained, and, as a consequence, any Waived 280G Benefits shall not be made or provided.

 

Section 6.19.     Tax Matters.

 

(a)        Following the Closing, at its option upon delivery of written notice thereof by the Shareholders’ Representative to Buyer no later than thirty (30) days after the Closing

 

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Date, the Shareholders’ Representative shall prepare or cause to be prepared (at the Shareholders’ Representative’s expense) and the Company shall file or cause to be filed all Tax Returns that are required to be filed by or with respect to the Company for any taxable period ending on or before the Closing Date and, subject to the rights to payment from the Sellers under Section 9.2(a), the Company shall pay or cause to be paid any Taxes shown due thereon.  All such Tax Returns shall be prepared in a manner consistent with past practice, except as otherwise required by applicable Law.  With respect to such Tax Returns, the Shareholders’ Representative shall furnish a completed copy of such Tax Return to Buyer for Buyer’s review and approval not later than twenty (20) days before the due date for filing such Tax Return (including extensions thereof), or if the Shareholders’ Representative has failed to notify Buyer of its election to prepare such Tax Returns, then Buyer shall furnish a completed copy of such Tax Return to the Shareholders’ Representative for the Shareholders’ Representative’s review and approval not later than twenty (20) days before the due date for filing such Tax Return (including extensions thereof).  The parties shall attempt in good faith to resolve any disagreement regarding such Tax Returns prior to filing.  In the event the parties are unable to resolve any dispute within ten (10) days prior to the due date for filing such Tax Return, such dispute shall be resolved pursuant to Section 6.19(c), which resolution shall be binding on the parties.  All Company Transaction Expenses that are deductible for U.S. federal income tax purposes shall be reported on the Company’s U.S. federal income Tax Return for the final Pre-Closing Tax Period except as otherwise required by Law.  The parties shall make any available elections under IRS Revenue Procedure 2011-29 to treat 70% of any success-based fees that are Company Transaction Expenses as amounts that did not facilitate the Transactions.  The Company shall not elect to waive any available carryback of a net operating loss or net capital loss for a Pre-Closing Tax Period or Overlap Period.

 

(b)       Following the Closing, Buyer shall prepare or cause to be prepared (at the Company’s expense) and the Company shall file or cause to be filed all Tax Returns that are required to be filed by or with respect to the Company for any Overlap Period and, subject to the rights to payment from the Sellers under Section 9.2(a), the Company shall pay or cause to be paid any Taxes shown due thereon.  All such Tax Returns shall be prepared in a manner consistent with past practice, except as otherwise required by applicable Law.  With respect to such Tax Returns, Buyer shall furnish a completed copy of such Tax Return to the Shareholders’ Representative for the Shareholders’ Representative’s review and approval with respect to the pre-Closing portion of the Overlap Period not later than twenty (20) days before the due date for filing such Tax Return (including extensions thereof), together with a statement setting forth the amount of Tax for which the Sellers are responsible pursuant to Section 9.2(a).  The parties shall attempt in good faith to resolve any disagreement regarding such Tax Returns prior to filing.  In the event the parties are unable to resolve any dispute within ten (10) days prior to the due date for filing such Tax Return, such dispute shall be resolved pursuant to Section 6.19(c), which resolution shall be binding on the parties.

 

(c)       Any dispute as to any matter covered by Section 6.19(a) or (b) shall be resolved by the Neutral Auditor.  The fees and expenses of the Neutral Auditor shall be borne equally by the Sellers, on the one hand, and Buyer, on the other.  If any dispute with respect to a Tax Return is not resolved prior to the due date of such Tax Return, such Tax Return shall be filed in the manner that the party responsible for filing such Tax Return deems correct without prejudice to the other party’s rights hereunder.

 

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(d)       The amount of any Taxes attributable to an Overlap Period shall be apportioned between the portion of such period ending on the Closing Date and the portion beginning after the Closing Date (i) in the case of property and ad valorem Taxes, by apportioning such Taxes on a per diem basis and (ii) in the case of all other Taxes, on a closing of the books basis, provided, however, that exemptions, allowances or deductions that are calculated on an annual basis (including depreciation and amortization deductions) shall be apportioned on a per diem basis.

 

(e)       If a written notice of deficiency, proposed adjustment, assessment, audit, examination or other administrative or court proceeding, suit, dispute or other claim with respect to Taxes of the Company is received by Ultimate Parent, Buyer or the Company or any of its Affiliates (a “Notified Party”) for which the Sellers would be expected to be liable pursuant to Section 9.2(a) (a “Tax Claim”), the Notified Party shall give the Shareholders’ Representative prompt notice of such Tax Claim.  After the Closing, the Shareholders’ Representative shall have the right (at its option and at the cost and expense of the Sellers), upon delivery of written notice thereof by the Shareholders’ Representative to Buyer within thirty (30) days (or such shorter period of time as may be necessitated by the nature of the Tax Claim but in no event less than ten (10) days) of the Shareholders’ Representative’s receipt of notice of such Tax Claim to represent the interests of the Company in any Tax Claim relating to a taxable period ending on or before the Closing Date (and the Company shall provide the Shareholders’ Representative with any necessary powers of attorney in connection therewith), and Buyer shall have the right to represent the interests of the Company in any Tax Claim relating to an Overlap Period; provided, however, that (i) the controlling party shall keep the non-controlling party reasonably informed and consult in good faith with the non-controlling party with respect to any issue relating to such Tax Claim, (ii) the controlling party shall provide the non-controlling party with copies of all correspondence, notices and other written material received from any Governmental Entity with respect to such Tax Claim and shall otherwise keep the non-controlling party apprised of substantive developments with respect to such Tax Claim, (iii) the controlling party shall provide the non-controlling party with a copy of, and an opportunity to review and comment on, all submissions made to a Governmental Entity in connection with such Tax Claim, and (iv) the controlling party may not agree to a settlement or compromise thereof without the prior written consent of the non-controlling party, which consent shall not be unreasonably withheld, conditioned or delayed.  If the Shareholders’ Representative fails to notify Buyer of its election to control a Tax Claim within thirty (30) days (or such shorter period of time as may be necessitated by the nature of the Tax Claim but in no event less than ten (10) days) following receipt by the Shareholders’ Representative of a notice of such Tax Claim, Buyer shall control such Tax Claim (at the Sellers’ expense) subject to the foregoing proviso. In the event of a conflict between the provisions of this Section 6.19(e), on the one hand, and the provisions of Section 9.5, on the other, the provisions of this Section 6.19(e) shall control.

 

(f)        After the Closing Date, the Sellers, on the one hand, and Ultimate Parent and Buyer, on the other hand, shall (and shall cause their respective Affiliates to) (i) assist the other party or parties, as the case may be, in preparing any Tax Returns that such other party or parties, as the case may be, is responsible for preparing and filing in accordance with Section 6.19(a) or (b), (ii) cooperate fully in responding to any inquiries from or preparing for any audits of, or disputes with Governmental Entities regarding, any Taxes or Tax Returns of the Company, and (iii) make available to the other party or parties, as the case may be, as reasonably requested,

 

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all information in its possession relating to the Company that may be relevant to any Tax Return, audit or examination, proceeding or determination and to any Governmental Entity as reasonably requested by the Shareholders’ Representative or Buyer all information, records and documents relating to Taxes of the Company.

 

(g)       The Sellers shall be entitled to any Tax refunds or overpayments in respect of Pre-Closing Tax Periods that are received or utilized as an offset, prepayment or credit by Ultimate Parent, Buyer or the Company, net of any out-of-pocket costs or Taxes attributable to such refunds; provided, however, that the Sellers shall not be entitled to any Tax refunds or overpayments that are (i) attributable to a carryback of a loss, credit or other Tax attribute from a Post-Closing Period or (ii) taken into account in the calculation of Closing Net Working Capital.  Buyer shall cause the Company to take reasonable actions to secure such refunds or overpayments as promptly as possible (including by filing IRS Form 4466) and shall pay to the Shareholders’ Representative (for the benefit of the Sellers in accordance with their Payout Percentages) any such amount within fifteen (15) days after the actual receipt of such refund or utilization of such overpayment or credit.

 

(h)       Without obtaining the prior written consent of the Shareholders’ Representative, which consent shall not be unreasonably withheld, conditioned or delayed, Buyer and Ultimate Parent shall not, and shall not cause or permit the Company to, (i) take any action on the Closing Date other than in the ordinary course of business that would reasonably be expected to give rise to any indemnification obligation of the Sellers under Section 9.2(a), (ii) make an election under Code section 338 with respect to the Transactions, (iii) amend any Tax Return of the Company for a Pre-Closing Tax Period or an Overlap Period, (iv) file any Tax Return of the Company for a Pre-Closing Tax Period or an Overlap Period other than one filed in accordance with Section 6.19(a) and (b), or (v) carry back any loss, credit or other Tax attribute from a taxable period beginning after the Closing Date to a Pre-Closing Tax Period or Overlap Period except as required by Law.  No party shall make (or purport to make) any election under Treasury Regulations section 1.1502-76(b)(2)(ii)(D) to ratably allocate items under Treasury Regulations section 1.1502-76(b)(2)(ii) or any election described in Treasury Regulations section 1.1502-76(b)(2)(iii).

 

ARTICLE VII - CONDITIONS PRECEDENT

 

Section 7.1.       Conditions to the Obligations of Each Party.  The respective obligations of Buyer, on the one hand, and Sellers, on the other hand, to consummate the Closing are subject to the waiver by Buyer and/or the Shareholders’ Representative, as appropriate, or the satisfaction, on or prior to the Satisfaction Date (or with respect to Section 7.1(a), on or prior to the Closing Date), of each of the following conditions:

 

(a)        Injunctions; Illegality.  No Governmental Entity shall have issued, enacted, entered, promulgated or enforced any Law or Order (that is final and non-appealable and that has not been vacated, withdrawn or overturned) restraining, enjoining or otherwise prohibiting the consummation of Transactions.

 

(b)       Requisite Regulatory Approvals.  (i) Each of (x) the waiting period, if any (and any extension thereof), applicable to the Transactions under the HSR Act shall have been

 

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terminated or shall have expired, (y) the Required Competition Consents shall have been obtained and (z) the consents, authorizations, orders and approvals from the Governmental Entities referred to in Schedule 7.1(b) of the Company Disclosure Letter shall have been received in form and substance reasonably satisfactory to Buyer (all such authorizations, consents, orders, approvals, filings and declarations and the lapse of all such waiting periods, as applicable, being referred to as the “Requisite Regulatory Approvals”) and (ii) all the Requisite Regulatory Approvals shall be in full force and effect.

 

(c)        Escrow Agreement.  Buyer and the Shareholders’ Representative shall have entered into the Escrow Agreement with the Escrow Agent.

 

Section 7.2.       Conditions to the Obligations of Buyer.  The obligation of Buyer to consummate the Closing is subject to the waiver by Buyer or the satisfaction on or prior to the Satisfaction Date (or with respect to Section 7.2(a), Section 7.2(b) (to the extent provided therein), Section 7.2(c)(ii), Section 7.2(h), and Section 7.2(i), in each case, on or prior to the Closing Date) of the following further conditions:

 

(a)       Performance.  All of the agreements and covenants of Sellers to be performed prior to the Closing pursuant to this Agreement shall have been duly performed in all material respects.

 

(b)       Representations and Warranties.  The representations and warranties made by Sellers in Article III and Article IV that are qualified by “Material Adverse Effect” shall be true and correct in all respects and those that are not so qualified shall be true and correct in all material respects, in each case, as of the date hereof and (x) with respect to the Fundamental Representations, the Closing Date and (y) with respect to all other representations and warranties, the Satisfaction Date, as if made at and as of such respective times (other than those made as of a specified date, which shall be true and correct in all respects as of such specified date, in each case disregarding all materiality qualifications and exceptions contained therein).

 

(c)       Officer’s Certificates.

 

(i)          On the Satisfaction Date, the Company shall have delivered to Buyer an officer’s certificate, dated as of the Satisfaction Date and executed in the name and on behalf of the Company, certifying that all of the conditions set forth in Section 7.2(b) that are to be satisfied as of the Satisfaction Date and 7.2(d) have been satisfied.

 

(ii)         On the Closing Date, the Company shall have delivered to Buyer an officer’s certificate, dated as of the Closing Date and executed in the name and on behalf of the Company, certifying that all of the conditions set forth in Sections 7.2(a) and 7.2(b) that are to be satisfied as of the Closing Date have been satisfied.

 

(d)       No Material Adverse Effect.  Since the date of this Agreement through the Satisfaction Date, there shall not have occurred a Material Adverse Effect.

 

(e)       No Litigation, Etc.  As of the Satisfaction Date, there shall not be any Action pending by any Governmental Entity that is reasonably likely to, (i) restrain, enjoin, prevent, prohibit or make illegal the acquisition of some or all of the Shares by Buyer, (ii)

 

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impose material limitations on the ability of Buyer or its Affiliates effectively to exercise full rights of ownership of all Shares following Closing,

 

(f)        Required Third Party Consents.  The Company shall have obtained all consents, waivers and approvals, and given all of the notices identified in Schedule 7.2(f) of the Buyer Disclosure Letter. As of the Satisfaction Date, each such consent, waiver and approval shall be in form and substance reasonably satisfactory to Buyer and shall not require as a term thereof or condition thereto satisfaction of any adverse condition or requirement on the conduct of business by the Buyer, the Company or any of its Subsidiaries.

 

(g)       Non-Compete Agreements.  Each Non-Compete Agreement shall be in full force and effect, and each Seller shall be able and willing, as of the Satisfaction Date, to perform their respective obligations under the Non-Compete Agreements.

 

(h)       FIRPTA Certificate.  On or prior to the Closing Date, Buyer shall have received an affidavit, executed by the Company under penalties of perjury, stating that capital stock of the Company is not a “U.S. real property interest” pursuant to Treasury Regulations section 1.1445-2(c)(3), dated as of the Closing Date.

 

(i)        Resignations and Releases. On or prior to the Closing Date, Buyer shall have received fully executed resignations and releases, in the form attached hereto as Exhibit 7.2(i), from each director and officer of the Company, resigning from any and all positions previously held with the Company and releasing the Company, Buyer and their respective Affiliates from any and all liability arising with respect to pre-Closing matters.

 

(j)         Customer Contracts.  As of the Satisfaction Date, each Contract listed on Schedule 7.2(j) of the Company Disclosure Letter in existence on the date hereof shall be in full force and effect, no material default on the part of the Company or any counterparty thereto shall be in effect in respect of any such Contract, and none of the Company, the Sellers or Buyer shall have received notice of any Person’s intent to terminate any such Contract or change in any material respect its business dealings with the Company pursuant to any such Contract.

 

Section 7.3.       Conditions to the Obligations of the Sellers.  The obligation of the Sellers to consummate the Closing is subject to the waiver by the Shareholders’ Representative or the satisfaction on or prior to the Satisfaction Date (or with respect to Section 7.3(a), Section 7.3(b) (to the extent provided therein), and Section 7.2(c)(ii), in each case, on or prior to the Closing Date) of the following further conditions:

 

(a)       Performance.  All of the agreements and covenants of Buyer to be performed prior to the Closing pursuant to this Agreement shall have been duly performed in all material respects.

 

(b)       Representations and Warranties.  The representations and warranties made by Buyer in Article V shall be true and correct in all respects (x) with respect to the Fundamental Representations, as of the Closing Date and (y) with respect to all other representations and warranties, as of the Satisfaction Date, as if made at and as of such respective times (other than those made as of a specified date, which shall be true and correct in all respects as of such specified date), except where the failure of such representations and warranties to be

 

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true and correct would not be reasonably likely to materially impair the ability of Buyer to consummate the transactions contemplated hereby.

 

(c)       Officer’s Certificates.

 

(i)          On the Satisfaction Date, Buyer shall have delivered to the Shareholders’ Representative an officer’s certificate, dated as of the Satisfaction Date and executed in the name and on behalf of Buyer, certifying that all of the conditions set forth in 7.3(b) that are to be satisfied as of the Satisfaction Date have been satisfied.

 

(ii)         On the Closing Date, Buyer shall have delivered to the Shareholders’ Representative an officer’s certificate, dated as of the Closing Date and executed in the name and on behalf of Buyer, certifying that all of the conditions set forth in Sections 7.3(a) and 7.3(b) that are to be satisfied as of the Closing Date have been satisfied.

 

Section 7.4.       Frustration of Closing Conditions.  None of Buyer or Sellers may rely on the failure of any condition set forth in this Article VII to be satisfied if such failure was caused by such party’s failure to act in good faith or such party’s failure to use its commercially reasonable efforts to cause the Closing to occur, as required by Section 6.5.

 

ARTICLE VIII - TERMINATION AND ABANDONMENT

 

Section 8.1.       Termination.  This Agreement may be terminated, and the transactions contemplated hereby may be abandoned, at any time prior to the Closing:

 

(a)       by mutual written consent of the Shareholders’ Representative and Buyer;

 

(b)       by either Buyer or the Shareholders’ Representative, if:

 

(i)          any Governmental Entity shall have issued, enacted, entered, promulgated or enforced any Law or Order (that is final and non-appealable and that has not been vacated, withdrawn or overturned) restraining, enjoining or otherwise prohibiting the consummation of the Transactions; provided that the party seeking to terminate pursuant to this Section 8.1(b)(i) shall have complied with its obligations, if any, under Section 6.5 in connection with such Law or Order; or

 

(ii)         the Satisfaction Date shall not have occurred on or prior to 11:59 P.M. New York City time on the three (3) month anniversary of the date of this Agreement (the “End Date”); provided that the End Date may be extended for up to sixty (60) days thereafter by written notice given prior to such initial End Date by the Shareholders’ Representative to Buyer or by Buyer to the Shareholders’ Representative if the Requisite Regulatory Approvals have not been obtained by such initial End Date; provided, further, that the right to terminate this Agreement pursuant to this Section 8.1(b)(ii) shall not be available to any party whose actions in breach of this Agreement or failure to take action in breach of this Agreement has been the principal cause of or resulted in any of the conditions set forth in Article VII having failed to be satisfied prior to such date;

 

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(c)       by the Shareholders’ Representative: if (i) any of the representations and warranties made by Buyer in Article V shall fail to be true and correct or (ii) there shall be a breach by Buyer of any covenant or agreement of Buyer in this Agreement that, in either case, (A) would result in the failure of a condition set forth in Section 7.1, 7.3(a) or 7.3(b) and (B) which is not curable or, if curable, is not cured upon the occurrence of the earlier of (x) the thirtieth (30th) day after written notice thereof is given by the Shareholders’ Representative to Buyer and (y) the day that is five (5) Business Days prior to the End Date; provided that the Shareholders’ Representative may not terminate this Agreement pursuant to this Section 8.1(c) if the Sellers are in material breach of this Agreement;

 

(d)       by Buyer: if (i) any of the representations and warranties made by the Sellers in Article III and Article IV shall fail to be true and correct or (ii) there shall be a breach by the Sellers of any covenant or agreement of the Sellers in this Agreement that, in either case, (A) would result in the failure of a condition set forth in Section 7.1, 7.2(a) or 7.2(b) and (B) which is not curable or, if curable, is not cured upon the occurrence of the earlier of (x) the thirtieth (30th) day after written notice thereof is given by Buyer to the Shareholders’ Representative and (y) the day that is five (5) Business Days prior to the End Date; provided that Buyer may not terminate this Agreement pursuant to this Section 8.1(d) if Buyer is in material breach of this Agreement; or

 

(e)       by Buyer if a Material Adverse Effect has occurred since the date of this Agreement and on or prior to the Satisfaction Date with respect to the Company.

 

Section 8.2.       Effect of Termination.  In the event of the termination of this Agreement pursuant to Section 8.1, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination is made, and this Agreement shall be terminated and become void and have no effect, and there shall be no liability hereunder on the part of Buyer, Sellers or the Company, except that Sections 6.2, 6.11, 6.14, 10.1, 10.10, 10.13 and this Section 8.2 shall survive any termination of this Agreement.  Nothing in this Section 8.2 shall (i) relieve or release any party to this Agreement of any liability or damages arising from a breach of this Agreement prior to its termination or (ii) impair the right of any party hereto to compel specific performance as provided in Section 10.12 by the other party or parties, as the case may be, of such party’s obligations under this Agreement.

 

ARTICLE IX - SURVIVAL; INDEMNIFICATION

 

Section 9.1.       Survival of Representations and Warranties.

 

(a)        The respective representations and warranties made by Sellers and Buyer in Articles III, IV and V and any obligation of a party hereto to indemnify the other party in respect of any breach of any covenant or agreement required to be performed or complied with prior to the Closing (each, a “Pre-Closing Covenant”) shall survive the Closing solely for the purpose of Sections 9.2 and 9.3 until the Survival Expiration Date; provided, however, that the Fundamental Representations (other than the representations and warranties of the Company set forth in Section 4.7 (Tax Matters)) shall survive the Closing until the third (3rd) anniversary of the Closing Date and the representations and warranties of the Company set forth in Section 4.7 (Tax Matters) shall survive the Closing until sixty (60) days following the expiration of the

 

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applicable statute of limitations. Any claims for indemnification under Section 9.2(a)(iii) shall survive the Closing until sixty (60) days following the expiration of the applicable statute of limitations.  All covenants to be performed or complied with after the Closing shall survive in accordance with their terms.

 

(b)       No party shall have any liability whatsoever with respect to any representation and warranty or Pre-Closing Covenant, as the case may be, unless a claim is validly made hereunder prior to the expiration of the applicable survival period for such representation and warranty or Pre-Closing Covenant, in which case such representation and warranty or Pre-Closing Covenant, as the case may be, shall survive as to such claim until such claim has been finally resolved pursuant to this Article IX.

 

Section 9.2.       Indemnification.

 

(a)       Subject to the other provisions of this Article IX, from and after the Closing, Buyer, the Company and each of their respective Affiliates and Representatives (the “Buyer Indemnitees”) shall be indemnified and each of them held harmless, by each Seller (severally and not jointly) against any Losses incurred by them related to, arising out of or as a result of any breach of or inaccuracy in any representation or warranty made by such Sellers in Article III of this Agreement on and as of the date hereof and as of the Closing Date (without giving effect to any materiality, “Material Adverse Effect” or similar qualification contained or incorporated directly or indirectly in any representation or warranty).  Subject to the other provisions of this Article IX, from and after the Closing, the Buyer Indemnitees shall be indemnified and held harmless, by each Seller (severally and not jointly) against any Losses incurred by them related to, arising out of or as a result of (i) any breach of or inaccuracy in any representation or warranty made by the Sellers in Article IV of this Agreement on and as of the date hereof and (x) with respect to the Fundamental Representations, as of the Closing Date and (y) with respect to all other representations and warranties, as of the Satisfaction Date (without giving effect to any materiality, “Material Adverse Effect” or similar qualification contained or incorporated directly or indirectly in any representation or warranty), (ii) any breach of any covenant or agreement by the Sellers or, prior to the Closing, the Company contained in this Agreement and (iii) any Excluded Taxes.

 

(b)       Subject to the limitations set forth in this Article IX, from and after the Closing, Buyer agrees to and shall indemnify the Sellers and hold each of them harmless against any Losses incurred by them related to, arising out of or as a result of: (i) any breach or inaccuracy of any representation or warranty made by Buyer in Article V of this Agreement on and as of the Satisfaction Date and (ii) any breach of any covenant or agreement by Buyer or, after the Closing, by the Company under this Agreement.

 

Section 9.3.       Limitation on Indemnification, Mitigation.

 

(a)       Notwithstanding anything to the contrary contained in this Agreement, (i) the Sellers shall not be liable for any claim for indemnification pursuant to Section 9.2(a)(i) (except in respect of the Fundamental Representations, with any breaches of or inaccuracies in such Fundamental Representations not being subject to the limitations set forth in this Section 9.3(a)) unless and until the aggregate amount of Qualifying Losses which may be recovered from

 

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the Sellers as a group equals or exceeds the Deductible and (ii) the maximum aggregate amount of indemnifiable Qualifying Losses which may be recovered by Buyer for indemnification pursuant to Section 9.2(a)(i) (except in respect of the Fundamental Representations, with any breaches of or inaccuracies in such Fundamental Representations not being subject to the limitations set forth in this Section 9.3(a)) shall in no event be greater than the amount remaining in the Escrow Fund after giving effect to all payments made pursuant to Section 2.6(f), if any (the “Indemnity Cap”).

 

(b)       Buyer and, after the Closing, the Company shall take and shall cause their respective Affiliates to use commercially reasonable efforts to mitigate any Loss for which any of them could be entitled to indemnification under this Article IX upon becoming aware of any event which would reasonably be expected to, or does actually, give rise thereto, including incurring costs to the extent necessary to remedy the breach which gives rise to such Loss.

 

(c)       Except as provided in the first sentence of Section 9.6, in no event shall any Seller be responsible (i) for any indemnifiable Loss or Losses in excess of such Seller’s Payout Percentage of the Purchase Price, excluding the Holdback Amount unless paid to the Sellers and (ii) for any indemnifiable Loss or Losses pursuant to Section 9.2(a)(i), (ii) or (iii) in excess of such Seller’s Payout Percentage of such Loss.

 

(d)       Any indemnifiable claim with respect to any breach or nonperformance by any party of a representation, warranty, covenant or agreement shall be limited to the Losses sustained and incurred by the indemnified party by reason of such breach or nonperformance reduced by an amount equal to any cash Tax benefit actually realized as a result of the utilization of the deductions resulting directly from such Loss by the indemnified party prior to the end of the year such indemnification payment is made, computed on a with and without basis, treating all such deductions as the last item of deduction available to the Indemnified Party. Notwithstanding anything in this Agreement to the contrary, no party shall be indemnified or reimbursed for any Loss arising or resulting from any change in applicable Law or GAAP from and after the Closing Date.  No indemnified party shall be entitled to recover Losses in respect of any claim or otherwise obtain reimbursement or restitution more than once with respect to any claim hereunder.

 

Section 9.4.       Losses Net of Insurance, Etc.  The amount of any Loss for which indemnification is provided under Section 9.2(a) or Section 9.2(b) shall be net of (i) any amount for which a reserve or accrual is established in Closing Working Capital hereunder or which has been taken into account as a current liability for purposes of the calculation of the Total Consideration, (ii) any amounts recovered by the Indemnified Party pursuant to any indemnification by or indemnification agreement with any third party and (iii) any proceeds under insurance policies maintained by the Company as of the Closing Date and for which the premiums were paid in full as of the Closing Date or other cash receipts or sources of reimbursement received as an offset against such Loss (each source of recovery referred to in clauses (ii) and (iii), a “Collateral Source”), if any, attributable to such Loss.  If the amount to be netted hereunder in connection with a Collateral Source from any payment required under Section 9.2(a) or Section 9.2(b) is determined after payment by the Indemnifying Party of any amount otherwise required to be paid to an Indemnified Party to this Article IX, the Indemnified Party shall repay to the Indemnifying Party, promptly after such determination, any

 

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amount that the Indemnifying Party would not have had to pay pursuant to this Article IX had such determination been made at the time of such payment, and any excess recovery from a Collateral Source shall be applied to reduce any future payments to be made by the Indemnifying Party pursuant to Section 9.2 or Section 9.3.

 

Section 9.5.       Indemnification Procedure.  All claims for indemnification by any Indemnified Party under Article IX shall be asserted and resolved as follows:

 

(a)       In the event any claim or demand in respect of which an Indemnified Party might seek indemnity under Article IX is asserted against or sought to be collected from such Indemnified Party by a Person other than the Sellers, the Company, Buyer or any Affiliate of the Company or Buyer (a “Third Party Claim”), the Indemnified Party shall deliver a Claim Notice with reasonable promptness to the Indemnifying Party.  If the Indemnified Party fails to provide the Claim Notice with reasonable promptness after the Indemnified Party receives notice of such Third Party Claim, the Indemnifying Party will not be obligated to indemnify the Indemnified Party with respect to such Third Party Claim to the extent that the Indemnifying Party’s ability to defend has been irreparably prejudiced by such failure of the Indemnified Party.  The Indemnifying Party will notify the Indemnified Party as soon as practicable within the thirty (30) days following receipt by the Indemnifying Party of a Claim Notice whether the Indemnifying Party disputes its liability to the Indemnified Party under Article IX and whether the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim.

 

(i)          If the Indemnifying Party notifies the Indemnified Party within the thirty (30) days (or such shorter period of time as may be necessitated by the nature of the Third Party Claim and specified in the Claim Notice) following receipt by the Indemnifying Party of a Claim Notice that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this Section 9.5(a) (which it may do only if it, based solely on the facts and circumstances set forth in the Claim Notice, acknowledges responsibility to provide indemnification in accordance with the provisions of this Article IX in connection with such Third Party Claim; provided that such acknowledgement shall not preclude the Indemnifying Party from later asserting a defense that it is not obligated to provide indemnification in accordance with the provisions of this Article IX in the event additional facts become known after such acknowledgement), then the Indemnifying Party will have the right to defend, with counsel reasonably satisfactory to the Indemnified Party, at the sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate proceedings, which proceedings will be vigorously and diligently prosecuted by the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party (but only with the consent of the Indemnified Party, which consent will not be unreasonably withheld, in the case of any settlement that (i) relates to Taxes or (ii) provides for any relief other than the payment of monetary damages as to which the Indemnified Party will be indemnified from the Escrow Fund).  The Indemnifying Party will have full control of such defense and proceedings, including (except as provided in the immediately preceding sentence) any settlement thereof; provided, however, that the Indemnified Party may, at the sole cost and expense of the Indemnified Party, at any time prior to the Indemnifying Party’s delivery of the notice referred to in the first sentence of this clause (i), file any motion, answer or other pleadings or take any other action that the Indemnified Party reasonably believes to be necessary or appropriate to protect its

 

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interests; and provided further, that if requested by the Indemnifying Party, the Indemnified Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnifying Party in contesting any Third Party Claim that the Indemnifying Party elects to contest.  The Indemnified Party may retain separate counsel to represent it in, but not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this clause (i), and the Indemnified Party will bear its own costs and expenses with respect to such separate counsel, except as provided in the preceding sentence and except that the Indemnifying Party will pay the costs and expenses of such separate counsel if (x) in the Indemnified Party’s good faith judgment, it is advisable, based on advice of counsel, for the Indemnified Party to be represented by separate counsel because a conflict or potential conflict exists between the Indemnifying Party and the Indemnified Party or (y) the named parties to such Third Party Claim include both the Indemnifying Party and the Indemnified Party and the Indemnified Party determines in good faith, based on advice of counsel, that defenses are available to it that are unavailable to the Indemnifying Party.  Notwithstanding the foregoing, the Indemnified Party may retain or take over the control of the defense or settlement of any Third Party Claim the defense of which the Indemnifying Party has elected to control if the Indemnified Party irrevocably waives its right to indemnity under Article IX with respect to such Third Party Claim.

 

(ii)         If (x) the Indemnifying Party fails to notify the Indemnified Party within the thirty (30) days following receipt by the Indemnifying Party of a Claim Notice that the Indemnifying Party desires to defend the Third Party Claim pursuant to Section 9.5(a), (y) if the Indemnifying Party gives such notice but fails to defend vigorously and diligently the Third Party Claim or (z) (A) the Third Party Claim relates to or arises in connection with an action, suit, proceeding or claim that is criminal in nature or being brought by a Governmental Entity, (B) the Third Party Claim seeks an injunction restricting the conduct of the Company’s business, (C) the Third Party Claim has a reasonable likelihood of resulting in Damages that would exceed the remaining balance of the Escrow Fund or (D) the Third Party Claim involves as a claimant a material customer, client or supplier of the Company, then the Indemnified Party will have the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings will be prosecuted by the Indemnified Party in good faith or will be settled at the discretion of the Indemnified Party (with the consent of the Indemnifying Party, which consent will not be unreasonably withheld).  The Indemnified Party will have full control of such defense and proceedings, including (except as provided in the immediately preceding sentence) any settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting.

 

(b)       In the event any Indemnified Party should have a claim under Article IX against any Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable promptness to the Indemnifying Party.  The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party’s rights hereunder except to the extent that an Indemnifying Party demonstrates that it has been irreparably prejudiced thereby.  If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the thirty (30) days following receipt by the Indemnifying Party of an Indemnity

 

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Notice whether the Indemnifying Party disputes the claim described in such Indemnity Notice, the Loss arising from the claim specified in such Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Article IX and the Indemnifying Party shall pay the amount of such Loss to the Indemnified Party on demand following the final determination thereof.  If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within the Resolution Period, such dispute shall be resolved by litigation in a court of competent jurisdiction in accordance with Section 10.10.

 

Section 9.6.       Sole Remedy/Waiver.  Except in the case of actual (and not constructive) fraud or intentional misrepresentation and as set forth in Section 10.12, the parties hereto acknowledge and agree that, in the event that the Closing occurs, the remedies provided for in this Article IX shall be the parties’ sole and exclusive remedy for any breach of the representations and warranties or covenants contained in this Agreement or any claims relating to this Agreement or any other document, certificate or agreement delivered pursuant hereto.  In furtherance of the foregoing, the parties hereby waive, effective upon the occurrence of the Closing, to the fullest extent permitted by applicable Law, any and all other rights, claims and causes of action (including rights of contribution, if any, and claims for rescission) known or unknown, foreseen or unforeseen, which exist or may arise in the future, that it may have against the Sellers or any of their Representatives, the Shareholders’ Representative or any of its Representatives, any member of the Board, or Buyer or any of its Representatives, as the case may be, arising under or based upon any federal, state or local Law (including any such Environmental Law or arising under or based upon any securities Law, common law or otherwise) for any breach of the representations and warranties or covenants contained in this Agreement.

 

Section  9.7.      Tax Treatment of Indemnity Payments.  All indemnity payments made pursuant to this Article IX shall be deemed to be, and each of the Sellers, Buyer and the Company shall treat, and shall cause each of their Subsidiaries to treat such payments as, an adjustment to the Purchase Price for all federal, state, local and foreign income Tax purposes except as otherwise required by applicable Law.

 

ARTICLE X - MISCELLANEOUS

 

Section 10.1.    Fees and Expenses.  Except as set forth in Sections 6.5(b)(y), 6.9(b), 6.12 and 6.15, all costs and expenses incurred in connection with this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.

 

Section 10.2.     Extension; Waiver.  Subject to the express limitations herein, at any time prior to the Closing, the parties hereto, by action taken by or on behalf of the Shareholders’ Representative, the Company or the Buyer, as the case may be, may (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein by any other applicable party or in any document, certificate or writing delivered pursuant hereto by any other applicable party or (c) waive compliance with any of the agreements or conditions contained herein.  Any

 

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agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.  No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed as a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right.

 

Section 10.3.     Notices.  Except as otherwise provided herein, all notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent via electronic mail in “.pdf” form (and in the case of delivery via electronic mail in “.pdf” form, followed by copies sent by overnight courier service or registered mail) to the respective parties as follows and shall be effective and deemed to have been given (a) if sent by electronic mail in “.pdf” form, on the next Business Day and (b) if delivered by hand or overnight courier service or certified or registered mail on a Business Day, when received and otherwise, on the next Business Day:

 

(a)                       If to Sellers or, prior to the Closing, the Company, at:

 

Armed Forces Services Corporation

2800 S. Shirlington Road, #350

Arlington, VA 22206

Attention:  Geoffrey J. Deutsch, President and CEO

E-mail:  GDeutsch@afsc.com

 

and

 

Shareholders’ Representative

c/o Armed Forces Services Corporation

2800 S. Shirlington Road, #350

Arlington, VA 22206

Attention:  Chief Executive Officer

 

with a copy (which shall not constitute notice) to:

 

Milbank, Tweed, Hadley & McCloy LLP

28 Liberty Street

New York, New York 10005

Attention:  Roland Hlawaty, Esq.

E-mail:  rhlawaty@milbank.com

 

(b)                       if to Ultimate Parent, Buyer or, after the Closing, the Company, at:

 

Magellan Health, Inc.

4800 Scottsdale Road, Ste. #4400

Scottsdale, AZ 85251

Attention:          Daniel Gregoire, General Counsel

E-mail:               DNGregoire@magellanhealth.com

 

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with a copy (which shall not constitute notice) to:

 

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Attention:          Raymond O. Gietz, Esq.

E-mail:               raymond.gietz@weil.com

 

or to such other Person or address as any party shall specify by notice in writing in accordance with this Section 10.3 to each of the other parties.  All such notices of a change of address shall be effective only upon receipt thereof.

 

Section 10.4.    Entire Agreement.  This Agreement together with the Company Disclosure Letter and the Buyer Disclosure Letter contains the entire understanding of the parties hereto with respect to the subject matter contained herein and supersedes all prior agreements and understandings, oral and written, with respect thereto, other than the Confidentiality Agreement.

 

Section 10.5.     Release; Disclaimer.

 

(a)       Effective as of the Closing, each of Buyer and the Company (each, a “Buyer Releasor”), on behalf of itself and its respective Subsidiaries and Affiliates, and each of their respective successors and assigns, hereby releases, acquits and forever discharges, to the fullest extent permitted by Law, each of the Sellers (each, a “Seller Releasee”) of, from and against any and all Actions, Liabilities, damages, judgments, debts and dues and of every kind, nature and description whatsoever, which such Buyer Releasor or its successors or assigns ever had, now has or may have on or by reason of any matter, cause or thing, in each case in his or her capacity as an equityholder of the Company and occurring or arising prior to the Closing, but only to the extent that such matter, cause or thing does not otherwise constitute fraud or willful misconduct.  Each Buyer Releasor agrees not to, and agrees to cause its respective Subsidiaries and Affiliates, and each of their respective successors and assigns, not to, assert any such claim against the Seller Releasees.  Notwithstanding the foregoing, each Buyer Releasor does not release (and expressly retains) any and all rights and interests under the terms and conditions of this Agreement, any Ancillary Agreement or the Confidentiality Agreement.

 

(b)       Other than with respect to this Agreement, the Ancillary Agreements, the Confidentiality Agreement and, with respect to the Persons identified on Schedule 7.2(g)(iii) only, any compensation or benefits owed by the Company to such Sellers, effective as of the Closing, each Seller (each, a “Seller Releasor”), on behalf of itself and on behalf of its marital community, if any, agents, heirs, executors, administrators, and each of their respective successors and assigns, hereby releases, acquits and forever discharges, to the fullest extent permitted by Law, each of Buyer and its respective past, present or future shareholders, partners, members, Affiliates (including, for the avoidance of doubt, Ultimate Parent and the Company), counsel, Representatives, and its successors and assigns (each, a “Buyer Releasee”) of, from and against any and all Actions, Liabilities, damages, judgments, debts and dues and of every kind, nature and description whatsoever, which such Seller Releasor or its successors or assigns ever had, now has or may have on or by reason of any matter, cause or thing in each case as an

 

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equityholder of the Company and occurring or arising prior to the Closing, but only to the extent that such matter, cause or thing does not otherwise constitute fraud or willful misconduct. Each Seller Releasor agrees not to, and agrees to cause its respective Subsidiaries and Affiliates, and each of their respective successors and assigns, not to, assert any such claim against the Buyer Releasees.

 

(c)       EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THE TRANSACTIONS CONTEMPLATED HEREBY ARE BEING EFFECTED “AS IS, WHERE IS, WITH ALL FAULTS,” AND THE SELLERS, THE COMPANY AND THE SHAREHOLDERS’ REPRESENTATIVE, FOR THEMSELVES AND ON BEHALF OF THEIR RESPECTIVE AFFILIATES AND REPRESENTATIVES, EACH EXPRESSLY DISCLAIM ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR QUALITY OF THE INTERESTS OR THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS AND OTHER INCIDENTS OF THE COMPANIES.

 

Section 10.6.     Binding Effect; Benefit; Assignment.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, legal representatives and successors and assigns and, with respect to the provisions of Sections 6.7, 6.9, 6.14, 10.5 and Article IX shall inure to the benefit of the Persons benefiting from the provisions thereof all of whom are intended to be third-party beneficiaries thereof.  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 each of the other parties; provided, however, that the Shareholders’ Representative may assign its rights and obligations under this Agreement to any of its Affiliates without prior written consent.  Any attempted assignment in violation of this Section 10.6 will be void.

 

Section 10.7.     Shareholders’ Representative.

 

(a)       Each Seller has constituted, appointed and empowered effective from and after the date of such consent, the Person designated as such by the Board as the Shareholders’ Representative, for the benefit of the Sellers and the exclusive agent and attorney-in-fact to act on behalf of each Seller, in connection with and to facilitate the consummation of the transactions contemplated hereby, which shall include the power and authority to: (i) enforce and protect the rights and interests of the Sellers and to enforce and protect the rights and interests of such Persons arising out of or under or in any manner relating to this Agreement and the transactions provided for herein, and to take any and all actions which the Shareholders’ Representative believes are necessary or appropriate under this Agreement for and on behalf of the Sellers including, consenting to, compromising or settling any such claims, conducting negotiations with Buyer and, after the Closing Date, the Company and their respective Representatives regarding such claims, and, in connection therewith, to (A) assert any claim or institute any Action; (B) investigate, defend, contest or litigate any Third Party Claim pursuant to Section 9.5 or any other Action or investigation initiated by Buyer and, after the Closing Date, the Company or any other Person, or by any Governmental Entity against the Shareholders’ Representative and/or any of the Sellers, and receive process on behalf of any or all Sellers in any such Action or investigation and compromise or settle on such terms as the Shareholders’ Representative shall determine to be appropriate, and give receipts, releases and discharges with

 

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respect to, any such Third Party Claim or other Action or investigation; (C) file any proofs of debt, claims and petitions as the Shareholders’ Representative may deem advisable or necessary; (D) settle or compromise any claims asserted under this Agreement; and (E) file and prosecute appeals from any decision, judgment or award rendered in any such Action or investigation, it being understood that the Shareholders’ Representative shall not have any obligation to take any such actions, and shall not have any liability for any failure to take any such actions; (ii) to refrain from enforcing any right of the Sellers arising out of or under or in any manner relating to this Agreement; provided, however, that no such failure to act on the part of the Shareholders’ Representative, except as otherwise provided in this Agreement, shall be deemed a waiver of any such right or interest by the Shareholders’ Representative or by the Sellers unless such waiver is in writing signed by the waiving party or by the Shareholders’ Representative; (iii) to make, execute, acknowledge and deliver all such other agreements, guarantees, orders, receipts, endorsements, notices, requests, instructions, certificates, stock powers, letters and other writings, and, in general, to do any and all things and to take any and all action that the Shareholders’ Representative, in its sole and absolute discretion, may consider necessary or proper or convenient in connection with or to carry out the transactions contemplated by this Agreement; (iv) to engage special counsel, accountants and other advisors and incur such other expenses on behalf of the Sellers in connection with any matter arising under this Agreement, which such expenses the Shareholders’ Representative is authorized to pay from the Expense Holdback Amount; and (v) subject to Section 10.8, to negotiate and execute any waivers or amendments of this Agreement or the Escrow Agreement.

 

(b)       The Shareholders’ Representative shall be entitled to receive reimbursement from, and be indemnified by, the Sellers for certain expenses, charges and liabilities as provided below.  In connection with this Agreement, and in exercising or failing to exercise all or any of the powers conferred upon the Shareholders’ Representative hereunder, (i) the Shareholders’ Representative shall incur no responsibility whatsoever to any Sellers by reason of any error in judgment or other act or omission performed or omitted hereunder, excepting only responsibility for any act or failure to act which represents willful misconduct and (ii) the Shareholders’ Representative shall be entitled to rely on the advice of counsel, public accountants or other independent experts experienced in the matter at issue, and any error in judgment or other act or omission of the Shareholders’ Representative pursuant to such advice shall in no event subject the Shareholders’ Representative to liability to any Sellers.  Each Seller shall indemnify, severally and not jointly, based on such Seller’s Payout Percentage, the Shareholders’ Representative against all losses, damages, liabilities, claims, obligations, costs and expenses, including reasonable attorneys’, accountants’ and other experts’ fees and the amount of any judgment against them, of any nature whatsoever (including, any and all expense whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened or any claims whatsoever), arising out of or in connection with any Action, investigation, challenge, or in connection with any appeal thereof, relating to the acts or omissions of the Shareholders’ Representative hereunder.  The foregoing indemnification shall not apply in the event of any Action which finally adjudicates the liability of the Shareholders’ Representative hereunder for its willful misconduct.  In the event of any indemnification hereunder, upon written notice from the Shareholders’ Representative to the Sellers as to the existence of a deficiency toward the payment of any such indemnification amount, each Seller shall promptly deliver to the Shareholders’ Representative full payment of his, her or its Payout Percentage of the amount of such deficiency.

 

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(c)        All of the indemnities, immunities and powers granted to the Shareholders’ Representative under this Agreement shall survive the Closing and/or any termination of this Agreement.

 

(d)       Buyer and, after the Closing Date, the Company shall have the right to rely upon all actions taken or omitted to be taken by the Shareholders’ Representative pursuant to this Agreement, all of which actions or omissions shall be legally binding upon the Sellers.

 

(e)        The grant of authority provided for herein (i) is coupled with an interest and shall be irrevocable and survive the death, incompetency, bankruptcy or liquidation of any Seller and (ii) shall survive the consummation of the Transactions, and any action taken by the Shareholders’ Representative pursuant to the authority granted in this Agreement shall be effective and absolutely binding on each Seller notwithstanding any contrary action of or direction from such Seller, except for actions or omissions of the Shareholders’ Representative constituting willful misconduct.

 

(f)        Each of the Company and Buyer acknowledges and agrees that the Shareholders’ Representative is a party to this Agreement solely to perform certain administrative functions in connection with the consummation of the transactions contemplated hereby.  Accordingly, each of the Company and Buyer acknowledges and agrees that, other than in the Shareholders’ Representative’s role as a Seller, the Shareholders’ Representative shall have no liability to, and shall not be liable for any Losses of, any of the Company or Buyer in connection with any obligations of the Shareholders’ Representative under this Agreement or otherwise in respect of this Agreement or the transactions contemplated hereby, except to the extent such Losses shall be proven to be the direct result of willful misconduct by the Shareholders’ Representative in connection with the performance of its obligations hereunder.

 

Section 10.8.     Amendment and Modification.  This Agreement may not be amended except by a written instrument executed by all parties to this Agreement.

 

Section 10.9.      Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument.  Signed counterparts of this Agreement may be delivered by facsimile and electronic mail in “.pdf” form.

 

Section 10.10.   Applicable Law.  THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS RULES THEREOF.  THE STATE OR FEDERAL COURTS LOCATED WITHIN NEW YORK COUNTY IN THE STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY AND THE PARTIES CONSENT TO AND AGREE TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS.  EACH OF THE PARTIES HEREBY WAIVES AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT

 

78

 

(I) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH PARTY’S PROPERTY ARE IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III) ANY LITIGATION OR OTHER PROCEEDING COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.  THE PARTIES HEREBY AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 10.3, OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF AND HEREBY WAIVE ANY OBJECTIONS TO SERVICE ACCOMPLISHED IN THE MANNER HEREIN PROVIDED.

 

Section 10.11.   Severability.  If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions contained in this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable term, provision, covenant or restriction or any portion thereof had never been contained herein.

 

Section 10.12.   Specific Enforcement.  The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached or threatened to be breached and that an award of money damages would be inadequate in such event.  Accordingly, it is acknowledged that the parties and the third party beneficiaries of this Agreement shall be entitled to equitable relief, without proof of actual damages, including an injunction or injunctions or Orders for specific performance to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement (including any Order sought by the Company and/or the Shareholders’ Representative to cause Buyer to perform its agreements and covenants contained in this Agreement, in addition to any other remedy to which they are entitled at law or in equity as a remedy for any such breach or threatened breach).  Each party further agrees that no other party hereto or any other Person shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 10.12, and each party hereto (a) irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument and (b) agrees to cooperate fully in any attempt by the other party or parties in obtaining such equitable relief.  Each party further agrees that the only permitted objection that it may raise in response to any action for equitable relief is that it contests the existence of a breach or threatened breach of this Agreement.

 

Section 10.13.   Waiver of Jury Trial.  EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES, AND AGREES TO CAUSE ITS SUBSIDIARIES TO WAIVE, ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 10.14.   Headings.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

79

 

Section 10.15.   Time is of the Essence.  Time is of the essence in this Agreement.  If the date specified for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or action taken) shall be the next date which is a Business Day.

 

Section 10.16.   Incorporation of Company Disclosure Letter.  The Company Disclosure Letter is incorporated herein by reference and made a part hereof.  If and to the extent any information required to be furnished in any section of the Company Disclosure Letter is contained in any other section thereof or in this Agreement, such information shall be deemed to be included in all other sections of the Company Disclosure Letter in which it is reasonably apparent from a reading of such disclosure that it would also apply to other sections of the Company Disclosure Letter.  Matters set forth in the Company Disclosure Letter may have been included for informational purposes only and are not necessarily limited to matters required by this Agreement to be included therein.  Nothing in this Agreement or in this Company Disclosure Letter constitutes (a) an admission that any information disclosed, set forth or incorporated by reference herein or in the Company Disclosure Letter is material or constitutes a Material Adverse Effect or (b) an admission of any liability or obligation of the Sellers or the Company.  By listing matters on the Company Disclosure Letter, none of the Sellers, the Company or any of their Affiliates shall be deemed to have (i) established any materiality standard, admitted any liability or concluded that one or more of such matters are material, constitute a Material Adverse Effect or (ii) expanded in any way the scope or effect of the representations and warranties of the Company contained in this Agreement.

 

ARTICLE XI - GUARANTY

 

Section 11.1.     Parent Guaranty.

 

(a)       Ultimate Parent is executing this Agreement to guaranty the performance of Buyer and, after the Closing Date, the Company under this Agreement and any agreement executed pursuant to this Agreement.  Ultimate Parent guarantees irrevocably, absolutely and unconditionally and as a primary obligation that Buyer and, after the Closing Date, the Company shall fully, completely and timely pay and perform all their obligations and assume all their Liabilities contained in this Agreement and any agreement executed pursuant to this Agreement (the “Guaranteed Obligations”).  If Buyer or, after the Closing Date, the Company fails or refuses to pay or perform any such obligations and Liabilities when due, Ultimate Parent shall, upon the written request of the Company prior to the Closing or the Shareholders’ Representative after the Closing (a “Performance Demand”), immediately pay or perform such obligations, as applicable.  A single Performance Demand shall be effective as to any specific default during the continuance of such default until Buyer, the Company or Ultimate Parent shall have cured such default, and additional written demands concerning such default shall not be required until such default is cured.

 

(b)       This Section 11.1 is a guaranty of payment and performance and not of collection.  There are no conditions precedent to the enforcement of this Section 11.1.  The obligations of Ultimate Parent hereunder shall be continuing, absolute and unconditional and,

 

80

 

without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by:

 

(i)          any invalidity, illegality or unenforceability against Buyer or, after the Closing Date, the Company of this Agreement or any agreement executed pursuant to this Agreement;

 

(ii)         any modification, amendment, restatement, waiver or rescission of, or any consent to the departure from, any of the terms of this Agreement or any agreement executed pursuant to this Agreement;

 

(iii)        any extension, renewal, settlement, compromise, waiver or release in respect of any Guaranteed Obligation, by operation of Law or otherwise, or any assignment of any Guaranteed Obligation by the Company or the Shareholders’ Representative on behalf of the Sellers;

 

(iv)        any change in the corporate existence structure or ownership of Buyer or, after the Closing Date, the Company;

 

(v)         any insolvency, bankruptcy, reorganization or other similar proceeding affecting Buyer or, after the Closing Date, the Company or their assets or any resulting release or discharge of any Guaranteed Obligation;

 

(vi)        any requirement that the Company or the Shareholders’ Representative exhaust any right or remedy or take any action against the Buyer or, after the Closing Date, the Company or any other Person before seeking to enforce the obligations of Ultimate Parent under this Section 11.1;

 

(vii)       the existence of any defense, set-off or other rights (other than a defense of payment or performance) that Ultimate Parent may have at any time against Buyer, the Company or the Shareholders’ Representative or any other Person, whether in connection herewith or any unrelated transactions; or

 

(viii)      any other act or failure to act or delay of any kind by Buyer or the Company.

 

(c)        This Section 11.1 shall continue to be effective, or be automatically reinstated, as the case may be, if at any time payment or performance, or any part thereof, of any of the Guaranteed Obligations is rescinded or must otherwise be restored, returned or rejected by the Sellers for any reason, including, upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Buyer or, after the Closing Date, the Company, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, Buyer or, after the Closing Date, the Company or any substantial part of their respective property, or otherwise, all as though such payments had not been made.  Ultimate Parent agrees that it will indemnify the Sellers on demand for all costs and expenses (including reasonable attorneys’ fees and disbursements) incurred by the Sellers in connection with such rescission or restoration which amounts shall be in addition to all other obligations hereunder.  If any Seller is required to refund part or all of any payment of Buyer or, after the Closing Date, the Company with respect

 

81

 

to any of the Guaranteed Obligations, such payment shall not constitute a release of Ultimate Parent from any liability hereunder, and Ultimate Parent’s liability hereunder shall be reinstated to the fullest extent allowed under applicable Law and shall not be construed to be diminished in any manner.

 

Section 11.2.     Representations and Warranties of the Ultimate Parent.

 

(a)       Ultimate Parent is a corporation duly organized, validly existing and in good standing under the laws of Delaware.  Ultimate Parent has the corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder.  The execution and delivery of this Agreement, and the performance of Ultimate Parent’s obligations hereunder, have been, or will have been at the Closing, duly authorized by all requisite corporate action and no other corporate action on the part of Ultimate Parent is necessary to authorize the execution, delivery and performance of this Agreement.  This Agreement, assuming the due execution and delivery of this Agreement by the other parties hereto, constitutes a valid and binding obligation of Ultimate Parent, enforceable against Ultimate Parent in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

 

(b)       The execution, delivery and performance by Ultimate Parent of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not (i) violate any provision of the Organizational Documents of Ultimate Parent, (ii) result in a breach of, or default under, or right to accelerate with respect to, any term or provision of any Contract, commitment or other obligation to which Ultimate Parent or any of its Affiliates is a party or is subject or (iii) violate or result in a breach of or constitute a default under any Law or other restriction of any Governmental Entity to which Ultimate Parent is subject.

 

(c)       The execution, delivery and performance by Ultimate Parent of this Agreement and the transactions contemplated hereby do not require any consents, waivers, authorizations or approvals of, or filings with, any third Persons which have not been obtained by Ultimate Parent.

 

(d)       As of the date hereof and on the Closing Date, Ultimate Parent has and will have unrestricted cash on hand and, if necessary, unrestricted cash available to it under credit facilities in place on the date hereof, sufficient to perform its obligations under this Agreement.

 

(e)       Ultimate Parent is not entering into the transactions contemplated hereby with actual intent to hinder, delay or defraud either present or future creditors.  Immediately after giving effect to the transactions contemplated hereby, Ultimate Parent will be Solvent and will have adequate capital to carry on its businesses in the ordinary course.

 

*          *          *          *          *

 

82

 

IN WITNESS WHEREOF, Buyer, the Company and each Seller have executed this Agreement as of the date first above written.

 

	
 
    	
MAGELLAN   HEALTHCARE, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Sam Srivastava
    
	
 
    	
 
    	
Name: Sam Srivastava
    
	
 
    	
 
    	
Title: CEO, Magellan   Healthcare, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
ARMED FORCES SERVICES   CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Geoffrey J. Deutsch
    
	
 
    	
 
    	
Name: Geoffrey J.   Deutsch
    
	
 
    	
 
    	
Title:   President & CEO, Armed Forces Services Corporation
    
	
 
    	
 
    	
 
    
	
 
    	
MAGELLAN   HEALTH, INC.
    
	
 
    	
(solely for purposes of   Article XI):
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jonathan N. Rubin
    
	
 
    	
 
    	
Name: Jonathan N. Rubin
    
	
 
    	
 
    	
Title: CFO, Magellan   Health, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
SELLERS:
    
	
 
    	
 
    	
 
    
	
 
    	
/s/   Felix W. Acosta
    
	
 
    	
Felix   W. Acosta
    
	
 
    	
 
    
	
 
    	
/s/   Michael P.C. Carns
    
	
 
    	
Michael   P.C. Carns
    
	
 
    	
 
    
	
 
    	
/s/   Geoffrey J. Deutsch
    
	
 
    	
Geoffrey   J. Deutsch
    
	
 
    	
 
    
	
 
    	
/s/   S. Frank Gallo
    
	
 
    	
S. Frank Gallo
    

 

 

[Signature Page to Share Purchase Agreement]

 

 

	
 
    	
The Hosmer Family   Revocable Trust 7/27/07
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Bradley C. Hosmer
    
	
 
    	
 
    	
Name: Bradley C. Hosmer
    
	
 
    	
 
    	
Title: Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Zita V. Hosmer
    
	
 
    	
 
    	
Name: Zita V. Hosmer
    
	
 
    	
 
    	
Title: Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
/s/ Sarah H. Kim
    
	
 
    	
Sarah H. Kim
    
	
 
    	
 
    	
 
    
	
 
    	
/s/ Vernon B.   Lewis, Jr.
    
	
 
    	
Vernon B.   Lewis, Jr.
    
	
 
    	
 
    
	
 
    	
The Miller Family Trust
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Keith R. Miller
    
	
 
    	
 
    	
Name: Keith R. Miller
    
	
 
    	
 
    	
Title: Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Valerie D. Miller
    
	
 
    	
 
    	
Name: Valerie D. Miller
    
	
 
    	
 
    	
Title: Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
/s/ Michael J. Nardotti, Jr.
    
	
 
    	
Michael J.   Nardotti, Jr.
    
	
 
    	
 
    
	
 
    	
/s/ Bradley J. Snyder
    
	
 
    	
Bradley J. Snyder
    
	
 
    	
 
    
	
 
    	
TCB Trust dated   September 1, 2015
    

 

 

[Signature Page to Share Purchase Agreement]

 

 

	
 
    	
By:
    	
/s/ Brodie S. Thomson
    
	
 
    	
 
    	
Name: Brodie S. Thomson
    
	
 
    	
 
    	
Title: Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
Twin Star Duggan   Charitable Unitrust
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Vernon B.   Lewis, Jr.
    
	
 
    	
 
    	
Name: Vernon B.   Lewis, Jr.
    
	
 
    	
 
    	
Title: Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
Twin Star Lewis   Charitable Unitrust
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Vernon B. Lewis.   Jr.
    
	
 
    	
 
    	
Name: Vernon B.   Lewis, Jr.
    
	
 
    	
 
    	
Title: Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
Twin Star Pederson   Charitable Unitrust
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Vernon B. Lewis, Jr
    
	
 
    	
 
    	
Name: Vernon B.   Lewis, Jr.
    
	
 
    	
 
    	
Title: Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
Twin Star Alban   Charitable Unitrust
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Vernon B.   Lewis, Jr.
    
	
 
    	
 
    	
Name: Vernon B.   Lewis, Jr.
    
	
 
    	
 
    	
Title: Trustee
    

 

[Signature Page to Share Purchase Agreement]

 

 

Annex A

 

Working Capital — Calculation Example

 

($ in actuals)

 

	
 
    	
 
    	
12/31/15
    	
 
    
	
Current   Assets
    	
 
    	
 
    	
 
    
	
Cash and Cash   Equivalents
    	
 
    	
Excluded
    	
 
    
	
Billed   Receivables
    	
 
    	
$
    	
26,589,503
    	
 
    
	
Unbilled   Receivables
    	
 
    	
8,894,684
    	
 
    
	
Other   Receivables
    	
 
    	
(1,082
    	
)
    
	
Prepaid Expenses
    	
 
    	
890,624
    	
 
    
	
Income Taxes   Receivable / (Payable)
    	
 
    	
154,289
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Current Assets
    	
 
    	
$
    	
36,528,018
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Current   Liabilities
    	
 
    	
 
    	
 
    
	
Accounts Payable
    	
 
    	
$
    	
6,515,991
    	
 
    
	
Customer/ Other   Deposits
    	
 
    	
(4,037
    	
)
    
	
Accrued Expenses
    	
 
    	
6,196,206
    	
 
    
	
Accrued   Incentive
    	
 
    	
0
    	
 
    
	
Accrued Wages,   Payroll Withholding & Taxes
    	
 
    	
5,011,295
    	
 
    
	
Billings in   Excess of Cost
    	
 
    	
0
    	
 
    
	
Deferred Revenue
    	
 
    	
0
    	
 
    
	
Deferred Rent   and Lease Incentive
    	
 
    	
137,470
    	
 
    
	
Capital Lease   Obligations
    	
 
    	
Excluded
    	
 
    
	
Accrued Contract   Losses
    	
 
    	
0
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Current   Liabilities
    	
 
    	
$
    	
17,856,925
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Working   Capital
    	
 
    	
$
    	
18,671,093
    	
 
    

 

Notes

 

Balance sheet figures are based upon 2015 audited financial statement included in the data room.  Income Taxes Receivable / Payable to be calculated excluding the tax effect of the Company Transaction Expenses.

 

The following accounts have been excluded from the definition of Working Capital:

· Cash and Cash Equivalents

· Capital Lease Obligations

 

 

Annex B

 

Defined Terms

 

“Current Holdback Contract” shall mean the indefinite-delivery, indefinite quantity contracts by and between the United States Army and the Company to provide Personnel Services Support (Contract No. W91WAW-11-D-0031) and Studies and Analysis Support (Contract No. W91WAW-10-D-0005) as of the date of this Agreement.

 

“Deductible” shall mean an amount equal to $[***].

 

“Escrow Amount” shall mean an amount equal to $[***].

 

“Escrow Release Date” shall mean the date that is [***] months from the Closing Date.

 

“Qualifying Loss” shall mean any individual indemnifiable Loss in excess of $[***], or one or more Losses substantially related to any other Loss, collectively in excess of $[***].

 

“Retention Contract” shall mean the indefinite-delivery, indefinite-quantity contract to be awarded by the United States Army, in connection with the HR Solutions Program in the Personnel Life Cycle Support (PLS) mission area, which contract is equivalent or greater in scope than the Current Holdback Contract.

 

“Survival Expiration Date” shall mean [***] months following the Closing Date.

 

	
***Confidential   Information has been omitted and filed separately with the Securities and   Exchange Commission. Confidential treatment has been requested with respect   to this omitted information.
    

 

 

Exhibit 7.2(g)(i)

 

FORM OF EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into by and between [NAME] an individual (“Employee”), and Magellan Health, Inc. on behalf of itself and its present and future subsidiaries and affiliates (collectively referred to herein as “Employer” or the “Company”).

 

WHEREAS, reference is made to that certain Share Purchase Agreement, dated as of May     , 2016, by and among Magellan Healthcare, Inc., Armed Forces Services Corporation (“AFSC”), the shareholders of AFSC party thereto, and the Company (the “Purchase Agreement”);

 

WHEREAS, Employer desires to obtain the services of Employee and Employee desires to render services to Employer; and

 

WHEREAS, Employer and Employee desire to set forth the terms and conditions of Employee’s employment with Employer under this Agreement;

 

NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual covenants and agreements contained in this Agreement, the parties agree as follows:

 

STATEMENT OF AGREEMENT

 

1.            Employment.  Employer agrees to employ Employee, and Employee accepts such employment in accordance with the terms of this Agreement, for a term of one year commencing on the Closing Date (as defined in the Purchase Agreement), and unless terminated earlier in accordance with the terms of this Agreement, ending on the      anniversary of the Closing Date.  Thereafter, this Agreement shall automatically renew for twelve (12) month periods, unless sooner terminated as provided herein.  If either party desires not to renew the Agreement, they must provide the other party with written notice of their intent not to renew the Agreement at least ninety (90) days prior to the next renewal date. Non-renewal of the Agreement by either party will in all cases result in termination of employment at the non-renewal date.  Employer’s notice of intent not to renew the Agreement shall be deemed to be a termination without cause and the provisions of Section 6(c) shall apply.

 

2.            Position and Duties of Employee.  Employee will serve as [TITLE] and shall have the usual and customary duties, responsibility and authority of a [TITLE]. Employee agrees to serve in such position, or in such other positions as Employer and Employee may mutually agree from time to time, and to perform the duties that Employer may assign from time to time to Employee that are consistent with Employee’s position, at the same or greater base salary level and a similar location, until the expiration of the term or such time as Employee’s employment with Employer is terminated pursuant to this Agreement.

 

3.            Time Devoted.  Employee will devote his or her full business time and energy to the business affairs and interests of Employer, and will use his or her best efforts and abilities to promote Employer’s interests.  Employee agrees that he or she will diligently endeavor to

 

 

perform services contemplated by this Agreement in a manner consistent with his or her position and in accordance with the policies established by the Employer. Notwithstanding the foregoing, Employee may participate in social, charitable, civic activities and such other personal affairs of Employee as do not interfere with performance of his or her duties hereunder. The parties have also agreed that Employee may serve as a director for other entities, provided that if such other entity is a for-profit enterprise, Employee shall first obtain the consent of Employer, which consent shall not be unreasonably withheld. Expenditure of a reasonable amount of time for personal matters and business and charitable activities shall not be deemed to be a breach of this Agreement, provided that those activities benefit the Company and/or do not materially interfere with the services required to be rendered to the Company under this Agreement.

 

4.            Compensation.

 

(a)       Base Salary.  Employer will pay Employee an annual base salary in the amount of [$XXX,XXX] which amount will be paid in semi-monthly intervals less appropriate withholdings for federal and state taxes and other deductions authorized by Employee.  Such salary will be subject to review and potential increases by Employer not less than annually and the term “Base Salary” shall mean the base salary as so increased.

 

(b)       Benefits.  Employee will be eligible to participate in Employer’s Benefit Plans commensurate with his or her position.  Employee will receive separate information detailing the terms of such Benefit Plans and the terms of those plans will control.  Employee also will be eligible to participate in any annual incentive bonus plan and long-term incentive plan generally applicable to employees at his or her level.  Employee’s annual target bonus opportunity will be no less than [XX%] of Base Salary. Any annual bonus for which Employee is entitled in respect of the 2016 calendar year will be pro-rated based upon the number of days that Employee has been employed pursuant to the terms of this Agreement. Annual and long-term incentive awards, if earned, will be determined and paid or granted (unless validly deferred if then permitted by the Company) between January 1 and March 15 of the year following the performance year.  During the term of this Agreement, Employee will be entitled to such other benefits of employment with Employer as are now or may later be in effect for salaried employees of Employer, and also will be eligible to participate in other benefits adopted for employees at his or her level.

 

(c)       Stock Options. Employer shall grant to Employee an option to purchase [XXXX] shares of the common stock of Employer at fair market value on the first business day of the month following the month of commencement of employment under this Agreement (the “Option”) pursuant to Employer’s 2011 Management Incentive Plan, or a successor plan. One-third of the total number of shares that are subject to the Option shall vest on each of the first three anniversaries of the date of grant, provided that Employee is still employed by Employer on each such vesting date. The Option and all other options granted Employee by Employer shall be subject to any applicable stock option plan, option certificate and shareholder and/or option holder agreements and other restrictions and limitations generally applicable to equity held by executives of Employer or otherwise required by law.

 

(d)       [Spot Bonus. To the extent not paid by AFSC prior to the Closing Date, Employee shall be eligible to receive a $50,000 cash bonus, payable on the first regular payroll

 

2

 

date following the Closing Date. In addition, Employee shall be eligible to receive a $50,000 cash bonus, payable on the first regular payroll date following the first anniversary of the Closing Date; provided that Employee remains employed by Employer on the first anniversary of the Closing Date.](1)

 

(e)       [Transaction Bonus. Employee shall be eligible to receive a cash bonus in an aggregate amount of $[•] (the “Transaction Bonus”). The Transaction Bonus shall be payable by the Company in three installments as follows: (i) to the extent not paid by AFSC prior to the Closing Date, $[•] of the Transaction Bonus shall be payable to Employee on the first regular payroll date following the Closing Date, (ii) $[•] of the Transaction Bonus shall be payable to Employee on the first regular payroll date following the first anniversary of the Closing Date and (iii) $[•] of the Transaction Bonus shall be payable to Employee on the first regular payroll date following the second anniversary of the Closing Date (each such payment in clauses (i) through (iii), a “Transaction Bonus Payment”); provided that Employee shall only be entitled to the Transaction Bonus Payment described in clauses (ii) and (iii) if Employee remains employed by Employer on the applicable anniversary of the Closing Date.](2) [Notwithstanding anything in this Agreement to the contrary, if required to avoid the imposition of taxes under Code Section 4999, Employee shall waive her right to the portion of the Transaction Bonus described in this Section 4(e) (“Waived Payment”) to the minimum extent necessary such that the remaining portion of the Transaction Bonus together with any other payments to which Employee is entitled, if any, shall not be a “parachute payment” within the meaning of Code Section 280G, and the Waived Payment shall not be paid to Employee unless the Waived Payment is approved by the stockholders of AFSC prior to the closing of the transactions contemplated by the Purchase Agreement in a manner that satisfies the stockholder approval requirements of Section 280G(b)(5) of the Code and the Treasury Regulations promulgated thereunder.](3)

 

5.            Expenses.  During the term of this Agreement, Employer will reimburse Employee promptly for all reasonable travel, entertainment, parking, business meetings and similar expenditures in pursuance and furtherance of Employer’s business upon receipt of reasonably supporting documentation as required by Employer’s policies applicable to its employees generally, subject to Section 10(a) (iii).

 

6.             Termination.

 

(a)       Termination Due to Resignation.  Employee may resign his or her employment at any time by giving thirty (30) days written notice of resignation to Employer.  Except as otherwise set forth in this Agreement, Employee’s employment, and Employee’s right to receive compensation and benefits from Employer, will terminate upon the effective date of Employee’s termination.

 

(1) NTD: To be included as appropriate.

 

(2) NTD: To be included as appropriate.  Include the following language if not applicable — “To the extent not paid by AFSC prior to the Closing Date, Employee shall be eligible to receive a cash bonus in the amount of $[•] (the “Transaction Bonus”), payable to Employee on the first regular payroll date following the Closing Date.”

 

(3) NTD: To be included as appropriate.

 

3

 

If Employee resigns pursuant to this Section 6(a), Employer’s only remaining financial obligation to Employee under this Agreement will be to pay, subject to Section 10: (i) any earned but unpaid Base Salary and accrued Paid Time Off through the effective date of Employee’s termination; (ii) reimbursement of expenses incurred by Employee through the effective date of termination which are reimbursable pursuant to this Agreement; and (iii) the Employee’s vested portion of any award under the Company’s Benefit Plans subject to its terms and conditions.

 

(b)       Termination with Cause.  Except as otherwise set forth in this Agreement, Employee’s employment, and Employee’s right to receive compensation and benefits from Employer, will be terminated for cause at the discretion of Employer under the following circumstances:

 

(i)                                   Employee’s commission of an act of fraud or dishonesty involving his or her duties on behalf of Employer;

 

(ii)                                Employee’s failure or refusal to perform duties reasonably assigned to Employee (other than any such failure resulting from incapacity due to physical or mental illness) or other material breach of any material term under this Agreement;

 

(iii)                             Employee’s material failure or refusal to abide by Employer’s policies, rules, procedures or directives which are provided to Employee in writing; or

 

(iv)                            Employee’s conviction of a felony or a misdemeanor involving moral turpitude.

 

If Employee is terminated pursuant to this Section 6(b), Employer’s only remaining financial obligation to Employee under this Agreement will be to pay, subject to Section 10: (i) any earned but unpaid Base Salary and accrued Paid Time Off through the date of Employee’s termination; (ii) reimbursement of expenses incurred by Employee through the date of termination which are reimbursable pursuant to this Agreement; and (iii) the Employee’s vested portion of any award under the Company’s Benefit Plans subject to its terms and conditions.

 

For the events described in Sections 6(b) (ii) and (iii), Employer will give Employee written notice of such deficiency and a 30 day opportunity to cure such situation.

 

(c)       Termination Without Cause.  Employer or Employee may terminate this Agreement without cause at any time.  “Without cause” termination shall include, but not be limited to termination by Employee following: (i) Employer’s notice to Employee of its intent not to renew this Agreement in accordance with the provisions of Section 1 hereof; (ii) Employer’s notice to Employee that his or her position will be relocated to an office which is greater than 25 miles from Employee’s prior work location; (iii) Employer’s reduction of Employee’s Base Salary (excluding any reduction, occurring at least six months after the effective date of this Agreement, of up to five percent (5%) applied uniformly to all similarly situated employee of Employer due to business circumstances) or Employer’s reduction of Employee’s target bonus opportunity to any amount less than the target bonus opportunity

 

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identified in Section 4(b) of this Agreement; (iv) material diminution in Employee’s title, authority, duties or responsibilities; or (v) any other breach by Employer of any material term under this Agreement; provided, however, that in all cases Employee must have given notice to Employer that an event under clause (ii) through (v) has occurred and the circumstance must remain uncorrected by Employer after the expiration of 30 days after receipt of such notice.  If Employer or Employee terminates this Agreement without cause, Employer shall continue to pay, subject to Section 10, Employee the compensation provided for in Section 4(a) of this Agreement for a period of time equal to twelve (12) months, commencing immediately following the termination date (the “Severance Period”).  Such pay continuation is contingent upon Employee executing Employer’s standard severance agreement substantially in the form attached hereto as Exhibit A, which incorporates a general release, at the time of termination.  In addition, Employee will receive (i) any earned but unpaid Base Salary and accrued Paid Time Off through the date of Employee’s termination; (ii) reimbursement of expenses incurred by Employee through the date of termination which are reimbursable pursuant to this Agreement; and (iii) the Employee’s vested portion of any Magellan Health, Inc. retirement, deferred compensation or other benefit plan, including but not limited to, any equity or long-term incentive awards, in accordance with the terms of those awards. If Employee participates in any incentive bonus plan(s), including but not limited to, any long term incentive plan(s), Employer may pay Employee, on a pro-rata basis, the amount of such plan(s) as Employee would have earned if Employee had been employed for the full calendar year. The pro-ration will be determined by the fraction of the number of months in the calendar year in which the Employee worked (rounded to the nearest whole month) divided by 12 months. In determining whether a pro-rata amount shall be paid to Employee, the Employer may consider factors that include but are not limited to (i) the Employee’s target bonus (percentage of base salary), (ii) the Company’s financial performance and (iii) the Employee’s achievement of his or her specific performance objectives. At the time of termination, Employer shall determine the Employee’s pro-rata amount, if any. Notwithstanding the foregoing, any payout of such bonus amount shall be contingent upon the Company satisfying the financial targets established by the Company’s Board of Directors. Payment of any bonus shall be made at the time of the annual bonus payout for all employees, subject to Section 4(b). COBRA coverage may be elected to continue health, dental, and vision insurance during the Severance Period and beyond. If COBRA coverage is elected, Employee will pay only the employee contribution rate for the health insurance portion of the COBRA coverage during the Severance Period.  Dental and vision coverage under COBRA will be billed at the full COBRA rate.

 

(d)       Automatic Termination.  This Agreement will terminate automatically upon the death or permanent disability of Employee.  Employee will be deemed to be “Disabled” or to suffer from a “Disability” within the meaning of this Agreement if, because of a physical or mental impairment, Employee has been unable to perform the essential functions of his or her position, with or without reasonable accommodation, for a period of 180 consecutive days, or if Employee can reasonably be expected to be unable to perform the essential functions of his or her position for such period.  If Employee is terminated pursuant to this Section 6(d), Employee will receive, subject to Section 10, (i) any earned but unpaid Base Salary and accrued Paid Time Off through the date of Employee’s termination; (ii) reimbursement of expenses incurred by Employee through the date of termination which are reimbursable pursuant to this Agreement; and (iii) the Employee’s vested portion of any Magellan Health, Inc. retirement, deferred

 

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compensation or other benefit plan, including but not limited to, any equity or long-term incentive awards. If Employee participates in any incentive bonus plan(s), including but not limited to, any long term incentive plan(s), Employer may pay Employee, on a pro-rata basis, the amount of such plan(s) as Employee would have earned if Employee had been employed for the full calendar year. The pro-ration will be determined by the fraction of the number of months in the calendar year in which the Employee worked (rounded to the nearest whole month) divided by 12 months.  In determining whether a pro-rata amount shall be paid to Employee, the Employer may consider factors that include but are not limited to (i) the Employee’s target bonus (percentage of base salary); (ii) the Company’s financial performance; and (iii) the Employee’s achievement of his or her specific performance objectives. At the time of termination, Employer shall determine the Employee’s pro-rata amount, if any. Notwithstanding the foregoing, any payout of such bonus amount shall be contingent upon the Company satisfying the financial targets established by the Company’s Board of Directors. Payment of any bonus shall be made at the time of the annual bonus payout for all employees, subject to Section 4(b).

 

(e)        Effect of Termination.  Except as otherwise provided for in this Section 6, upon termination of this Agreement, all rights and obligations under this Agreement will cease except for (i) the rights and obligations under Sections 4 and 5 to the extent Employee has not been compensated or reimbursed for services performed prior to termination (the amount of compensation to be prorated for the portion of the pay period prior to termination); (ii) the rights and obligations under Sections 7, 8 and 9; and (iii) all procedural and remedial provisions of this Agreement.

 

7.             Protection of Confidential Information/Non-Competition/Non-Solicitation.

 

Employee covenants and agrees as follows:

 

(a)(i)    Confidential Information:  During Employer’s employment of Employee and following the termination of Employee’s employment for any reason, Employee will not use or disclose, directly or indirectly, for any reason whatsoever or in any way, other than at the direction of Employer during the course of Employee’s employment or after receipt of the prior written consent of Employer, any confidential information of Employer or its controlled subsidiaries or affiliates, that comes into his or her knowledge during his or her employment by Employer (the “Confidential Information” as hereinafter defined).  The obligation not to use or disclose any Confidential Information will not apply to any Confidential Information that is or becomes public knowledge through no fault of Employee, but the termination of the obligation for non-use or nondisclosure by reason of such information becoming public will extend only from the date such information becomes public knowledge.  The above will be without prejudice to any additional rights or remedies of Employer under any state or federal law protecting trade secrets or other information.

 

(a)(ii)   Trade Secrets.  Employee shall hold in confidence all Trade Secrets of Employer, its direct and indirect subsidiaries, and/or its customers that came into his or her knowledge during his or her employment by Employer and shall not disclose, publish or make use of at any time after the date hereof such Trade Secrets, other than at the direction of Employer, for as long as the information remains a Trade Secret.

 

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(a)(iii)  For purposes of this Agreement, the following definitions apply:  “Confidential Information” means any data or information, other than Trade Secrets, that is valuable to Employer and not generally known to the public or to competitors of Employer, and which, for clarification, excludes general “know how.”  It is understood that the term “Confidential Information” does not mean and shall not include information which:

 

(a)                                 is or subsequently becomes publicly available without the breach of any obligation owed to the Employer;

 

(b)                                 was in Employee’s possession prior to the date of Employee’s employment with the Company or ASFC;

 

(c)                                  is disclosed with the prior written approval of the Employer; or

 

(d)                                 is obligated to be produced under order of a court of competent jurisdiction or a valid administrative, congressional, or other subpoena, civil investigative demand or similar process; provided, however, that upon issuance of any such order, subpoena, demand or other process, the Employee shall promptly notify the Employer and shall provide the Employer with an opportunity (if then available) to contest, at the Employer’s expense, the propriety of such order or subpoena (or to arrange for appropriate safeguards against any further disclosure by the court or administrative or congressional body seeking to compel disclosure of such Confidential Information).

 

“Trade Secret” means information including, but not limited to, any technical or non-technical data, formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers or other information similar to any of the foregoing, which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

 

(a)(iv) Interpretation.  The restrictions stated in paragraphs 7(a)(i) and 7(a)(ii) are in addition to and not in lieu of protections afforded to trade secrets and confidential information under applicable state law.  Nothing in this Agreement is intended to or shall be interpreted as diminishing or otherwise limiting Employer’s right under applicable state law to protect its trade secrets and confidential information.

 

(b)                       Non-Competition.

 

(i)                                     Employee covenants and agrees that during the term of his or her employment with Employer and for a period of 24 months immediately following the termination of said employment for any reason, he or she will not, on his or her own behalf or as a partner, officer, director, employee, agent, or consultant of any other person or entity, directly or indirectly, engage or attempt to engage

 

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in the business of developing, providing or selling products or services in the United States that are products or services developed, provided or offered by Employer or its subsidiaries and affiliates at the time of the termination of this Agreement (whether such products or services are developed, provided or offered by such other person or entity individually or on an integrated basis with other products or services developed, provided or offered directly by such person or entity or through affiliated persons or entities) unless waived in writing by Employer in its sole discretion. Employee recognizes that the above restriction is reasonable and necessary to protect the interest of the Employer and its controlled subsidiaries and affiliates.

 

(ii)                                  The foregoing clause (i) shall not prevent Employee from accepting employment with or performing services for an enterprise if such enterprise is also engaged in other lines of business and Employee’s services are restricted to services or employment that are not engaged in the activities described in clause (i) above.

 

(iii)                               During the 24-month period immediately following Employee’s termination from his or her employment with Employer, Employee may submit a written request to Employer outlining a proposed employment or other employment opportunity that Employee is considering. Employer will review such request, and make a determination within ten (10) business days following receipt of such request, in its sole discretion, as to whether the opportunity would constitute a breach of the non-competition covenant and/or whether or not Employer is willing to waive the requirements of this subsection (b) with respect to such opportunity.  For the avoidance of doubt, the Employer’s determination of what does or does not constitute a breach of the non-competition covenant is not binding upon any court or arbitrator for purposes of any action relating to the enforcement of such covenant.

 

(c)          Non-Solicitation.  To protect the goodwill of Employer and its controlled subsidiaries and affiliates, or the customers of Employer and its subsidiaries and affiliates, Employee agrees that, for a period of 24 months immediately following the termination of his or her employment with Employer, he or she will not, without the prior written permission of Employer, directly or indirectly, for himself or herself or on behalf of any other person or entity, solicit, divert away, take away or attempt to solicit or take away any Customer of Employer for purposes of providing or selling services that are offered by Employer, if Employer, or the particular controlled subsidiary or affiliate of Employer, is then still engaged in the sale or provision of such services at the time of the solicitation.  For purposes of this Section 7(c), “Customer” means any

 

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individual or entity to whom Employer or its controlled subsidiaries or affiliates has provided, or contracted to provide, services and with whom Employee had, alone or in conjunction with others, contact with or knowledge of, during the twelve months prior to the termination of his or her employment.  For purposes of this Section 7(c), Employee had contact with or knowledge of a customer if (i) Employee had business dealings with the customer on behalf of Employer or its controlled subsidiaries or affiliates; (ii) Employee was responsible for supervising or coordinating the dealings between the customer and Employer or its controlled subsidiaries or affiliates; or (iii) Employee obtained or had access to trade secrets or confidential information about the customer as a result of Employee’s association with Employer or its controlled subsidiaries or affiliates.

 

(d)       Non-Solicitation/Hiring of Employees.  During Employer’s employment of Employee and for a period of 24 months following the termination of Employee’s employment with Employer for any reason, Employee will not solicit for employment or hire, directly or indirectly, any employee of Employer or any of its subsidiaries or affiliates who was employed with Employer or its controlled subsidiaries or affiliates within the 24-month period immediately prior to Employee’s termination.  General solicitations or advertisements not specifically targeted at employees of Employer or any of its subsidiaries or affiliates shall not violate this Section 7(d).

 

8.             Work Made for Hire.  Employee agrees that any written program materials, protocols, research papers, other writings, as well as improvements, inventions, new techniques, programs or products (the “Work”) made or developed by Employee within or after normal working hours during the term of this Agreement and relating to the business or activities of Employer or any of its subsidiaries or affiliates, shall be deemed to have been made or developed by Employee solely for the benefit of Employer and will be considered “work made for hire” within the meaning of the United States Copyright Act, Title 17, United States Code, which vests all copyright interest in and to the Work in the Employer.  In the event, however, that any court of competent jurisdiction finally declares that the Work is not or was not a work made for hire as agreed, Employee agrees to assign, convey, and transfer to the Employer all right, title and interest Employee may presently have or may have or be deemed to have in and to any such Work and in the copyright of such work, including but not limited to, all rights of reproduction, distribution, publication, public performance, public display and preparation of derivative works, and all rights of ownership and possession of the original fixation of the Work and any and all copies. Additionally, Employee agrees to execute any documents necessary for Employer to record and/or perfect its ownership of the Work and the applicable copyright.

 

9.            Property of Employer.  Employee agrees that, upon the termination of Employee’s employment with Employer, Employee will immediately surrender to Employer all property, equipment, funds, lists, books, records and other materials of Employer or its controlled subsidiaries or affiliates in the possession of or provided to Employee.

 

10.          Special Rules for Compliance with Code Section 409A.  This Section 10 serves to ensure compliance with applicable requirements of Section 409A of the Internal Revenue Code (the “Code”).  Certain provisions of this Section 10 modify other provisions of this

 

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Agreement.  If the terms of this Section 10 conflict with other terms of the Agreement, the terms of this Section 10 control.

 

(a)           Timing of Certain Payments.  Payments and benefits specified under this Agreement shall be paid at the times specified as follows:

 

(i)            Accrued Payments at Termination.  Sections 6(a) — (d) of this Agreement require payment of amounts earned but unpaid or accrued at the date of Employee’s termination.  Unless the amount is payable under an applicable plan, program or arrangement on explicit terms providing for a delay in payment compliant with Code Section 409A, these amounts shall be payable at the date the amounts otherwise would have been payable under the applicable plans, programs and arrangements but in no event more than 30 days after Employee’s termination of employment (subject to 10(d)).

 

(ii)           Expense Reimbursements.  Any payment under Section 5 or otherwise as an expense reimbursement hereunder must be paid no later than the end of Employee’s taxable year next following the taxable year in which Employee incurred the reimbursable expense.  With regard to any provision herein that provides for expense reimbursement or in-kind benefits, except as permitted by Code Section 409A, (a) the right to reimbursement or in-kind benefits will not be subject to liquidation or exchange for another benefit, and (b) the amount of expenses eligible for reimbursements or in-kind benefits provided during any taxable year will not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year.

 

(iii)          Other Payments.  Any other payment or benefit required under this Agreement to be paid in a lump sum or otherwise to be paid promptly at or following a date or event shall be paid within five days after the due date, subject to Section 10(b), (c) and (d) below.

 

(iv)          No Influence on Year of Payment.  In the case of any payment under the Agreement payable during a specified period of time following a termination or other event (including any payment for which the permitted payment period begins in one calendar year and ends in a subsequent calendar year), Employee shall have no right to elect in which year the payment will be made, and the Company’s determination of when to make the payment shall not be influenced in any way by Employee.

 

(b)           Special Rules for Severance Payments.  In the case of payments in the nature of continuation of payments under Section 4(a) required under Section 6(c) (the “Severance Payments”), the following rules will apply:

 

(i)             Separate Payments.  Each monthly installment of the Severance Payments shall

 

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be deemed to be a separate payment for all purposes, including for purposes of Section 409A.

 

(ii)          Severance Payment Timing Rules.  Each installment of Severance Payments shall be treated as follows for purposes of Section 409A:

 

(A)       Installments payable during the year of termination and by March 15 of the year following termination shall, to the maximum extent possible, be deemed to constitute a short-term deferral under Treasury Regulation § 1.409A-1(b)(4);

(B)       Installments payable during the period within six months after termination, to the extent not covered by Section 10(b)(ii)(A), shall, to the maximum extent possible, be deemed to constitute amounts payable under the “two-year/two-times” exclusion from being a deferral of compensation under Treasury Regulation § 1.409A-1(b)(9)(iii);

(C)       To the extent that the “two-year/two-times” exclusion from being a deferral of compensation under Treasury Regulation § 1.409A-1(b)(9)(iii) has not been fully applied by virtue of Section 10(b)(ii)(B), installments payable as Severance Payments shall be excluded, to the maximum extent possible, by such “two-years/two-times” exclusion (applied in the reverse order of payment of the installments — that is, to the latest installments first); and

(D)       All installments of the Severance Payment not covered by Section 10(b)(ii)(A), (B) and (C) shall be paid at the applicable installment payment date in compliance with Section 409A, except that any such payment shall be subject to the six-month delay rule of Section 10(d).

 

(c)           Special Rules for Other Payments.  With respect to any bonus amount that might be payable following termination of employment under any plan or arrangement covering Employee as may then be in effect, ), the following rules will apply:

 

(i)            Separate Payments.  The amount payable thereunder shall each be deemed to be a separate payment for all purposes, including for purposes of Section 409A (subject to any further designation of separate payments explicitly made in any separately identifiable plan or arrangement for purposes of Section 409A).

 

(ii)           Payment Timing Rules.  Except as specifically provided in Section 6(c) with respect to any pro-rata annual bonus, a payment referenced in Section 10(c)(i) shall be payable as a lump-sum payment within five days after termination of employment if and to the extent that (A) the separate payment constitutes short-term deferral under Treasury Regulation § 1.409A-1(b)(4), (B) the amount of the separate payment not covered by Section 10(c)(ii)(A) can be paid under the “two-year/two-times” exclusion from being a deferral of compensation under Treasury Regulation § 1.409A-1(b)(9)(iii), after first applying such exclusion under Section 10(b)(ii), (C) the separate payment is covered by any other applicable exclusion or exemption under Treasury Regulation § 1.409A-1(b)(9) (provided that the exclusion under subsection (b)(9)(v)(D) shall be used only to the extent not relied upon for other payments or benefits) and (D), the six-month delay rule in Section 10(d)

 

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does not apply to the separate payment (except as otherwise provided in Section 10(c)(iii)).  Any other such separate payment (i.e., amounts subject to the six-month delay rule) shall be subject to the six-month delay rule of Section 10(d), subject to Section 10(c) (iii).  Any delay in payment under the six-month delay rule shall not limit Employee’s rights under this Agreement to not forfeit a specified item of compensation as a result of Employee’s termination.

 

(d)           Six-Month Delay Rule.

 

 

(i)             General Rule.  The six-month delay rule will apply to certain payments and benefits under the Agreement if all of the following conditions are met:

 

(A)       Employee is a “key employee” (as defined in Code Section 416(i) without regard to paragraph (10) thereof) for the year in which the termination occurs.  The Company will determine status of “key employees” annually, under administrative procedures applicable to all Section 409A plans and arrangements and applied in accordance with Treasury Regulation § 1.409A-1(i).

 

(B)       The Company’s stock is publicly traded on an established securities market or otherwise.

 

(C)       The payment or benefit in question is a deferral of compensation and not excepted, exempted or excluded from being such by the short-term deferral rule, or the “two-years/two-times” rule in Treasury Regulation § 1.409A-1(b)(9)(iii), or any other exception, exemption or exclusion; provided, however, that the exclusion under Treasury Regulation § 1.409A-1(b)(9)(v)(D) shall apply only if and to the extent that it is not necessary to apply to any other payment or benefit payable within six months after Employee’s termination.

 

(ii)          Effect of Rule.  If it applies, the six-month delay rule will delay a payment or benefit which otherwise would be payable under this Agreement within six months after Employee’s separation from service.

 

(A)       Any delayed payment or benefit shall be paid on the date six months after Employee’s separation from service.

 

(B)       During the six-month delay period, accelerated payment will occur in the event of the Employee’s death but not for any other reason (including no acceleration upon a change in control), except for accelerations expressly permitted under Treasury Regulation § 1.409A-1 — 1.409A-6.

 

(C)       Any payment that is not triggered by a termination, or is triggered by a termination but would be made more than six months after the termination (without applying this six-month delay rule), or would be payable at a fixed

 

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date not tied to termination that is earlier than the expiration of the six-month delay period, shall be unaffected by the six-month delay rule.

 

(iii)       Limit to Application of Six-Month Delay Rule.  If the terms of this Agreement or other plan or arrangement or document relating to this Agreement or payments hereunder impose this six-month delay rule in circumstances in which it is not required for compliance with Section 409A, those terms shall not be given effect.

 

(e)           Other Provisions.

 

(i)             Interest on Delayed Payments.  If any payment is delayed by application of the six-month delay rule under Section 10(d) or a delay resulting from the application of Section 10(b)(iii) or 10(c)(iii), interest will accrue on such unpaid amount at a rate equal to the short-term applicable federal rate (with semiannual compounding) established by the Internal Revenue Service under Section 1274(b)(2)(B) of the Internal Revenue Code and in effect at the date the amount would have been paid but for the six-month delay rule hereunder.

 

(ii)          Good Reason.  The rules governing constructive termination not for cause are intended to qualify such a termination as an “involuntary separation” within the meaning of Treasury Regulation § 1.409A-1(n)(2)(i), and shall be so construed and interpreted.

 

(iii)       Non-transferability.  No right to any payment or benefit under this Agreement shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by Employee’s creditors or of any of Employee’s beneficiaries.

 

(iv)      No Acceleration.  The timing of payments and benefits under the Agreement may not be accelerated to occur before the time specified for payment hereunder, except to the extent permitted under Treasury Regulation § 1.409A-3(j)(4) or as otherwise permitted under Code Section 409A without Employee incurring a tax penalty.

 

(v)         Timing Relating to Release.  Other provisions of this Agreement (including this Section 10) notwithstanding, if Employee is obligated to execute a release, non-competition, or other agreement as a condition to receipt of a payment hereunder, the Company will supply to Employee a form of such release or other document not later than the date of Employee’s termination, which must be returned within the time period required by law (or 21 days if no period is specified by law) and must not be revoked by Employee within the applicable time period in order for Employee to satisfy any such condition.  To the extent that any severance payments are deferred compensation under Section 409A, and are not otherwise exempt from the application of Section 409A, then, if the period during which Employee may consider and sign the severance agreement

 

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spans two calendar years, the payment of severance will not be made or begin until the later calendar year.

 

(vi)      Definition of Termination of Employment.  For purposes of this Agreement, the term “termination of employment” shall mean a separation from service as defined in Treasury Regulation § 1.409A-1(h).

 

11.          Remedies.  Employer or its controlled subsidiaries or affiliates will be entitled to appropriate equitable relief, including, but not limited to, a temporary restraining order and a preliminary injunction, without the necessity of posting a bond.  Employee will also be entitled to seek equitable relief against Employer in connection with enforcement of the covenants and obligations set forth in Sections 7, 8 and 9.  The provisions of Sections 4, 5, 6, 7, 8 and 9 will survive the termination of this Agreement in accordance with the terms set forth in each Section.

 

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13.          Notices.  Any notice or request required or permitted to be given to any party will be given in writing and, excepting personal delivery, will be given at the address set forth below or at such other address as such party may designate by written notice to the other party to this Agreement:

 

	
To Employee:
    	
[Address 1]
    
	
 
    	
[Address 2]
    
	
 
    	
[Address 3]
    
	
 
    	
 
    
	
To Employer:
    	
Magellan   Health, Inc.
    
	
 
    	
4800 N. Scottsdale   Road, Ste. #4400
    
	
 
    	
Scottsdale, AZ 85251
    
	
 
    	
Attention:    General Counsel
    

 

Each notice given in accordance with this Section will be deemed to have been given, if personally delivered, on the date personally delivered; if delivered by facsimile transmission, when sent and confirmation of receipt is received; or, if mailed, on the third day following the day on which it is deposited in the United States mail, certified or registered mail, return receipt requested, with postage prepaid, to the address last given in accordance with this Section.

 

14.          Headings.  The headings of the sections of this Agreement have been inserted for convenience of reference only and should not be construed or interpreted to restrict or modify any of the terms or provisions of this Agreement.

 

15.          Severability.  If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Agreement, such provision will be fully severable and this Agreement and each separate provision will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.  In addition, in lieu of such illegal, invalid or unenforceable provision, there will be added automatically, as a part of this Agreement, a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable, to the extent such reformation is allowable under applicable law.

 

16.          Governing Law.  This Agreement and all issues relating to the validity, interpretation, and performance will be governed by, interpreted, and enforced under the laws of the State of Arizona.

 

17.          Binding Effect.  This Agreement will be binding upon and shall inure to the benefit of each party and each party’s respective successors, heirs and legal representatives.  This Agreement may not be assigned by Employee to any other person or entity but may be assigned by Employer to any subsidiary or affiliate of Employer or to any successor to or transferee of all, or any part, of the stock or assets of Employer.

 

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18.          Employer Policies, Regulations, and Guidelines for Employees.  Employer may issue policies, rules, regulations, guidelines, procedures or other material, whether in the form of handbooks, memoranda, or otherwise, relating to its Employees.  These materials are general guidelines for Employee’s information and will not be construed to alter, modify, or amend this Agreement for any purpose whatsoever.

 

19.           Entire Agreement.  This Agreement embodies the entire agreement and understanding between the parties with respect to its subject matter and supersedes all prior agreements and understandings, whether written or oral, relating to its subject matter, unless expressly provided otherwise within this Agreement.  No amendment or modification of this Agreement will be valid unless made in writing and signed by each of the parties.  No representations, inducements, or agreements have been made to induce either Employee or Employer to enter into this Agreement, which are not expressly set forth within this Agreement. Employee and Employer acknowledge and agree that Employer’s controlled subsidiaries and affiliates are express third party beneficiaries of this Agreement.

 

20.          Non-Disparagement.   During the term of this agreement and thereafter, neither party shall knowingly, directly or indirectly, make any disparaging or defamatory remarks or statements (written, oral, electronic, or by any other method) about the other party (including, in the case of the Company, against any of its affiliates and any of their respective officers, directors, employees, shareholders, agents or businesses) in any manner likely to be harmful to the other party or their business reputations or personal reputations. The foregoing shall not be violated by truthful statements in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including depositions in connection with such proceedings); provided that the applicable party has given the other party prompt written notice of any such legal process and cooperated with such other party’s efforts to seek a protective order.

 

21.          Purchase Agreement.  In the event that the Purchase Agreement is terminated in accordance with its terms without the consummation of the transactions contemplated thereby, this Agreement shall be null and void ab initio as of the date of such termination.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the     day of May 2016.

 

	
 
    	
 
    	
MAGELLAN   HEALTH, INC.
    
	
“Employee”
    	
 
    	
“Employer”
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

 

Exhibit A

 

FORM OF CONFIDENTIAL SEVERANCE AGREEMENT AND RELEASE

 

The following sets forth the Severance Agreement and Release (“Severance Agreement”) between Magellan Health, Inc. (“Magellan” or “Employer”) and [                ] (“Employee”).

 

In consideration of the following obligations contained herein, the parties agree as follows:

 

1.                                      Separation Pay. Employee’s employment will terminate on [                     ] (“Termination Date”) in accordance with Section 6(c) of the Employment Agreement between Magellan and Employee executed on [                  ] (the “Employment Agreement”). Magellan will pay Employee separation pay in an amount equal to $[                 ], less all lawful deductions. The separation pay will be paid out in equal installments on a semi-monthly basis beginning on the next regular payday following the later of the Termination Date or the Effective Date (explained in Paragraph 21 below) and according to Magellan’s normal payroll policy and practices for the period [                   ] through [                         ] (the “Severance Period”).

 

2.                                      Bonus. In accordance with Section 6(c) of the Employment Agreement, Magellan has determined that Employee will not receive a pro-rata bonus for calendar year [           ].

 

[Or, if Magellan elects to pay a pro-rata bonus:

 

Bonus. Employee shall be eligible to receive, on a pro-rata basis, a bonus for the [           ] performance year in the amount that Employee would have earned under the terms of Magellan’s [            ] Incentive Compensation Program (“ICP”) if Employee had been employed for the full calendar year determined in accordance with, and subject to the conditions of, Section 6(c) of the Employment Agreement.]

 

3.                                      Employment Benefits. Through Employee’s Termination Date, Employee will receive all employment benefits for which Employee is eligible pursuant to and in accordance with Employer’s company policies and as required by law. Following Employee’s Termination Date, Employee will receive a payment for all accrued but unused Paid Time Off pursuant to and in accordance with Employer’s company policies, the Employment Agreement, and as required by law.

 

4.                                      EAP Services. Employee may continue to access Employee Assistance Program services during the Severance Period by calling 1-866-266-2376.

 

5.                                      COBRA Payments. If Employee elects COBRA coverage, he/she will be required to pay only the employee contribution rate for the health insurance portion of the COBRA coverage during the Severance Period. Dental and vision coverage under COBRA will be billed at the rate set forth in the Employment Agreement or, if not specified in the Employment Agreement, at 102% of the full COBRA rate. Employer complies with all applicable COBRA continuation health coverage laws.

 

6.                                      General Release of All Claims. In consideration for the payments described in Paragraph 1 [or “the payments described in Paragraphs 1 and 2” if a bonus is paid] and the other benefits provided for in this Severance Agreement, which are in excess of the compensation

 

 

and benefits that Employee would normally receive upon his termination from Magellan, Employee hereby releases Magellan from any and all claims, demands, actions, suits, injuries, damages, or liabilities that Employee had, has, or may have against Magellan, known or unknown, from the beginning of time up to the later of the Effective Date of this Severance Agreement or the Termination Date, excepting only those claims, if any, which Employee is prohibited by law from waiving. This release includes, but is not limited to, a release of all claims under the Employment Agreement, Title VII of the Civil Rights Act of 1964, the Rehabilitation Act of 1973, the Americans with Disabilities Act, the Employment Retirement Insurance Security Act, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Equal Pay Act, and all other federal, state, and local laws related to employment practices or otherwise.

 

However, notwithstanding the foregoing, nothing in this Severance Agreement shall be construed to waive any right that is not subject to waiver by private agreement, including, without limitation, any claims arising under state unemployment insurance or workers compensation laws or California Labor Code section 2802. Employee understands that rights or claims under the Age Discrimination in Employment Act of 1967 (29 U.S.C. § 621, et seq.) that may arise after Employee executes this Severance Agreement are not waived.

 

Employee also agrees to waive and relinquish all rights and benefits afforded under any applicable federal, state, or local law which provides in substance that a release shall not extend to claims or injuries which are unknown or unsuspected to exist at the time the release is executed.

 

Magellan expressly denies that it has any liability to Employee, and this Severance Agreement should not be construed as an admission of such liability.

 

Employee is advised to consult an attorney before signing this Severance Agreement.

 

For purposes of this Paragraph, Magellan shall include its past and present directors, officers, agents, and employees, as well as its corporate parents, subsidiaries, affiliates, and successors, and their past and present directors, officers, agents, and employees.

 

7.                                      Promise Not to Sue. In consideration for the payments described in Paragraph 1 [or “the payments described in Paragraphs 1 and 2” if a bonus is paid] and the other benefits provided for in this Severance Agreement, Employee promises not to sue or bring any legal or administrative claim, action, arbitration or proceeding of any kind against Magellan with respect to matters released herein. Employee acknowledges that as of the date of the execution of this Severance Agreement he/she has not instituted any legal or administrative claim, action, arbitration or proceeding of any kind against Magellan.

 

Nothing in this Severance Agreement shall be construed to prohibit Employee from filing a charge or complaint with the Equal Employment Opportunity Commission (EEOC), National Labor Relations Board (NLRB) or other comparable federal, state, or local administrative agency or participating in any investigation or proceeding conducted by such administrative agencies or from reporting possible violations of federal law or regulation to

 

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any governmental agency or entity including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. Employee does not need Magellan’s prior authorization to make any such charges, complaints, reports or disclosures and Employee is not required to notify Magellan that he/she has made such reports or disclosures. Notwithstanding the foregoing, Employee agrees to waive Employee’s right to recover individual relief in any charge, complaint, report or lawsuit filed by Employee or anyone on Employee’s behalf.

 

For purposes of this Paragraph, Magellan shall include its past and present directors, officers, agents, and employees, as well as its corporate parents, subsidiaries, affiliates, and successors, and their past and present directors, officers, agents, and employees.

 

8.                                      Non-Disparagement. Employee agrees that he/she will not make any disparaging comments about Magellan or any negative reference to the character, quality, or propriety of Magellan’s personnel or business operations, except as may be required by law, or take other action intended to hamper, impede, or obstruct the successful and continued business operations of Magellan. Employee acknowledges that as of the date of the execution of this Severance Agreement he/she has not made any such disparaging or negative comments or taken any such hampering, impeding, or obstructing action.

 

For purposes of this Paragraph, Magellan shall include its corporate subsidiaries, affiliates, and successors.

 

9.                                    Assistance with Magellan Legal Defenses. Employee agrees to fully cooperate with Magellan in its defense of any matter that Employee was involved in during his/her employment and to make himself/herself available to assist in the defense of any such matter as required by Magellan or its counsel, provided that Magellan pays Employee for his/her reasonable expenses and, to the extent that such cooperation is requested after the Severance Period, his/her reasonable hours of service in a prorated amount of Employee’s current verifiable salary or, if not employed, Employee’s prorated last Magellan salary.

 

10.                               Return of Company Property. Employee agrees that, within two (2) days of the Termination Date, he/she will return to Magellan all property of Magellan that he/she has in his/her possession and any documents, records, or information appearing on any medium which contain things of any nature pertaining to his/her work at Magellan or any of its affiliate or subsidiary corporations in accordance with Section 9 of the Employment Agreement.

 

11.                               Protection of Confidential Information/Trade Secrets, Non-Competition, and Non-Solicitation. Employee agrees that he/she remains subject to, and that he/she shall comply with, Section 7 of the Employment Agreement during the Severance Period and, to the extent provided for in the Employment Agreement, thereafter. Employee acknowledges that as of the date of execution of this Severance Agreement he/she has not violated any term of Section 7 of the Employment Agreement.

 

12.                               Job References. Magellan’s corporate policy requires that all job references regarding current or former employees of Magellan be neutral in nature. The only job references provided to

 

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current or former employees, prospective employers, or any other third parties regarding a current or former employee are limited to the employee’s dates of employment and the positions held. Any agent or employee of Magellan who provides a job reference that is not limited to the employee’s dates of employment and positions held does so in his or her individual capacity and is acting outside the scope of his or her authority and responsibilities.

 

13.                               Confidentiality. The parties agree that Magellan desires to keep this Severance Agreement confidential. Employee agrees that he/she will not publicize, discuss, or reveal the existence of this Severance Agreement or its terms to anyone not a party to the Agreement, other than his/her spouse (if any) or his/her personal medical, legal, and financial advisors, or unless required by court order. The persons that Employee is prohibited from disclosing the existence or terms of this Severance Agreement include, but are not limited to, the news media and any current or former Magellan employees.

 

14.                               Compensation/Benefits Non-Transferable. Employee agrees that the Severance Agreement compensation and benefits are nontransferable and will immediately terminate in the event of his/her death.

 

15.                               Obligations Conditioned upon Performance. The obligations of any party to perform any of the promises of this Severance Agreement shall be conditioned upon the performance by all of the parties of their respective obligations hereunder and under the Employment Agreement.

 

16.                               Entire Agreement. The provisions included in this Severance Agreement constitute the entire agreement between Employee and Magellan and supersede any other existing agreement(s) between Employee and Magellan and/or its current and past affiliate or subsidiary companies with respect to its subject matter, excluding only the Employment Agreement, any other fully executed Non-Compete/Non-Solicit and Confidentiality Agreement and/or Employment Agreement that Employee has with Magellan, and any agreement between Magellan and Employee relating to the grant of stock options or restricted stock units to Employee, the terms of which shall remain in effect notwithstanding the existence of this Severance Agreement. In the event of a conflict between the terms of this Severance Agreement and any of the excluded agreements referenced in the prior sentence, the terms of this Severance Agreement shall govern. No other subsequent agreement shall have any force or effect unless it is reduced to writing and signed by both parties.

 

17.                               Governing Law. This Severance Agreement shall be construed in accordance with and governed by the laws of the State of                 .

 

18.                               Successors and Assigns. Employee agrees that this Severance Agreement binding upon him/her and his/her successors, assigns, heirs, executors, administrators, and legal representatives.

 

19.                               Severability. Should any provision of this Severance Agreement other than Paragraphs 6 and 7 be declared or be determined by any court of competent jurisdiction to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining parts, terms or

 

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provisions shall not be effected thereby and said illegal, unenforceable, or invalid term, part or provision shall be deemed not to be a part of this Severance Agreement. If Paragraph 6 and/or Paragraph 7 of this Severance Agreement are declared or determined to be illegal, invalid or unenforceable, in whole or in part, the parties agree to replace the invalid or unenforceable portion through good faith negotiations with valid and enforceable provisions consistent with the intent of Paragraphs 6 and 7.

 

20.                               Voluntary Agreement/Review Period. If Employee is or will be at least forty years old on the Termination Date, Employee understands and agrees that with respect to any possible claim arising under the Age Discrimination in Employment Act of 1967 he/she has been given twenty-one (21) days to review and consider this Severance Agreement. Employee will then have seven (7) days following his/her signing of the Severance Agreement to revoke it, in which case the Severance Agreement will not be effective and Employee will not be entitled to receive the payments and other benefits described in this Severance Agreement, including without limitation the payments described in Paragraph 1 [or “the payments described in Paragraphs 1 and 2” if a bonus is paid]. Employee understands that he/she will not receive any payment under the Severance Agreement until the revocation period has passed. Employee must submit notice of revocation in writing to Nicole Amling, VP Human Resources, at naamling@magellanhealth.com, delivered on or before the expiration of the revocation period.

 

If Employee is or will be thirty-nine years old or younger on the Termination Date, Employee has been given ten (10) days to review and consider this Severance Agreement. If Employee is or will be thirty-nine years old or younger on the Termination Date, he/she has no revocation period.

 

Magellan has advised and hereby advises in writing Employee to discuss the Severance Agreement with an attorney. By signing the Severance Agreement, Employee acknowledges that he/she is relying upon his/her own judgment and the advice of his/her attorney and not on any recommendations or representations of Magellan, its counsel, or other representatives. Employee may sign and return the Severance Agreement sooner than the given consideration period if he/she would like, thereby waiving the consideration period.

 

21.                               Effective Date. The “Effective Date” of date of this Severance Agreement shall be determined as follows:

 

If Employee is or will be at least forty years old on the Termination Date, the Effective Date of this Severance Agreement shall be the eighth day following execution of this Severance Agreement by Employee, provided that Employee has not revoked the Severance Agreement as described in paragraph 20, above.

 

If Employee is or will be thirty-nine years old or younger on the Termination Date, the Effective Date of this Severance Agreement shall be the date that Employee signs the Severance Agreement.

 

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THIS IS A GENERAL RELEASE — READ BEFORE SIGNING

 

I AGREE THAT I HAVE READ THE SEVERANCE AGREEMENT AND INCORPORATED RELEASE, HAVE HAD SUFFICIENT TIME TO REVIEW CAREFULLY THE CONTENTS THEREOF, UNDERSTAND THE CONTENTS THEREOF, HAVE BEEN GIVEN THE OPPORTUNITY TO HAVE IT REVIEWED BY MY OWN COUNSEL, FREELY AND VOLUNTARILY ASSENT TO ALL THE TERMS AND CONDITIONS THEREOF, AND SIGN THE SAME AS MY OWN FREE ACT.

 

	
 
    	
 
    	
 
    
	
 
    	
 [Employee Name]
    	
 
    	
Witness
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date
    	
 
    	
 
    	
Date
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
MAGELLAN HEALTH, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Date
    
						

 

6

 

Exhibit 7.2(g)(ii)

 

FORM OF NON-COMPETITION AND NON-SOLICITATION AGREEMENT

 

THIS NON-COMPETITION AND NON-SOLICITATION AGREEMENT (“Agreement”) is made and entered into by and between [·], an individual (“Seller”)(1), and Magellan Health, Inc., a Delaware corporation, on behalf of itself and its present and future subsidiaries and affiliates (collectively referred to herein as “Magellan”).

 

WHEREAS, reference is made to that certain Share Purchase Agreement (the “Purchase Agreement”), dated as of the date hereof, by and among Magellan, Magellan Healthcare, Inc., a Delaware corporation (“Purchaser”), Armed Forces Services Corporation, a Virginia corporation (“AFSC”) and the sellers party thereto, pursuant to which Purchaser will purchase all of the outstanding shares of capital stock of AFSC from the sellers (the “Sale”), with the result that AFSC will become a wholly-owned subsidiary of Purchaser;

 

WHEREAS, Seller is a Seller under the Purchase Agreement;

 

WHEREAS, Seller has detailed knowledge of competitively sensitive and important confidential information and trade secrets of AFSC and its business, including information regarding AFSC’s plans and relationships with its customers, suppliers and others, and has obtained and may in the future obtain similar information and trade secrets concerning Magellan’s businesses; and

 

WHEREAS, Seller further recognizes Magellan’s interests in protecting, among other things, Magellan’s relationships with its employees, customers, suppliers and others, and the goodwill associated with its ongoing business;

 

NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual covenants and agreements contained in this Agreement, the parties agree as follows:

 

STATEMENT OF AGREEMENT

 

1.             Protection of Confidential Information/Non-Competition/Non-Solicitation.

 

Seller covenants and agrees as follows:

 

(a)(i)    Confidential Information:  From and after the closing of the transactions contemplated by the Purchase Agreement (the “Sale Closing”), Seller agrees not to use or disclose, directly or indirectly, for any reason whatsoever or in any way, other than after receipt of the prior written consent of Magellan, any Confidential Information of AFSC or Magellan that is known by Seller as of the Sale Closing or subsequently comes into his or her knowledge.  The obligation not to use or disclose any Confidential Information will not apply to any Confidential Information that is or becomes public knowledge through no fault of Seller, and that may be utilized by the public without any direct or indirect obligation to Magellan, but the termination of

 

(1) Note to Draft: To be signed by all Sellers, except Sarah Kim.

 

 

the obligation for non use or nondisclosure by reason of such information becoming public will extend only from the date such information becomes public knowledge.  The above will be without prejudice to any additional rights or remedies of Magellan under any state or federal law regarding the protection of trade secrets or other information.

 

(a)(ii)   Trade Secrets.  Seller shall hold in confidence all Trade Secrets of AFSC or Magellan, that are known by Seller as of the Sale Closing or subsequently come into his or her knowledge and shall not disclose, publish or make use of at any time after the date hereof such Trade Secrets, other than at the direction of Magellan, for as long as the information remains a Trade Secret.

 

(a)(iii)  For purposes of this Agreement, the following definitions apply:

 

“Confidential Information” means any data or information, other than Trade Secrets, that is valuable to AFSC or Magellan and not generally known to the public or to competitors of AFSC or Magellan.  It is understood that the term “Confidential Information” does not mean and shall not include information which:

 

(a)                       is or subsequently becomes publicly available, except by reason of a breach of Seller’s obligation under this Agreement;

 

(b)                       is or becomes subsequently known to Seller without, to the knowledge of Seller, the breach of any obligation owed to Magellan;

 

(c)                        is disclosed with the prior written approval of Magellan; or

 

(d)                       is obligated to be produced under order of a court of competent jurisdiction or a valid administrative, congressional, or other subpoena, civil investigative demand or similar process; provided, however, that upon issuance of any such order, subpoena, demand or other process, Seller shall promptly notify Magellan and shall provide Magellan with an opportunity (if then available) to contest, at Magellan’s expense, the propriety of such order or subpoena (or to arrange for appropriate safeguards against any further disclosure by the court or administrative or congressional body seeking to compel disclosure of such Confidential Information).

 

“Trade Secret” means information including, but not limited to, any technical or non-technical data, formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers or other information similar to any of the foregoing, which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

 

(a)(iv) Interpretation.  The restrictions stated in paragraphs 1(a)(i) and 1(a)(ii) are in addition to and not in lieu of protections afforded to trade secrets and confidential information

 

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under applicable state law.  Nothing in this Agreement is intended to or shall be interpreted as diminishing or otherwise limiting Magellan’s right under applicable state law to protect its trade secrets and confidential information.  The foregoing restrictions will not be interpreted to prohibit the use of Confidential Information or Trade Secrets in connection with Seller asserting or defending Seller’s rights in connection with a bona fide dispute under the Purchase Agreement or this Agreement.

 

(b)       Non-Competition.

 

(i)                                     Seller covenants and agrees that during the period of four (4) years following the Sale Closing (the “Term”), he or she will not, on his or her own behalf or as a partner, officer, director, employee, agent, or consultant of any other person or entity, directly or indirectly, engage or attempt to engage in a business that competes with the federal contracting business conducted by AFSC as of the Sale Closing and the business planned to be conducted by AFSC as of such time to the extent reflected in AFSC’s pipeline of active business prospects (the “Competing Business”) unless waived in writing by Magellan in its sole discretion.  Seller recognizes that the foregoing restriction is reasonable and necessary to protect the interest of Magellan.

 

(ii)                                  During the Term, Seller may submit a written request to Magellan outlining a proposed employment or other business opportunity that Seller is considering. Magellan will review such request, and make a determination within ten (10) business days following receipt of such request, in its view, as to whether the opportunity would constitute a breach of the foregoing non-competition covenant.

 

(c)       Non-Solicitation.  To protect the goodwill of Magellan or the customers of Magellan, Seller agrees that during the Term, he or she will not, without the prior written permission of Magellan, directly or indirectly, for himself or herself or on behalf of any other person or entity, solicit, divert away, take away or attempt to solicit or take away any Customer for purposes of providing or selling products or services that are a Competing Business, if Magellan is then still engaged in the sale or provision of such products or services at the time of the solicitation.  For purposes of this Section 1(c), “Customer” means any individual or entity to whom AFSC or Magellan had provided, or contracted to provide, services and with whom Seller had, alone or in conjunction with others, contact with or knowledge of.  For purposes of this section, Seller had contact with or knowledge of a Customer if (i) Seller had business dealings with the customer on behalf of AFSC or Magellan; (ii) Seller was responsible for supervising or coordinating the dealings between the customer and AFSC or Magellan or; (iii) Seller obtained or had access to trade secrets or confidential information about the Customer as a result of Seller’s association with AFSC or Magellan.

 

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(d)       Non-Solicitation/Hiring of Employees.  During the Term, Seller agrees that he or she will not, without the prior written permission of Magellan, directly or indirectly, for himself or herself or on behalf of any other person or entity, solicit for employment or hire any employee of AFSC or Magellan during the Term.

 

2.            Remedies.  An actual or threatened violation by Seller of the covenants and obligations set forth in Section 1 will cause irreparable harm to Magellan and that the remedy at law for any such violation will be inadequate. Seller agrees, therefore, that Magellan will be entitled to equitable relief against Seller in connection with enforcement of the covenants and obligations set forth in Section 1.

 

3.             Notices.  Any notice or request required or permitted to be given to any party will be given in writing and, excepting personal delivery, will be given at the address set forth below or at such other address as such party may designate by written notice to the other party to this Agreement:

 

	
To Seller:
    	
c/o Armed Forces   Services Corporation
    
	
 
    	
2800 S. Shirlington   Road, #350
    
	
 
    	
Arlington, VA 22206
    
	
 
    	
Attention: [·]
    
	
 
    	
Email:  [·]
    
	
 
    	
 
    
	
To Magellan:
    	
Magellan   Health, Inc.
    
	
 
    	
4800 N. Scottsdale   Road, Ste. #4400
    
	
 
    	
Scottsdale, AZ 85251
    
	
 
    	
Attention:    General Counsel
    
	
 
    	
Facsimile:  (860)   507-1990
    
	
 
    	
Email:    DNGregoire@magellanhealth.com
    

 

Each notice given in accordance with this Section will be deemed to have been given, if personally delivered, on the date personally delivered; if delivered by facsimile transmission or email, when sent and confirmation of receipt is received; or, if mailed, on the third day following the day on which it is deposited in the United States mail, certified or registered mail, return receipt requested, with postage prepaid, to the address last given in accordance with this Section.

 

4.             Headings.  The headings of the sections of this Agreement have been inserted for convenience of reference only and should not be construed or interpreted to restrict or modify any of the terms or provisions of this Agreement.

 

5.             Severability.  If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Agreement, such provision will be fully severable and this Agreement and each separate provision will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement will remain in full

 

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force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.  In addition, in lieu of such illegal, invalid or unenforceable provision, there will be added automatically, as a part of this Agreement, a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable, to the extent such reformation is allowable under applicable law.

 

6.             Governing Law.  This Agreement and all issues relating to the validity, interpretation, and performance will be governed by, interpreted, and enforced under the laws of the State of New York.

 

7.            Binding Effect.  This Agreement will be binding upon and shall inure to the benefit of each party and each party’s respective successors, heirs and legal representatives.  This Agreement may not be assigned by Seller to any other person or entity but may be assigned by Magellan to any subsidiary or affiliate of Magellan or to any successor to or transferee of all, or any part, of the stock or assets of Magellan.

 

8.             Entire Agreement.  This Agreement embodies the entire agreement and understanding between the parties with respect to its subject matter and supersedes all prior agreements and understandings, whether written or oral, relating to its subject matter, unless expressly provided otherwise within this Agreement.  No amendment or modification of this Agreement will be valid unless made in writing and signed by each of the parties.  No representations, inducements, or agreements have been made to induce either Seller or Magellan to enter into this Agreement, which are not expressly set forth within this Agreement. Seller and Magellan acknowledge and agree that Magellan’s controlled subsidiaries and affiliates are express third party beneficiaries of this Agreement.

 

9.             Purchase Agreement.  Notwithstanding anything herein to the contrary, this Agreement and the rights and obligations hereunder, shall be effective subject to and as of the Sale Closing.  In the event that the Purchase Agreement is terminated in accordance with its terms without the consummation of the transactions contemplated thereby, this Agreement shall be null and void ab initio as of the date of such termination.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the        day of May 2016.

 

	
 
    	
 
    	
MAGELLAN   HEALTH, INC.
    
	
“Seller”
    	
 
    	
“Magellan”
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
Name: [·]
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

 

Exhibit 7.2(g)(iii)

 

FORM OF SUBSCRIPTION AGREEMENT

 

THIS AGREEMENT is made as of [•], 2016 (this “Agreement”), by and between [•], an individual (“Purchaser”)(1), and Magellan Health, Inc., a Delaware corporation (the “Company”).  Capitalized terms used herein and not otherwise defined herein have the respective meanings ascribed to them in the Purchase Agreement (as defined below).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain Share Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), by and among the Company, Magellan Healthcare, Inc., a Delaware corporation (“Buyer”), Armed Forces Services Corporation, a Virginia corporation (“AFSC”), the sellers party thereto (including Purchaser) (collectively, the “Sellers”), and [•], in its capacity as the seller representative, Buyer will purchase all of the outstanding shares of capital stock of the Company from the Sellers (the “Sale”), with the result that Purchaser will become a wholly-owned Subsidiary of Buyer; and

 

WHEREAS, Purchaser desires to subscribe and purchase, and the Company desires to sell to Purchaser, in connection with the consummation of the Sale, [•] shares (the “Restricted Shares”) of ordinary common stock, par value $0.01 per share, of the Company (the “Common Stock”) having a Fair Market Value (as hereinafter defined) equal to the amount set forth on Exhibit A attached hereto;

 

NOW, THEREFORE, in consideration of the representations, warranties and covenants, and subject to the conditions, contained in this Agreement, and intending to be legally bound thereby, the parties hereto hereby agree as follows:

 

1.         Definitions.

 

(a)           “Cause” shall mean:

 

	
(A)
    	
Purchaser is convicted of (or pleads guilty or nolo   contendere to) a felony or a misdemeanor involving moral turpitude;
    
	
 
    	
 
    
	
(B)
    	
Purchaser’s commission of an act of fraud or   dishonesty involving Purchaser’s duties on behalf of the Company; provided,   however, that the Company will give Purchaser written notice of the   acts committed by Purchaser which the Company believes constitutes an act of   fraud or dishonesty involving Purchaser’s duties on behalf of the   Company.  The Company will then give Purchaser the opportunity to meet   with Purchaser’s immediate
    

 

(1) NTD: Parties to enter into subscription agreements: Geoffrey J. Deutsch, TCB Trust dated September 1, 2015, and Sarah H. Kim.

 

 

	
 
    	
supervisor(s) to respond to the allegations and   explain Purchaser’s position, if any, why such allegations are false or   unwarranted.  Purchaser’s termination pursuant to this clause   (B) will only be effective after the conclusion of such meeting and the   Company specifying in writing the acts that Purchaser committed for which the   Company is terminating the employment of Purchaser;
    
	
 
    	
 
    
	
(C)
    	
Purchaser’s failure or refusal to perform duties   reasonably assigned to Company (other than any such failure resulting from   incapacity due to physical or mental illness) or other material breach of any   material term of any written employment agreement at the time in effect   between the Company and Purchaser (as applicable, the “Employment   Agreement”); provided, that to   the extent such failure, refusal or breach may be cured, Purchaser shall have   failed to cure such deficiency within ten (10) days of a written notice   of such deficiency by the Company (or, if such default is of a nature that   cannot be cured by Purchaser within such ten (10) day period,   Purchaser’s failure to cure such deficiency within a reasonable period, but   in no event more than thirty (30) days from such written notice by the   Company); or
    
	
 
    	
 
    
	
(D)
    	
Purchaser’s material failure or refusal to abide by   Company’s policies, rules, procedures or directives which are provided to   Purchaser in writing, including any material violation of the Company’s Code   of Ethics (as then in effect); provided, that to the extent such   failure, refusal or violation may be cured, Purchaser shall have failed to   cure such deficiency within ten (10) days of a written notice of such   deficiency by the Company (or, if such default is of a nature that cannot be   cured by Purchaser within such ten (10) day period, Purchaser’s failure   to cure such deficiency within a reasonable period, but in no event more than   thirty (30) days from such written notice by the Company).
    

 

(b)           “Fair Market Value” shall mean with respect to the Restricted Shares the average of the closing trading prices (as reported) on The Nasdaq Stock Market of the shares of Common Stock of the Company over the five (5) trading days ended on (i) the trading day immediately preceding the date hereof (such average being $[•]) or (ii) the date of the Offer specified in Section 4(d).

 

(c)           “Good Reason” shall mean:

 

	
(A)
    	
notification to Purchaser that Purchaser’s position   with the Company will be relocated to an office which is greater
    

 

2

 

	
 
    	
than twenty-five (25) miles from Purchaser’s prior   office location;
    
	
 
    	
 
    
	
(B)
    	
a reduction in Purchaser’s base salary (to the   extent applicable, to an amount below the “base salary” amount identified in   the Employment Agreement or a reduction of Purchaser’s target bonus   opportunity to any amount less than the target bonus opportunity identified   in the Employment Agreement);
    
	
 
    	
 
    
	
(C)
    	
material diminution in Purchaser’s title, authority,   duties or responsibilities; or
    
	
 
    	
 
    
	
(D)
    	
any other breach by the Company of any   material term under the Employment Agreement;
    

 

provided, that, in each such case, Purchaser provides notice to the Company within ninety (90) days that such event or condition constituting Good Reason has arisen, and such event or condition continues uncured for a period of more than thirty (30) days  after Purchaser gives notice thereof to the Company.

 

(d)           “Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

(e)           “Transfer” shall mean, with respect to any Restricted Shares, any sale, assignment, alienation, conveyance, gift, pledge, lien, encumbrance, bequest by will or under intestacy laws or by operation of law or other transfer, with or without consideration, of all or part of such Restricted Shares, or of any beneficial interest therein, now or hereafter owned by Purchaser, including by execution, attachments, levy or similar process.

 

2.         Sale and Purchase of the Restricted Shares. At the Closing referred to in Section 3(a) below, subject to the terms and conditions set forth herein, the Company shall sell to Purchaser, and Purchaser shall purchase from the Company, the Restricted Shares and Purchaser shall pay to the Company the amount set forth on Exhibit A (the “Purchase Price”).

 

3.         The Closing.

 

(a)           The closing of the purchase and sale of the Restricted Shares (the “Closing”) shall occur immediately after the closing provided for by the Purchase Agreement (the “Sale Closing”).  The date on which the Sale Closing and the Closing take place is referred to herein as the “Closing Date.”

 

(b)           At the Closing, the Company shall deliver to Purchaser certificates representing the Restricted Shares, bearing a legend as hereinafter provided, upon payment of the Purchase Price by wire transfer of immediately available funds to such account as shall be designated in writing by the Company to Purchaser prior to the Closing or by other means

 

3

 

reasonably acceptable to the Company.  Payment of the Purchase Price shall be made in U.S. dollars.

 

4.         Vesting of Restricted Shares; Restrictions on Transfer.

 

(a)           Vesting of Restricted Shares.  One hundred percent of the Restricted Shares (the “Unvested Shares”) shall vest based on the passage of time, with (x) one-half (1/2) vesting on the twelve (12) month anniversary of the Closing Date (as defined in the Purchase Agreement) and (y) one-half (1/2) vesting on the twenty-four (24) month anniversary of the Closing Date.  In addition to the time-based vesting schedule set forth in the preceding sentence, all Unvested Shares shall immediately vest upon the earliest to occur of the date upon which (i) Purchaser dies, (ii) Purchaser’s employment with the Company is terminated by reason of his becoming “Disabled” (as defined in the form of employment agreement referred to in Section 7.2 of the Purchase Agreement), (iii) Purchaser’s employment with the Company is terminated by the Company without Cause (including by reason of the Company’s (or the Company’s Affiliate) failure to renew the terms of any employment agreement to which Purchaser is a party) or (iv) Purchaser’s employment with the Company is terminated by Purchaser for Good Reason (as defined herein) (provided that Purchaser’s service with the Company has not previously terminated after the date hereof for any other reason).  Upon each such time as Unvested Shares vest pursuant to the preceding sentences, such shares shall from and after such time be referred to as “Vested Shares”.  If Purchaser’s employment with the Company (or an Affiliate (as defined in the Purchase Agreement) of the Company) is terminated by Purchaser without Good Reason (including by reason of Purchaser’s failure to renew the terms of any employment agreement to which Purchaser is a party with the Company or any of its Affiliates) or terminated by the Company for Cause, in each case, before any portion of the Unvested Shares has vested pursuant to this Section 4(a), then Purchaser shall immediately as of such time forfeit such Unvested Shares to the Company and shall deliver any certificates representing such forfeited shares, endorsed for transfer, to the Company for no consideration.

 

(b)           Transfers Generally Prohibited.  Without the prior written consent of the Company (executed by an executive officer thereof), no Transfer of any of the Unvested Shares shall be permitted.  Vested Shares may be Transferred subject to the Company’s rights in subsection (d) below.

 

(c)           Certain Transfers Permitted.  Notwithstanding the foregoing provisions of this Section 4, the Restricted Shares may be Transferred (i) in the event of Purchaser’s death, by will or the laws of descent and distribution or by a written beneficiary designation accepted by the Company, (ii) by operation of law in connection with a merger, consolidation, recapitalization, reclassification or exchange of shares of Common Stock, reorganization or similar transaction involving the Company and affecting the Common Stock generally or (iii) with the approval of the Company, to a member of Purchaser’s family, or a trust primarily for the benefit of Purchaser and/or one or more members of Purchaser’s family, or to a corporation, partnership or other entity primarily for the benefit of Purchaser and/or one or more such family members and/or trusts or (iv) with the approval of the Company, in another estate or personal financial planning transaction; provided, however, that in any such case the Restricted Shares so Transferred shall remain subject in the hands of the Transferee to the restrictions on Transfer provided hereby and all other terms hereof, including those relating to vesting, if applicable.

 

4

 

(d)          Right of First Refusal.

 

(i)           If following the time Restricted Shares vest hereunder, Purchaser desires to Transfer all or any portion of the Vested Shares, other than pursuant to the provisions of subsection (c) above (the “Offered Shares”), then Purchaser shall first furnish a written notice of such proposed Transfer to the Company setting forth the terms of the proposed Transfer, including the amount and type of consideration to be paid by the proposed transferee (the “Transferee”), the terms and conditions of the proposed Transfer and the name of the Transferee.  Such written notice will be deemed to be an offer to sell the Offered Shares to the Company (the “Offer”) for an amount equal to the Fair Market Value of the Offered Shares.

 

(ii)          The Company may elect to purchase all or some of the Offered Shares by providing written notice to Purchaser of its election to purchase within thirty (30) days after receipt of the Offer (the “Notice Period”).  If the Company timely exercises its option to purchase the Offered Shares, Purchaser shall sell the Offered Shares elected to be purchased to the Company, and the Company shall purchase the Offered Shares elected to be purchased and pay to Purchaser an amount in cash equal to the Fair Market Value of the Offered Shares elected to be purchased at a closing to be held no later than sixty (60) days after the Company’s receipt of the Offer.

 

(iii)         If the Company fails to exercise its option to purchase all of the Offered Shares, then Purchaser shall have ninety (90) days after the expiration of the Notice Period or the date upon which the Company notifies Purchaser that it will not be purchasing the Offered Shares to sell the Offered Shares not so elected to be purchased to the Transferee on the terms and conditions specified in the Offer.  If Purchaser does not consummate the sale of such Offered Shares within such ninety (90)-day period, then Purchaser may not thereafter Transfer any of the Restricted Shares without again complying with this Section 4(d).

 

(e)           Legend.  Purchaser acknowledges that the Company may legend any certificates representing the Restricted Shares (or other shares or securities distributed in respect thereof) with a legend in the form set forth as Exhibit B and enter appropriate stop-transfer instructions with any transfer agent or registrar, as may reasonably be determined by the Company to be appropriate to effectuate the provisions of this Section 4, including any applicable federal or state securities law.

 

(f)            Securities Act Restrictions on Resale of Restricted Shares.  Purchaser acknowledges that the issuance of the Restricted Shares to Purchaser pursuant to this Agreement has not been registered under the Securities Act or any U.S. state law in reliance upon an exemption from such registration and that the Restricted Shares may not be sold or otherwise Transferred absent registration of such transaction or the availability of an exemption from registration thereunder and, if requested by the Company, the delivery to the Company of an opinion of counsel in form and substance reasonably acceptable to the Company as to the availability of an exemption from registration thereunder.

 

(g)           Fiduciary and Securities Law Restrictions.  Purchaser acknowledges that, as an employee, officer and/or manager or director of AFSC (or the Company or another of its Affiliates), Purchaser may be subject to restrictions on his ability to sell or otherwise Transfer Restricted Shares by reason of being a fiduciary for the Company or

 

5

 

by reason of federal or state securities laws and/or the policies regarding transactions in securities of the Company from time to time adopted by the Company and applicable to Purchaser.  Nothing contained herein shall relieve Purchaser of any restrictions on Transfer of Restricted Shares provided thereby and any other restrictions of Transfer of Restricted Shares provided herein shall be in addition to and not in lieu of any other restrictions provided thereby.

 

5.         Representations and Warranties of the Company.  The Company hereby represents and warrants to Purchaser as follows:

 

(a)           Organization and Good Standing.  The Company is duly organized, validly existing and in good standing under the laws of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted.

 

(b)           Authorization.  The Restricted Shares to be issued pursuant hereto have been duly authorized and, when issued and delivered in consideration of the payment of the Purchase Price, will be validly issued, fully paid and non-assessable and, except as otherwise expressly provided herein, are entitled to all of the rights and privileges of validly issued and outstanding shares of the Company’s Common Stock.  The Company has full corporate power and authority to execute and deliver this Agreement and all other agreements and instruments contemplated hereby to which the Company is a party and to perform its obligations hereunder and thereunder, and this Agreement and all such other agreements and instruments have been duly authorized, executed and delivered by the Company and, assuming the due execution and delivery of this Agreement and all other agreements and instruments contemplated hereby to which the Company is a party, by the other parties hereof and thereof, are valid, binding and enforceable against the Company in accordance with their terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws of general application affecting or relating to the enforcement of creditors’ rights generally and (ii) is subject to general principles of equity, whether considered in a proceeding at law or in equity.

 

(c)           Compliance with Law and Other Obligations.  The execution, delivery and performance of this Agreement by the Company, and the fulfillment of and compliance with the terms hereof by the Company, do not and will not (i) violate any statute, law, ordinance, rule, regulation or order of any court or governmental authority or any judgment, order or decree (U.S. federal, state or local or foreign) applicable to the Company, (ii) violate any requirements of any material obligation of the Company, (iii) result in or constitute (with or without the giving of notice, lapse of time or both) any default or event of default under any material obligation of the Company, or give rise to a right of termination of, or accelerate the performance required by, any terms of any such material obligation.

 

6.         Representations and Warranties of Purchaser.  Purchaser hereby represents and warrants to the Company that:

 

(a)           Authorization and Enforceability.  Purchaser has full right, capacity and power to execute and deliver this Agreement and all other agreements and instruments contemplated hereby to which Purchaser is a party, and to perform his obligations hereunder and thereunder.  This Agreement and all other agreements and instruments

 

6

 

contemplated hereby to which Purchaser is a party have been duly executed and delivered by or on behalf of such Purchaser and, assuming due execution by other parties, constitute legal, valid and binding agreements, enforceable against Purchaser in accordance with their terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws of general application affecting or relating to the enforcement of creditors’ rights generally and (ii) is subject to general principles of equity, whether considered in a proceeding at law or in equity.

 

(b)           Compliance with Law and Other Obligations.  The execution, delivery and performance of this Agreement and all other agreements and instruments contemplated hereby to which such Purchaser is a party and the fulfillment of and compliance with the respective terms hereof and thereof by Purchaser, do not and will not (i) violate any statute, law ordinance, rule, regulation or order of any court or governmental authority or any judgment, order or decree (U.S. federal, state or local or foreign) applicable to Purchaser, (ii) violate any requirements of any material obligation of Purchaser, or (ii) result in or constitute (with or without the giving of notice, lapse of time or both) any default or event of default under any material obligation of Purchaser, or give rise to a right of termination of, or accelerate the performance required by, any terms of any such material obligation.

 

(c)           Investment Intent; Accredited Investor Status; Sufficiency of Information.  The Restricted Shares to be received by Purchaser will be acquired by Purchaser for investment only for his own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof in violation of applicable U.S. federal or state or foreign securities laws.  Purchaser has no current intention of selling, granting any participation in or otherwise distributing the Restricted Shares in violation of applicable U.S. federal or state or foreign securities laws.  Purchaser does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant any participation to such person or entity, or to any third person or entity, with respect to any of the Restricted Shares, in each case, in violation of applicable U.S. federal or state or foreign securities laws.  Purchaser is one of the following and therefore an “accredited investor,” as such term is defined in Rule 501 of the Securities Act:  (i) a person whose individual net worth, or joint net worth with their spouse, at the time of purchasing the Restricted Shares exceeds $1,000,000 or (ii) a person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with their spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.  Purchaser, alone or together with his advisors, has such knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of investing in the Restricted Shares pursuant hereto.  In deciding to invest in the Restricted Shares Purchaser has relied upon independent investigations made by Purchaser and, to the extent believed by Purchaser to be appropriate, Purchaser’s representatives, including Purchaser’s own professional, tax and other advisors, and is making an independent decision to invest in the Shares.  Purchaser has been furnished with such documents, materials and information as Purchaser deems necessary or appropriate for evaluating an investment in the Restricted Shares, and Purchaser has considered such documents, materials and information and understands and has evaluated the types of risks involved in a purchase of the Restricted Shares.  Purchaser has had, prior to his purchase of the Restricted Shares, the opportunity to ask questions of, and receive answers from, the Company concerning the terms and conditions of the transactions contemplated by this Agreement and Purchaser’s investment in the Restricted Shares and to obtain additional information necessary to verify the

 

7

 

accuracy of any information furnished to him or her or to which he or she had access.  Purchaser has not relied upon any representations or other information (whether oral or written) from the Company or its respective stockholders, directors, officers or Affiliates, or from any other person or entity, in connection with his investment in the Restricted Shares, except for the representations explicitly included herein.  Purchaser acknowledges that the Company has not given any assurances with respect to the tax consequences of Purchaser’s acquisition, ownership and disposition of the Restricted Shares.

 

7.         Conditions to Obligations of the Company and Purchaser.

 

(a)           Upon a termination of the Purchase Agreement in accordance with its terms before consummation of the Sale Closing, this Agreement shall automatically terminate, and be of no further force or effect.

 

(b)           Purchaser hereby agrees to make, as of the Closing, an election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (a “Section 83(b) Election”) with respect to the Restricted Shares, and Purchaser hereby authorizes the Company to timely file such election with the Internal Revenue Service on Purchaser’s behalf.  The form for making the Section 83(b) Election is attached hereto as Exhibit C.  The Company and Purchaser shall each be provided a copy of the Section 83(b) Election.

 

8.         Additional Shares.  In the event that the Company issues any additional shares of its capital stock or other securities in exchange for or with respect to Restricted Shares at a time when such Restricted Shares are not Transferable in accordance with Section 4(b), whether by way of a stock dividend, stock split, recapitalization, or other transaction, the new or additional shares held by or issuable to Purchaser as a result thereof shall be treated as “Restricted Shares” for the purposes of this Agreement and shall be subject to the same restrictions and other terms (including terms of forfeiture) of this Agreement as are applicable to the initial Restricted Shares.

 

9.         Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be considered an original, but all of which taken together shall constitute 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 parties (including by facsimile or via portable document format (.pdf)).

 

10.       No Waiver, Modifications in Writing.  This Agreement and any exhibits, schedules or other documents referred to herein or therein, sets forth the entire understanding of the parties, and supersedes all prior agreements, arrangements, term sheets, presentations and communications, whether oral or written, with respect to the specific subject matter hereof.  No waiver of or consent to any departure from any provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof; provided that notice of any such waiver shall be given to each party hereto as set forth below.  Except as otherwise provided herein, no amendment, modification or termination of any provision of this Agreement shall be effective unless signed in writing by or on behalf of the Company and Purchaser.  Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure from the terms of any

 

8

 

provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given.

 

11.       Binding Effect; Assignment.  The rights and obligations of each party under this Agreement may not be assigned to any other person or entity.  Except as expressly provided in this Agreement, this Agreement shall not be construed so as to confer any right or benefit upon any person or entity other than the parties to this Agreement, and their respective successors and assigns.  This Agreement shall be binding upon the Company, Purchaser and its respective heirs, successors, legal representatives and permitted assigns.

 

12.       Severability of Provisions.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

13.       Injunctive Relief.  Each of the parties to this Agreement hereby acknowledges that in the event of a breach by any of them of any material provision of this Agreement, the aggrieved party may be without an adequate remedy at law.  Each of the parties therefore agrees that, in the event of a breach of any material provision of this Agreement, the aggrieved party may elect to institute and prosecute proceedings to enforce specific performance or to enjoin the continuing breach of such provision, as well as to obtain damages for breach of this Agreement.  By seeking or obtaining any such relief, the aggrieved party will not be precluded from seeking or obtaining any other relief to which it may be entitled.

 

14.       Notices.  All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given, made, served or delivered if delivered personally, sent by facsimile (receipt of which is confirmed), sent by electronic mail or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:

 

If to the Company, to:

 

Magellan Health, Inc.

4800 N. Scottsdale Road, Ste. #4400

Scottsdale, Arizona 85251

Attention:  Daniel Gregoire, General Counsel

Facsimile:  (860) 507-1990

Email: DNGregoire@magellanhealth.com

 

with a copy (which shall not constitute notice) to:

 

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, NY 10153

Attention:  Raymond O. Gietz, Esq.

Facsimile:  (212) 310-8007

Email: raymond.gietz@weil.com

 

9

 

If to Purchaser, to:

 

[·]

Attention:  [·]

Facsimile:  [·]

Email:  [·]

 

with a copy (which shall not constitute notice) to:

 

[·]

Attention:  [·]

Facsimile:  [·]

Email:  [·]

 

or, in each case, such other address or facsimile number as such party may hereafter specify by like notice to the other parties hereto.

 

15.       Exhibits and Descriptive Headings.  All Exhibits to this Agreement shall be deemed to be a part of this Agreement.  The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

 

16.       Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles, policies or provisions thereof or of any other jurisdiction concerning conflict or choice of laws.

 

[The remainder of this page has been intentionally left blank.]

 

10

 

IN WITNESS WHEREOF, the parties hereto have executed this Subscription Agreement on the date first written above.

 

	
 
    	
THE COMPANY:
    
	
 
    	
 
    
	
 
    	
MAGELLAN   HEALTH, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PURCHASER:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    

 

 

EXHIBIT A

 

	
Purchaser
    	
 
    	
Price (US$)
    	
 
    	
Number of Restricted
   Shares
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

EXHIBIT B

 

Restricted Share Legend

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE ACT”), OR THE APPLICABLE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES LAWS, OR UNLESS SUCH PLEDGE, SALE, ASSIGNMENT OR TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE SECURITIES LAWS.

 

THIS SECURITY AND TRANSFER THEREOF IS SUBJECT TO THE PROVISIONS OF AND THE RESTRICTIONS UNDER THAT CERTAIN SUBSCRIPTION AGREEMENT, DATED AS OF [•], 2016, BY AND BETWEEN THE PURCHASER OF THIS SECURITY AND MAGELLAN HEALTH, INC. (THE “AGREEMENT”), WHICH IN PART RESTRICTS THE TRANSFER OF THIS SECURITY IN THE MANNER SET FORTH IN THE AGREEMENT. SUCH PROVISIONS INCLUDE, WITHOUT LIMITATION, SECTION 4 OF THE AGREEMENT (INCLUDING IN PARTICULAR SECTION 4(D) (RIGHT OF FIRST REFUSAL)), ALL OF WHICH IS INCORPORATED HEREIN BY REFERENCE.

 

 

EXHIBIT C

 

Election to Include

Property in Gross Income

Pursuant to §83(b) of the

United States Internal Revenue Code

 

On [   ], 2016, the undersigned (the “Taxpayer”) acquired shares of ordinary common stock, par value $0.01 per share (the “Property”) of Magellan Health, Inc., a Delaware corporation (the “Company”).  The Property is subject to certain restrictions pursuant to the Subscription Agreement by and between the Taxpayer and the Company, dated as of [   ], 2016.

 

Pursuant to § 83(b) of the Internal Revenue Code of 1986, as amended and Treasury Regulation § 1.83-2 promulgated thereunder, the Taxpayer hereby makes an election, with respect to the Property, to report as taxable income for calendar year 2016 the excess, if any, of the Property’s fair market value on [   ], 2016 over the purchase price thereof.

 

The following information is supplied in accordance with Treasury Regulation § 1.83-2(e):

 

1.             The name, address and taxpayer identification number of the Taxpayer:

 

	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Taxpayer I.D. No.:
    	
 
    	
 
    

 

2.             A description of the Property with respect to which the election is being made:

 

[    ] shares of ordinary common stock, par value $0.01 per share of the Company.

 

3.            The date on which the Property was transferred and the taxable year for which such election is made:

 

[   ], 2016, and calendar year 2016.

 

4.            The nature of the restriction(s) to which the Property is subject:

 

The Property is subject to transfer restrictions.  In addition, the property is subject to forfeiture restrictions that lapse only if the Taxpayer remains employed by the Company through the twelve (12) month and twenty-four (24) month anniversaries of [   ], 2016, or if the Taxpayer dies, is terminated by reason of becoming disabled, is terminated by the Company without cause or resigns under certain circumstances.

 

 

5.            Fair market value at the time of transfer:

 

The fair market value at time of transfer (determined without regard to any restrictions other than restrictions which by their terms will never lapse) of the Property was $[    ].

 

6.             Amount paid for the Property:

 

The amount paid by the Taxpayer for the Property was $[    ].

 

7.             Amount to include in gross income:

 

The amount to include in gross income is $0.

 

8.             Furnishing statement to the Company:

 

A copy of this statement has been furnished to the Company.

 

This election must be filed with the Internal Revenue Service Center with which Taxpayer files Taxpayer’s federal income tax returns and must be made within thirty (30) days after the date of grant.  This filing should be made by registered or certified mail, return receipt requested.  The Taxpayer should retain two (2) additional copies of the completed form for filing with Federal and state tax returns for the Taxpayer’s current tax year and one (1) additional copy for the Taxpayer’s records.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, the undersigned Taxpayer executes this Election to Include Property in Gross Income Pursuant to § 83(b) of the United States Internal Revenue Code of 1986, as amended, as of the      day of                      , 2016.

 

	
 
    	
 
    
	
 
    	
[Name]
    

 

 

Exhibit 7.2(i)

 

RESIGNATION AND RELEASE OF CLAIMS AGREEMENT

 

This Resignation and Release of Claims Agreement (this “Agreement”) is made as of [•], 2016, by and between [•](1) (“Releasing Party”) and Armed Forces Services Corporation, a Virginia corporation (“Company”).  In this Agreement, Releasing Party and Company are referred to as the “Parties” and each a “Party.”

 

Recitals

 

A.           Reference is made to that certain Share Purchase Agreement dated as of [•], 2016 (the “Purchase Agreement”), by and among Magellan Health, Inc., a Delaware corporation (“Magellan”), Magellan Healthcare, Inc., a Delaware corporation (“Purchaser”), Company and the holders of shares set forth on the signature pages thereto, pursuant to which Purchaser will purchase all of the issued and outstanding shares of capital stock of Company from the sellers party thereto, including Releasing Party (the “Transaction”).

 

B.            Nothing contained in this Agreement, and no act taken pursuant to it, will constitute an admission by Company of any liability to Releasing Party.

 

C.            The Parties acknowledge and represent that they are fully competent to enter into this Agreement, that they have had a reasonable amount of time in which to consider this Agreement before executing it, that they have had the opportunity to consult with an attorney about its terms and effect, and that they enter into this Agreement knowingly and voluntarily.

 

D.            To induce Magellan and Purchaser to execute, and consummate the transactions contemplated by the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned, intending to be legally bound, hereby covenants and agrees as follows:

 

Terms

 

1.             Resignation. Releasing Party hereby resigns his/her position as [office] [and as a member of the board of directors] of the Company with effect as of the Closing as defined in the Purchase Agreement.

 

2.             Payment.

 

Fees and Expenses.  Releasing Party acknowledges that Releasing Party has received, among other things: (1) payment for any and all director fees and/or other monies owed to Releasing Party as of the date of execution of this Agreement and (2) reimbursement for all expenses incurred by Releasing Party as a director as of the date of execution of this Agreement.

 

(1) Note to Draft: Each requested director and officer to be party to a standalone release. Conforming changes to be made as between an officer or a director.

 

 

3.             Release of Claims.

 

General Release of All Claims Against Released Parties.  Releasing Party on behalf of Releasing Party and on behalf of Releasing Party’s marital community, if any, agents, heirs, executors, administrators, and assigns, hereby knowingly and voluntarily releases and discharges forever Company and its respective parent, subsidiary or affiliate entities (including, for the avoidance of doubt, Magellan and its subsidiaries and controlled affiliates); its respective, directors, managers, members, officers, agents, and employees; its respective predecessors; and all of its respective attorneys, accountants, insurers, agents, successors and assigns (collectively, the “Released Parties”) from any and all debts, liabilities and obligations (whether direct or indirect, known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due, and whether in contract, tort, strict liability or otherwise) and any claims relating thereto (including any claim to attorneys’ fees and costs) (“Claims”); provided, however, that this release shall be effective as of, and conditioned upon the occurrence of, the consummation of the Transaction and does not extend to: (1) any Claim based on conduct occurring after the Parties execute this Agreement, (2) any Claim to enforce the terms of, or any breach of, this Agreement, the Purchase Agreement or any document or agreement delivered in connection herewith or therewith or any of the provisions set forth in the foregoing (in each case, to the extent that the shareholder has a right to enforce the terms thereof or the Shareholders’ Representative has the right to enforce such terms on behalf of such shareholder), (3) any Claim for indemnification, advancement or contribution by the Releasing Party as an officer or director of the Company under the articles of incorporation and by-laws of the Company, each as in effect on the date hereof or (4) any accrued and unpaid salary, bonus, benefits or other compensation earned in the ordinary course of business in accordance with Company’s current compensation and benefit plans and policies.  Releasing Party intends, by Releasing Party’s release of Claims, to release all such Claims, whether known or unknown by Releasing Party.

 

a.         No Pending Claims.  Releasing Party expressly represents and warrants that as of the date of execution of this Agreement, Releasing Party has not, directly or indirectly, filed or lodged any administrative charge(s) or claim(s), or any complaint(s) with any governmental agencies or other legal claim(s) against any Released Parties as defined in this Paragraph 1, or related in any manner to the Claims released by this Agreement.

 

b.        No One Else Has Interest In Claims.  Releasing Party expressly represents and warrants that: no other person or entity has or has had any interest in the Claims released by this Agreement; that Releasing Party has the sole right and exclusive authority to execute this Agreement; and Releasing Party has not sold, assigned, transferred, conveyed, or otherwise disposed of any of the Claims released by this Agreement.

 

4.             Severability.  If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect.

 

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5.             Binding Agreement.  This Agreement will bind and inure to the benefit of the Parties and all of their heirs, executors, administrators, successors, assigns, and legal representatives, as well as all other persons in privity with them.

 

6.             Entire Agreement.  The Parties acknowledge that no promise or inducement has been offered except as set forth in this Agreement and that they execute this Agreement without reliance upon any statement or representation other than what is contained in this Agreement.  This Agreement constitutes the entire agreement between the Parties with respect to the matters that it covers and supersedes all prior and contemporaneous agreements, representations and understandings of the Parties with respect to those matters.  This Agreement may be amended only by written agreement, signed by the Party or Parties to be bound by the amendment.  Parol evidence will be inadmissible to show agreement by and between the Parties to any term or condition contrary to or in addition to the terms and conditions contained in this Agreement.

 

7.             Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to the principles, policies or provisions thereof or of any other jurisdiction concerning conflict or choice of laws.

 

8.             Counterpart Originals.  This Agreement may be executed in counterparts (each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement) and shall become effective when one or more counterparts has been signed by each of the parties and delivered to the other party (including by facsimile or via portable document format (.pdf)).

 

9.             Recitals.  The recitals set forth above are incorporated herein by this reference and made part of this Agreement.

 

[SIGNATURES ON FOLLOWING PAGE]

 

3

 

The Parties hereby execute this Agreement on the date set forth below.

 

	
Dated:              , 2016.
    	
[NAME]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Dated:             , 2016.
    	
Armed Forces Services   Corporation
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

[Signature Page to Release of Claims Agreement]

 

 

Schedule 7.2(g)(iii)

 

	
Seller
    	
 
    	
Amount of Restricted Parent Shares
    
	
Geoffrey J. Deutsch
    	
 
    	
$
    	
2,150,000
    
	
TCB Trust dated   September 1, 2015
    	
 
    	
$
    	
1,600,000
    
	
Sarah H. Kim
    	
 
    	
$
    	
250,000

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