<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM__________________________
COMMISSION FILE NO. 0-23311
AMERICAN PHYSICIAN PARTNERS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2648089
(State or other (I.R.S. Employer
jurisdiction of Identification)
incorporation or
organization)
3600 CHASE TOWER
2200 ROSS AVENUE
DALLAS, TEXAS 75201
(Address of principal executive offices, including zip code)
(214) 303-2776
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at November 12, 1998
----- --------------------------------
COMMON STOCK, $0.0001 PAR VALUE 19,234,214 SHARES
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AMERICAN PHYSICIAN PARTNERS, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
FORM 10-Q ITEM PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1998 (Unaudited) and December 31, 1997...... 1
Consolidated Statements of Income (Unaudited) for the three months and nine months
ended September 30, 1998 and 1997........................................................... 2
Consolidated Statements of Cash Flows (Unaudited) for the three months and nine months
ended September 30, 1998 and 1997........................................................... 3
Notes to Consolidated Financial Statements.................................................. 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...... 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................. 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................... 13
Item 2. Changes in Securities....................................................................... 13
Item 3. Defaults Upon Securities.................................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders......................................... 13
Item 5. Other Information .......................................................................... 13
Item 6. Exhibits and Reports on Form 8-K............................................................ 13
SIGNATURES.................................................................................................... 14
</TABLE>
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................... $ 4,990 $ 4,572
Accounts receivable, net of allowances .................. 33,593 21,398
Due from affiliated practices ........................... 615 3,651
Other current assets .................................... 3,658 2,351
--------- ---------
Total current assets ................................. 42,856 31,972
PROPERTY AND EQUIPMENT, net ................................ 35,466 22,837
INVESTMENTS IN JOINT VENTURES .............................. 4,110 3,725
INTANGIBLE ASSETS, net ..................................... 59,691 1,790
DEFERRED FINANCING COSTS ................................... 3,992 2,395
OTHER ASSETS ............................................... 152 47
--------- ---------
Total assets ......................................... $ 146,267 $ 62,766
========= =========
LIABILITES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses ................... $ 4,597 $ 12,689
Accrued physician retention ............................. 6,279 4,330
Accrued salaries and benefits ........................... 4,110 1,514
Due to joint ventures ................................... 1,312 639
Current portion of long-term debt ....................... 971 858
Current portion of capital lease obligations ............ 154 1,791
Deferred income taxes ................................... 5,882 6,124
Other current liabilities ............................... 1,212 651
--------- ---------
Total current liabilities ............................ 24,517 28,596
DEFERRED INCOME TAXES ...................................... 4,194 3,872
LONG-TERM DEBT, net of current portion ..................... 107,275 51,734
CAPITAL LEASE OBLIGATIONS, net of current portion .......... 6,032 1,482
OTHER LIABILITIES .......................................... 262 297
--------- ---------
Total liabilities .................................... 142,280 85,981
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES ............ 601 820
STOCKHOLDERS' EQUITY:
Common stock ............................................ 2 2
Additional paid-in capital .............................. (911) (18,460)
Retained earnings (deficit) ............................. 4,295 (5,577)
--------- ---------
Total stockholders' equity ........................... 3,386 (24,035)
--------- ---------
Total liabilities and stockholders' equity ........... $ 146,267 $ 62,766
========= =========
</TABLE>
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1998 1997 1998 1997
------------- ----------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Physician groups revenue, net ................ $ 53,869 $ -- $ 152,008 $ --
Less: amounts retained by physician groups ... (18,814) -- (53,681) --
--------- --------- --------- ---------
Service fee revenue ..................... 35,055 -- 98,327 --
COSTS AND EXPENSES:
Salaries and benefits ........................ 10,738 -- 30,447 --
Practice supplies ............................ 2,234 -- 6,391 --
Practice rent and lease expenses ............. 2,677 -- 8,205 --
Other practice expenses ...................... 7,220 -- 18,624 --
Corporate general and administrative ......... 2,595 1,300 7,034 2,915
Depreciation and amortization ................ 2,976 84 8,355 96
--------- --------- --------- ---------
Total costs and expenses ................ 28,440 1,384 79,056 3,011
--------- --------- --------- ---------
OPERATING INCOME (LOSS) ........................ 6,615 (1,384) 19,271 (3,011)
OTHER EXPENSES:
Interest expense, net ........................ 2,054 60 5,142 132
--------- --------- --------- ---------
Total other expenses .................... 2,054 60 5,142 132
--------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES, MINORITY
INTERESTS IN CONSOLIDATED SUBSIDIARIES
AND EQUITY IN EARNINGS OF INVESTMENTS .......... 4,561 (1,444) 14,129 (3,143)
EQUITY IN EARNINGS OF INVESTMENTS .............. 1,096 -- 2,342 --
MINORITY INTERESTS IN INCOME OF
CONSOLIDATED SUBSIDIARIES ...................... (168) -- (391) --
--------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES ..................... 5,489 (1,444) 16,080 (3,143)
INCOME TAX EXPENSE ............................. (2,081) -- (6,208) --
--------- --------- --------- ---------
NET INCOME (LOSS) .............................. $ 3,408 $ (1,444) $ 9,872 $ (3,143)
========= ========= ========= =========
NET INCOME (LOSS) PER COMMON SHARE-
Basic ........................................ $ 0.18 $ (0.72) $ 0.53 $ (1.57)
Diluted ...................................... $ 0.18 $ (0.72) $ 0.51 $ (1.57)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic ........................................ 18,908 2,000 18,572 2,000
Diluted ...................................... 19,356 2,000 19,219 2,000
</TABLE>
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1998 1997 1998 1997
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ........................................ $ 3,408 $ (1,444) $ 9,872 $ (3,143)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities --
Minority interests .................................... 168 -- 391 --
Depreciation and amortization ......................... 2,976 84 8,355 96
Equity in earnings of investments ..................... (1,096) -- (2,342) --
Changes in assets and liabilities- net of acquisitions
Accounts receivable, net .......................... (1,769) -- (3,776) --
Other current assets .............................. (246) (9) 1,810 (132)
Other noncurrent assets ........................... (733) (1,510) (1,957) (3,567)
Accounts payable and accrued expenses ............. 594 1,324 (8,139) 2,932
Accrued salaries and benefits ..................... 1,280 528 2,322 528
Due to joint ventures ............................. 530 -- 782 --
Other liabilities ................................. (726) -- 2,921 --
-------- -------- -------- --------
Net cash provided by (used in)
operating activities ........................... 4,386 (1,027) 10,239 (3,286)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ...................... (3,531) -- (8,252) (122)
Cash paid for acquisitions ............................... (15,924) -- (54,905) --
Contributions to joint ventures .......................... -- -- 352 --
Distributions from joint ventures ........................ 979 -- 1,062 --
-------- -------- -------- --------
Net cash used in investing activities .......... (18,476) -- (61,743) (122)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt ................. 46,700 1,000 92,785 1,000
Payments on long-term debt ............................... (29,984) -- (38,797) --
Payments on capital leases ............................... (766) -- (1,869) --
Advances from (to) physician practices ................... (20) -- (237) --
Proceeds from the exercise of options .................... 25 -- 40 --
-------- -------- -------- --------
Net cash provided by financing activities ...... 15,955 1,000 51,922 1,000
-------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ........................................ 1,865 (27) 418 (2,408)
CASH AND CASH EQUIVALENTS, beginning of period .............. 3,125 110 4,572 2,491
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS, end of period .................... $ 4,990 $ 83 $ 4,990 $ 83
======== ======== ======== ========
</TABLE>
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated unaudited financial statements have been
prepared by American Physician Partners, Inc. (the "Company" or "APPM") pursuant
to the rules and regulations of the Securities and Exchange Commission, and
reflect all adjustments (all of which are of a normal recurring nature) which,
in the opinion of management, are necessary for a fair statement of the results
of the interim periods presented. These financial statements do not include all
disclosures associated with the annual financial statements and, accordingly,
should be read in conjunction with the attached Management's Discussion and
Analysis of Financial Condition and Results of Operations and the consolidated
financial statements and footnotes for the year ended December 31, 1997,
included in APPM's Form 10-K filed with the Securities and Exchange Commission
on March 31, 1998.
1. BASIS OF PRESENTATION
The consolidated financial statements have been prepared on the accrual
basis of accounting and include the accounts of the Company and its wholly-owned
subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation.
The Company does not consolidate the operating results and accounts of the
physician practices with which it affiliates (the "Affiliated Practices"). For
display purposes, the Company has presented physician groups revenue and amounts
retained by physician groups in the accompanying consolidated statements of
income to arrive at the Company's service fee revenue.
Reclassification
Certain prior year amounts have been reclassified to conform to current
year presentation. These reclassifications have no effect on the previously
reported net loss, stockholders' deficit, or cash flows.
Service Fee Revenue
Service fee revenue represents physician groups revenue less amounts
retained by physician groups. The amounts retained by physician groups represent
amounts paid to the physicians pursuant to the service agreements between the
Company and the Affiliated Practices. Under the service agreements, the Company
provides each physician group with the facilities and equipment used in its
medical practice, assumes responsibility for the management of the operations of
the practice, and employs substantially all of the non-physician personnel
utilized by the group.
The Company's service fee revenues are dependent upon the operating
results of the Affiliated Practices. Where state law allows, service fees due
under the service agreements are derived from two distinct revenue streams: (1)
a negotiated percentage (typically 20% to 30%) of the adjusted professional
revenues as defined in the service agreement; and (2) 100% of the adjusted
technical revenues as defined in the service agreements. In states where the law
requires a flat fee structure, the Company has negotiated a base service fee,
which is equal to the fair market value of the services provided under the
service agreement and which is renegotiated each year to equal the fair market
value of the services provided under the service agreement. The service fees
received by the Company under either fee structure provide the Company with a
net profit or equivalent interest in the Affiliated Practices and, as a result,
the Company displays the revenues, net of amounts retained by physicians, and
expenses of the Affiliated Practices. Adjusted professional revenues and
adjusted technical revenues are determined by deducting certain contractually
agreed-upon expenses (non-physician salaries and benefits, rent, depreciation,
insurance, interest and other physician costs) from physician groups revenue.
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Service fee revenue in the third quarter and year-to-date 1998 consists of
the following (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
Professional component $ 8,861 $25,955
Technical component
26,194 72,372
------- -------
$35,055 $98,327
======= =======
</TABLE>
2. ACQUISITIONS AND PRACTICE AFFILIATIONS
In July 1998, the Company completed its acquisition of two imaging centers
in the Greater Bay Area of California. In August 1998, the Company completed its
acquisition of an imaging center in San Antonio, Texas. The total consideration
for these transactions was approximately $9,775,000. These transactions will be
accounted for under the purchase method.
In September 1998, the Company announced its affiliation with WB&A
Imaging, P.C. (formerly known as Drs. Wener, Boyle & Associates, P.A.), a
15-physician radiology practice based in the Washington Metropolitan Area. The
Company also announced the acquisition of WB&A Imaging, P.C.'s four imaging
centers. The total consideration for these transactions was approximately
$9,076,000 consisting of the issuance of 359,374 shares of the Company's common
stock, cash and assumed debt. These transactions were accounted for under the
purchase method.
3. EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128
("SFAS 128"), "Earnings per Share," effective December 15, 1997. SFAS 128
requires that the calculation of basic earnings per share be calculated by
dividing net income by the weighted average number of shares of common stock
outstanding during the period and diluted earnings per common share be
calculated using the weighted average number of shares of common stock and
common stock equivalents. As required, the Company reported earnings per share
in accordance with SFAS 128.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS)
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Company's
consolidated financial statements and notes thereto included in the Annual
Report on Form 10-K for the year ended December 31, 1997, and with the
consolidated financial statements included in this Form 10-Q.
OVERVIEW
American Physician Partners, Inc. ("APPM" or the "Company") is a leading
provider of radiology services. The Company's focus is on the development,
consolidation and management of integrated radiology and imaging center
networks. As of November 12, 1998, APPM provided management services to 79
owned, operated or managed diagnostic imaging centers ("ICs"), 50 hospital
radiology departments and ten Affiliated Practices consisting of 258 physicians
practicing in California, Florida, Kansas, Maryland, New York, Texas and
Virginia. The Company provides Affiliated Practices with the capital resources
and expertise to invest in new technologies, complete consolidating
acquisitions, implement sophisticated management information systems, promote
efficient practice patterns, develop coordinated marketing efforts and realize
purchasing economies of scale.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1998
The Company conducted no significant operations before its initial public
offering ("IPO") in November 1997 when the Company acquired the tangible and
intangible non-medical assets and certain liabilities of, and entered into
service agreements with seven radiology practices (the "Founding Affiliated
Practices"). The acquisitions that occurred simultaneously with the IPO are
referred to herein as the "Reorganizations". As a result, the Company's
comparative third-quarter and year-to-date 1997 results are not meaningful.
Service Fee Revenue
The Company generated service fee revenue of $35,055 for the three months
ended September 30, 1998. There was no service fee revenue generated during the
same period ended September 30, 1997.
Salaries and Benefits
Salaries and benefits for the three months ended September 30, 1998, were
$10,738. Salaries and benefits include certain costs of non-physician clinical
and administrative employee expenses paid by the Company pursuant to the terms
of the service agreements. The percentage of salaries and benefits to total
service fee revenue was 30.6% for the three months ended September 30, 1998.
Practice Supplies
Practice supplies for the three months ended September 30, 1998, were
$2,234. Practice supplies include costs of film, contrast and other related
supplies paid by the Company pursuant to the terms of the service agreements.
The percentage of practice supplies to total service fee revenue was 6.4% for
the three months ended September 30, 1998.
Practice Rent and Lease Expenses
Practice rent and lease expenses for the three months ended September 30,
1998, were $2,677. Practice rent and lease expenses include costs of the
facilities used to provide the medical and administrative services and lease
costs for equipment used in the performance of certain medical and
administrative procedures.
6
<PAGE> 9
Other Practice Expenses
Other practice expenses for the three months ended September 30, 1998,
were $7,220. Other practice expenses include all other costs associated with the
maintenance and continued operation of the Affiliated Practices. The percentage
of other practice expenses to total service fee revenue was 20.6% for the three
months ended September 30, 1998.
Corporate General and Administrative
Corporate general and administrative expenses for the three months ended
September 30, 1998, were $2,595 compared to $1,300 for the three months ended
September 30, 1997 representing an increase of $1,295 or 99.6%. The percentage
of corporate general and administrative expenses to total service fee revenue
was 7.4% for the three months ended September 30, 1998. Corporate general and
administrative expenses increased due to the continued building of the Company's
infrastructure prior to and following its IPO.
Depreciation and Amortization
Depreciation and amortization expenses for the three months ended
September 30, 1998, were $2,976 compared to $84 for the three months ended
September 30, 1997, representing an increase of $2,892. The percentage of
depreciation and amortization expenses to total service fee revenue was 8.5% for
the three months ended September 30, 1998. Depreciation and amortization
expenses increased from the 1997 amount due to the Reorganizations and the
subsequent acquisitions completed in 1998.
Interest Expense
Interest expense for the three months ended September 30, 1998, was $2,054
compared to $60 for the three months ended September 30, 1997, representing an
increase of $1,994. The percentage of interest expense to total service fee
revenue was 5.9% for the three months ended September 30, 1998. Interest expense
increased due the cost of borrowings under the Company's $160 million credit
facility (the "Credit Facility") entered into on November 26, 1997 (as amended
on May 19, 1998), the assumption of certain indebtedness and capital lease
obligations of the Founding Affiliated Practices in connection with the
Reorganizations and the assumption of certain indebtedness and capital lease
obligations of practices acquired post IPO.
Income Tax Expense
Income taxes were provided on the taxable income of the Company for
federal and state reporting purposes using the applicable effective rates.
Net Income
As a result of the foregoing factors, the Company generated a net income
of $3,408 for the three months ended September 30, 1998, or diluted income per
share of $0.18 on 19,356,000 shares outstanding, compared to a net loss of
$1,444 for the three months ended September 30, 1997, or diluted loss per share
of $(0.72) on 2,000,000 shares outstanding.
Three Months Ended September 30, 1997
Prior to November 26, 1997, the Company had no revenue while incurring
corporate overhead expenses associated with building its management
infrastructure. As a result, the Company's comparative third quarter 1997
results are not meaningful.
7
<PAGE> 10
Nine Months Ended September 30, 1998
The Company conducted no significant operations before its IPO in November
1997 when the Company acquired the tangible and intangible non-medical assets
and certain liabilities, and entered into service agreements with the Founding
Affiliated Practices. The acquisitions that occurred simultaneously with the IPO
are referred to herein as the "Reorganizations". As a result, the Company's
comparative third-quarter and year-to-date 1997 results are not meaningful.
Service Fee Revenue
The Company generated service fee revenue of $98,327 for the nine months
ended September 30, 1998. There was no service fee revenue generated during the
same period ended September 30, 1997.
Salaries and Benefits
Salaries and benefits for the nine months ended September 30, 1998, were
$30,447. Salaries and benefits include certain costs of non-physician clinical
and administrative employee expenses paid by the Company pursuant to the terms
of the service agreements. The percentage of salaries and benefits to total
service fee revenue was 31.0% for the nine months ended September 30, 1998.
Practice Supplies
Practice supplies for the nine months ended September 30, 1998, were
$6,391. Practice supplies include costs of film, contrast and other related
supplies paid by the Company pursuant to the terms of the service agreements.
The percentage of practice supplies to total service fee revenue was 6.5% for
the nine months ended September 30, 1998.
Practice Rent and Lease Expenses
Practice rent and lease expenses for the nine months ended September 30,
1998, were $8,205. Practice rent and lease expenses include costs of the
facilities used to provide the medical services and lease costs for equipment
used in the performance of certain medical procedures. The percentage of
practice rent and lease expenses to total service fee revenue was 8.3% for the
nine months ended September 30, 1998.
Other Practice Expenses
Other practice expenses for the nine months ended September 30, 1998, were
$18,624. Other practice expenses include all other costs associated with the
maintenance and continued operation of the Affiliated Practices. The percentage
of other practice expenses to total service fee revenue was 19.0% for the nine
months ended September 30, 1998.
Corporate General and Administrative
Corporate general and administrative expenses for the nine months ended
September 30, 1998, were $7,034 compared to $2,915 for the nine months ended
September 30, 1997 representing an increase of $4,119 or 141.3%. The percentage
of corporate general and administrative expenses to total service fee revenue
was 7.2% for the nine months ended September 30, 1998. Corporate general and
administrative expenses increased due to the continued building of the Company's
infrastructure prior to and following its IPO.
Depreciation and Amortization
Depreciation and amortization expenses for the nine months ended September
30, 1998, were $8,355 compared to $96 for the nine months ended September 30,
1997, representing an increase of $8,259. The percentage of depreciation and
amortization expenses to total service fee revenue was 8.5% for the nine months
ended September 30, 1998. Depreciation and amortization expenses increased from
the 1997 amount due to the Reorganizations and the subsequent acquisitions
completed in 1998.
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<PAGE> 11
Interest Expense
Interest expense for the nine months ended September 30, 1998, was $5,142
compared to $132 for the nine months ended September 30, 1997, representing an
increase of $5,010. The percentage of interest expense to total service fee
revenue was 5.2% for the nine months ended September 30, 1998. Interest expense
increased due the cost of borrowings under the Company's $160 million credit
facility (the "Credit Facility") entered into on November 26, 1997 (as amended
on May 19, 1998), the assumption of certain indebtedness and capital lease
obligations of the Founding Affiliated Practices in connection with the
Reorganizations and the assumption of certain indebtedness and capital lease
obligations of practices acquired post IPO.
Income Tax Expense
Income taxes were provided on the taxable income of the Company for
federal and state reporting purposes using the applicable effective rates.
Net Income
As a result of the foregoing factors, the Company generated a net income
of $9,872 for the nine months ended September 30, 1998, or diluted income per
share of $0.51 on 19,219,000 shares outstanding, compared to a net loss of
$3,143 for the nine months ended September 30, 1997, or diluted loss per share
of $(1.57) on 2,000,000 shares outstanding.
Nine Months Ended September 30, 1997
Prior to November 26, 1997, the Company had no revenue while incurring
corporate overhead expenses associated with building its management
infrastructure. As a result, the Company's comparative year-to-date 1997 results
are not meaningful.
Liquidity and Capital Resources
Net cash from operations for the nine months ended September 30, 1998, was
$10,239. Net cash from operations includes a use of cash in the amount of $6,400
for deferred income taxes as a result of the conversion of the Founding
Affiliated Practices from cash basis to accrual basis. The Company files a
consolidated annual return on the accrual basis.
Net cash used in investing activities for the nine months ended September
30, 1998, was $61,743. During the nine months ended September 30,1998, the
Company expended $54,905 in consideration for acquisitions. These expenditures
were funded primarily from borrowings under the Credit Facility.
Net cash flows from financing activities for the nine months ended
September 30, 1998, were $51,922. Net borrowings during the nine months ended
September 30, 1998, under the Credit Facility were $56,150 which was used to
finance the Company's on-going development activities, the acquisition of new
equipment and for working capital purposes.
Under the terms of the Credit Facility dated November 26, 1997 (as amended
May 19, 1998), the Company may borrow, repay and reborrow amounts during the
first three years of the Credit Facility. Amounts outstanding under the Credit
Facility at the end of three years are required to be repaid in quarterly
installments of varying amounts commencing September 30, 2000. The Credit
Facility expires and all loans thereunder mature on the sixth anniversary of the
closing date of the Credit Facility. Borrowings under the Credit Facility at any
time may not exceed the lesser of $160.0 million or 3.00 times the consolidated
EBITDA of the Company, giving pro forma effect to acquisitions made with such
borrowings. At September 30, 1998, the Company was eligible to borrow up to
$160.0 million under the Credit Facility, and the Company had outstanding
borrowings of $105.8 million under the Credit Facility. At the Company's option,
the interest rate is (i) an adjusted LIBOR rate plus an applicable margin which
can vary from 1.5% to 2.5% dependent on certain financial ratios or (ii) the
prime rate plus an applicable margin which can vary from 0.5% to 1.50%. In each
case the applicable margin varies based on financial ratios maintained by the
Company. The Credit Facility includes certain restrictive covenants including
prohibitions on the payment of dividends and the maintenance of certain
financial ratios (including minimum debt-service
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<PAGE> 12
coverage and maximum debt-to-EBITDA coverage, as defined). Borrowings under the
Credit Facility are secured by all service agreements of which the Company is or
becomes a party and a pledge of the stock of the Company's subsidiaries.
Approximately $21.5 million of borrowings under the Credit Facility were used to
pay a portion of the cash portion due pursuant to the Reorganizations.
On April 13, 1998, the Company announced that it planned to make a private
offering of $100.0 million aggregate principal amount of Senior Subordinated
Notes Due 2008 (the "Notes") to certain initial purchasers who will resell the
Notes in reliance on the exemption from registration contained in Rule 144A
under the Securities Act of 1933, as amended. This offering was subsequently
cancelled due to market conditions.
On June 8, 1998, the Company announced that it completed the expansion of
its Credit Facility to $160 million. As a result, the Company elected not to
pursue the previously-announced private offering of Notes.
The Company anticipates that funds generated from operations, cash and
cash equivalents, and funds available under the Credit Facility will be
sufficient to meet the Company's working capital requirements and debt
obligations and to finance any necessary capital expenditures at least through
the end of 1998. Expansion of the Company's business through acquisitions may
require additional funds, which, to the extent not provided by
internally-generated sources, cash, and the Credit Facility, would require the
Company to seek additional debt or equity financing.
Year 2000 Issue
Impact of Year 2000: The Year 2000 Issue exists because many computer
systems and applications currently use two-digit date fields to designate a
year. As the century date occurs, computer programs, computers and embedded
microprocessors controlling equipment with date-sensitive systems may recognize
Year 2000 as 1900 or not at all. This inability to recognize or properly treat
Year 2000 may result in computer system failures or miscalculations of critical
financial and operational information as well as failures of equipment
controlling date-sensitive microprocessors. In addition, there are two other
related issues, which could also lead to miscalculations or failures: (i) some
older systems' programming assigns special meaning to certain dates, such as
9/9/99 and (ii) the Year 2000 is a leap year.
State of Readiness: The Company started to formulate a plan to address the
Year 2000 Issue in the third quarter of 1998. To date, the Company's primary
focus has been on its own internal information technology systems, including all
types of systems in use by the Company in its operations, finance and human
resources departments, and to deal with the most critical systems first. The
Company is in the process of developing a Year 2000 Plan to address all of its
Year 2000 Issues. The Year 2000 Plan being developed will involve generally the
following phases: awareness, assessment, renovation, testing and implementation.
Although the Company's assessment of the Year 2000 Issue is incomplete, the
Company has completed an assessment of approximately 50% of its internal
information technology systems. The Company estimates that it will complete the
assessment of its remaining internal information technology systems by March 31,
1999 and will establish a timetable for the renovation phase of the remaining
technology systems. The Company has already completed the renovation of
approximately 40% of its information technology systems, including modifying and
upgrading software and developing and purchasing new software, and continues to
renovate the portions of such systems for which assessment is complete. The
Company has not begun or established a timetable for the testing and
implementation phases. The Company's goal is to complete such phases by
September 30, 1999, although complications arising from unanticipated
acquisitions might cause some delay.
The Company has recently begun to assess the potential for Year 2000
problems with the information systems of its customers, payors and vendors. The
Company is preparing questionnaires that it expects to send to its customers,
vendors and other third parties with which the Company has a material
relationship by December 31, 1998. The Company expects to complete the
assessment with respect to such parties by March 31,1999, provided that the
parties return the requested information by February 28, 1999. The Company does
not have sufficient information to provide an estimated timetable for completion
of renovation and testing that such parties with which the Company has a
material relationship may undertake. The Company is unable to estimate the costs
that it may incur to remedy the Year 2000 issues relating to such parties. The
Company has received some preliminary information concerning the Year 2000
readiness of some of its customers, vendors and other third parties with which
the Company has a material relationship and expects to engage in discussions
with most
10
<PAGE> 13
of such parties during the balance of 1998 and through March 31, 1999 in an
attempt to determine the extent to which the Company is vulnerable to those
parties' possible failure to become Year 2000 compliant. All of the Company's
diagnostic imaging equipment used to provide imaging services have computer
systems and applications, and in some cases embedded microprocessors, that could
be affected by Year 2000 issues. The Company has begun to assess the impact on
its diagnostic imaging equipment by contacting the vendors of such equipment.
The vendor with respect to the majority of the MRI and CT equipment used by the
Company has informed the Company that (i) certain identified MRI and CT
equipment is Year 2000 compliant, (ii) it has developed software for functional
work arounds to ensure Year 2000 compliance with respect to the balance of its
noncompliant MRI and CT equipment and (iii) remediation will be made during
future regular maintenance visits. The Company is in the process of contacting
the other vendors of its diagnostic imaging equipment. The Company expects to
receive information from such other vendors by December 31, 1998 with respect to
their assessment of the impact on the equipment that they provided to the
Company and the nature and timetable of the remediation that such vendors may
propose. The Company expects to complete its assessment by March 31, 1999 and
that renovation will be completed by September 30, 1999. The Company expects
that its equipment vendors will propose timely remediation and will bear the
cost of modifying or otherwise renovating the Company's diagnostic imaging
equipment. The Company has recently begun an assessment of the potential for
Year 2000 problems with the embedded microprocessors in its other equipment,
facilities and corporate and regional offices, including telecommunications
systems, utilities, dictation systems, security systems and HVACS and expects to
complete the assessment by March 31, 1999.
COSTS TO ADDRESS YEAR 2000 ISSUE: The Company estimates on a preliminary
basis that the cost of assessment, renovation, testing and implementation of its
internal systems will range from approximately $500,000 to $1,500,000, of which
approximately $20,000 has been incurred. The major components of these costs
are: consultants, additional personnel costs, programming, new software and
hardware, software upgrades and travel expenses. The Company expects that such
costs will be funded through operating cash flows. This estimate, based on
currently available information, will be updated as the Company continues its
assessment and proceeds with renovation, testing and implementation and may be
adjusted upon receipt of more information from the Company's vendors, customers
and other third parties and upon the design and implementation of the Company's
contingency plan. In addition, the availability and cost of consultants and
other personnel trained in this area and unanticipated acquisitions might
materially affect the estimated costs. The effects of the aforementioned costs
have had no material impact on the Company's progress as it relates to other
information system projects and implementation.
RISKS TO THE COMPANY: The Company's Year 2000 Issue involves significant
risks. There can be no assurance that the Company will succeed in implementing
the Year 2000 Plan it is developing. The following describes the Company's most
reasonably likely worst-case scenario, given current uncertainties. If the
Company's renovated or replaced internal information technology systems fail the
testing phase, or any software application or embedded microprocessors central
to the Company's operations are overlooked in the assessment or implementation
phases, significant problems including delays may be incurred in billing the
Company's major customers (Medicare, HMOs or private insurance carriers) for
services performed. If its major customers' systems do not become Year 2000
compliant on a timely basis, the Company will have problems and incur delays in
receiving and processing correct reimbursement. If the computer systems of third
parties (including hospitals) with which the Company's systems exchange data do
not become Year 2000 compliant both on a timely basis and in a manner compatible
with continued data exchange with the Company's information technology systems,
significant problems may be incurred in billing and reimbursement. If the
systems on the diagnostic imaging equipment utilized by the Company are not Year
2000 compliant, the Company may not be able to provide imaging services to
patients. If the Company's vendors or suppliers of the Company's necessary
power, telecommunications, transportation and financial services, fail to
provide the Company with equipment and services the Company will be unable to
provide services to its customers. If any of these uncertainties were to occur,
the Company's business, financial condition and results of operations would be
adversely affected. The Company is unable to assess the likelihood of such
events occurring or the extent of the effect on the Company.
CONTINGENCY PLAN: The Company has not yet established a contingency plan
to address unavoided or unavoidable Year 2000 risks with internal information
technology systems and with customers, vendors and other third parties, but it
expects to create such a plan by June 30, 1999.
11
<PAGE> 14
Forward-Looking Statements
This report contains or may contain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 including
statements of the Company's and management's expectations, intentions, plans and
beliefs, including those contained in or implied by "Management's Discussion and
Analysis of Financial Condition and Results of Operations." These
forward-looking statements, as defined in Section 21E of the Securities Exchange
Act of 1934, are dependent on certain events, risks and uncertainties that may
be outside of the Company's control. These forward-looking statements may
include statements of management's plans and objectives for the Company's future
operations and statements of future economic performance; the Company's capital
budget and future capital requirements, and the Company's meeting its future
capital needs; and the assumptions described in this report underlying such
forward-looking statements. Actual results and developments could differ
materially from those expressed in or implied by such statements due to a number
of factors, including, without limitation, those described in the context of
such forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's cash equivalents and its Credit Facility.
12
<PAGE> 15
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time the Company is subject to certain legal proceedings and
claims which arise in the normal course of its business. Pending matters include
claims relating to professional services provided by a Founding Affiliated
Practice. The Company also became subject to certain of the pending claims as
the result of successor liability in connection with the acquisition of the
Founding Affiliated Practices; however, the Company believes that the ultimate
resolution of such claims net of applicable indemnification and available
insurance will not have a material adverse effect on the business, financial
condition or results of operations of the Company. Each existing Affiliated
Practice has retained responsibility for, and agreed to indemnify the Company in
full against, the liabilities associated with these lawsuits. In the event (i)
the Company is subsequently added as a party in any of these lawsuits, (ii) an
Affiliated Practice denies their obligation to indemnify the Company or (iii) a
monetary judgment is entered against the Company and indemnification is
unavailable for any reason, the Company's business, financial condition and
results of operations could be materially adversely affected.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. See Index to Exhibits following signatures.
(b) Reports on Form 8-K
13
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN PHYSICIAN PARTNERS, INC.
Date: November 13, 1998 /s/ MARK L. WAGAR
-------------------------------------
Mark L. Wagar
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 13, 1998 /s/ SAMI S. ABBASI
-------------------------------------
Sami S. Abbasi
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: November 13, 1998 /s/ DAVID W. YOUNG
--------------------------------------
David W. Young
Controller and Treasurer
(Principal Accounting Officer)
14
<PAGE> 17
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
NUMBER
2.1 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and among American Physician Partners, Inc., Carroll
Imaging Associates, P.A., Diagnostic Imaging Associates, P.A.,
Drs. Copeland, Hyman and Shackman, P.A., Drs. Decarlo, Lyon,
Hearn & Pazourek, P.A., Drs. Thomas, Wallop, Kim & Lewis, P.A.,
Harbor Radiologists, P.A., and Perilla, Syndler & Associates,
P.A. **
2.2 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc.,
Radiology and Nuclear Medicine, A Professional Association. **
2.3 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and Mid
Rockland Imaging Associates, P.C.**
2.4 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and
Rockland Radiological Group, P.C.**
2.5 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and
Advanced Imaging of Orange County, P.C. **
2.6 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and
Central Imaging Associates, P.C. **
2.7 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and
Nyack Magnetic Resonance Imaging, P.C. **
2.8 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and
Pelham Imaging Associates, P.C. **
2.9 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and
Women's Imaging Consultants, P.C. **
2.10 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and
Pacific Imaging Consultants, A Medical Group, Inc. **
2.11 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and
Total Medical Imaging, Inc.**
2.12 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and
Valley Radiologists Medical Group, Inc. **
2.13 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and The
Ide Group, P.C. **
2.14 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and M&S
X-Ray Associates, P.A .**
2.15 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and
South Texas MR, Inc. **
2.16 Agreement and Plan of Reorganization and Merger, dated June 27,
1997 by and between American Physician Partners, Inc., and San
Antonio MR, Inc. **
2.17 Agreement and Plan of Exchange, dated June 27, 1997 by and
among American Physician Partners, Inc., Lexington MR, Ltd. and
the Sellers **
2.18 Agreement and Plan of Exchange, dated June 27, 1997 by and
among American Physician Partners, Inc., Madison Square Joint
Venture and the Sellers **
2.19 Agreement and Plan of Exchange, dated June 27, 1997 by and
among American Physician Partners, Inc., South Texas No. 1 MRI
Limited Partnership, a Texas limited partnership, and the
Sellers **
2.20 Agreement and Plan of Exchange, dated June 27, 1997 by and
among American Physician Partners, Inc., San Antonio MRI
Partnership No. 2 Ltd., a Texas limited partnership, and the
Sellers **
2.21 Agreement and Plan of Exchange, dated June 27, 1997 by and
between American Physician Partners, Inc., and the Sellers **
15
<PAGE> 18
2.22 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and among American
Physician Partners, Inc., Carroll Imaging Associates, P.A.,
Diagnostic Imaging Associates, P.A., Drs. Thomas, Wallop, Kim &
Lewis, P.A., Drs. Copeland, Hyman & Shackman, P.A., Drs.
DeCarlo, Lyon, Hearn & Pazourek, P.A., Harbor Radiologists,
P.A., and Perilla, Sindler & Associates, P.A.**-
2.23 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and Radiology and Nuclear Medicine, A
Professional Association.**
2.24 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and Mid Rockland Imaging Associates,
P.C.**
2.25 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and Rockland Radiological Group,
P.C.**
2.26 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and Advanced Imaging of Orange
County, P.C.**
2.27 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and Central Imaging Associates,
P.C.**
2.28 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and Nyack Magnetic Resonance Imaging,
P.C.**
2.29 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and Pelham Imaging Associates, P.C.**
2.30 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and Women's Imaging Consultants,
P.C.**
2.31 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and Pacific Imaging Consultants, A
Medical Group, Inc.**
2.32 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and Total Medical Imaging, Inc.**
2.33 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and Valley Radiologists Medical
Group, Inc.**
2.34 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and The Ide Group, P.C.**
2.35 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and M & S X-Ray Associates, P.A.**
2.36 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and South Texas MR, Inc.**
2.37 Amendment No. 1 to the Agreement and Plan of Reorganization and
Merger, dated as of September 30, 1997, by and between American
Physician Partners, Inc., and San Antonio MR, Inc.**
2.38 Amendment No. 1 to the Agreement and Plan of Exchange, dated
September 30, 1997, by and between American Physician Partners,
Inc., and Lexington MR, Ltd.**
2.39 Amendment No. 1 to the Agreement and Plan of Exchange, dated
September 30, 1997, by and between American Physician Partners,
Inc., and Madison Square Joint Venture.**
2.40 Amendment No. 1 to the Agreement and Plan of Exchange, dated
September 30, 1997, by and between American Physician Partners,
Inc., and South Texas No. 1 MRI Limited Partnership.**
2.41 Amendment No. 1 to the Agreement and Plan of Exchange, dated
September 30, 1997, by and between American Physician Partners,
Inc., and San Antonio MRI Partnership No. 2, Ltd.**
2.42 Asset Purchase Agreement, dated as of January 1, 1998, by and
among American Physician Partners, Inc., Community Radiology
Associates, Inc., Drs. Korsower and Pion Radiology, P.A., and
the Principal Stockholders ****
2.43 Asset Purchase Agreement, dated as of January 12, 1998, by and
among American Physician Partners, Inc., Valley Imaging
Partners, Inc., Questar Imaging, Inc. and Questar Imaging VR,
Inc. ****
2.44 Asset Purchase Agreement, dated as of January 23, 1998, by and
among American Physician Partners, Inc., Valley Imaging
Partners, Inc., PAL Imaging Corp. and the Principal
Stockholders ****
16
<PAGE> 19
2.45 Asset Purchase Agreement, dated as of April 1, 1998, by and
among American Physician Partners, Inc., Treasure Coast Imaging
Partners, Inc. and Radiology Imaging Associates, Basilico,
Gallagher and Raffa, M.D., P.A. and Robert F. Basilico, M.D.,
Edward Gallagher, M.D., R.J. Raffa, M.D., Joseph T. Charles,
M.D., Alex N. Vennos, M.D., and Robin J. Connolly, M.D.*****
2.46 Asset Purchase Agreement, dated as of April 1, 1998, by and
among American Physician Partners, Inc., Treasure Coast Imaging
Partners, Inc. and St. Lucie Imaging and Breast Center, Inc.
and Robert F. Basilico, M.D., Edward Gallagher, M.D., R.J.
Raffa, M.D., Joseph T. Charles, M.D., Alex N. Vennos, M.D., and
Robin J. Connolly, M.D.*****
2.47 Asset Purchase Agreement, dated as of April 28, 1998, by and
among American Physician Partners, Inc., Valley Imaging
Partners, Inc., LXL, Ltd. and the Partners of LXL, Ltd.*****
2.48 Asset Purchase Agreement, dated as of June 1, 1998, by and
among American Physician Partners, Inc., Mid Rockland Imaging
Partners, Inc., Empire State Imaging Partners, Inc., RF
Management Corp. and Modern Medical Modalities Corporation*****
2.49 Asset Purchase Agreement, dated as of June 23, 1998, by and
among American Physician Partners, Inc., Valley Imaging
Partners, Inc., Brewster Imaging Center, Inc. and Each
Principal Stockholder*****
2.50 Asset Purchase Agreement, dated as of June 29, 1998, by and
among American Physician Partners, Inc., Valley Imaging
Partners, Inc. and Bryan M. Shieman, M.D., a sole
proprietorship d/b/a El Camino Center for Osteoporosis and/or
ECOO II*****
2.51 Stock Purchase Agreement, dated September 1, 1998 by and among
American Physician Partners, Inc., WB&A Imaging Partners, Inc.
and Vimla Bhooshan, M.D., John B. DeGrazia, M.D., Edwin
Goldstein, M.D., Paul T. Lubar, M.D., Calvin D. Neithamer,
M.D., William P. O'Grady, M.D., Robert A. Olshaker, M.D.,
Stanley M. Perl, M.D., Michael S. Usher, M.D., Alan B.
Kronthal, M.D., Steven A. Meyers, M.D., Victor A. Bracey, M.D.
and Larry W. Busching *
2.52 Asset Purchase Agreement, dated September 1, 1998, by and among
American Physician Partners, Inc., Ormond Imaging Partners,
Inc., Magnetic Resonance Imaging Associates Limited Partnership
and Paul T. Lubar, Stanley M. Perl, Michael S. Usher, John B.
DeGrazia, Larry W. Busching, Vimla Bhooshan, William P.
O'Grady, Robert A. Olshaker, and Calvin D. Neithamer *
2.53 Asset Purchase Agreement, dated September 1, 1998, by and among
American Physician Partners, Inc., Ormond Imaging Partners,
Inc., Duke Associates Limited Partnership and Paul T. Lubar,
Stanley M. Perl, Michael S. Usher, John B. DeGrazia, Larry W.
Busching, Vimla Bhooshan, William P. O'Grady, Edwin Goldstein,
Robert A. Olshaker, Calvin D. Neithamer and Alan J. Kronthal *
3.2 Amended and Restated Bylaws of American Physician Partners,
Inc.***
4.1 Form of certificate evidencing ownership of Common Stock of
American Physician Partners, Inc.***
4.2 Form of Convertible Promissory Note of American Physician
Partners, Inc.**
10.1 American Physician Partners, Inc. 1996 Stock Option Plan **
10.2 Employment Agreement between American Physician Partners, Inc.
and Gregory L. Solomon **
10.3 Employment Agreement between American Physician Partners, Inc.
and Mark S. Martin **
10.4 Employment Agreement between American Physician Partners, Inc.
and Sami S. Abbasi **
10.5 Employment Agreement between American Physician Partners, Inc.
and Paul M. Jolas **
10.6 Form of Indemnification Agreement for certain Directors and
Officers ***
10.7 Form of Registration Rights Agreement **
10.8 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., APPI-Advanced Radiology,
Inc. and Carroll Imaging Associates, P.A., Diagnostic Imaging
Associates, P.A., Drs. Thomas, Wallop, Kim & Lewis, P.A., Drs.
Copeland, Hyman and Shackman, P.A., Drs. Decarlo, Lyon, Hearn &
Pazourek, P.A., Harbor Radiologists, P.A., Perilla, Sindler &
Associates, P.A.**
10.9 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Ide Admin Corp. and Ide
Imaging Group, P.C.**
10.10 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., M & S X-Ray Associates, P.A.
and M&S Imaging Associates, P.A.**
10.11 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Rockland Radiological Group,
P.C. and The Greater Rockland Radiological Group, P.C.**
10.12 Service Agreement dated November 26, 1997 by and among American
Physician Partners, Inc., Advanced Imaging of Orange County,
P.C. and The Greater Rockland Radiological Group, P.C.**
10.13 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Central Imaging Associates,
P.C. and The Greater Rockland Radiological Group, P.C.**
17
<PAGE> 20
10.14 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Nyack Magnetic Resonance
Imaging, P.C. and The Greater Rockland Radiological Group,
P.C.**
10.15 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Pelham Imaging Associates,
P.C. and The Greater Rockland Radiological Group, P.C.**
10.16 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Women's Imaging Consultants,
P.C. and The Greater Rockland Radiological Group, P.C.**
10.17 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., APPI-Pacific Imaging Inc.
and PIC Medical Group, Inc.**
10.18 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., Radiology and Nuclear
Medicine, a Professional Association and RNM L.L.C.**
10.19 Service Agreement dated November 26, 1997, by and among
American Physician Partners, Inc., APPI-Valley Radiology, Inc.
and Valley Radiology Medical Associates, Inc.**
10.20 Consulting Agreement between American Physician Partners, Inc.
and Michael L. Sherman, M.D.***
10.21 Office Building Lease Agreement between Dallas Main Center
Limited Partnership and American Physician Partners, Inc.***
10.22 First Amendment to Office Building Lease Agreement between
Dallas Main Center Limited Partnership and American Physician
Partners, Inc.***
10.23 Credit Agreement by and among American Physician Partners,
Inc., GE Capital Corporation and the other credit parties
signatory thereto.***
10.24 Consulting Agreement between American Physician Partners, Inc.
and Lawrence R. Muroff, M.D.***
10.25 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Lawrence Muroff, M.D.***
10.26 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Mark Martin.***
10.27 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Sami Abbasi.***
10.28 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Gregory L. Solomon.***
10.29 First Amendment to Consulting Agreement between American
Physician Partners, Inc. and Lawrence R. Muroff, M.D.***
10.30 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Michael Sherman, M.D.***
10.31 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Paul M. Jolas.***
10.32 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Derace Schaffer, M.D.***
10.33 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and John Pappajohn.***
10.34 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Mary Pappajohn.***
10.35 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Thebes Ltd.***
10.36 Side Letter dated November 12, 1997 by and between American
Physician Partners, Inc. and Halkis Ltd.***
10.37 Service Agreement dated January 1, 1998, by and among American
Physician Partners, Inc., Community Imaging Partners, Inc.,
Community Radiology Associates, Inc. and Drs. Korsower and Pion
Radiology, P.A.****
10.38 Service Agreement dated April 1, 1998, by and among American
Physician Partners, Inc., Treasure Coast Imaging Partners, Inc.
and Radiology Imaging Associates - Basilico, Gallagher & Raffa,
M.D., P.A. *****
10.39 First Amendment to Credit Agreement and Consent dated May 19,
1998, by and among American Physician Partners, Inc., General
Electric Capital Corporation and the other credit parties
signatory thereto*****
10.40 Employment Agreement between American Physician Partners, Inc.
and Mark L. Wagar*****
18
<PAGE> 21
10.41 Service Agreement dated September 1, 1998, by and among
American Physician Partners, Inc., WB&A Imaging Partners, Inc.
and WB&A Imaging, P.C. *
10.42 Office Building Lease Agreement between The Equitable-Nissei
Dallas Company and Fibreboard Corporation *
10.43 Office Building Sublease Agreement by and between Fibreboard
Corporation and American Physician Partners, Inc. *
11.1 Statement re: computation of per share earnings*
27 Financial Data Schedule*
- --------------
* Filed herewith.
** Incorporated by reference to the corresponding Exhibit number to the
Registrant's Registration Statement No. 333-31611 on Form S-4.
*** Incorporated by reference to the corresponding Exhibit number to the
Registrant's Registration Statement No. 333-30205 on Form S-1.
**** Incorporated by reference to the corresponding Exhibit number to the
Registrant's Form 10-Q filed on May 15, 1998
***** Incorporated by reference to the corresponding Exhibit number to the
Registrant's Form 10-Q filed on August 14, 1998.
19
<PAGE> 1
===============================================================================
EXHIBIT 2.51
STOCK PURCHASE AGREEMENT
by and among
American Physician Partners, Inc.
(a Delaware corporation),
WB&A Imaging Partners, Inc.
(a Maryland corporation)
(f/k/a Drs. Wener, Boyle & Associates, P.A.,
a Maryland professional corporation),
and
Vimla Bhooshan, M.D.
John B. DeGrazia, M.D.
Edwin Goldstein, M.D.
Paul T. Lubar, M.D.
Calvin D. Neithamer, M.D.
William P. O'Grady, M.D.
Robert A. Olshaker, M.D.
Stanley M. Perl, M.D.
Michael S. Usher, M.D.
Alan J. Kronthal, M.D.
Steven A. Meyers, M.D.
Victor A. Bracey, M.D.
Larry W. Busching
===============================================================================
September 1, 1998
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
this 1st day of September, 1998, by and among American Physician Partners,
Inc., a Delaware corporation ("APPM"), WB&A Imaging Partners, Inc., a Maryland
corporation (formerly known as Drs. Wener, Boyle & Associates, P.A., a Maryland
professional corporation) (the "Company"), and Vimla Bhooshan, M.D., John B.
DeGrazia, M.D., Edwin Goldstein, M.D., Paul T. Lubar, M.D., Calvin D.
Neithamer, M.D., William P. O'Grady, M.D., Robert A. Olshaker, M.D., Stanley M.
Perl, M.D., Michael S. Usher, M.D., Alan J. Kronthal, M.D., Steven A. Meyers,
M.D., Victor A. Bracey, M.D. and Larry W. Busching (collectively
"Shareholders"). Capitalized terms not otherwise defined when first used herein
shall have the meanings ascribed to them in Article XIII of this Agreement.
RECITALS
A. Shareholders own 11,548 shares of common stock (the "Company Common
Stock"), $.01 par value per share, of Company, which shares constitute all of
the issued and outstanding capital stock of Company (the "Shares").
B. Shareholders, other than Larry W. Busching, are radiologists
holding active licenses from the State of Virginia, the State of Maryland,
and/or the District of Columbia to practice radiology within the respective
States or the District of Columbia.
C. Shareholders desire to sell to APPM and APPM desires to purchase
from Shareholders the Shares.
D. In connection with the transactions effected pursuant to this
Agreement, and prior to the Closing Date (as defined in Section 1.4 hereof),
Company and Shareholders shall have effected the following transactions (such
transactions, including those effected pursuant hereto and together with the
purchase and sale of the Shares, the "Transactions"): (i) each of the
Shareholders shall have entered into an employment agreement with WB&A Imaging,
P.C., a Maryland professional corporation; (ii) Company shall have transferred
all of its Professional Assets to WB&A Imaging, P.C.; and (iii) WB&A Imaging,
P.C., and Ormond Imaging Partners, Inc., a Delaware corporation and
wholly-owned subsidiary of APPM ("Ormond"), shall have entered into the Service
Agreement of even date pursuant to which Ormond will manage and administer the
non-medical aspects of the practice of radiology engaged in by WB&A Imaging,
P.C.
AGREEMENT
NOW, THEREFORE, in consideration of the preceding recitals and the
mutual representations, warranties, covenants and agreements set forth herein,
and other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
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<PAGE> 3
ARTICLE I
SALE AND PURCHASE OF STOCK
Section 1.1 Agreement to Sell and Purchase Stock. For the
consideration hereinafter provided and subject to the terms and conditions of
this Agreement, at the Closing (as defined in Section 1.4 hereof) Shareholders
shall sell, assign, transfer, convey and deliver to APPM, free and clear of all
liens, charges, claims or encumbrances, and APPM shall purchase and acquire
from Shareholders, the Shares of Shareholders. At the Closing, Shareholders
shall cause to be delivered to APPM certificates representing the Shares,
together with accompanying signed stock powers or instruments of assignment,
duly endorsed in blank for the transfer of the Shares to APPM with all
necessary transfer taxes paid or other revenue stamps affixed thereto.
Section 1.2 Purchase Price. At the Closing, subject to the terms and
conditions of this Agreement, APPM agrees to pay to Shareholders, as the
purchase price (the "Purchase Price") for the Shares, the consideration set
forth in Exhibit A.
Section 1.3 Certain Prorations.
The items set forth on Schedule 1.3 hereto shall be prorated or
adjusted among APPM and the other parties hereto as of the Closing Date.
At the Closing, Shareholders shall pay or credit to APPM all sums
required to effectuate the prorations and adjustments contemplated by the
provisions of this Section 1.3. If final figures have not been calculated on
any of the adjustments, prorations or reimbursements as of the Closing Date,
then the parties to this Agreement shall close this transaction using estimated
adjustments, prorations and reimbursements which shall be subject to later
readjustment when such final figures have been calculated, but in no event
later than six months after the Closing Date.
Any difference between the actual and estimated sums under Section 1.3
hereof may be offset by APPM against the Purchase Price at the Closing if not
paid prior to such time.
Section 1.4 Closing. The closing of the sale and purchase of the
Shares under and in accordance with this Agreement (the "Closing") shall take
place at the offices of Sherman, Meehan, Curtin & Ain, 1900 M Street, N.W.,
Suite 600, Washington, D.C. 20036, on September 22, 1998, effective as of
September 1, 1998 (the "Effective Date"), or such later date as may be mutually
agreed to in writing by the parties hereto (the "Closing Date"). Each party
shall be responsible for its own attorneys' fees, and accountants' and other
advisory fees associated with the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
As an inducement to APPM to enter into this Agreement and to purchase
the Shares and except as set forth and referenced in the Schedules, each
Shareholder and Company, jointly and severally (subject to the terms and
conditions hereof), represent and warrant to APPM as follows:
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<PAGE> 4
Section 2.1 Capitalization; Ownership of Company Shares. The
authorized capital stock of Company consists solely of 100,000 shares of
Company Common Stock of which 11,548 shares are issued and outstanding.
Shareholders are the owners of all right, title and interest (legal, record and
beneficial) in and to the Shares described in Schedule 2.1 hereto, free and
clear of any and all liens, charges, claims, encumbrances or restrictions of
any nature whatsoever (except for any restrictions on transfer imposed by any
federal securities laws or state blue sky laws) and the Shares described in
Schedule 2.1 are all of the issued and outstanding Company Common Stock. The
delivery to APPM of the Shares pursuant to and in accordance with the
provisions of this Agreement will transfer to APPM good and marketable title in
and to all such Shares free and clear of any and all liens, charges, claims,
encumbrances or restrictions of any kind or nature whatsoever (except for any
restrictions on transfer imposed by any federal securities laws or state Blue
Sky laws). Except as specifically contemplated in this Agreement, no Person or
entity has any interest, agreement, option, right, participation, or privilege
(whether preemptive or contractual) capable of becoming an agreement or option,
for the purchase of any of the Shares, or any interest therein, from
Shareholders. Each of the Shares of Company Common Stock has been legally and
validly issued and is fully paid and nonassessable, and was issued pursuant to
a valid exemption from registration under (i) the Securities Act and (ii) all
applicable state securities laws. No Shares of Company Common Stock have been
issued or disposed of in violation of any preemptive rights, rights of first
refusal, or similar rights of Shareholders or any interest holder of Company.
Other than Company Common Stock, Company has no securities, bonds, debentures,
notes or other obligations the holders of which have the right to vote (or are
convertible into or exercisable for securities having the right to vote) with
Shareholders on any matter.
Section 2.2 Transactions in Capital Stock. There exist no Company
Rights. Company has no obligation (contingent or otherwise) to purchase, redeem
or otherwise acquire any of its equity securities or any interests therein or
to pay any dividend or make any distribution in respect thereof, except as set
forth in that certain Stockholders Agreement dated November 21, 1993, which
Stockholders Agreement will be terminated and canceled contemporaneously with
the Closing.
Section 2.3 Organization and Good Standing; Qualification. Company is
a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, with all requisite corporate power and
authority to own, operate and lease its assets and properties and to carry on
its business as currently conducted. Company is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary, except where such
failure to be so qualified or in good standing would not have a Material
Adverse Effect on Company. Copies of the Articles of Incorporation of Company,
as amended or restated, and the Bylaws of Company, as amended or restated, and
copies of the corporate minutes of Company for the 24 months immediately
preceding the date of this Agreement, all of which have been or will be made
available to APPM for review, are true and complete as in effect on the date of
this Agreement, and in the case of the corporate minutes, accurately reflect
all material proceedings of the Shareholders and directors of Company (and all
committees thereof) for the subject time period. The stock record books of
Company, which have been or will be made available to APPM for review, contain
true, complete and accurate records of the stock ownership of record of Company
and the transfer record of the shares of its capital stock.
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<PAGE> 5
Section 2.4 Authorization and Validity. Company and the Shareholders
have all requisite corporate and individual power to enter into this Agreement
and all other agreements entered into in connection with the transactions
contemplated hereby, and to consummate the Transactions contemplated hereby and
thereby. The execution, delivery, and performance by Company of this Agreement
and the agreements contemplated herein, and the consummation by Company of the
Transactions contemplated hereby and thereby, are within Company's corporate
powers and have been duly authorized by all necessary action on the part of
Company's Board of Directors and Shareholders. This Agreement has been duly
executed by Company and Shareholders, and this Agreement, and all other
agreements and obligations entered into and undertaken in connection with the
Transactions contemplated hereby to which Company and Shareholders are a party,
constitute, or upon execution will constitute, valid and binding agreements of
Company and Shareholders, enforceable against them in accordance with their
respective terms, except as enforceability may be limited by bankruptcy or
other laws affecting the enforcement of creditors' rights generally, or by
general equity principles, or by public policy.
Section 2.5 Governmental Authorization. Other than consents, filings
or notifications required to be made or obtained by APPM and except as
disclosed on Schedule 2.5 hereto and in Section 4.1 hereof, the execution,
delivery and performance by Company and Shareholders of this Agreement and the
agreements provided for herein, and the consummation of the transactions
contemplated hereby and thereby by Company and Shareholders, to the best
knowledge of Company and Shareholders require no action by or in respect of, or
filing with, any governmental body, agency, official or authority.
Section 2.6 Absence of Conflicting Agreements or Required Consents.
The execution, delivery and performance by Company and each of the Shareholders
of this Agreement and any other documents contemplated hereby (with or without
the giving of notice, the lapse of time, or both): (i) other than consents,
filings or notifications required to be made or obtained by APPM and except as
may be disclosed on Schedule 2.5 and in Section 4.1 hereof do not require the
consent of any governmental or regulatory body or authority or any other third
party except for such consents for which the failure to obtain would not
reasonably be expected to result in a Material Adverse Effect on Company or a
Shareholder; (ii) will not conflict with any provision of Company's Articles of
Incorporation, as amended or restated, or Bylaws, as amended or restated; (iii)
will not conflict with, result in a violation of, or constitute a default under
any law, ordinance, regulation, ruling, judgment, order or injunction of any
court or governmental instrumentality to which Company or a Shareholder is a
party or by which Company or a Shareholder or any of their properties are
subject or bound except for such conflict, violation or default the occurrence
of which would not reasonably be expected to result in a Material Adverse
Effect on Company or Shareholders; (iv) except as is disclosed in Schedule
2.18, will not conflict with, constitute grounds for termination of, result in
a breach of, constitute a default under, require any notice under, or
accelerate or permit the acceleration of, any performance required by the terms
of any agreement, instrument, license or permit, material to this transaction,
to which Company or a Shareholder is a party or by which Company or a
Shareholder or any of their properties are bound except for such conflict,
termination, breach or default, the occurrence of which would not reasonably be
expected to result in a Material Adverse Effect on Company or Shareholders; and
(v) will not create any Encumbrance or restriction upon any of the assets or
properties of Company or Shareholders.
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<PAGE> 6
Section 2.7 Subsidiaries and Investments. Except as is disclosed in
Schedule 2.7 hereto, Company does not own, directly or indirectly, any capital
stock or other equity, ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
Section 2.8 Absence of Changes. Except as permitted or contemplated by
this Agreement, since September 1, 1996, Company has conducted its business
only in the ordinary course and has not:
(a) suffered any change (whether or not covered by insurance)
that, individually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect on Company;
(b) paid, discharged or satisfied any material liability,
other than the payment, discharge or satisfaction of liabilities in the
ordinary course of business;
(c) written off as uncollectible any receivable, except for
write-offs in the ordinary course of business;
(d) except in the ordinary course of business and consistent
with past practice, canceled or compromised any debts, or waived or permitted
to lapse any claims or rights, or sold, transferred or otherwise disposed of
any of its properties or assets;
(e) entered into any commitment or transaction not in the
ordinary course of business that is material to Company, taken as a whole, or
made any capital expenditure or commitment in excess of $5,000 individually or
$10,000 in the aggregate;
(f) made any material change in any method of accounting or
accounting practice, credit practices, collection policies, or payment
policies;
(g) except in the ordinary course of business consistent with
past practice, incurred any liabilities or obligations (absolute, accrued or
contingent) in excess of $5,000 individually or $10,000 in the aggregate;
(h) mortgaged, pledged, subjected, or agreed to subject, any
of its assets, tangible or intangible, to any claim or Encumbrance, except for
liens for current personal property taxes not yet due and payable or for
mechanics, landlords, materialmen, and other statutory liens, purchase money
security interests, sale-leaseback interests granted, and all other
Encumbrances granted in similar transactions;
(i) sold, redeemed, acquired or otherwise transferred any
equity or other interest in itself other than with respect to the purchase of
1,000 shares of Company Common Stock by each of Alan B. Kronthal and Robert A.
Olshaker, 688 shares of Company Common Stock by Steven A. Meyers, and 430
shares of Company Common Stock by Victor A. Bracey and 430 shares of Company
Common Stock by Larry W. Busching;
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<PAGE> 7
(j) increased any salaries, wages or any employee benefits
for any employee of Company, or paid any bonus, except in the ordinary course
of business and consistent with past practice;
(k) hired, committed to hire, or terminated any employee
except in the ordinary course of business;
(l) declared, set aside, or made any payments, dividends or
other distributions to Shareholders in their capacities as Shareholders, or any
other holder of capital stock of Company (except as expressly contemplated
herein); or
(m) agreed, whether in writing or otherwise, to take any
action described in this Section 2.8.
Section 2.9 Litigation and Claims. Except as is disclosed in Schedule
2.9 hereto, there are no claims, lawsuits, actions, arbitrations,
administrative or other proceedings, governmental investigations or inquiries
pending or, to the best knowledge of Company and Shareholders, threatened,
against Company, Shareholders, any Physician Employees, or, to the best
knowledge of Company and Shareholders, any other licensed professional or other
individual affiliated with Company which (i) if successful, individually or in
the aggregate, reasonably would be expected to have a Material Adverse Effect
on Company or Shareholders or (ii) if successful, reasonably would be expected
to materially adversely affect the ability of Company or Shareholders to effect
the Trans actions contemplated hereby. There are no unsatisfied judgments
against Company or Shareholders or any Physician Employee, or any consent
decrees to which any of the foregoing is subject, relating to services provided
on behalf of Company. Each of the matters, if any, disclosed in Schedule 2.9
(collectively, the "Litigation") is fully covered by policies of insurance of
Company or Shareholders as in effect on the date hereof.
Section 2.10 No Violation of Law. Neither Company nor any Shareholder
has been, nor shall be as of the Closing Date (by virtue of any action,
omission to act, contract to which it is a party, or any occurrence or state of
facts whatsoever), in violation of any applicable local, state or federal law,
ordinance, regulation, order, injunction or decree, or any other requirement of
any governmental body, agency, authority or court binding on it, or relating to
its properties, assets or business or its advertising, sales or pricing
practices, except for violations which reasonably, individually or in the
aggregate, would not have a Material Adverse Effect on Company or any
Shareholder.
Section 2.11 Employee Matters. Except as listed in Schedule 2.11
hereto and in Schedule 2.13 hereto, Company is not currently a party to any
employment contract (except for oral employment agreements which are terminable
at will), consulting or collective bargaining contracts, deferred compensation,
profit sharing, bonus, stock option, stock purchase or other nonqualified
benefit or compensation commitments, benefit plans, arrangements or plans
(whether written or oral), of or pertaining to Company and any of its present
or former employees, or any predecessors in interest. Schedule 2.11 lists each
employee or contractor of, or consultant to, Company who received any salary,
benefit or bonus for 1997 in excess of $50,000, or who is expected to receive
any salary, benefit or bonus in 1998 in excess of $50,000. Company is not
delinquent in payment
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<PAGE> 8
to any of its employees or Physician Employees for wages, salaries, bonuses or
other direct compensation for any services performed for it to the date hereof
or amounts required to be reimbursed to such employees. Upon termination of
employment of any employee or Physician Employee, no severance or other
payments will become due, and Company has no policy, past practice, or plan of
paying severance on termination of employment, except for the deferred
compensation provisions contained in the employment agreements with the
Shareholders specified in Schedule 2.11 (which employment agreements are being
terminated or assumed as of the Effective Date by WB&A Imaging, P.C.).
Section 2.12 Labor Relations.
(a) Company is in material compliance with all applicable
laws respecting employment and employment practices, terms and conditions of
employment, wages and hours, occupational safety and health, and is not engaged
in any unfair labor practice within the meaning of Section 8 of the National
Labor Relations Act;
(b) There is no unfair labor practice, charge or complaint or
any other employment-related matter against or involving Company pending, or,
to the best knowledge of Company or Shareholders, threatened, before the
National Labor Relations Board or any other federal, state or local agency,
authority or court;
(c) There are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including discrimination
based upon sex, age, marital status, race, national origin, the making of
workers' compensation claims, sexual preference, handicap or veteran status)
pending, or, to the best knowledge of Company and Shareholders, threatened,
before the Equal Employment Opportunity Commission or any other federal, state
or local agency or court against Company. There have been no governmental
audits of the equal employment opportunity practices of Company, and, to the
best knowledge of Company and Shareholders, no basis for any such audit exists
which, if conducted, would reasonably be expected to result in a Material
Adverse Effect on Company;
(d) To the best knowledge of Company and Shareholders,
Company is in compliance with the Immigration Reform and Control Act of 1986,
as amended, and all applicable regulations promulgated thereunder; and
(e) There are no inquiries, investigations or monitoring
activities of any licensed, registered, or certified professional personnel
employed or retained by Company pending, or, to the best knowledge of Company
and Shareholders, threatened, by any state professional board or agency charged
with regulating the professional activities of radiology care practitioners.
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Section 2.13 Employee Benefit Plans.
(a) Identification. Schedule 2.13 hereto contains a complete
and accurate list of all employee benefit plans (within the meaning of Section
3(3) of ERISA) sponsored by Company or to which Company contributes on behalf
of its employees and all employee benefit plans previously sponsored or
contributed to on behalf of its employees within the three years preceding the
date hereof (the "Employee Benefit Plans"). Company has provided to APPM copies
of all current plan documents (as they may have been amended to the date
hereof), determination letters, pending determination letter applications,
trust instruments, insurance contracts or policies related to an Employee
Benefit Plan, administrative services contracts, annual reports for immediately
preceding three (3) years, actuarial valuations, summary plan descriptions,
summaries of material modifications, administrative forms and other documents
that constitute a part of, or are incident to the administration of, the
Employee Benefit Plans. Subject to the requirements of ERISA, each of the
Employee Benefit Plans can be terminated or amended at will by Company without
any further liability or obligation on the part of Company to make further
contributions or payments in connection therewith following such termination,
except to the extent of any benefits accrued through the date of termination
which accrued benefits shall be paid by Company. No unwritten amendment exists
with respect to any Employee Benefit Plan.
(b) Administration. Each Employee Benefit Plan has been
administered and maintained in compliance with all applicable laws, rules and
regulations, except where the failure to be in compliance would not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
(c) Examinations. Company has not received any written notice
that any Employee Benefit Plan is currently the subject of an audit,
investigation, enforcement action or other similar proceeding conducted by any
state or federal agency or authority.
(d) Prohibited Transactions. No prohibited transactions
(within the meaning of Section 4975 of the Code or Section 406 of ERISA) have
occurred with respect to any Employee Benefit Plan. There has been no breach of
any duty under ERISA or applicable law (including, without limitation, any
health care contractor requirements or any other tax law requirements, or
conditions to favorable tax treatment, applicable to such plan), which would be
reasonably likely to result, directly or indirectly (including through any
obligation of indemnification or contribution), in any taxes, penalties or
other liability to APPM or any of its Affiliates.
(e) Claims and Litigation. No pending, or, to the best
knowledge of Company and Shareholders, threatened, claims, suits or other
proceedings exist with respect to any Employee Benefit Plan other than normal
benefit claims filed by participants or beneficiaries.
(f) Qualification. Except as noted on Schedule 2.13, Company
has received a favorable determination letter or ruling from the IRS for each
of the Employee Benefit Plans intended to be qualified within the meaning of
Section 401(a) or 501(c)(9) of the Code and/or tax-exempt within the meaning of
Section 501(a) of the Code and, to the best knowledge of Company and
Shareholders, each such Employee Benefit Plan has been continually qualified
under the applicable Section of the Code since the effective date of such
Employee Benefit Plan. No proceedings are pending, or, to the best knowledge of
Company and Shareholders, have been threatened, that could result in the
revocation of any such favorable determination letter or ruling.
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(g) Funding Status. No accumulated funding deficiency (within
the meaning of Section 412 of the Code), whether waived or unwaived, exists
with respect to any Employee Benefit Plan or any plan sponsored by any member
of a controlled group (within the meaning of Section 412(n)(6)(B) of the Code)
in which Company is a member (a "Controlled Group"). Neither Company nor any
member of a Controlled Group maintains or has ever maintained an Employee
Benefit Plan subject to Title IV of ERISA or an Employee Benefit Plan described
in Section 501(c)(9) of the Code.
(h) Excise Taxes. Neither Company nor any member of a
Controlled Group has any liability to pay excise taxes with respect to any
Employee Benefit Plan under applicable provisions of the Code or ERISA.
(i) Multi-employer Plans. Neither Company nor any member of a
Controlled Group is or ever has been obligated to contribute to a
multi-employer plan within the meaning of Section 3(37) of ERISA or any other
Employee Benefit Plan which has been subject to Title IV of ERISA or Section
412 of the Code.
(j) PBGC. No facts or circumstances are known to Company or
Shareholders that would be reasonably likely to result in the imposition of
liability against APPM or any of its Affiliates by the Pension Benefit Guaranty
Corporation ("PBGC") as a result of any act or omission by Company or any
member of a Controlled Group. To the best knowledge of Company and
Shareholders, no reportable event (within the meaning of Section 4043 of
ERISA), for which the notice requirement has not been waived, has occurred with
respect to any Employee Benefit Plan subject to the requirements of Title IV of
ERISA.
(k) Retirees. Except as noted on Schedule 2.13, Company has
no obligation or commitment to provide medical, dental or life insurance
benefits to or on behalf of any of its employees who may retire or any of its
former employees who have retired except as may be required pursuant to the
continuation of coverage provisions of Section 4980B of the Code and the
applicable provisions of ERISA.
(l) Labor Unions. Neither Company nor Shareholders, nor, to
the best knowledge of Company and Shareholders, Physician Employees are members
of any labor union or parties to any agreement or contract with any labor
union.
(m) Other Compensation Arrangements. Neither Company nor
Shareholders, nor, to the best knowledge of Company and Shareholders, Physician
Employees are a party to any compensation or debt arrangement with any Person
relating to the provision of health care related services other than
arrangements with Company or to which Company is a party.
Section 2.14 Environmental Matters.
(a) Company has not within the five years preceding the date
hereof, through the Closing Date, received from any federal, state or local
governmental body, agency, authority or entity, or any other Person, any
written notice, demand, citation, summons, complaint or order, or any written
notice of any penalty, lien or assessment, and to the best knowledge of Company
and
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Shareholders, no investigation or review is pending by any governmental entity,
with respect to any (i) alleged violation by Company of any Environmental Law
(as defined in subsection (e) below); (ii) alleged failure by Company to have
any environmental permit, certificate, license, approval, registration or
authorization required pursuant to any Environmental Law in connection with the
conduct of its business; or (iii) alleged illegal Regulated Activity (as
defined in subsection (e) below) by Company.
(b) Company has not used, transported, disposed of, or
arranged for the disposal of (as those terms are defined in and construed under
the Comprehensive Environmental Response, Compensation and Liability Act) any
Hazardous Substance (as defined herein) in a manner that would be reasonably
likely to give rise to any Environmental Liabilities (as defined in subsection
(e) below) for Company under any applicable Environmental Law that had, or
would reasonably be likely to have, a Material Adverse Effect on Company.
Company has not engaged in any activity, or failed to undertake any activity,
which action or failure to act has given, or would reasonably be likely to
give, rise to any Environmental Liabilities or enforcement action by any
federal, state or local regulatory agency or authority, or has resulted, or
would reasonably be likely to result, in any fine or penalty imposed pursuant
to any Environmental Law which, in any such instance, had, or would reasonably
be likely to have, a Material Adverse Effect on Company. To the best knowledge
of Company and Shareholders, there is no known presence of asbestos in or on
Company's owned or leased premises. To the best knowledge of Company, there is
no friable asbestos in or on Company's owned or leased premises.
(c) To the best knowledge of Company and Shareholders, no
soil or water in or under any assets currently or formerly held for use or sale
by Company is or has been contaminated by any Hazardous Substance while such
assets or premises were owned, leased, operated or managed, directly or
indirectly, by Company, and where such contamination had, or would be
reasonably likely to have, a Material Adverse Effect on Company.
(d) There have been no environmental audits or other similar
reports which have been prepared by, for or, to the best knowledge of Company
and Shareholders, concerning, Company within the five years preceding the date
hereof through the Closing Date with respect to any real property now or
previously owned or leased by Company or any of its predecessors.
(e) For the purposes of this Section 2.14, the following
terms have the following meanings:
"Environmental Laws" shall mean any domestic, federal, state
or local laws, ordinances, codes, regulations, rules, policies and
orders (including without limitation, Medical Waste Laws) that are
intended to assure the protection of the environment, or that
classify, regulate, call for the remediation of, require reporting
with respect to, or list or define air, water, groundwater, solid
waste, hazardous, toxic, or radioactive substances, materials, wastes,
pollutants or contaminants, or which are intended to assure the safety
of employees, workers or other persons, including the public in each
case as in effect on the date hereof.
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"Environmental Liabilities" shall mean all liabilities of
Company, whether contingent or fixed, which (i) have arisen, or would
reasonably be likely to arise, under Environmental Laws and (ii)
relate to actions occurring or conditions existing on or prior to the
date hereof or the Closing Date.
"Hazardous Substances" shall mean any toxic or hazardous
substances, material or waste, including Medical Waste, or any
pollutant or contaminant, or infectious or radioactive substance or
material, including without limitation those substances, materials and
wastes defined in or regulated under any Environmental Laws.
"Regulated Activity" shall mean any generation, treatment,
storage, recycling, transportation, disposal or release of any
Hazardous Substances.
Section 2.15 Filing Reports. All returns, reports, plans and filings
of any kind or nature necessary to be filed by Company with any governmental
agency or authority have been properly completed and timely filed in compliance
with all applicable requirements, except where failure to so file would not
have a Material Adverse Effect on Company.
Section 2.16 Lease Agreements. Schedule 2.16 hereto contains a true,
accurate and complete list of all the lease agreements and license agreements
to which Company is a party and pursuant to which Company leases (whether as
lessor or lessee) or licenses (whether as licensor or licensee) any real or
personal property related to the operation of its business and which requires
payments in excess of $12,000 per year (the "Lease Agreements"). Company has
delivered to APPM true and complete copies of all of the Lease Agreements.
There is not under any Lease Agreement (i) any existing or claimed material
default by Company or event which, with notice or lapse of time, or both, would
constitute a material default by Company, which, individually or in the
aggregate, may reasonably be expected to result in a Material Adverse Effect on
Company, or (ii) to the best knowledge of Company, any existing material
default by any other party under any of the Lease Agreements or any event
which, with notice or lapse of time, or both, would constitute a material
default by any such party. There is no pending or, to the best knowledge of
Company and Shareholders, threatened reassessment of any property covered by
the Lease Agreements. Company has a good, clear, valid and enforceable, except
as enforceability may be limited by bankruptcy or other laws affecting the
enforcement of creditors' rights generally, or by general equity principles, or
by public policy, leasehold interest under each of the Lease Agreements. The
Lease Agreements are in compliance with all applicable safe harbor provisions
promulgated by the Department of Health and Human Services in connection with
the enforcement of the federal Fraud and Abuse Statute, 42 CFR Part 1001, and
any similar applicable state safe harbor or other exemption provisions. Neither
Company nor, to the best knowledge of Company and Shareholders, any other party
thereto, has challenged the validity or effectiveness of any Lease Agreement.
Section 2.17 Insurance Policies. Schedule 2.17 hereto lists and
briefly describes Company's policies of insurance to which Company is a party
or under which Company or any officer or director thereof is or has been
covered at any time during the last five years preceding the date of this
Agreement relating to the business of Company (the "Insurance Policies"). All
premiums with respect to the Insurance Policies are currently paid. All
Insurance Policies currently maintained by Company ("Current Policies"), taken
together, (i) are sufficient for compliance with
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legal and contractual requirements to which Company is a party or by which
Company may be bound, and (ii) shall be maintained in force (including the
payment of all premiums and compliance with their terms) without interruption
up to and including the Closing Date. True, complete and correct copies of all
Current Policies have been provided to APPM. Neither Company nor any officer or
director thereof has received any notice or other written communication from
any issuer of any Current Policy canceling such policy, materially increasing
any deductibles or retained amounts thereunder, or materially increasing the
annual or other premiums payable thereunder, and, to the best knowledge of
Company and Shareholders, no such cancellation or increase of deductibles,
retainers or premiums is threatened. There are no outstanding claims,
settlements or premiums owed against any Insurance Policy, and all required
notices have been given and all known potential or actual claims under any
Insurance Policy have been presented in due and timely fashion. Within the five
years preceding the Agreement, neither Company nor Shareholders have filed a
written application for any professional liability insurance coverage which has
been denied by an insurance agency or carrier. Schedule 2.17 also sets forth a
list of all claims under any Insurance Policy in excess of $2,500 per
occurrence filed by Company or Shareholders during the immediately preceding
three-year period. Each Physician Employee has, at all times while a Physician
Employee, maintained or been covered by professional malpractice insurance in
such types and amounts as are customary for such a physician practicing the
same type of radiology in the same geographic area.
Section 2.18 Contracts and Commitments.
Schedule 2.18 hereto contains a true, accurate and complete list, and
Company has delivered to APPM true and complete copies, of each contract,
agreement and other instrument (other than insurance contracts identified in
Section 2.17 or Lease Agreements identified in Section 2.16) to which Company
is a party or by which it or any of its properties or assets are bound
including, without limitation, (i) all agreements between Company, on the one
hand, and any Payor, government entity, provider, hospital, health maintenance
organization, other managed care organization or other third party provider, on
the other hand, then in effect relating to the provision of medical, diagnostic
imaging or consulting services, treatments, patient referrals or other similar
activities, (ii) all indentures, mortgages, notes, loan or credit agreements,
and other agreements and obligations relating to the borrowing of money, or to
the direct or indirect guarantee or assumption of obligations of third parties
requiring Company to make, or setting forth conditions under which Company
would be required to make, aggregate future payments in excess of $10,000 in
any fiscal year or $25,000 in the aggregate, (iii) all agreements for capital
improvements or acquisitions involving an amount of $75,000 in any fiscal year
or $75,000 in the aggregate, (iv) all agreements containing a covenant limiting
the freedom of Company (or any provider employee of Company) to compete in any
line of business with any person or entity or in any geographic area, or (v)
all written contracts and commitments providing for future payments by Company
in excess of $10,000 in any fiscal year or $25,000 in the aggregate and that
are not cancelable by providing notice of sixty (60) days or less. Company has
not challenged the validity or effectiveness of any such contract, agreement or
other instrument, and has not received written notification from any other
party thereto challenging its validity or effectiveness or indicating any plan
or intention of any other party to exercise any right to cancel or terminate
any contract, agreement or instrument required to be disclosed pursuant to
Section 2.18, and to the best knowledge of Company and Shareholders, there are
no fact(s) that would justify the exercise of such a right. To the best
knowledge of Company and
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Shareholders, none of the parties to any such contract, agreement or instrument
contemplates any amendment or change thereto; there has been no threatened
cancellation thereof; there are no outstanding disputes thereunder; each such
contract, agreement and instrument is with unrelated third parties and was
entered into on an arms-length basis with the exception of the agreement with
Diagnostic Management Associates, Inc.; and, subject to the provisions and
qualifications of Schedule 2.18, and assuming the receipt of the appropriate
consents, all will continue to be binding in accordance with their terms after
consummation of the transaction contemplated herein except as enforceability
may be limited by bankruptcy or other laws affecting the enforcement of
creditor's rights generally, or by general equity principles, or by public
policy; there are no contracts, agreements or other instruments to which
Company is a party or is bound (other than physician employment contracts,
Insurance Policies, the agreements specified on Schedule 2.18, and the Lease
Agreements) which either singularly or in the aggregate could reasonably be
expected to have a Material Adverse Effect on the value of the assets and
properties of Company. Notwithstanding the foregoing, Company shall not possess
at Closing any contracts or agreements relating to the provision of
professional medical services and other such agreements and contracts that APPM
consents to in writing to be transferred to WB&A Imaging, P.C.
Section 2.19 Licenses, Authorization and Provider Programs. Each of
Company, and each Physician Employee, and, to the best knowledge of Company and
Shareholders, each other licensed employee or independent contractor of Company
(i) is the holder of all valid licenses, approvals, orders, consents, permits,
registrations, qualifications, and other rights and authorizations required by
law, ordinance, regulation or ruling of any governmental regulatory authority
necessary to operate its/his/her business, and (ii) is eligible to participate
in and to receive reimbursement under programs funded in whole or in part by
federal, state or local entities for which Company is eligible ("Governmental
Programs"). Each of Company, each Shareholder, and each Physician Employee has
a current provider number for such Governmental Programs and with such private
non-governmental programs (including without limitation any private insurance
program) under which Company is presently receiving payments directly or
indirectly from any Payor for patient care provided by such Physician Employee,
licensed employee or independent contractor (such non-governmental programs
herein referred to as "Private Programs"). A true, correct and complete list of
such licenses, permits and other authorizations (including, but not limited to,
verification of Medicare and Medicaid provider numbers (if any)), and provider
agreements, is set forth in Schedule 2.19 hereto. No violation, default, order
or deficiency exists with respect to any of the items listed in Schedule 2.19
hereto except for such violations, defaults, orders or deficiencies which would
not be reasonably likely to have a Material Adverse Effect on Company, and,
except as disclosed in Schedule 2.19 hereof, there is no action pending, or, to
the best knowledge of Company and Shareholders, threatened, by any state or
federal agencies having jurisdiction over the items listed in Schedule 2.19,
either to revoke, withdraw or suspend any material license or to terminate the
participation of Company in any Governmental Program or Private Program, and,
to the best knowledge of Company and Shareholders, no event has occurred which,
with or without notice or lapse of time, or both, would constitute grounds for
a violation, order or deficiency with respect to any of the items listed in
Schedule 2.19 or to revoke, withdraw or suspend any material license of Company
to operate its business as is presently being conducted by it. No contract with
a health care provider or Payor has been materially amended or terminated
within the last twelve (12) months. To the best knowledge of Company and
Shareholders, there has been no decision by either party not to renew any
existing agreement with any provider or Payor relating to Company's business as
presently being conducted by it.
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Section 2.20 Inspections and Investigations. Neither the right of
Company, nor any Physician Employee, nor, to the best knowledge of Company and
the Shareholders, any licensed professional or other individual affiliated with
Company, to receive reimbursements pursuant to any Governmental Program or
Private Program has been terminated or otherwise materially and adversely
affected as a result of any investigation or action whether by any federal or
state governmental regulatory authority or other third party. No Physician
Employee, or, to the best knowledge of Company and Shareholders, licensed
professional or other individual affiliated with the business, has, during the
past three years prior to the Closing Date, had his professional license or
privileges limited, suspended or revoked by any governmental regulatory
authority or agency, trade association, professional review organization,
accrediting organization or certifying agency (including orders that have been
entered by any such entities but stayed). True, correct and complete copies of
all reports, correspondence, notices and other documents relating to any matter
described or referenced in this Section 2.20 have been provided to APPM.
Section 2.21 Proprietary Rights and Information.
(a) Set forth in Schedule 2.21 hereto is a complete and
accurate list and summary description of the following: (i) all trademarks
(registered and unregistered), trade-names, service marks and other trade
designations, including common law rights, registrations and applications
therefor, currently owned in whole or part, or used by Company, (ii) all
patents and applications therefor, and inventions and discoveries that may be
patentable, currently owned, in whole or in part, or used by Company, (iii) all
licenses, royalties, and assignments thereof to which Company is a party, (iv)
all copyrights (for published and unpublished works) currently owned, in whole
or part, or used by Company, and (v) other similar agreements relating to the
foregoing to which Company is a party (including expiration date if applicable)
(collectively, the "Proprietary Rights").
(b) Schedule 2.21 hereto contains a complete and accurate
list and summary description of all agreements relating to technology, trade
secrets, know-how or processes that Company is licensed or authorized to use by
others (other than technology, know-how or processes generally available to
other health care providers) or which it licenses or authorizes others to use,
and true, correct and complete copies of which have been provided to APPM.
There are no outstanding or, to the best knowledge of Company and Shareholders,
threatened, disputes or disagreements with respect to any such agreement.
(c) Company owns or has the legal right to use the
Proprietary Rights without conflicting with, infringing or violating the rights
of any other Person. No consent of any Person will be required for the use
thereof by Company upon consummation of the Transactions contemplated hereby,
and the Proprietary Rights are freely transferable. To the best knowledge of
Company and Shareholders, no claim has been asserted by any Person to the
ownership of, or for infringement by Company of, any Proprietary Right of any
other Person, and neither Company nor Shareholders is aware of any valid basis
for any such claim. To the best knowledge of Company and Shareholders, no
proceedings have been threatened which challenge the Proprietary Rights of
Company. Company has the right to use, free and clear of any adverse claims or
rights of others, all trade secrets, customer lists and proprietary information
required for the performance and marketing of all medical services.
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Section 2.22 Accounts Receivable; Payors.
(a) Schedule 2.22 hereto sets forth a list and aging of all
accounts receivable of Company as of August 31, 1998, which list is complete,
true and accurate in all material respects. All such accounts receivable arose
in the ordinary course of business and have not been previously written off as
bad debts, and, are, to the extent still uncollected, to the best knowledge of
Company and Shareholders, collectible in the ordinary course of business, net
of reserves for doubtful and uncollectible accounts shown in Company Financial
Statements or on the accounting records of Company (which reserves are
calculated consistent with generally accepted accounting principles and past
practice). Nothing contained herein shall be deemed a guarantee of collection
with respect to the accounts receivable.
(b) Schedule 2.22 hereto sets forth (i) a true, correct and
complete list of the names and addresses of each Payor of Company as of such
date, which accounted for more than 5% of the revenues of Company in the fiscal
year ended December 31, 1997, or which is reasonably expected to account for
more than 5% of the revenues of Company for the fiscal year to end December 31,
1998, and (ii) a single line item listing for all private-pay patients in the
aggregate of Company. Company has satisfactory relations with such Payors set
forth in (i) above, and to the best knowledge of Company and Shareholders none
of such Payors has notified Company in writing that it intends to discontinue
its relationship with Company or to deny any payments due from, or any claims
for payment submitted to, any such party.
Section 2.23 Accounts Payable; Suppliers.
(a) Schedule 2.23 hereto sets forth a true and complete (i)
list of the accounts payable of Company as of August 31, 1998, and (ii) list of
each individual indebtedness owed by Company of $5,000 or more, setting forth
the payee and the amount of indebtedness.
(b) Schedule 2.23 sets forth a true, correct and complete
list of the names and addresses of each of the providers/suppliers of products
or services to Company (including without limitation all non-Physician Employee
providers of care to patients) which accounted for a dollar volume of purchases
paid for by Company in excess of $25,000 for the fiscal year ended December 31,
1997, or which is reasonably expected to account for a dollar volume of
purchases paid for by Company in excess of $25,000 for the fiscal year to end
December 31, 1998.
Section 2.24 Taxes.
(a) Filing of Tax Returns. Company has duly and timely filed
(in accordance with any extensions duly granted by the appropriate governmental
agency, if applicable) with the appropriate governmental agencies all Tax
Returns required to be filed with the United States or any state or any
political subdivision thereof or any foreign jurisdiction. All such Tax Returns
are complete and accurate in all material respects and properly reflect the
taxes of Company for the periods covered thereby.
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(b) Payment of Taxes. Except for such items as Company may be
disputing in good faith by proceedings in compliance with applicable law, which
are described in Schedule 2.24, (i) Company has paid all taxes, penalties,
assessments and interest that have become due with respect to any Tax Returns
that it has filed, and has made appropriate estimated tax payments, if any, for
all of the same that have not yet become due and payable ("Taxes"), and (ii)
Company is not delinquent in the payment of any tax, assessment or governmental
charge.
(c) No Pending Deficiencies, Delinquencies, Assessments or
Audits. Company has not received any notice that any tax deficiency or
delinquency has been asserted against Company, and, to the best knowledge of
Company and Shareholders, there is no threat of such assertion. There is no
unpaid assessment, proposal for additional taxes, deficiency or delinquency in
the payment of any of the taxes of Company that could reasonably be likely to
be asserted by any taxing authority. There is no taxing authority audit of
Company pending, or, to the best knowledge of Company and Shareholders,
threatened, and the results of any completed audits are properly reflected in
Company Financial Statements. Company has not violated any applicable federal,
state, local or foreign tax law. There are no security interests or liens on
any assets of Company which have resulted from any failure to pay (or alleged
failure to pay) taxes.
(d) No Extension of Limitation Period. Company has not
granted an extension to any taxing authority of the statute of limitation
period during which any tax liability may be assessed or collected.
(e) All Withholding Requirements Satisfied. All monies
required to be withheld by Company and paid to governmental agencies for all
income, social security, unemployment insurance, sales, excise, use, and other
taxes have been collected or withheld and paid to the respective governmental
agencies.
(f) Foreign Person. Neither Company nor any Shareholder is a
foreign person, as such term is referred to in Section 1445(f)(3) of the Code
and Treasury Regulations Section 1.1445-2.
(g) Safe Harbor Lease. None of the properties or assets of
Company constitutes property that Company, APPM, Ormond or any Affiliate of
APPM, will be required to treat as being owned by another person pursuant to
the "Safe Harbor Lease" provisions of Section 168(f)(8) of the Code prior to
repeal by the Tax Equity and Fiscal Responsibility Act of 1982.
(h) Tax Exempt Entity. None of the assets or properties of
Company are subject to a lease to a "tax exempt entity" as such term is defined
in Section 168(h)(2) of the Code.
(i) Collapsible Corporation. Company has not at any time
consented to have the provisions of Section 341(f)(2) of the Code apply to it.
(j) Boycotts. Company has not at any time participated in or
cooperated with any international boycott as defined in Section 999 of the
Code.
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(k) Parachute Payments. No payment required or contemplated
to be made by Company will be characterized as an "excess parachute payment"
within the meaning of Section 280G(b)(1) of the Code.
(l) S Corporation. Company has not made an election to be
taxed as an "S" corporation under Section 1362(a) of the Code.
(m) Personal Holding Companies. Company is not or has not
been a personal holding company within the meaning of Section 542 of the Code.
Section 2.25 Fraud and Abuse and Self Referral. Neither Company nor
any of the Shareholders has engaged, and, to the best knowledge of Company, no
Persons or entities providing professional services for or on behalf of Company
have engaged, in any activities which are prohibited under 42 U.S.C. 1320a 7,
7a or 7b, or 42 U.S.C. 1395nn, or (subject to the exceptions or safe harbor
provisions set forth in such legislation) the regulations promulgated
thereunder or pursuant to any similar state or local statutes or regulations,
or which are prohibited by applicable rules of professional conduct.
Section 2.26 Continuity of Business Enterprise. There has not been any
sale, distribution or spin-off of significant assets of Company other than in
the ordinary course of business within the two years preceding the date of this
Agreement.
Section 2.27 Company Financial Statements. Attached hereto as Schedule
2.27 are (i) the compiled statements of assets, liabilities, and Shareholders'
equity, income tax basis, of the Company as of December 31, 1997 and the
accompanying supplementary information, income tax basis (collectively, the
"Company Annual Financial Statements") and (ii) the compiled consolidated
assets, liabilities, and Shareholders' equity of the Company as of June 30,
1998, and the related statements of income, and statements of cash flows of
Company for the six (6) month period then ended (collectively, the "Company
Current Financial Statements"). Company Annual Financial Statements and Company
Current Financial Statements are sometimes collectively referred to herein as
the "Company Financial Statements." Company Annual Financial Statements (a)
have been prepared in accordance with generally accepted accounting principles
consistently applied (except as may be indicated therein or in the notes
thereto), (b) present fairly the financial position of Company as of the dates
indicated and present fairly the results of Company's operations for the
periods then ended, and (c) are in accordance with the books and records of
Company, which have been properly maintained and are complete and correct in
all material respects. Company Current Financial Statements present fairly the
financial position of Company as at the dates thereof and the results of its
operations and changes in financial position for the periods then ended,
subject to normal year-end adjustments (the effect of which will not
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on Company) and lack of footnotes thereto.
Section 2.28 No Undisclosed Liabilities. Company does not have any
liabilities or obligations of any nature, whether known or unknown and whether
accrued, absolute, contingent or otherwise, asserted or unasserted except for
liabilities or obligations reflected or reserved against in Company's Current
Balance Sheet.
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Section 2.29 Schedules. All Schedules required by this Article II and
attached hereto are true, correct, and complete in all material respects as of
the date of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF APPM
As an inducement to Company and Shareholders to enter into this
Agreement and to sell the Shares, APPM hereby represents and warrants as
follows:
Section 3.1 Organization and Good Standing; Qualification. APPM is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware, with all requisite corporate power and authority
to own, operate and lease its assets and properties and to carry on its
business as currently conducted. APPM is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except where such failure to be so
qualified or in good standing would not have a Material Adverse Effect on APPM.
Copies of the Articles of Incorporation of APPM as amended or restated, and the
bylaws of APPM, as amended, and copies of the corporate minutes of APPM
regarding this Agreement and the Transactions contemplated hereby and thereby,
all of which have been or will be made available to Company for review, are
true, correct and complete as in effect on the date of this Agreement and
accurately reflect all material proceedings of the stockholders and directors
of APPM (and all committees thereof) regarding this Agreement and the
Transactions contemplated hereby and thereby.
Section 3.2 Authorization and Validity. APPM has all requisite
corporate power to execute and deliver this Agreement and all other agreements
entered into in connection with the Transactions contemplated hereby and to
consummate the Transactions contemplated hereby and thereby. The execution,
delivery and performance by APPM of this Agreement and the agreements provided
for herein, and the consummation by APPM of the Transactions contemplated
hereby and thereby, are within APPM's corporate powers and have been duly
authorized by all necessary action on the part of APPM's Board of Directors.
This Agreement has been duly executed by APPM. This Agreement and all other
agreements and obligations entered into and undertaken in connection with the
Transactions contemplated hereby and thereby to which APPM is a party
constitute, or upon execution will constitute, valid and binding agreements of
APPM enforceable against it in accordance with their respective terms, except
as may be limited by bankruptcy or other laws affecting creditors' rights
generally, or by general equity principles, or by public policy.
Section 3.3 Absence of Conflicting Agreements or Required Consents.
The execution, delivery and performance of this Agreement by APPM and any other
documents contemplated hereby (with or without the giving of notice, the lapse
of time, or both): (i) other than consents, filings or notifications required
to be made or obtained by Company or Shareholders, do not require the consent
of any governmental or regulatory body or authority or any other third party
except for such consents for which the failure to obtain would not result in a
Material Adverse Effect on APPM; (ii) will not conflict with any provision of
APPM's Articles of Incorporation, as amended or restated, or Bylaws, as
amended; (iii) will not conflict with, result in a violation of, or constitute
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a default under any law, ordinance, regulation, ruling, judgment, order or
injunction of any court or governmental instrumentality to which APPM is a
party or by which APPM or its properties are subject or bound except for such
conflict, violation or default the occurrence of which would not reasonably be
expected to result in a Material Adverse Effect on APPM; (iv) will not conflict
with, constitute grounds for termination of, result in a breach of, constitute
a default under, require any notice under, or accelerate or permit the
acceleration of any performance required by the terms of, any agreement,
instrument, license or permit, material to this transaction, to which APPM is a
party or by which APPM or any of its properties are bound except for such
conflict, termination, breach or default, the occurrence of which would not
result in a Material Adverse Effect on APPM; and (v) will not create any
Encumbrance or restriction upon any of the assets or properties of APPM.
Section 3.4 Finder's Fees. No investment banker, broker, finder or
other intermediary has been retained by or is authorized to act on behalf of
APPM who is entitled to any fee or commission upon consummation of the
Transactions contemplated by this Agreement or referred to herein.
Section 3.5 Governmental Authorizations. Other than consents, filings
or notifications required to be made or obtained by Company or Shareholders,
the execution, delivery and performance by Company of this Agreement and the
agreements provided for herein, and the consummation of the Transactions
contemplated hereby and thereby by APPM, to the best knowledge of APPM, require
no action by or in respect of, or filing with, any governmental body, agency,
official or authority.
Section 3.6 Litigation and Claims. There are no claims, lawsuits,
actions, arbitrations, administrative or other proceedings, governmental
investigations or inquiries pending, or, to the best knowledge of APPM,
threatened against APPM which could adversely materially affect the ability of
APPM to effect the Transactions contemplated hereby.
Section 3.7 No Violation of Law. APPM has not been, and shall not be
as of the Closing Date (by virtue of any action, omission to act, contract to
which it is a party or any occurrence or state of facts whatsoever), in
violation of any applicable local, state or federal law, ordinance, regulation,
order, injunction or decree, or any other requirement of any governmental body,
agency, authority or court binding on it, or relating to its properties, assets
or business or its advertising, sales or pricing practices, except for
violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on APPM.
Section 3.8 APPM Common Stock. The APPM Common Stock issued to the
Shareholders pursuant hereto, has been validly issued by APPM, is fully paid
and non-assessable, and to APPM's best knowledge, based on representations made
by the Shareholders to APPM, is exempt from registration under federal
securities laws.
ARTICLE IV
COVENANTS OF COMPANY AND SHAREHOLDERS
Section 4.1 Spin-Off Transaction. Each of Company, the Shareholders
and APPM acknowledges and agrees that in order to effect the Transactions
contemplated hereby in accordance with the applicable law of the State of
Maryland, including without limitation Section 5-111 of the
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Corporations and Associations Volume of the Maryland Annotated Code, it will be
necessary, immediately prior to or contemporaneously with the Closing, (i) to
convert Company from a professional corporation to a business corporation under
Maryland law, and (ii) to transfer to WB&A Imaging, P.C. all of those certain
assets of the Company (the "Professional Assets") specified in Schedule 4.1
hereto, which by law cannot be either acquired or used by Company as a business
corporation because they relate to the professional practice of radiology.
Accordingly, the parties hereto agree that the following steps should be taken
immediately prior to or contemporaneously with the Closing, and that the
parties will reasonably cooperate therein:
(a) Company and Shareholders shall file, or cause to be
filed, with the Maryland State Department of Assessments and Taxation ("MSDAT")
appropriate amendments to Company's Articles of Incorporation to effect a
conversion of Company from a professional corporation to a business corporation
under the laws of the State of Maryland, which amendments, among other things,
shall delete all references in the Articles of Incorporation to the rendering
of professional services and shall adopt the name "WB&A Imaging Partners,
Inc."; and
(b) Company and Shareholders shall transfer, or cause to be
transferred, to WB&A Imaging, P.C. all of Company's right, title and interest
in and to all of the Professional Assets.
Section 4.2 New Leases. Each of the parties hereto acknowledges and
confirms that Company presently leases certain offices (the "Offices") at which
it conducts its business and which are located at 2616 Sherwood Hall Lane,
Alexandria, Virginia, and 1020 Duke Street, Alexandria, Virginia, from Duke
Associates Limited Partnership, a Virginia limited partnership under separate
office leases (the "Existing Office Leases"). Each of the parties additionally
acknowledges and confirms its understanding that Ormond has agreed to and shall
enter directly into new leases (the "New Office Leases") with Duke Associates
Limited Partnership for the continued leasing of the Offices. Accordingly,
notwithstanding any provision in this Agreement to the contrary, the parties
agree that contemporaneously with, and as a condition to the Closing, (a) the
Existing Office Leases shall be terminated and canceled and the New Office
Leases shall be executed, and (b) Ormond shall enter into a new office lease
with Magnetic Resonance Imaging Associates Limited Partnership for the leasing
of the MRI Facility located at 8001 Branch Avenue, Clinton, Maryland (the
"Branch Avenue Lease").
Section 4.3 Transfer of Stock Ownership Interests. As reflected on
Schedule 2.7 hereto, Company (a) owns 1,000 shares of common stock (the "MIN
Stock") in Medical Imaging Network, Inc. ("MIN"), and is a party to that
certain Third Amended Stockholders Agreement for Medical Imaging Network, Inc.
(the "MIN Stockholders Agreement"), dated as of January 23, 1995, by and among,
inter alia, MIN and Company, and to that certain Participation Agreement for
Physician Services (the "Participation Agreement"), dated as of January 1,
1992, by and between MIN and Company; and (b) is a party to that certain
Agreement Concerning Virginia's Physicians Network Inc. (the "VPN Agreement"),
dated January 14, 1997, by and among Company and each physician employee of the
Company specified therein (collectively, the "VPN Physicians"), pursuant to
which Company is deemed to be the equitable owner of all shares of stock in the
Virginia's Physician's Network, Inc. ("VPN") now held by each of the VPN
Physician. Each of the parties hereto (i) agrees
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that, immediately prior to the Closing, Company shall transfer, set over, and
assign to WB&A Imaging, P.C. ("WBA") (1) the MIN Stock, and (2) all of
Company's right, title, and interest under the MIN Stockholders Agreement and
the Participation Agreement (the "MIN Transfers"), and (ii) acknowledges and
confirms that the MIN Transfers are subject to the consent and approval of MIN
and the other stockholders of MIN, and that the MIN Transfers shall be binding
upon the parties hereto regardless of whether the required consent and approval
of MIN and the other stockholders of MIN are received. APPM also acknowledges
and agrees that receipt, after the Closing, of the consent and approval of MIN
and its other stockholders to the MIN Transfers is not assured, and that
neither Company, WBA nor any of the Shareholders shall have any liability if
and in the event such approval and consent is not received. APPM shall
cooperate reasonably with WBA and the Shareholders, after the Closing, in
securing the required consent of MIN and its other stockholders to the MIN
Transfers. Each of the parties hereto additionally agrees that, immediately
prior to the Closing, Company, together with the VPN Physicians and WBA, shall
enter into an amendment to the VPN Agreement pursuant to which WBA shall be
designated as, and shall be deemed to be, the equitable owner of all of the VPN
Stock owned by the VPN Physicians.
Section 4.4 WBA Fees. In connection with the assignment by Company to
WBA of the Payor Contracts as part of the Professional Assets identified on
Schedule 4.1 hereto, each of the parties hereto acknowledges and agrees that it
is likely that Company will receive, after the Closing, fees for services
rendered after the Closing by WBA and to which WBA shall be entitled
(collectively, the "WBA Fees"). The parties agree that, subject to the terms
and conditions of the Service Agreement, promptly after its receipt of any WBA
Fees, APPM shall take, or shall cause Company to take, any and all action
necessary to transfer, assign, set over, and deliver to WBA all of such WBA
Fees.
Section 4.5 Company Bank Accounts. Each of the parties agrees that the
account balances existing as of the Closing in each of the bank accounts of
Company (collectively, the "Bank Accounts") shall be deemed to be the property
of the Shareholders and may be distributed to the Shareholders immediately
prior to or contemporaneously with the Closing.
Section 4.6 Third Party Consents. Notwithstanding anything to the
contrary contained herein, including, without limitation, the representation
and warranty of Company and Shareholders in Section 2.6 hereof, each of APPM,
Company, and Shareholders acknowledges and agrees that, as of the Closing, the
necessary consents will not have been received from the other parties to the
transfer by Company to WBA of all right, title, and interest of Company under
the "Third Party Payor Contracts" which term is defined on Schedule 4.1 hereto
and which contracts constitute a part of the Professional Assets. Each of the
parties hereto acknowledges and confirms that it has reviewed Schedule 2.18
hereto, the provisions of which shall be deemed in substitution of any and all
other representations and warranties by Company or Shareholders in this
Agreement regarding the assignability of the Third Party Payor Contracts. Each
of the parties hereto agrees that it will cooperate reasonably with each other
in undertaking and completing the steps specified in Schedule 2.18 hereto
regarding the assignment or other transfer of the benefits of each Third Party
Payor Contract from Company to WBA. APPM confirms and agrees that neither
Company nor any of the Shareholders shall be deemed to be in breach of any
representation, warranty or covenant of or under this Agreement if and in the
event the assignment of any Third Party Payor Contract cannot be effected or
any such Third Party Payor Contract is canceled as a result of or in connection
with the Transactions under this Agreement.
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ARTICLE V
Intentionally Omitted
ARTICLE VI
POST-CLOSING COVENANTS OF APPM
Section 6.1 Removal of Paul T. Lubar as Guarantor. APPM will use
commercially reasonable efforts to cause Prime Leasing, Inc. to remove and
release Paul T. Lubar as a guarantor for and with respect to the equipment
lease entered in by Company, as lessee, and Prime Leasing, as lessor.
ARTICLE VII
Intentionally Omitted
ARTICLE VIII
CLOSING DELIVERIES BY THE PARTIES
Section 8.1 Deliveries of Shareholders and Company. At or prior to the
Closing Date, Shareholders and Company shall deliver to APPM the following, all
of which shall be in a form reasonably satisfactory to APPM:
(a) a copy of resolutions of the Board of Directors of
Company authorizing the execution, delivery and performance of this Agreement,
the Transactions to which Company is a party, and all related documents and
agreements in consummation of the Transactions, each certified by the Secretary
of Company as being true and correct copies of the originals thereof subject to
no modifications or amendments;
(b) Articles of Incorporation of Company certified by MSDAT;
(c) Bylaws of Company certified by the Secretary of Company;
(d) stock certificates representing the Shares, together with
accompanying signed stock powers or instruments of assignment, duly endorsed in
blank for the transfer of the Shares to APPM with all necessary transfer taxes
paid or other revenue stamps affixed thereto;
(e) Intentionally Omitted;
(f) Intentionally Omitted;
(g) Intentionally Omitted;
(h) Intentionally Omitted;
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(i) a certificate of the Secretary of Company certifying the
incumbency of the directors and officers of Company and as to the signatures of
such directors and officers who have executed documents delivered at the
Closing on behalf of Company;
(j) a certificate, dated within thirty days prior to the
Closing Date, of MSDAT for Company establishing that Company is in existence,
has paid all franchise or similar taxes, if any, and is in good standing to
transact business in the State of Maryland;
(k) all authorizations, consent, approvals, permits and
licenses referenced in Section 2.16 of this Agreement;
(l) the Service Agreement in substantially the form attached
hereto as Exhibit B (the "Service Agreement");
(m) an executed Shareholders' Release by Shareholders in
substantially the form attached hereto as Exhibit E (the "Shareholders'
Release");
(n) Employment Agreements in substantially the form attached
hereto as Exhibit C (the "Employment Agreements") executed by each of the
Shareholders;
(o) legal opinion of counsel to Company in substantially the
form attached hereto as Exhibit D;
(p) Intentionally Omitted;
(q) resignations effective on September 22, 1998 of all
officers and directors of Company;
(r) minute book and all other books and records, including
all accounting records, of the Company;
(s) such other instrument or instruments prepared by Company
or Shareholders as shall be necessary or appropriate, as APPM or its counsel
shall reasonably request, to carry out and effect the purpose and intent of
this Agreement and the Transactions, provided, however, that the same do not
increase the obligations or liabilities of Company or Shareholders beyond those
created by this Agreement; and
(t) the New Office Leases and the Branch Avenue Lease.
Section 8.2 Deliveries of APPM. At or prior to the Closing Date, APPM
shall deliver to Shareholders and Company the following, all of which shall be
in a form reasonably satisfactory to Shareholders and Company:
(a) a copy of resolutions of the Board of Directors of APPM
authorizing the execution, delivery and performance of this Agreement, the
Transactions to which APPM is a party, and all related documents and agreements
in consummation of the Transactions, each certified by the Secretary of APPM as
being true and correct copies of the originals thereof subject to no
modifications or amendments;
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(b) Articles of Incorporation of APPM, certified by the
Secretary of APPM;
(c) Bylaws of APPM as they exist on the Closing Date,
certified by the Secretary of APPM;
(d) Intentionally Omitted;
(e) Intentionally Omitted;
(f) a certificate of the Secretary of APPM certifying the
incumbency of the directors and officers of APPM and as to the signatures of
such directors and officers who have executed documents delivered at the
Closing on behalf of APPM;
(g) a certificate, dated within ten days prior to the Closing
Date, of the Secretary of the State of Delaware for APPM establishing that APPM
is in existence, has paid all franchise or similar taxes, if any, and is in
good standing to transact business in the State of Delaware.
(h) Intentionally Omitted;
(i) the Service Agreement;
(j) the Purchase Price; and
(k) such other instrument or instruments prepared by APPM as
shall be necessary or appropriate, as Company or its counsel shall reasonably
request, to carry out and effect the purpose and intent of this Agreement and
the Transactions, provided, however, that the same do not increase the
obligations or liabilities of Company or Shareholders beyond those created by
this Agreement.
Section 8.3 Intentionally Omitted.
ARTICLE IX
POST-CLOSING MATTERS
Section 9.1 Further Instruments of Transfer. During a reasonable
period following the Closing, at the request of APPM, Shareholders and Company
shall deliver any further instruments of transfer and take all reasonable
action as may be necessary or appropriate to carry out the purpose and intent
of this Agreement and the Transactions. During a reasonable period following
the Closing, at the request of Company, APPM and Ormond shall deliver any
further instruments of transfer and take all reasonable action as may be
necessary or appropriate to carry out the purpose and intent of this Agreement
and the Transactions.
Section 9.2 Survival of Article X. Notwithstanding any other provision
of this Agreement to the contrary, Article X of this Agreement shall survive
the Closing.
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ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnification by Company and Shareholders. Subject to
the terms and conditions of this Article X, Company and Shareholders jointly
and severally agree to indemnify, defend and hold harmless APPM and its
directors, officers, shareholders, employees, agents, attorneys, consultants,
Affiliates, legal representatives, and heirs from and against all losses,
claims, obligations, demands, assessments, penalties, liabilities, costs,
damages, reasonable attorneys' fees and expenses (including, without
limitation, all reasonable costs of experts and all reasonable costs incidental
to or in connection with any appellate process) (collectively, "Damages")
asserted against or incurred by such individuals and/or entities arising out
of, in connection with or resulting from:
(a) a breach by Company or Shareholders of any representation
or warranty or covenant of Company or Shareholders contained in this Agreement
or in any schedule, exhibit, certificate or other instrument delivered pursuant
to or as a part of this Agreement; or
(b) any violation (or alleged violation) by Company and/or
any of its past or present directors, officers, partners, shareholders,
employees (including, without limitation, Physician Employees), agents,
attorneys, consultants, Affiliates, legal representatives, and heirs of any
state or federal law governing health care fraud and abuse or prohibition on
referral of patients to any Person or entity in which a licensed professional
has a financial or other form of interest occurring on before the Closing Date,
or any overpayment or obligation (or alleged overpayment or obligation) arising
out of or resulting from claims submitted to any Payor on or before the Closing
Date and for which Company received payment on or before the Effective Date
("Healthcare Fraud").
Section 10.2 Indemnification by APPM. Subject to the terms and
conditions of this Article X, APPM agrees to indemnify, defend and hold
harmless Company and Shareholders, and, as applicable, their respective
directors, officers, shareholders, employees, agents, attorneys, consultants,
Affiliates, legal representatives, and heirs from and against all Damages
asserted against or incurred by such individuals and/or entities arising out
of, in connection with or resulting from a breach by APPM of any representation
or warranty or covenant of APPM contained in this Agreement or in any schedule,
exhibit, certificate or other instrument delivered pursuant to or as a part of
this Agreement.
Section 10.3 Claims. All claims for indemnification pursuant to this
Article X shall be asserted and resolved as follows:
(a) Any party claiming indemnification pursuant to this
Article X (an "Indemnified Party") shall promptly (and, in any event at least
ten days prior to the due date for any responsive pleadings, filings or other
documents) (i) notify the party from whom indemnification is sought (the
"Indemnifying Party") of any third-party claim or claims asserted against the
Indemnified Party (a "Third Party Claim") that could give rise to a right of
indemnification pursuant to this Article X and (ii) transmit to the
Indemnifying Party a written notice ("Claim Notice") describing in reasonable
detail the nature of the Third Party Claim, a copy of all papers served with
respect to such claim (if any), an estimate of the amount of Damages
attributable to the Third Party
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Claim, and the basis of the Indemnified Party's request for indemnification
under this Agreement. Except as provided in Section 10.5, the failure to
promptly deliver a Claim Notice shall not relieve any Indemnifying Party of its
obligations to any Indemnified Party with respect to the related Third Party
Claim except to the extent that the resulting delay is materially prejudicial
to the defense of such claim. Any damages ultimately awarded shall be reduced
by the costs incurred as a result of such delay. Within 30 days after receipt
of any Claim Notice (the "Election Period"), the Indemnifying Party shall
notify the Indemnified Party (x) whether the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Article X with respect
to such Third Party Claim and (y) whether the Indemnifying Party desires, at
the sole cost and expense of such Indemnifying Party, to defend the Indemnified
Party against such Third Party Claim;
(b) If the Indemnifying Party notifies the Indemnified Party
within the Election Period that the Indemnifying Party elects to assume the
defense of the Third Party Claim, then the Indemnifying Party shall have the
right to defend, at its sole cost and expense, with counsel reasonably
acceptable to such Indemnified Party, such Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 10.3(b). Except as set forth
in Section 10.3(f) hereof, the Indemnifying Party shall have full control of
such defense and proceedings, including any compromise or settlement thereof.
The Indemnified Party is hereby authorized, at the sole cost and expense of the
Indemnifying Party (but only if the Indemnified Party is entitled to
indemnification hereunder), to file, during the Election Period, any motion,
answer or other pleadings that the Indemnified Party reasonably shall deem
necessary or appropriate to protect its interests or those of the Indemnifying
Party and not prejudicial to the Indemnifying Party. If requested by the
Indemnifying Party, the Indemnified Party agrees, at the sole cost and expense
of the Indemnifying Party, to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim that the Indemnifying Party elects
to contest, including, without limitation, the making of any related
counterclaim against the Person asserting the Third Party Claim or any
cross-complaint against any Person. The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this Section 10.3(b) and shall bear its
own costs and expenses with respect to such participation; provided, however,
that if the named parties to any such action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party, and the
Indemnified Party has been advised by counsel that there may be one or more
legal defenses available to it that are different from or additional to those
available to the Indemnifying Party, then the Indemnified Party may employ
separate counsel at the expense of the Indemnifying Party, and upon written
notification thereof, the Indemnifying Party shall not have the right to assume
the defense of such action on behalf of the Indemnified Party; provided further
that the Indemnifying Party shall not, in connection with any one such action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the Indemnified Party, which firm shall be designated
in writing by the Indemnified Party. Notwithstanding the foregoing, the
Indemnifying Party shall be prohibited from confessing or settling any criminal
allegations brought against the Indemnified Party without the express written
consent of the Indemnified Party.
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(c) If the Indemnifying Party fails to notify the Indemnified
Party within the Election Period that the Indemnifying Party elects to defend
the Indemnified Party pursuant to Section 10.3(b), or if the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section 10.3(b) but fails
diligently and promptly to prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right to defend, at the sole cost and expense
of the Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings, provided, however,
that the Indemnified Party may not enter into, without the Indemnifying Party's
consent, which shall not be unreasonably withheld, any compromise or settlement
of such Third Party Claim. Notwithstanding the foregoing, if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the effect
that the Indemnifying Party disputes its potential liability to the Indemnified
Party under this Article X and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this Section
or of the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all costs and expenses of such litigation. The Indemnifying Party may
participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 10.3(c), and the Indemnifying Party
shall bear its own costs and expenses with respect to such participation;
provided, however, that if the named parties to any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party, and the Indemnifying Party has been advised by counsel that there may be
one or more legal defenses available to it that are different from or
additional to those available to the Indemnified Party, then the Indemnifying
Party may employ separate counsel and upon written notification thereof, the
Indemnified Party shall not have the right to assume the defense of such action
on behalf of the Indemnifying Party.
(d) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of damages attributable to such claim and
the basis of the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not notify the Indemnified Party
within sixty (60) days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes such claim, the claim specified by the Indemnified
Party in the Indemnity Notice shall be deemed a liability of the Indemnifying
Party hereunder. If the Indemnifying Party has timely disputed such claim, as
provided above, such dispute shall be resolved by litigation in an appropriate
court of competent jurisdiction if the parties do not reach a settlement of
such dispute within thirty (30) days after notice of a dispute is given.
(e) Payments of all amounts owing by any Indemnifying Party
pursuant to this Article X relating to a Third Party Claim shall be made within
thirty (30) days after the latest of (i) the settlement of such Third Party
Claim, (ii) the expiration of the period for appeal of a final adjudication of
such Third Party Claim, or (iii) the expiration of the period for appeal of a
final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Agreement. Payments of all amounts owing by the Indemnifying
Party pursuant to Section 10.3(d) shall be made
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within thirty (30) days after the later of (i) the expiration of the 60-day
Indemnity Notice period or (ii) the expiration of the period for appeal of a
final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Agreement.
(f) The Indemnifying Party shall provide the Indemnified
Party with written notice of any firm offer that is made to settle or
compromise a Third Party Claim against an Indemnified Party. If a firm offer is
made to settle such a claim solely by the payment of money damages, and such
offer is contingent only upon the acceptance by the Indemnifying Party, and the
Indemnifying Party notifies the Indemnified Party in writing that the
Indemnifying Party agrees to such settlement, but the Indemnified Party elects
not to accept and agree to it, the Indemnified Party may continue to contest or
defend such Third Party Claim and, in such event, the total maximum liability
of the Indemnifying Party to indemnify or otherwise reimburse the Indemnified
Party hereunder with respect to such a claim shall be limited to and shall not
exceed the amount of such settlement offer, plus reasonable out-of-pocket costs
and reasonable expenses (including reasonable attorneys' fees and
disbursements) to the date of notice that the Indemnifying Party desired to
accept such settlement.
(g) Notwithstanding any provision herein to the contrary, the
obligation of an Indemnifying Party to provide indemnification to an
Indemnified Party for breach of any representation or warranty as provided in
Sections 10.1(a) or 10.2 hereof shall not take effect unless and until the
Damages asserted against or incurred in the aggregate and on a collective basis
by the Indemnified Parties pursuant to either Section 10.1 or 10.2 (as
applicable) as a result of such a breach or breaches exceeds $15,000 (but
expressly excluding any claims involving fraud, intentional misrepresentation,
title to the Shares, Taxes, Litigation and Healthcare Fraud).
(h) Notwithstanding any provision herein to the contrary,
APPM shall have the right to offset against a Shareholder and/or Company
amounts due and payable by APPM to such Person or entity as payment for any
indemnification obligation of Company or Shareholders pursuant to this Article
X.
(i) The remedies provided in this Agreement shall be
exclusive of any other rights or remedies available to one party against the
other, either at law or in equity, except that this section shall not limit
either party's right to equitable relief, to the extent and as appropriate,
with respect to fraud, intentional misrepresentations, title to the Purchased
Assets, Taxes, Litigation or Healthcare Fraud.
Section 10.4 Costs, Expenses and Legal Fees. Whether or not the
transactions contemplated hereby are consummated, each party hereto shall bear
its own costs and expenses (including attorneys' fees), except that each party
hereto agrees to pay the costs and expenses (including reasonable attorneys'
fees and expenses) incurred by the other parties in successfully (a) enforcing
any of the terms of this Agreement or (b) proving that another party breached
any of the terms of this Agreement.
Section 10.5 Tax Benefits; Insurance Proceeds. The total amount of any
indemnity payments owed by one party to another party to this Agreement shall
be reduced by any correlative tax benefits received by the party to be
indemnified or the net proceeds received by the party to be indemnified with
respect to recovery from third parties or insurance proceeds, and such
correlative insurance benefit shall be net of the insurance premium, if any,
that becomes due as a result of such claim.
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Section 10.6 Breach by Shareholder. The parties agree that,
notwithstanding any other provision of this Agreement to the contrary, if and
in the event a right of indemnification under this Agreement arises in favor of
APPM as a result of a breach by a specific Shareholder of a representation,
warranty, or covenant particular to that Shareholder, then APPM shall first
seek to enforce its rights of indemnification against, and indemnification
from, the Shareholder who is in breach, and second, seek to enforce its rights
of indemnification against, and indemnification from, the other Shareholders.
Section 10.7 Survival.
(a) All of the respective obligations of the parties
contained in this Agreement or in any other document delivered in accordance
with and pursuant to this Agreement, including without limitation all
covenants, agreements, indemnities, representations (other than with respect to
the due authority of a party), and warranties (other than with respect to the
due authority of a party), shall survive Closing for a period of twenty-four
(24) months; provided, however, that the limitation of this clause (a) shall
not apply to claims involving fraud, intentional misrepresentations, title to
the Shares, Taxes, Litigation and Healthcare Fraud, for which the period for
making such claims shall expire on the date which is six (6) months after the
termination of the applicable statute of limitations relating thereto.
(b) If, within such twenty-four (24) month period (or longer
period, if applicable), no written notice is given by one party to the other
party of any alleged breach of a covenant, agreement, indemnification,
representation, or warranty of the other party under this Agreement, then all
liability of the other party, except as otherwise provided in this Agreement,
shall terminate. If written notice of any alleged breach of a covenant,
agreement, indemnification, warranty, or obligation is given to the other party
within such twenty-four (24) month period (or longer period, if applicable),
then the liability of the other party shall survive as to the matter(s) in
question in such notice, and the liability of the other party as to all other
matters shall cease, except as otherwise provided in this Agreement.
Section 10.8 Release. Notwithstanding anything in this Agreement to
the contrary, from and after the Closing, Buyer and APPM shall be deemed, for
all purposes, to have released each of the Shareholders from, and to have
waived with respect to each of the Shareholders, all losses, claims,
obligations, demands, assessments, penalties, liabilities, costs, damages,
reasonable attorneys' fees and expenses arising out of, in connection with, or
resulting from any breach of fiduciary duty claim against any Shareholder in
their capacity as a director or an officer of Company.
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ARTICLE XI
Intentionally Omitted
ARTICLE XII
MISCELLANEOUS
Section 12.1 Amendment; Waivers. This Agreement may be amended,
modified or supplemented only by an instrument in writing executed by all the
parties hereto. Any waiver of any terms and conditions hereof must be in
writing, and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
Section 12.2 Assignment. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the Transactions
contemplated hereby shall be assignable by any party hereto, except an
assignment by APPM to a wholly-owned subsidiary of APPM; provided that any such
assignment shall not relieve APPM of its obligations hereunder. Notwithstanding
the foregoing provision or any other provision in this Agreement, APPM's right
to assign, transfer, convey, hypothecate or otherwise dispose of the Shares
immediately after the Closing and at any time thereafter shall be unrestricted
other than as required by federal and state securities laws for compliance
therewith.
Section 12.3 Parties In Interest; No Third Party Beneficiaries. Except
as otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto. Except
as otherwise expressly provided herein, neither this Agreement nor any other
agreement contemplated hereby or by the Transactions shall be deemed to confer
upon any Person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
Section 12.4 Schedules and Exhibits. Company Disclosure Schedules and
Exhibits attached to this Agreement are by this reference incorporated herein
and made a part hereof.
Section 12.5 Entire Agreement. Except as is expressly provided in
writing, this Agreement and Transactions contemplated hereby and thereby
constitute the entire agreement of the parties regarding the subject matter
hereof, and supersede all prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof.
Section 12.6 Severability. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
Section 12.7 Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants contained herein shall survive
the Closing in accordance with the provisions of Section 10.7, and all
statements contained in any certificate, exhibit or other instrument delivered
by or on behalf of Company, Shareholders or APPM pursuant to this Agreement
shall be deemed to have been representations and warranties by Company, each
Shareholder or APPM.
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SECTION 12.8 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF MARYLAND, WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAWS RULES OF THE STATE OF MARYLAND.
Section 12.9 Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of
the terms or provisions hereof.
Section 12.10 Gender and Number. When the context requires, the gender
of all words used herein shall include the masculine, feminine and neuter and
the number of all words shall include the singular and plural.
Section 12.11 Construction. The parties to this Agreement have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The parties to this Agreement intend that each
representation, warranty and covenant contained herein shall have independent
significance. If any party hereto has breached any representation, warranty or
covenant contained in this Agreement in any respect, the fact that there exists
another representation, warranty or covenant relating to the same subject
matter (regardless of the relative levels of specificity) which the party has
not breached shall not detract from or mitigate the fact that the party is in
breach of the first representation, warranty or covenant.
Section 12.12 Confidentiality; Publicity and Disclosures. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the
transactions contemplated by this Agreement without the prior knowledge and
consent of the other parties hereto except (a) to authorized representatives of
said party and (b) to counsel, other advisers and immediate family members to
said party provided that such advisers and immediate family members (other than
counsel) agree to the confidentiality provisions of this Section 12.12, unless
(i) such information becomes available to or known by the public generally
through no fault of the Company, Shareholders or APPM, as the case may be, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, that prior to disclosing any information pursuant to
this clause (ii) the Company, Shareholders or APPM, as the case may be, shall,
if possible, give prior written notice thereof to the other parties and provide
the other parties with the opportunity to contest such disclosure, (iii) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or (iv)
the disclosing party is the sole and exclusive owner of such confidential
information as a result of the transactions hereunder; provided that the
foregoing shall not prohibit any disclosure by press release, filing or
otherwise that APPM has determined in its good faith judgment and after advice
of legal counsel to be required by federal securities laws or the rules of the
National Association of Securities Dealers.
31
<PAGE> 33
Section 12.13 Notice. Whenever this Agreement requires or permits any
notice, request, or demand from one party to another, the notice, request or
demand must be in writing to be effective and shall be deemed to be delivered
and received (i) if personally delivered, when delivered to the party to whom
notice is sent, (ii) if delivered by mail (whether actually received or not),
at the close of business on the third business day next following the day when
placed in the mail, postage prepaid, certified or registered, or (iii) if
delivered by nationally recognized overnight courier, at the close of the next
business day following delivery to said overnight courier, addressed to the
appropriate party or parties, at the address of such party set forth below (or
at such other address as such party may designate by written notice to all
other parties in accordance herewith):
If to APPM : American Physician Partners, Inc.
3600 Chase Tower
2200 Ross Avenue
Dallas, TX 75201-2776
Attn: Mark L. Wagar, President and CEO
Paul M. Jolas, General Counsel and Sr. VP
with a copy to: Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attn: Kenneth K. Bezozo, Esq.
If to Company
or Shareholders: Drs. Wener, Boyle & Associates, P.A.
1020 Duke Street
Alexandria, Virginia 22314-3512
Attn: Paul T. Lubar, M.D.
with a copy to : Sherman, Meehan, Curtin & Ain
1900 M Street, NW, Suite 600
Washington, DC 20036
Attn: Sam H. Roberson, Esq.
Section 12.14 No Waiver. No party hereto shall by any act (except by
written instrument pursuant to Section 12.1 of this Agreement), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default in or breach of any of the terms
and conditions hereof. No failure to exercise, nor any delay in exercising, on
the part of any party hereto, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. No remedy set forth in
this Agreement or otherwise conferred upon or reserved to any party shall be
considered exclusive of any other remedy available to any party, but the same
shall be distinct, separate and cumulative and may be exercised from time to
time as often as occasion may arise or as may be deemed expedient.
32
<PAGE> 34
Section 12.15 Intentionally Omitted.
Section 12.16 Time of Essence. Time is of the essence of this
Agreement.
Section 12.17 Remedies Not Exclusive. No remedy conferred by any of
the specific provisions of this Agreement is intended to be exclusive of any
other remedy, and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise. The election of anyone or more
remedies by any party hereto shall not constitute a waiver of the right to
pursue other available remedies.
Section 12.18 Execution. Other than original stock certificates, this
Agreement and any other documents related hereto, including exhibits and/or
certificates, may be executed by facsimile signature page if promptly followed
by delivery of an executed original.
Section 12.19 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
ARTICLE XIII
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth below:
"Affiliate" with respect to any Person shall mean a Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"APPM" shall have the meaning set forth in the preamble to this
Agreement.
"Best knowledge of APPM" and similar phrases shall mean with respect
to APPM, the knowledge of Paul M. Jolas, in his capacity as Senior Vice
President of APPM, and with respect to Ormond, the knowledge of Paul M. Jolas,
in his capacity as Senior Vice President of Ormond, with the obligation to
investigate and review the records and files pertaining to APPM and Ormond, as
may be the case, but without further investigation.
"Best knowledge of Company" and similar phrases shall mean the
knowledge of Paul T. Lubar, M.D., in his capacity as President of the Company,
and Larry W. Busching, in his capacity as General Manager of Company, with the
obligation and duty to investigate and review the records and files pertaining
to Company, but without further investigation.
33
<PAGE> 35
"Best knowledge of Shareholders" and similar phrases shall mean the
knowledge of each respective Shareholder, without further investigation.
"Claim Notice" shall have the meaning set forth in Section 10.3(a).
"Closing" shall mean the closing of the transactions contemplated by
this Agreement as set forth in Section 1.4.
"Closing Date" shall have the meaning set forth in Section 1.4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the common stock of APPM, $.0001 par value.
"Company" shall have the meaning set forth in the preamble to this
Agreement.
"Company Common Stock" shall have the meaning set forth in the
preamble to this Agreement.
"Company Current Balance Sheet" shall mean the unaudited balance sheet
of Company as of June 30, 1998.
"Company Current Financial Statements" shall mean the related
statements of income, stockholders' equity and statements of cash flows of
Company for the period ended June 30, 1998, and Company Current Balance Sheet.
"Company Financial Statements" shall mean, collectively, Company
Annual Financial Statements and Company Current Financial Statements.
"Company Rights" shall mean all arrangements, calls, commitments,
agreements, options, rights to subscribe to, scrips, understandings, warrants,
or other binding obligations of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of Company
Common Stock, or by which Company is or may be bound to issue additional shares
of Company Common Stock or other Company Rights.
"Company Annual Financial Statements" shall mean the unaudited balance
sheet of Company as of December 31, 1997, and the related statements of income,
stockholders' equity and statements of cash flows of Company for the year ended
December 31, 1997.
"Confidential Information" shall mean all trade secrets and other
confidential and/or proprietary information of the particular Person,
including, but not limited to, information derived from reports, processes,
data, know-how, software programs, improvements, inventions, strategies,
compensation structures, reports, investigations, research, work in progress,
codes, marketing and sales programs and plans, financial projections, cost
summaries, formulae, contract analyses, financial information, forecasts,
confidential filings with any state or federal agency, and all other
confidential concepts, methods of doing business, ideas, materials or
information prepared or performed for, by or on behalf of such Person by its
employees, officers, directors, agents, representatives, or consultants.
34
<PAGE> 36
"Controlled Group" shall have the meaning set forth in Section
2.13(g).
"Current Policies" shall have the meaning set forth in Section 2.15.
"Damages" shall have the meaning set forth in Section 10.1.
"Election Period" shall have the meaning set forth in Section 10.3(a).
"Employment Agreements" shall have the meaning set forth in Section
8.1(a).
"Employee Benefit Plans" shall have the meaning set forth in Section
2.13.
"Encumbrance" shall mean any charge, claim, community property
interest, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
"Environmental Laws" shall have the meaning set forth in Section
2.14(e).
"Environmental Liabilities" shall have the meaning set forth in
Section 2.14(e).
"ERISA" shall have the meaning set forth in Section 2.11.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Governmental Programs" shall have the meaning set forth in Section
2.19.
"Hazardous Substances" shall have the meaning set forth in Section
2.14(e).
"Indemnified Party" shall have the meaning set forth in Section
10.3(a).
"Indemnifying Party" shall have the meaning set forth in Section
10.3(a).
"Indemnity Notice" shall have the meaning set forth in Section
10.3(d).
"Insurance Policies" shall have the meaning set forth in Section 2.17.
"IRS" shall mean the Internal Revenue Service.
"Material Adverse Effect" shall mean a material adverse effect on the
assets, properties, business, operations, condition (financial or otherwise),
liabilities, results of operations or prospects of the Person or Persons being
referred to, taken as a whole (including its consolidated subsidiaries, if
any), in consideration of all relevant facts and circumstances.
35
<PAGE> 37
"Medical Waste" shall mean (i) pathological waste, (ii) blood, (iii)
sharps, (iv) wastes from surgery, (v) contaminated disposable equipment and
supplies, (vi) cultures and stocks of infectious agents and associated
biological agents, (vii) contaminated animals, (viii) isolation wastes, (ix)
contaminated equipment, (x) laboratory waste, (xi) any substance, pollutant,
material, or contaminant listed or regulated under any Medical Waste Law, and
(xii) other biological waste and discarded materials contaminated with or
exposed to blood, excretion, or secretions from human beings or animals.
"Medical Waste Laws" shall mean the following, including regulations
promulgated and orders issued thereunder, as in effect on the date hereof and
the Closing Date: (i) the MWTA, (ii) the U.S. Public Vessel Medical Waste
Anti-Dumping Act of 1988, 33 USCA ss.ss. 2501 et seq., (iii) the Marine
Protection, Research, and Sanctuaries Act of 1972, 33 USCA ss.ss. 1401 et seq.,
(iv) The Occupational Safety and Health Act, 29 USCA ss.ss. 651 et seq., (v)
the United States Department of Health and Human Services, National Institute
for Occupational Safety and Health, Infectious Waste Disposal Guidelines,
Publication No. 88-119, and (vi) any other federal, state, regional, county,
municipal, or other local laws, regulations, and ordinances insofar as they are
applicable to any of Company's assets or operations and purport to regulate
Medical Waste or impose requirements related to Medical Waste.
"MWTA" shall mean the Medical Waste Tracking Act of 1988, 42 U.S.C.
ss.ss. 6992, et seq.
"Ordinary course of business" shall mean the usual and customary way
in which the particular entity has conducted its business in the past.
"Ormond" shall have the meaning set forth in the recitals to this
Agreement.
"Payors" shall mean any and all private or governmental Persons,
obligated by contract or by law to render payment to Company in consideration
of the performance of professional medical services including, but not limited
to, Medicare and Medicaid Programs, insurance companies, health maintenance
organizations, preferred provider organizations, independent practice
associations, hospitals, hospital systems, integrated delivery systems and
CHAMPUS.
"Person" shall mean any natural person, corporation, partnership,
joint venture, limited liability company, association, group, organization or
other entity.
"Physician Employee" shall mean each physician employed by Company.
"Private Programs" shall have the meaning set forth in Section 2.19.
"Professional Assets" shall have the meaning set forth in Section 4.10
and described in Schedule 4.10.
"Proprietary Rights" shall have the meaning set forth in Section 2.21.
36
<PAGE> 38
"Purchase Price" shall have the meaning set forth in Section 1.2
hereof.
"Regulated Activity" shall have the meaning set forth in Section
2.14(e).
"Schedules" shall mean the schedules attached hereto as of the date of
this Agreement or otherwise delivered by Company pursuant to the terms hereof,
as such may be amended or supplemented from time to time pursuant to the
provisions hereof.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Service Agreement" shall have the meaning set forth in Section
8.1(l).
"Shareholder" shall have the meaning set forth in the recitals to this
Agreement.
"Shareholders" shall have the meaning set forth in the recitals to
this Agreement.
"Shareholders' Release" shall have the meaning set forth in Section
8.1(m).
"Spin-Off Transaction" shall have the meaning set forth in Section
4.1.
"Tax Returns" shall include all federal, state, local or foreign
income, excise, corporate, franchise, property, sales, use, payroll,
withholding, provider, environmental, duties, value added and other tax returns
(including information returns).
"Third Party Claim" shall have the meaning set forth in Section
10.3(a).
* * * * *
[SIGNATURES ON NEXT PAGE]
37
<PAGE> 39
IN WITNESS WHEREOF, each of the parties hereto has caused its duly
authorized representative to sign, or has signed, this Stock Purchase Agreement
as of the date first written above.
APPM:
AMERICAN PHYSICIAN PARTNERS, INC.
By:
--------------------------------------
Paul M. Jolas, Senior Vice President
COMPANY:
WB&A IMAGING PARTNERS, INC.,
a Maryland corporation
By:
--------------------------------------
President
SHAREHOLDERS:
-----------------------------------------
Vimla Bhooshan, M.D.
-----------------------------------------
John B. DeGrazia, M.D.
-----------------------------------------
Edwin Goldstein, M.D.
-----------------------------------------
Paul T. Lubar, M.D.
-----------------------------------------
Calvin D. Neithamer, M.D.
38
<PAGE> 40
-----------------------------------------
William P. O'Grady, M.D.
-----------------------------------------
Robert A. Olshaker, M.D.
-----------------------------------------
Stanley M. Perl, M.D.
-----------------------------------------
Michael S. Usher, M.D.
-----------------------------------------
Alan J. Kronthal, M.D.
-----------------------------------------
Steven A. Meyers, M.D.
-----------------------------------------
Victor A. Bracey, M.D.
-----------------------------------------
Larry W. Busching
39
<PAGE> 1
EXHIBIT 2.52
================================================================================
ASSET PURCHASE AGREEMENT
dated as of
September 1, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.
(a Delaware corporation),
ORMOND IMAGING PARTNERS, INC.
(a Delaware corporation),
MAGNETIC RESONANCE IMAGING ASSOCIATES LIMITED PARTNERSHIP
(a Maryland limited partnership),
and
PAUL T. LUBAR, STANLEY M. PERL, MICHAEL S. USHER,
JOHN B. DEGRAZIA, LARRY W. BUSCHING,
VIMLA BHOOSHAN, WILLIAM P. O'GRADY,
ROBERT A. OLSHAKER, AND CALVIN D. NEITHAMER
================================================================================
<PAGE> 2
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of
September 1, 1998, is by and among AMERICAN PHYSICIAN PARTNERS, INC., a
Delaware corporation ("APPM"), ORMOND IMAGING PARTNERS, INC., a Delaware
corporation and a wholly-owned subsidiary of APPM ("Buyer"), MAGNETIC
RESONANCE IMAGING ASSOCIATES LIMITED PARTNERSHIP, a Maryland limited
partnership ("Seller"), and Paul T. Lubar, Stanley M. Perl, Michael S. Usher,
John B. DeGrazia, Larry W. Busching, Vimla Bhooshan, William P. O'Grady,
Robert A. Olshaker, and Calvin D. Neithamer (collectively, the "General
Partners").
RECITALS
A. Seller owns and operates one diagnostic imaging center located
at 8001 Branch Avenue, Clinton, Maryland (the "Business").
B. Buyer is a wholly-owned subsidiary of APPM. APPM is engaged
in the business of owning, operating and acquiring the assets of, and managing
the non-medical aspects of, radiology practices and diagnostic imaging centers.
C. Buyer desires (i) to purchase from Seller certain of the
assets and other rights related to the Business which Seller desires to sell to
Buyer (said assets and rights are defined in Section 2.1 as the "Purchased
Assets"), and (ii) to assume certain liabilities of Seller relating thereto as
set forth herein, on the terms and conditions specified in this Agreement.
The General Partners acknowledge that they have received adequate consideration
for entering into this Agreement and performing their obligations under this
Agreement, and that they will be benefited by the transactions contemplated by
this Agreement. The General Partners acknowledge that APPM and Buyer have
relied on the General Partners' participation in this Agreement in connection
with APPM's and Buyer's entering into this Agreement and consummating the
transactions provided for in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the preceding recitals and the
mutual representations, warranties, covenants and agreements set forth herein,
the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
<PAGE> 3
"Affiliate" with respect to any Person shall mean a Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"APPM" shall have the meaning set forth in the preamble to this
Agreement.
"Best knowledge of Seller" and similar phrases shall mean the
knowledge of Paul T. Lubar, M.D., in his capacity as a General Partner of
Seller, and Larry W. Busching, in his capacity as the managing General Partner
of Seller, with the obligation and duty to investigate and review the records
and files pertaining to Seller, but without further investigation.
"Best knowledge of Buyer" and similar phrases shall mean the knowledge
of Paul M. Jolas, in his capacity as senior vice president of Buyer, with the
obligation and duty to investigate and review the records and files pertaining
to Buyer, but without further investigation.
"Best knowledge of General Partners" and similar phrases shall mean
the knowledge of each respective General Partner, without further
investigation.
"Buyer" shall have the meaning set forth in the preamble to this
Agreement.
"Claim Notice" shall have the meaning set forth in Section 14.3(a).
"Closing" shall mean the closing of the transactions contemplated by
this Agreement as set forth in Article IV.
"Closing Date" shall have the meaning set forth in Section 4.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidential Information" shall mean all trade secrets and other
confidential and/or proprietary information of the particular Person,
including, but not limited to, information derived from reports, processes,
data, know-how, software programs, improvements, inventions, strategies,
compensation structures, reports, investigations, research, work in progress,
codes, marketing and sales programs and plans, financial projections, cost
summaries, formulae, contract analyses, financial information, forecasts,
confidential filings with any state or federal agency, and all other
confidential concepts, methods of doing business, ideas, materials or
information prepared or performed for, by or on behalf of such Person by its
employees, officers, directors, agents, representatives, or consultants.
"Controlled Group" shall have the meaning set forth in Section
5.19(g).
"Damages" shall have the meaning set forth in Section 14.1.
"Election Period" shall have the meaning set forth in Section 14.3(a).
2
<PAGE> 4
"Employee Benefit Plans" shall have the meaning set forth in Section
5.19(a).
"Encumbrance" shall mean any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income or exercise of any
other attribute of ownership.
"Environmental Laws" shall have the meaning set forth in Section
5.22(e).
"ERISA" shall have the meaning set forth in Section 5.17.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"General Partners" shall have the meaning set forth in the preamble to
this Agreement.
"Indemnified Party" shall have the meaning set forth in Section
14.3(a).
"Indemnifying Party" shall have the meaning set forth in Section
14.3(a).
"Indemnity Notice" shall have the meaning set forth in Section
14.3(d).
"Insurance Policies" shall have the meaning set forth in Section 5.24.
"IRS" shall mean the Internal Revenue Service.
"Lease Assignments" shall have the meaning set forth in Section
11.1(f).
"Lease Agreements" shall have the meaning set forth in Section 5.20.
"Limited Partners" shall mean all of the limited partners of Seller.
"Material Adverse Effect" shall mean a material adverse effect on the
assets, properties, business, operations, condition (financial or otherwise),
liabilities or results of operations of the Person or Persons being referred
to, taken as a whole, in consideration of all relevant facts and circumstances.
"Medical Waste" shall mean (i) pathological waste, (ii) blood, (iii)
sharps, (iv) wastes from surgery or autopsy, (v) dialysis waste, including
contaminated disposable equipment and supplies, (vi) cultures and stocks of
infectious agents and associated biological agents, (vii) contaminated animals,
(viii) isolation wastes, (ix) contaminated equipment, (x) laboratory waste,
(xi) any substance, pollutant, material, or contaminant listed or regulated
under any Medical Waste Law, and (xii) other biological waste and discarded
materials contaminated with or exposed to blood, excretion, or secretions from
human beings or animals.
3
<PAGE> 5
"Medical Waste Laws" shall mean the following, including regulations
promulgated and orders issued thereunder, as in effect of the date hereof and
the Closing Date: (i) the MWTA, (ii) the U.S. Public Vessel Medical Waste Anti-
Dumping Act of 1988, 33 USCA 2501 et seq., (iii) the Marine Protection,
Research, and Sanctuaries Act of 1972, 33 USCA 1401 et seq., (iv) The
Occupational Safety and Health Act, 29 USCA 651 et seq., (v) the United States
Department of Health and Human Services, National Institute for Occupational
Safety and Health, Infectious Waste Disposal Guidelines, Publication No.
88-119, and (vi) any other federal, state, regional, county, municipal, or
other local laws, regulations, and ordinances insofar as they are applicable to
any Seller's assets or operations and purport to regulate Medical Waste or
impose requirements related to Medical Waste.
"MWTA" shall mean the Medical Waste Tracking Act of 1988, 42 U.S.C.
6992, et seq.
"Ordinary course of business" shall mean the usual and customary way
in which the particular entity has conducted its business in the past.
"Partners" shall mean the General Partners and the Limited Partners.
"Payors" shall mean any and all third-party payors including, but not
limited to, Medicare and Medicaid Programs (as defined in Section 5.28(a)),
insurance companies, health maintenance organizations, preferred provider
organizations, independent practice associations, hospitals, hospital systems,
integrated delivery systems, CHAMPUS, and any and all other private or
governmental entities rendering payment to Seller for professional medical or
technical services.
"Person" shall mean any natural person, corporation, partnership,
joint venture, limited liability company, association, group, organization or
other entity.
"Purchased Assets" shall have the meaning set forth in Section 2.1.
"Regulated Activity" shall have the meaning set forth in Section
5.22(e).
"Schedules" shall mean the schedules attached hereto as of the date
hereof or otherwise delivered by any party hereto pursuant to the terms hereof,
as such may be amended or supplemented from time to time pursuant to the
provisions hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in the preamble to this
Agreement.
"Seller Annual Financial Statements" shall have the meaning set forth
in Section 5.10.
"Seller Current Balance Sheet" shall have the meaning set forth in
Section 5.10.
"Seller Current Financial Statements" shall have the meaning set forth
in Section 5.10.
4
<PAGE> 6
"Seller Financial Statements" shall have the meaning set forth in
Section 5.10.
"Tax Returns" shall include all federal, state, local or foreign
income, excise, corporate, franchise, property, sales, use, payroll,
withholding, provider, environmental, duties, value added and other tax returns
(including information returns).
"Third Party Claim" shall have the meaning set forth in Section
14.3(a).
Section 1.2 Rules Of Interpretation. The definitions set forth
in Section 1.1 shall be equally applicable to both the singular and the plural
forms of the terms therein defined and shall cover both genders.
Unless otherwise indicated "herein," "hereby," "hereunder," "hereof,"
"hereinabove," "hereinafter" and other equivalent words refer to this Agreement
and not solely to the particular Article, Section or subdivision hereof in
which such word is used.
This Agreement occasionally omits the modifying words "all" and "any"
and the articles "the" and "an," but the fact that a modifier or an article is
absent from one statement and appears in another is not intended to affect the
interpretation of either statement.
Unless otherwise indicated, reference herein to an Article number
(e.g., Article IV) or a Section number (e.g., Section 6.2) shall be construed
to be a reference to the designated Article number or Section number of this
Agreement.
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.1 Purchased Assets. Seller hereby sells, assigns,
transfers, conveys and delivers to Buyer, and Buyer hereby purchases, all
right, title and interest of Seller in and to the following assets, rights and
interests used in the operation of the Business, of every kind and description,
wherever located, whether tangible or intangible, excluding the Excluded Assets
(as such term is defined in Section 2.2 below), including, without limitation,
the following assets, rights and interests (collectively, the "Purchased
Assets"):
(a) Leasehold Improvements. All improvements, other
constructions, construction-in-progress and non-landlord owned fixtures
(collectively, the "Improvements") owned by Seller and located on the Real
Property (as defined in Section 2.2 hereof) including, without limitation, the
Improvements as listed in Schedule 2.1(a) hereto;
(b) Personal Property. All tangible personal property
(collectively, the "Personal Property") of every kind and nature (other than
items of tangible personal property that are consumed, disposed of, or held for
sale, or are inventoried in the ordinary course of business), including,
without limitation, all furniture, machinery, owned or licensed computer
systems, and equipment, including, without limitation, the Personal Property
listed in Schedule 2.1(b) hereto;
5
<PAGE> 7
(c) Inventory. All inventories of supplies, drugs, food,
janitorial and office supplies, maintenance and shop supplies, and other
disposables which are existing as of the Closing Date (the "Inventory"). A
list of Inventory as of the date of this Agreement is attached as Schedule
2.1(c) hereto;
(d) Intangible Assets. All intangible property
(collectively, the "Intangible Assets") of every kind and nature, including,
without limitation, the following:
(i) All patents, trademarks, trade names,
business names (including all names associated with specialty programs
or services operated by Seller), service marks, logos, trade secrets,
copyrights, and all applications and registrations therefor that are
owned by Seller, and licenses thereof pursuant to which Seller has any
right to the use or benefit of, or other rights with respect to, any
of the foregoing (collectively, the "Intellectual Property"),
including, without limitation, the items identified in Schedule
2.1(d)(i) hereto;
(ii) All telephone numbers;
(iii) All licenses, permits, certificates,
franchises, registrations, authorizations, filings, consents,
accreditations, approvals and other indicia of authority relating to
the operation of the Business as presently conducted by Seller
(collectively, the "Governmental Licenses and Permits"), which
Governmental Licenses and Permits are listed in Schedule 2.1(d)(iii)
hereto. In the event the sale, transfer, assignment, or conveyance of
any of the Governmental Licenses and Permits is unlawful or is not
permissible under any agreement, or federal, state, or local law,
rule, or regulation, then the terms "sale, transfer or assignment",
for the purposes of this Agreement with respect to any such
Governmental Licenses and Permits, shall be deemed to mean and require
(1) Seller's relinquishment of all of its right, title and interest
in, to and under such Governmental Licenses and Permits as of the
Closing Date to the fullest extent necessary or appropriate to enable
Buyer to acquire such Governmental Licenses and Permits, and (2) the
issuance or grant to Buyer by the appropriate third party or federal,
state, or local governmental authority of all right, title and
interest in, to and under such Governmental Licenses and Permits as of
the Closing Date reasonably equivalent to that relinquished by the
Seller, including, but not limited to, the right, authority, and
approval for Buyer to provide services at the Business from and after
the Closing Date in a reasonably equivalent manner as the Seller prior
to the Closing Date;
(iv) All benefits, proceeds or any other amounts
payable under any policy of insurance maintained by Seller with
respect to destruction of, damage to, or loss of use of any of the
Purchased Assets including, without limitation, the items set forth in
Schedule 2.1(d)(iv);
(v) All deposits or prepayments (the "Deposits")
held by Seller in connection with future services to be rendered by
Seller, by Payors delivered under any payor agreements including,
without limitation, the Deposits set forth in Schedule 2.1(d)(v);
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(vi) Those advance payments, prepayments, prepaid
expenses, deposits and the like (the "Prepaids") which are existing as
of the Closing Date, and which were made by Seller solely with respect
to its operation of the Business (the "Purchased Prepaids") subject to
any applicable prorations as specified in this Agreement, the current
categories and amounts of which are set forth in Schedule 2.1(d)(vi)
hereto;
(vii) Seller's goodwill associated with the
Purchased Assets;
(viii) All interests in joint ventures,
partnerships, corporations and limited liability companies, other than
any such interests or any marketable and investment securities
identified in Schedule 2.2 as Excluded Assets (as defined in Section
2.2) (provided that the failure of Seller to list publicly-traded
securities in such Schedule shall not cause same to be among the
Purchased Assets), including, without limitation, the interests
identified in Schedule 2.1(d)(viii) hereto; and
(ix) To the extent assignable, all warranties,
guarantees and covenants not to compete with respect to the Business
including, without limitation, the arrangements identified in Schedule
2.1(d)(ix) hereto;
(e) Purchased Contracts. All right, title and interest
of Seller in, to and under the leases, contracts and agreements to which Seller
is a party or a beneficiary and which relate to or are necessary for the
Business (collectively, the "Purchased Contracts"). Schedule 2.1(e) hereto
contains a list of all leases, contracts and agreements to which Seller is a
party or a beneficiary, which relate to or are necessary for the Business and
which either (i) involve the payment or receipt by Seller of any form of
services or consideration in any 12-month period in excess of $10,000, or (ii)
which will extend beyond the Closing and that are not terminable or cancelable
upon 60 days' notice;
(f) Books and Records. Seller shall make available to
Buyer and, at the Closing Date, Buyer shall take possession of, all of Seller's
books, records, papers, computer tapes, disks or data and instruments related
to the Business or the Purchased Assets or which are required or necessary in
order for Buyer to conduct the Business from and after the Closing Date
including all operating data and records pertaining to the assets, properties,
business, operations, accounts, financial condition, customers or suppliers of
the Business (collectively, "Books and Records"), including, without
limitation, the following:
(i) subject to any applicable federal and state
law, patient and medical records and all other medical and financial
information regarding patients of the Business;
(ii) patient lists;
(iii) employment and personnel records relating to
retained employees;
(iv) personnel policies and manuals, electronic
data processing materials, books of account, accounting books,
financial records, sales records, sales and payroll tax returns,
customer data, journals and ledgers; and
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(v) all material, documents, and information
relating to the Personal Property and the Lease Agreements, all
property use and operational material, contracts, correspondence, and
governmental material (i.e., licenses, permits, notices, and other
matters with respect to governmental authorities), information and
notices. Seller shall be entitled to retain copies of any of the
Books and Records and shall be responsible for all costs and expenses
relating to such copies, Buyer also agrees to make the Books and
Records available for inspection and copying by Seller, at Seller's
expense, after Closing, during normal business hours and upon
reasonable advance notice in connection with any audit, inquiry, or
litigation to which Seller may be made a party or in connection with
any tax or other governmental filing that Seller is required to make;
(g) Accounts Receivable. Accounts receivable arising on
or subsequent to the Closing Date; and
(h) Residual Assets. All other assets of Seller other
than the Excluded Assets (as such term is defined in Section 2.2 below).
Section 2.2 Excluded Assets. Notwithstanding Section 2.1(a), the
definition of "Purchased Assets" shall exclude all assets, rights and interests
identified on Schedule 2.2 hereto (collectively, the "Excluded Assets"). The
Excluded Assets shall not be transferred by Seller to Buyer. In connection
with the foregoing, Buyer and Seller each confirms and agrees that Seller
presently owns that real property known as and located at 8001 Branch Avenue,
Clinton, Maryland, which, together with all buildings and landlord improvements
thereon and appurtenances thereto, is hereafter referred to as the "Real
Property." The Real Property is used in connection with the Business. On the
Closing Date, Seller shall enter into a lease, in form and substance acceptable
to Seller and Buyer, for the rental of the real property to Buyer, which lease
is intended by Seller to be ultimately assigned by Seller to Duke Associates
Limited Partnership in connection with Seller's intended sale of the real
property to said partnership.
Section 2.3 Subsequent Actions. If, during a reasonable time
following the Closing Date, APPM or Buyer shall consider or be advised that any
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in
Buyer its right, title or interest in, to or under any of the Purchased Assets
or otherwise to carry out the transactions described in this Agreement, Seller
shall, at the sole cost and expense of Buyer, execute and deliver all such
bills of sale, assignments and assurances and shall take and do all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under the Purchased Assets or
otherwise to carry out the transactions described in this Agreement; provided,
however, that the same do not increase Seller's obligations or liabilities
beyond those created by this Agreement.
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ARTICLE III
ASSUMED LIABILITIES
Section 3.1 Assumed Liabilities. As of the Closing, Buyer hereby
agrees to assume, satisfy or perform when due only those liabilities and
obligations of Seller relating to operation of the Business as set forth on
Schedule 3.1 hereto (the "Assumed Liabilities"). Other than the Assumed
Liabilities, Buyer shall not assume, nor shall APPM or Buyer or any of their
respective affiliates or subsidiaries be deemed to have assumed, guaranteed,
agreed to perform or otherwise be bound by, or be responsible or otherwise
liable for, any liability or obligation of any nature of Seller (whether or not
related to the Business), or claims for such liability or obligation, whether
accrued, matured or unmatured, liquidated or unliquidated, fixed or contingent,
known or unknown (the "Unassumed Liabilities"). Specifically, and without
limiting the generality of the foregoing, other than the Assumed Liabilities,
neither APPM nor Buyer nor any of their respective Affiliates or subsidiaries
shall have any liability or obligation with respect to or arising out of: (a)
acts or omissions of Seller, its partners, agents or employees whether prior to
or subsequent to the Closing Date, and whether or not in the ordinary course of
business; (b) liabilities or obligations relating to or secured by any portion
of either the Purchased Assets or the Business prior to the Closing; (c)
employee related liabilities (including accrued wages, vacation,
employee-related insurance or deferred compensation claimed by any person in
connection with his or her employment by, or termination of employment with,
Seller, or payroll taxes payable or liabilities arising under any Employee
Benefit Plan maintained by Seller); (d) liabilities or obligations of Seller,
including those for attorneys' fees, arising out of any litigation or other
proceeding pending as of the Closing Date in connection with the Business or
any claim, whether or not asserted and whether or not liquidated or contingent,
with respect to the Business arising from acts or the failure to take any
action by Seller or any of its partners, agents or employees prior to the
Closing Date; (e) liabilities for any income or other tax, whether disputed or
not, attributable to Seller and/or the Business for any period or transaction
through the Closing; (f) except as set forth on Schedule 3.1, trade payables
which arise prior to the Closing; (g) claims by any Payor or patient with
respect to any matter or billing occurring prior to the Closing and for which
payment is received by Seller prior to the Closing; and (h) any other liability
or obligation of Seller. Buyer shall be responsible for all refunds required
by Payors in the event such refund relates to the accounts receivable purchased
by Buyer (but not to exceed the purchase price, determined on a pro rata basis,
that Buyer paid for the particular accounts receivable required to be
refunded); provided, however, that Seller shall remain responsible for all
other refunds which relate to revenue collected prior to Closing. A list of
all refunds and credits due as of the Closing Date shall be set forth on
Schedule 3.1 hereto and such refunds and credits shall be deemed Unassumed
Liabilities. All employment tax liabilities of Seller shall remain the
Seller's responsibility for collection, remittance and tax filing purposes for
the period through the Closing. Seller shall supply confirmation that all past
and current employment taxes through the Closing have been remitted to the
appropriate agencies in a timely manner.
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ARTICLE IV
PURCHASE PRICE AND CLOSING
Section 4.1 Purchase Price.
(a) Aggregate Purchase Price. The aggregate purchase
price (the "Purchase Price") for the sale, transfer, assignment, conveyance and
delivery of the Purchased Assets from Seller to Buyer shall consist of all of
the consideration set forth on Exhibit A hereto (the "Consideration").
(b) Allocation of Purchase Price. The Purchase Price
shall be allocated by Buyer and Seller in accordance with Schedule 4.1(b)
hereto.
Section 4.2 Closing and Effective Time. The closing of the
transactions contemplated under this Agreement (the "Closing") shall take place
at the offices of Sherman, Meehan, Curtin & Ain, on September 22, 1998,
effective as of September 1, 1998 or on such other date as the parties may
mutually agree in writing.
The transfer of the Purchased Assets by Seller to Buyer and Buyer's
assumption of the Assumed Liabilities shall be deemed effective as of 12:01
a.m. on September 1, 1998 (the "Effective Time"). The obligations and proceeds
from the operations of the Business shall be deemed to be the property of Buyer
from and after the Effective Time, and Buyer and Seller shall take any and all
actions reasonably necessary to carry out the intent of this Section 4.2.
Section 4.3 Closing Deliveries.
(a) Seller. At the Closing, Seller shall execute and
deliver to Buyer: (i) a Bill of Sale substantially in the form attached as
Exhibit B hereto ("Bill of Sale"); (ii) the documents required to be delivered
pursuant to Section 11.1 hereof; and (iii) such other instruments as shall be
reasonably requested by Buyer to vest in Buyer title in and to the Purchased
Assets. Buyer shall have possession of the tangible Purchased Assets and the
Books and Records immediately upon Closing.
(b) Buyer. At the Closing, Buyer shall deliver to
Seller: (i) the cash portion of the Consideration in immediately available
funds; (ii) the shares of APPM common stock constituting a portion of the
Consideration as specified in Exhibit A; (iii) the documents required to be
delivered pursuant to Section 11.2 hereof; and (iv) such other instruments as
shall be reasonably requested by Seller to complete the assumption of the
Assumed Liabilities by Buyer.
Section 4.4 Certain Prorations.
(a) The items set forth on Schedule 4.4(a) shall be
prorated or adjusted between the parties hereto as of the Effective Time.
(b) At Closing, each party shall pay or credit to the
other party all sums required to effectuate the prorations and adjustments
contemplated by the provisions of this Section 4.4. If final figures have not
been calculated on any of the adjustments, prorations or reimbursements as of
the Closing, then the parties hereto shall close this transaction using
estimated adjustments,
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prorations and reimbursements which shall be subject to later readjustment when
such final figures have been calculated. The parties hereto shall seek to
determine the amounts of all prorations, adjustments and reimbursements
required hereunder on or before the Closing, if possible, and no later than six
(6) months following the Closing.
Section 4.5 Inventory. Seller shall cause an inventory to be
taken of the Inventory as near in time as possible to the Closing with the
results extended and adjusted through the Closing Date. Such inventory process
shall be subject to audit.
Section 4.6 Closing Expenses.
(a) Seller shall be responsible for the following
expenses (i) obtaining, filing and recording any and all releases,
satisfactions, UCC termination statements and similar documents required in
order to cause title to the Purchased Assets to be free, clear and unencumbered
except for Permitted Encumbrances (as defined in Section 5.3 hereof); and (ii)
all sales, use, transfer and other taxes, if any, required by or imposed as a
result of the transactions contemplated hereby.
(b) Each party shall be responsible for its own
attorneys', accountants' and other advisory fees associated with the closing of
the transactions contemplated by this Agreement.
Section 4.7 Delivery of Closing Stock to Partners. Seller has
represented to Buyer and APPM that it intends, as soon as practicable after the
Closing to liquidate in accordance with Maryland law, and, in connection with
such liquidation, to distribute the purchase price less any appropriate
payments for partnership liabilities, to the Partners. Therefore, Seller has
requested that the Closing Stock be issued directly to the Partners. Within
three (3) days following the Closing Date, APPM will submit a letter to its
transfer agent requesting that the transfer agent issue to the Partners the
Closing Stock as described in Exhibit A.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER AND GENERAL PARTNERS
As an inducement to APPM and to Buyer to enter into this Agreement and
except as set forth and referenced in the Schedules, Seller and the General
Partners each represent and warrant, jointly and severally, to APPM and to
Buyer as follows:
Section 5.1 Organization and Good Standing; Qualification.
Seller is a limited partnership that has been duly organized and is validly
existing under the laws of the State of Maryland, with all requisite power and
authority (i) to own, operate and lease its assets and properties, (ii) to
carry on its business as currently conducted and as now contemplated, (iii) to
execute and deliver this Agreement, and (iv) to consummate the transactions
contemplated by this Agreement. Seller is not qualified to do business in any
foreign jurisdiction because it is not required to be qualified in any other
jurisdiction.
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Section 5.2 Authorization and Validity. Seller has all requisite
power to enter into this Agreement and all other agreements entered into in
connection with the transactions contemplated hereby, and to consummate the
transactions contemplated hereby. The execution, delivery, and performance by
Seller of this Agreement and the agreements contemplated herein, and the
consummation by Seller of the transactions contemplated hereby and thereby, are
within Seller's powers and have been duly authorized and approved by all
necessary action on the part of Seller's Partners. This Agreement has been
duly executed by Seller, and this Agreement and all other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which Seller is a party, constitute, or upon execution
will constitute, valid and binding agreements of Seller, enforceable against it
in accordance with their respective terms, except as enforceability may be
limited by bankruptcy or other laws affecting the enforcement of creditors'
rights generally, or by general equity principles, or by public policy.
Section 5.3 Title to Purchased Assets.
(a) Schedule 5.3(a) hereto sets forth a true, correct and
complete list of all claims, liabilities, liens, pledges, options, charges,
adverse claims, leases, licenses, rights to use or occupancy, security
interests, restrictions and encumbrances of any kind affecting the Purchased
Assets (collectively, the "Encumbrances").
(b) Seller has good, clear, record and marketable title
to, or valid leasehold interests in, all of the Purchased Assets, free and
clear of all Encumbrances, except as set forth in Schedule 5.3(b) hereto (the
"Permitted Encumbrances"), and, subject to the Permitted Encumbrances, Seller
has full power and right to sell, assign and deliver the Purchased Assets in
accordance with the terms of this Agreement. The delivery to Buyer of the
instruments of transfer of ownership contemplated by this Agreement shall vest
valid and marketable title to the Purchased Assets in the Buyer, free and clear
of all Encumbrances, except for the Permitted Encumbrances. Except for
Excluded Assets, there are no material assets used in the Business which are
not Purchased Assets.
Section 5.4 Condition of Tangible Assets. Except as set forth on
Schedule 5.4 hereto, the tangible Personal Property and any other tangible
Purchased Assets are in reasonable operating condition and are sufficient for
the operation of the Business as presently conducted, and, to the best
knowledge of Seller and the General Partners, are in conformity with all
applicable laws, ordinances, orders, regulations and other requirements
(including, without limitation, applicable occupational safety and health laws
and regulations) relating thereto currently in effect.
Section 5.5 Consents and Approvals. Except as set forth on
Schedule 5.5 hereto or addressed in Section 5.6, no consent, approval or
authorization of, notice to, or declaration, filing or registration with, any
person or entity is required to be made or obtained by Seller in connection
with its execution, delivery and performance of this Agreement and its
consummation of the transactions contemplated hereby.
Section 5.6 Governmental Authorization. Except as expressly set
forth in Schedule 5.6 hereto, and other than consents, filings or notifications
required to be made or obtained by Buyer or APPM, to the best knowledge of
Seller and the General Partners, the execution, delivery and
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performance by Seller of this Agreement and the agreements provided for herein,
and the consummation of the transactions contemplated hereby and thereby by
Seller, require no action by or in respect of, or filing with, any governmental
body, agency, official or authority.
Section 5.7 Continuity of Business Enterprise. Except as set
forth in Schedule 5.7 hereto, and except with respect to the Real Estate as
referenced in Section 2.2 hereof, there has not been any sale, distribution or
spin-off of significant assets of Seller other than in the ordinary course of
business within the two years preceding the date of this Agreement.
Section 5.8 Subsidiaries and Investments. Except as set forth in
Schedule 5.8 hereto, Seller does not own, directly or indirectly, any capital
stock or other equity, ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity (each a "Seller
Subsidiary").
Section 5.9 Absence of Conflicting Agreements or Required
Consents. Subject to approval of this Agreement by the Partners of Seller, the
execution, delivery and performance by Seller of this Agreement and any other
documents contemplated hereby (with or without the giving of notice, the lapse
of time, or both): (i) except as set forth in Schedule 5.5, Schedule 5.6 or
Schedule 5.9 hereto, do not require the consent of any governmental or
regulatory body or authority or any other third party, except for such consents
for which the failure to obtain would not reasonably be expected to result in a
Material Adverse Effect on the Business and the Purchased Assets; (ii) will not
conflict with or result in a violation of any provision of Seller's limited
partnership agreement; (iii) will not conflict with, result in a violation of,
or constitute a default under, any law, rule, ordinance, or regulation, or any
ruling, decree, determination, award, judgment, order or injunction of any
court or governmental instrumentality which is applicable to Seller or by which
Seller or its properties are subject or bound, except for such conflict,
violation or default the occurrence of which would not reasonably be expected
to result in a Material Adverse Effect on the Business and the Purchased
Assets; (iv) except as set forth in Schedule 5.9, will not conflict with,
constitute grounds for termination of, result in a breach of, constitute a
default under, require any notice under, or accelerate or modify, or permit any
person to accelerate or modify, any performance required by the terms of, any
agreement, instrument, license or permit material to this transaction, to which
Seller is a party or by which Seller or any of its properties are subject or
bound, except for such conflict, termination, breach, or default, the
occurrence of which would not reasonably be expected to result in a Material
Adverse Effect on the Business and the Purchased Assets; and (v) will not
create any Encumbrance or restriction upon any of the assets or properties of
Seller.
Section 5.10 Seller Financial Statements. Attached hereto as
Schedule 5.10 are (i) the compiled statements of assets, liabilities, and
partners' capital, income tax basis, of the Company as of December 31, 1997,
and the related statements of revenues, expenses, partners' capital and cash
flows, income tax basis for the year ended December 31, 1997 (collectively,
the "Seller Annual Financial Statements") and (ii) the compiled consolidated
statement of assets, liabilities, partners' capital as of June 30, 1998 (the
"Seller Current Balance Sheet") and the related statements of income, and
statements of cash flows of Seller for the six (6) month period then ended
(collectively, the "Seller Current Financial Statements"). Seller Annual
Financial Statements and Seller Current Financial Statements are sometimes
collectively referred to herein as the "Seller Financial
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Statements." Seller Annual Financial Statements (a) have been prepared in
accordance with the cash method of accounting (except as may be indicated
therein or in the notes thereto), (b) present fairly the financial position of
Seller as of the dates indicated and present fairly the results of Seller's
operations for the periods then ended, and (c) are in accordance with the books
and records of Seller, which have been properly maintained and are complete and
correct in all material respects. Seller Current Financial Statements present
fairly the financial position of Seller as at the dates thereof and the results
of its operations and changes in financial position for the periods then ended,
subject to normal year-end adjustments (the effect of which will not
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on Seller) and lack of footnotes thereto.
Section 5.11 No Undisclosed Liabilities. Except as listed in
Schedule 5.11 hereto, Seller does not have any liabilities or obligations of
any nature, whether known or unknown and whether accrued, absolute, contingent
or otherwise, asserted or unasserted except for liabilities or obligations
reflected or reserved against in Seller's Current Balance Sheet.
Section 5.12 Litigation and Claims. Except as listed in Schedule
5.12 hereto, there are no claims, lawsuits, actions, arbitrations,
administrative or other proceedings, governmental investigations or inquiries
pending or, to the best knowledge of Seller and the General Partners,
threatened, against Seller that could adversely affect the operations, business
condition (financial or otherwise), or results of operations or the prospects
of Seller and which (i) if successful, individually or in the aggregate,
reasonably would be expected to have a Material Adverse Effect on Seller, or
(ii) if successful, reasonably would be expected to materially adversely affect
the ability of Seller to effect the transactions contemplated hereby. There
are no unsatisfied judgments against Seller or any consent decrees to which
Seller is subject. Except as set forth in Schedule 5.12, each of the matters,
if any, set forth in Schedule 5.12 (collectively, the "Litigation") is fully
covered by policies of insurance of Seller as in effect on the date hereof.
Section 5.13 No Violation of Law. Seller has not been, nor shall
be as of the Closing Date (by virtue of any action, omission to act, contract
to which it is a party, or any occurrence or state of facts whatsoever), in
violation of any applicable local, state or federal law, ordinance, regulation,
order, injunction or decree, or any other requirement of any governmental body,
agency, authority or court binding on it, or relating to its properties, assets
or business or its advertising, sales or pricing practices, except for
violations which reasonably, individually or in the aggregate, would not have a
Material Adverse Effect on Seller.
Section 5.14 Contracts and Commitments.
(a) Schedule 5.14 contains a true, accurate and complete
list, and Seller has delivered to Buyer true and complete copies, of each
contract, agreement and other instrument (other than insurance contracts
identified in Schedule 5.24 or Lease Agreements identified in Schedule 5.20),
to which Seller is a party or by which it or any of its properties or assets
are bound including, without limitation, (i) all agreements between Seller, on
the one hand, then in effect, and any Payor, government entity, provider,
hospital, health maintenance organization, other managed care organization or
other third-party provider, on the other hand, relating to the provision of
medical, diagnostic imaging or consulting services, treatments, patient
referrals or other similar activities, (ii)
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all indentures, mortgages, notes, loan or credit agreements and other
agreements and obligations relating to the borrowing of money or to the direct
or indirect guarantee or assumption of obligations of third parties requiring
Seller to make, or setting forth conditions under which Seller would be
required to make, future payments in excess of $10,000 in any fiscal year or
$25,000 in the aggregate, (iii) all agreements for capital improvements or
acquisitions involving an amount of $10,000 in any fiscal year or $25,000 in
the aggregate, (iv) all agreements containing a covenant limiting the freedom
of Seller to compete in any line of business with any person or entity or in
any geographic area, or (v) all written contracts and commitments providing for
future payments by Seller in excess of $10,000 in any fiscal year or $25,000 in
the aggregate and that are not cancelable by providing notice of sixty (60)
days or less. Except as noted in Schedule 5.14, (1) no party to any such
contract, agreement, or other instrument has delivered written notification to
any other party challenging its effectiveness or validity; (2) to the best
knowledge of Seller and the General Partners, there has been no threatened
cancellation thereof; (3) there are no outstanding disputes thereunder; (4)
each is with unrelated third parties and was entered into on an arms-length
basis in the ordinary course of business; and (5) assuming the receipt of the
appropriate consents, each constituting an Assumed Contract, will continue to
be in full force and effect and binding in accordance with their terms after
consummation of the transaction contemplated herein, except as enforceability
may be limited by bankruptcy or other laws affecting the enforcement of
creditor's rights generally, or by general equity principles, or by public
policy. Except as noted in Schedule 5.14, there are no contracts, agreements
or other instruments to which Seller is a party or is bound (other than
physician employment contracts, insurance policies and the lease agreements)
which could, either singularly or in the aggregate, be reasonably expected to
have a Material Adverse Effect on the value to Buyer of the Purchased Assets,
or which could inhibit or prevent Seller from transferring to or vesting in
Buyer good and sufficient title to the Purchased Assets. Notwithstanding the
foregoing, Seller shall not transfer to Buyer any contracts or agreements
relating to the provision of professional medical services or other such
agreements and contracts that Buyer consents to in writing to be retained by
Seller. Except as set forth in Schedule 5.14, no contract with a health care
provider or Payor has been materially amended or terminated within the last
twelve (12) months.
(b) Except as disclosed in Schedule 5.14, (i) Seller has
not received written notice of any plan or intention of any other party to
exercise any right to cancel or terminate such contract, agreement or
instrument, and, to the best knowledge of Seller and the General Partners,
Seller is not aware of any fact(s) that would justify the exercise of such a
right; and (ii) Seller does not currently contemplate, and, to the best
knowledge of Seller and the General Partners, no other Person currently
contemplates, any amendment or change to any such contract, agreement or
instrument.
Section 5.15 No Brokers. Seller has not entered into and will not
enter into any agreement, arrangement or understanding with any Person or firm
which will result in the obligation of Buyer to pay any finder's fee, brokerage
commission or similar payment.
Section 5.16 No Other Agreements to Sell the Assets of the
Business. Seller does not have any legal obligation, absolute or contingent,
to any other individual or entity to sell any of the Purchased Assets (other
than agreements for the sale of Inventory in the ordinary course), or to effect
any sale of the Business or to enter into any agreement with respect thereto.
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Section 5.17 Employee Matters.
(a) Employment Contracts. Except as set forth in
Schedule 5.17 and Schedule 5.19 hereto, Seller is not currently a party to any
employment contract (except for oral employment agreements which are terminable
at will), consulting or collective bargaining contracts, deferred compensation,
pension plan (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended, and all rules and regulations from time to
time promulgated thereunder ("ERISA")), profit sharing, bonus, stock option,
stock purchase or other nonqualified benefit or compensation commitments,
benefit plans, arrangements or plans (whether written or oral), including all
welfare plans (as defined in Section 3(1) of ERISA) of or pertaining to Seller
and any of its present or former employees, or any predecessors in interest.
(b) Employees. As of August 15, 1998, Seller employed a
collective total of three (3) full-time employees. Schedule 5.17 lists each
employee of, or consultant to, Seller who received combined salary, benefits
and bonuses for 1997 in excess of $50,000 or who is expected to receive
combined salary, benefits and bonuses in 1998 in excess of $50,000. Seller is
not delinquent in payment to any of its employees for wages, salaries, bonuses
or other direct compensation for any services performed for it to the date
hereof or amounts required to be reimbursed to such employees.
(c) Severance Arrangements. Except as set forth on
Schedule 5.17, upon termination of employment of any employee, no severance or
other payments will become due, and Seller has no policy, past practice, or
plan of paying severance on termination of employment.
Section 5.18 Labor Relations. Except to the extent set forth in
Schedule 5.18 hereto:
(a) To the best knowledge of Seller and the General
Partners, no executive, key employee or group of employees has any plans to
terminate employment with Seller, except by reason of terminating such
relationship by becoming an employee of Buyer in connection with Buyer's
purchase of the Business pursuant hereto;
(b) There is no unfair labor practice, charge or
complaint or any other employment-related matter against or involving Seller
pending, or, to the best knowledge of Seller and the General Partners,
threatened, before the National Labor Relations Board or any other federal,
state or local agency, authority or court;
(c) There are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including discrimination
based upon sex, age, marital status, race, national origin, the making of
workers' compensation claims, sexual preference, handicap or veteran status)
pending, or, to the best knowledge of Seller and the General Partners,
threatened, before the Equal Employment Opportunity Commission or any other
federal, state or local agency or court against Seller. There have been no
governmental audits of the equal employment opportunity practices of Seller,
and, to the best knowledge of Seller and the General Partners, no basis for any
such audit exists; and
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(d) To the best knowledge of Seller and the General
Partners, there are no inquiries, investigations or monitoring activities of
any licensed, registered, or certified professional personnel employed or
retained by Seller pending or threatened by any state professional board or
agency charged with regulating the professional activities of health care
practitioners.
Section 5.19 Employee Benefit Plans.
(a) Identification. Schedule 5.19 hereto contains a
complete and accurate list and description of all employee benefit plans
(within the meaning of Section 3(3) of ERISA) sponsored by Seller or to which
Seller contributes on behalf of its employees and all employee benefit plans
previously sponsored or contributed to on behalf of its employees within the
three years preceding the date hereof (the "Employee Benefit Plans"). Seller
has provided to Buyer copies of all current plan documents (as they may have
been amended to the date hereof), determination letters, pending determination
letter applications, trust instruments, insurance contracts or policies related
to an Employee Benefit Plan, administrative services contracts, annual reports
for the immediately preceding three (3) years, actuarial valuations, summary
plan descriptions, summaries of material modifications, administrative forms
and other documents that constitute a part of or are incident to the
administration of the Employee Benefit Plans. Except as set forth in Schedule
5.19 and subject to the requirements of ERISA, each of the Employee Benefit
Plans can be terminated or amended at will by Seller without any further
liability or obligation on the part of Seller to make further contributions or
payments in connection therewith following such termination except to the
extent of any benefits accrued through the date of termination which accrued
benefits shall be paid by Seller. Except as set forth in Schedule 5.19, no
unwritten amendment exists with respect to any Employee Benefit Plan.
(b) Administration. Each Employee Benefit Plan has been
administered and maintained in compliance with all applicable laws, rules and
regulations, except where the failure to be in compliance would not,
individually or in the aggregate, result in a Material Adverse Effect.
(c) Examinations. Except as set forth in Schedule 5.19,
neither Seller nor any General Partner has received any written notice that any
Employee Benefit Plan is currently the subject of an audit, investigation,
enforcement action or other similar proceeding conducted by any state or
federal agency or authority.
(d) Prohibited Transactions. No prohibited transactions
(within the meaning of Section 4975 of the Code or Section 406 of ERISA) have
occurred with respect to any Employee Benefit Plan. There has been no breach
of any duty under ERISA or applicable law (including, without limitation, any
health care contractor requirements or any other tax law requirements, or
conditions to favorable tax treatment, applicable to such plan), which would be
reasonably likely to result, directly or indirectly (including through any
obligation of indemnification or contribution), in any taxes, penalties or
other liability to APPM or any of its Affiliates.
(e) Claims and Litigation. Except as set forth in
Schedule 5.19, no pending, or, to the best knowledge of Seller and the General
Partners, threatened, claims, suits or other
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proceedings exist with respect to any Employee Benefit Plan other than normal
benefit claims filed by participants or beneficiaries.
(f) Qualification. Except as set forth on Schedule 5.19,
Seller has received a favorable determination letter or ruling from the IRS for
each of the Employee Benefit Plans intended to be qualified within the meaning
of Section 401(a) or 501(c)(9) of the Code and/or tax-exempt within the meaning
of Section 501(a) of the Code, and, to the best knowledge of Seller and the
General Partners, such Employee Benefit Plan has been continually qualified
under the applicable Section of the Code since the effective date of such
Employee Benefit Plan. No proceedings are pending, or, to the best knowledge
of Seller and the General Partners, have been threatened, that could result in
the revocation of any such favorable determination letter or ruling.
(g) Funding Status. Except as set forth in Schedule
5.19, no accumulated funding deficiency (within the meaning of Section 412 of
the Code), whether waived or unwaived, exists with respect to any Employee
Benefit Plan or any plan sponsored by any member of a controlled group (within
the meaning of Section 412(n)(6)(B) of the Code) in which Seller is a member (a
"Controlled Group"). Neither Seller nor any member of a Controlled Group
maintains or has ever maintained an Employee Benefit Plan subject to Title IV
of ERISA or an Employee Benefit Plan described in Section 501(c)(9) of the
Code.
(h) Excise Taxes. Neither Seller nor any member of a
Controlled Group has any liability to pay excise taxes with respect to any
Employee Benefit Plan under applicable provisions of the Code or ERISA.
(i) Multi-employer Plans. Neither Seller nor any member
of a Controlled Group is or ever has been obligated to contribute to a
multi-employer plan within the meaning of Section 3(37) of ERISA or any other
Employee Benefit Plan which has been subject to Title IV of ERISA or Section
412 of the Code.
(j) PBGC. No facts or circumstances are known to Seller
or the General Partners that would be reasonably likely to result in the
imposition of liability against APPM, Buyer or any of its Affiliates by the
Pension Benefit Guaranty Corporation ("PBGC") as a result of any act or
omission by Seller or any member of a Controlled Group. To the best knowledge
of Seller and the General Partners, no reportable event (within the meaning of
Section 4043 of ERISA), for which the notice requirement has not been waived,
has occurred with respect to any Employee Benefit Plan subject to the
requirements of Title IV of ERISA.
(k) Retirees. Seller has no obligation or commitment to
provide medical, dental or life insurance benefits to or on behalf of any of
its employees who may retire or any of its former employees who have retired
except as may be required pursuant to the continuation of coverage provisions
of Section 4980B of the Code and the applicable provisions of ERISA.
(l) Other Compensation Arrangements. Except as set forth
in Schedule 5.19, Seller is not a party to any compensation or debt arrangement
with any person relating to the provision of health care related services other
than arrangements with Seller or to which Seller is a party.
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Section 5.20 Lease Agreements. Schedule 5.20 hereto contains a
true, accurate and complete list of all the lease agreements and license
agreements to which Seller is a party and pursuant to which Seller leases
(whether as lessor or lessee) or licenses (whether as licensor or licensee) any
real or personal property related to the operation of its business and which
requires payments in excess of $10,000 per year (the "Lease Agreements").
Seller has delivered to Buyer true and complete copies of all of the Lease
Agreements. There is not under any Lease Agreement (i) any existing or claimed
material default by Seller, or event which, with notice or lapse of time, or
both, would constitute a material default by Seller, which, individually or in
the aggregate, may reasonably be expected to result in a Material Adverse
Effect on Seller, or (ii) to the best knowledge of Seller and the General
Partners, any existing material default by any other party under any of the
Lease Agreements or any event which, with notice or lapse of time, or both,
would constitute a material default by any such party. There is no pending,
or, to the best knowledge of Seller and the General Partners, threatened,
reassessment of any property covered by the Lease Agreements. Seller has a
good, clear, valid and enforceable, except as enforceability may be limited by
bankruptcy or other laws affecting the enforcement of creditors' rights
generally, or by general equity principles, or by public policy, leasehold
interest under each of the Lease Agreements. The Lease Agreements are in
compliance with all applicable safe harbor provisions promulgated by the
Department of Health and Human Services in connection with the enforcement of
the federal Fraud and Abuse Statute, 42 CFR Part 1001 and any similar
applicable state law safe harbor or other exemption provisions. Neither Seller
nor, to the best knowledge of Seller and the General Partners, any other party
thereto, has challenged the validity or effectiveness of any Lease Agreement.
Section 5.21 Real and Personal Property.
(a) Except for the Real Property, Seller does not own any
interest in real property.
(b) Except as set forth in Schedule 5.3 hereto and except
for the Real Property excluded in accordance with Section 2.2 hereof, Seller
(i) has good and marketable title to all of its properties and assets (real,
personal and mixed, tangible and intangible) and any rights or interests
therein which it purports to own including, without limitation, all the
property and assets reflected in Seller Financial Statements; and (ii) owns
such rights, interests, assets and property free and clear of all Encumbrances,
title defects or objections (except for taxes not yet due and payable and the
Permitted Encumbrances). Seller Financial Statements reflect all personal
property used in connection with the operation of the Business subject to
disposition in the ordinary course of business and such personal property are
the necessary assets to continue operation of Seller.
Section 5.22 Environmental Matters.
(a) Seller has not, within the five (5) years preceding
the date hereof through the Effective Time, received from any federal, state or
local governmental body, agency, authority or entity, or any other Person, any
written notice, demand, citation, summons, complaint or order or
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any written notice of any penalty, lien or assessment, and, to the best
knowledge of Seller and the General Partners, no investigation or review is
pending by any governmental entity, with respect to any (i) alleged violation
by Seller of any Environmental Law (as defined in subsection (e) below); (ii)
alleged failure by Seller to have any environmental permit, certificate,
license, approval, registration or authorization required pursuant to any
Environmental Law in connection with the conduct of its Business; or (iii)
alleged illegal Regulated Activity (as defined in subsection (e) below) by
Seller.
(b) Seller has not used, transported, disposed of, or
arranged for the disposal of (as those terms are defined in and construed under
the Comprehensive Environmental Response, Compensation and Liability Act), any
Hazardous Substance (as defined herein) in a manner that would be reasonably
likely to give rise to any Environmental Liabilities (as defined in subsection
(e) below) for Seller under any applicable Environmental Law that had, or would
reasonably be likely to have, a Material Adverse Effect on Seller. Seller has
not engaged in any activity, or failed to undertake any activity, which action
or failure to act has given, or would reasonably be likely to give, rise to any
Environmental Liabilities or enforcement action by any federal, state or local
regulatory agency or authority, or has resulted, or would reasonably be likely
to result, in any fine or penalty imposed pursuant to any Environmental Law
that had, or would reasonably be likely to have, a Material Adverse Effect on
Seller. Schedule 5.22 hereto discloses, to the best knowledge of Seller and
the General Partners, any presence of asbestos in or on Seller's owned or
leased premises.
(c) To the best knowledge of Seller and the General
Partners, no soil or water in or under any assets currently or formerly held
for use or sale by Seller is or has been contaminated by any Hazardous
Substance while such assets or premises were owned, leased, operated or
managed, directly or indirectly, by Seller where such contamination had, or
would be reasonably likely to have, a Material Adverse Effect on Seller.
(d) Schedule 5.22 contains a list of all environmental
audits and other similar reports which have been prepared by, for, or, to the
best knowledge of Seller and the General Partners, concerning, Seller, within
the five (5) years preceding the date hereof through the Effective Time, with
respect to any real property now or previously owned or leased by Seller, or
any of its predecessors, true and complete copies of which have been provided
to Buyer.
(e) For the purposes of this Section 5.22, the following
terms have the following meanings:
"Environmental Laws" shall mean any and all domestic, federal,
state and local laws (including case law), regulations, ordinances,
rules, judgments, orders, decrees, codes, injunctions and permits
relating to the environment or to emissions, discharges or releases of
Hazardous Substances into the environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances or the
clean-up or other remediation thereof.
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"Environmental Liabilities" shall mean all liabilities of
Seller, whether contingent or fixed, which (i) have arisen, or would
reasonably be likely to arise, under Environmental Laws and (ii)
relate to actions occurring or conditions existing on or prior to the
date hereof or the Effective Time.
"Hazardous Substances" shall mean any air pollution, toxic,
radioactive, caustic or otherwise hazardous substance regulated by any
Environmental Law, (including but not limited to (i) Medical Waste and
(ii) petroleum, its derivatives, by-products and other hydrocarbons),
and any material constituent elements thereof displaying any of the
foregoing characteristics.
"Regulated Activity" shall mean any generation, treatment,
storage, recycling, transportation, disposal or release of any
Hazardous Substances.
Section 5.23 Filing Reports. All returns, reports, plans and
filings of any kind or nature necessary to be filed by Seller with any
governmental agency or authority have been properly completed and timely filed
in compliance with all applicable requirements, except where failure to so file
would not have a Material Adverse Effect on Seller.
Section 5.24 Insurance Policies. Schedule 5.24 hereto lists and
briefly describes Seller's policies of insurance to which Seller is a party or
under which Seller is or has been covered at any time during the last five (5)
years preceding the date of this Agreement relating to the Business of Seller
(the "Insurance Policies"). All premiums with respect to the Insurance
Policies are currently paid. All Insurance Policies currently maintained by
Seller ("Current Policies"), taken together, (i) are sufficient for compliance
with legal and contractual requirements to which Seller is a party or by which
Seller may be bound, and (ii) shall be maintained in force (including the
payment of all premiums and compliance with their terms) without interruption
up to and including the Closing Date. True, complete and correct copies of all
Current Policies have been provided to Buyer. Except as set forth in Schedule
5.24, Seller has not received any written notice or other written communication
from any issuer of any Current Policy canceling such policy, materially
increasing any deductibles or retained amounts thereunder, or materially
increasing the annual or other premiums payable thereunder, and, to the best
knowledge of Seller and the General Partners, no such cancellation or increase
of deductibles, retainages or premiums is threatened. Except as set forth in
Schedule 5.24, there are no outstanding claims, settlements or premiums owed
against any Insurance Policy, and all required notices have been given, and all
known potential or actual claims under any Insurance Policy have been
presented, in due and timely fashion. Except as set forth in Schedule 5.24,
since January 1, 1993, neither Seller nor any Affiliate thereof has filed a
written application for any professional liability insurance coverage which has
been denied by an insurance agency or carrier. Schedule 5.24 also sets forth a
list of all claims under any Insurance Policy in excess of $10,000 per
occurrence filed by Seller during the immediately preceding three-year period.
Section 5.25 Accounts Receivable; Payors.
(a) Attached hereto as Schedule 5.25(a) is a list and
aging of all accounts receivable of Seller as of August 31, 1998, which list is
complete, true and accurate in all material
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respects. All such accounts receivable arose in the ordinary course of
business and have not been previously written off as bad debts, and, are, to
the extent still uncollected, collectible in the ordinary course of business,
net of reserves for doubtful and uncollectible accounts shown in Seller
Financial Statements or on the accounting records of Seller (which reserves are
adequate and calculated consistent with past practice). Nothing contained
herein shall be deemed a guarantee of collection with respect to the accounts
receivable.
(b) Schedule 5.25(b) hereto sets forth a true, correct
and complete list of the names and addresses of each Payor including, but not
limited to, all private-pay patients as a single Payor, of Seller which
accounted for more than five percent (5%) of the revenues of Seller in the
fiscal year ended December 31, 1997, or which is reasonably expected to account
for more than five percent (5%) of the revenues of Seller for the fiscal year
to end December 31, 1998. Except as set forth in Schedule 5.25(b), Seller has
satisfactory relations with such Payors, and, to the best knowledge of Seller
and the General Partners, none of such Payors has notified Seller that it
intends to discontinue its relationship with Seller or to deny any payments due
from, or any claims for payment submitted to, any such party.
Section 5.26 Accounts Payable; Suppliers.
(a) Attached hereto as Schedule 5.26(a) is a true and
complete (i) list of the accounts payable of Seller as of August 31, 1998, and
(ii) list of each individual indebtedness of $10,000 or more, setting forth the
payee and the amount of indebtedness.
(b) Schedule 5.26(b) sets forth a true, correct and
complete list of the names and addresses of each of the providers/suppliers of
products or services to Seller which accounted for a dollar volume of
purchases paid for by Seller in excess of $10,000 for the fiscal year ended
December 31, 1997, or which is reasonably expected to account for a dollar
volume of purchases paid for by Seller in excess of $10,000 for the fiscal year
to end December 31, 1998.
Section 5.27 Inventory. All items of inventory on Seller Current
Balance Sheet contained in Seller Financial Statements consisted, and all such
items on hand on the date of this Agreement consist, net of all applicable
reserves with respect thereto (calculated consistent with past practice), of
items of a quality and a quantity usable and saleable in the ordinary course of
Seller's Business and conform to generally accepted standards in the industry
of which Seller is a part. The amount of Seller's inventory is reasonably
consistent with Seller's inventory levels over the twelve (12) month period
immediately preceding the Effective Date. The value of the inventories
reflected on Seller Current Balance Sheet contained in Seller Financial
Statements are net of adequate reserves for damaged, excess, and unusable
items. Purchase commitments of Seller for inventory are not materially in
excess of normal requirements, and, to the best knowledge of Seller and the
General Partners, none of such purchase commitments are at prices materially in
excess of prevailing market prices at the time of such purchase commitment.
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Section 5.28 Licenses, Authorization and Provider Programs.
(a) Except as listed in Schedule 5.28(a) hereto, Seller,
and, to the best knowledge of Seller and the General Partners, each licensed
employee or independent contractor of Seller, (i) is the holder of all valid
licenses, approvals, orders, consents, permits, registrations, qualifications
and other rights and authorizations required by law, ordinance, regulation or
ruling of any governmental regulatory authority necessary to operate
its/his/her business, and (ii) is eligible to participate under Titles XVIII
and XIX of the Social Security Act for Maryland, Virginia and Washington, D.C.
(the "Medicare and Medicaid Programs") (Medicare and Medicaid Programs and such
other similar federal, state or local reimbursement or governmental programs
for which Seller is eligible are hereinafter referred to, collectively, as the
"Governmental Programs"), and (iii) has current provider numbers for such
Governmental Programs and with such private non-governmental programs
(including without limitation any private insurance program) under which Seller
is presently receiving payments directly or indirectly from any Payor for
patient care (such non-governmental programs herein referred to as "Private
Programs"). A true, correct and complete list of such licenses, permits and
other authorizations, and provider agreements, is set forth in Schedule
5.28(a), true, complete and correct copies of which have been provided to APPM.
No violation, default, order or deficiency exists with respect to any of the
items listed in Schedule 5.28(a) except for such violations, defaults, orders
or deficiencies which would not be reasonably likely to have a Material Adverse
Effect on Seller, and there is no action pending, or, to the best knowledge of
Seller and the General Partners, threatened, by any state or federal agencies
having jurisdiction over the items listed in Schedule 5.28(a), either to
revoke, withdraw or suspend any material license or to terminate the
participation of Seller in any Governmental Program or Private Program, and, to
the best knowledge of Seller and the General Partners, no event has occurred
which, with or without notice or lapse of time, or both, would constitute
grounds for a violation, order or deficiency with respect to any of the items
listed in Schedule 5.28(a) or to revoke, withdraw or suspend any material
license to operate its Business as is presently being conducted by it. To the
best knowledge of Seller and the General Partners, there has been no decision
not to renew any existing agreement with any provider or Payor relating to
Seller's Business as presently being conducted by it. Except as set forth in
Schedule 5.28(a) or Schedule 5.12, neither Seller nor the Business (i) has had
his/her/its professional license, Drug Enforcement Agency number,
Medicare/Medicaid provider status or staff privileges at any hospital or
diagnostic imaging center suspended, relinquished, terminated or revoked, (ii)
has been reprimanded, sentenced, or disciplined by any licensing board, state
agency, regulatory body or authority, hospital, Payor or specialty board, or
(iii) has had a final judgment or settlement entered against him/her/its in
connection with a malpractice or similar action.
(b) Except as set forth in Schedule 5.28(b), Seller is
not required, and for the 72-month period prior to the Effective Time was not
required, to file any cost reports or other reports with any Governmental
Program or Private Program.
Section 5.29 Inspections and Investigations. Neither the right of
Seller, nor, to the best knowledge of Seller and the General Partners, the
right of any licensed professional or other individual employed or retained by
Seller, to receive reimbursements pursuant to any Governmental Program or
Private Program has been terminated or otherwise materially and adversely
affected as
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a result of any investigation or action whether by any federal or state
governmental regulatory authority or other third party. Except as set forth
and described in Schedule 5.29 hereto, to the best knowledge of Seller and the
General Partners, no licensed professional or other individual affiliated with
the Business has, during the past three (3) years prior to the Effective Time,
had their professional license suspended or revoked by any governmental
regulatory authority or agency, hospital, integrated delivery system, trade
association, professional review organization, accrediting organization or
certifying agency. True, correct and complete copies of all reports,
correspondence, notices and other documents relating to any matter described or
referenced in Schedule 5.29 have been provided to Buyer.
Section 5.30 Proprietary Rights and Information.
(a) Set forth in Schedule 5.30(a) hereto are a complete
and accurate list and summary description of the following: (i) all trademarks
(registered and unregistered), trade names, service marks and other trade
designations, including common law rights, registrations and applications
therefor, currently owned in whole or part, or used by Seller, (ii) all patents
and applications therefor, and inventions and discoveries that may be
patentable, currently owned, in whole or in part, or used by Seller, (iii) all
licenses, royalties, and assignments thereof to which Seller is a party, (iv)
all copyrights (for published and unpublished works) currently owned, in whole
or part, or used by Seller, and (v) other similar agreements relating to the
foregoing to which Seller is a party (including expiration date if applicable)
(collectively, the "Proprietary Rights").
(b) Schedule 5.30(b) contains a complete and accurate
list and summary description of all agreements relating to technology, trade
secrets, know-how or processes that Seller is licensed or authorized to use by
others (other than technology, know-how or processes generally available to
other health care providers) or which it licenses or authorizes others to use;
true, correct and complete copies of which have been provided to Buyer or APPM.
There are no outstanding, and, to the best knowledge of Seller and the General
Partners, no threatened, disputes or disagreements with respect to any such
agreement.
(c) Seller owns or has the legal right to use the
Proprietary Rights without conflicting with, infringing or violating the rights
of any other person. Except as disclosed in Schedule 5.30(c), no consent of
any Person will be required for the use thereof by Buyer or APPM upon
consummation of the transactions contemplated hereby and the Proprietary Rights
are freely transferable. To the best knowledge of Seller and the General
Partners, no claim has been asserted by any person to the ownership of, or for
infringement by Seller of, any Proprietary Right of any other Person, and
Seller is not aware of any valid basis for any such claim. To the best
knowledge of Seller and the General Partners, no proceedings have been
threatened which challenge the Proprietary Rights of Seller. Seller has the
right to use, free and clear of any adverse claims or rights of others, all
trade secrets, customer lists and proprietary information required for the
performance and marketing of all merchandise and services formerly or presently
sold or marketed by Seller.
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Section 5.31 Taxes.
(a) Filing of Tax Returns. Seller has duly and timely
filed (in accordance with any extensions duly granted by the appropriate
governmental agency, if applicable) with the appropriate governmental agencies
all Tax Returns required to be filed by the United States or any state or any
political subdivision thereof or any foreign jurisdiction. All such Tax
Returns are complete and accurate in all material respects and properly reflect
the taxes of Seller for the periods covered thereby.
(b) Payment of Taxes. Except for such items as Seller
may be disputing in good faith by proceedings in compliance with applicable
law, which are described in Schedule 5.31(b) hereto, (i) Seller has paid all
taxes, penalties, assessments and interest that have become due with respect to
any Tax Returns that it has filed ("Taxes"), and has properly accrued on its
books and records in accordance with the cash method of accounting for all of
the same that have not yet become due and payable, and (ii) Seller is not
delinquent in the payment of any tax, assessment or governmental charge.
(c) No Pending Deficiencies, Delinquencies, Assessments
or Audits. Except as set forth in Schedule 5.31(c) hereto, Seller has not
received any notice that any tax deficiency or delinquency has been asserted
against Seller, and, to the best knowledge of Seller and the General Partners,
there is no threat of such assertion. There is no unpaid assessment, proposal
for additional taxes, deficiency, or delinquency in the payment of any of the
taxes of Seller that could reasonably be likely to be asserted by any taxing
authority. There is no taxing authority audit of Seller pending, or to the
best knowledge of Seller and the General Partners, threatened, and the results
of any completed audits are properly reflected in Seller Financial Statements.
Seller has not violated any applicable federal, state, local or foreign tax
law. There are no security interests or liens on any assets of Seller which
have resulted from any failure to pay (or alleged failure to pay) taxes.
(d) No Extension of Limitation Period. Seller has not
granted an extension to any taxing authority of the statute of limitation
period during which any tax liability may be assessed or collected.
(e) All Withholding Requirements Satisfied. All monies
required to be withheld by Seller and paid to governmental agencies for all
income, social security, unemployment insurance, sales, excise, use, and other
taxes have been collected or withheld and paid to the respective governmental
agencies.
(f) Foreign Person. Neither Seller nor any General
Partner is a foreign person, as such term is referred to in Section 1445(f)(3)
of the Code and Treasury Regulations Section 1.1445-2.
(g) Safe Harbor Lease. None of the properties or assets
of Seller constitutes property that Seller, APPM, Buyer or any Affiliate of
APPM, will be required to treat as being owned by another person pursuant to
the "Safe Harbor Lease" provisions of Section 168(f)(8) of the Code prior to
repeal by the Tax Equity and Fiscal Responsibility Act of 1982.
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(h) Tax Exempt Entity. None of the assets or properties
of Seller are subject to a lease to a "tax exempt entity" as such term is
defined in Section 168(h)(2) of the Code.
(i) Collapsible Corporation. Seller has not at any time
consented to have the provisions of Section 341(f)(2) of the Code apply to it.
(j) Boycotts. Seller has not at any time participated in
or cooperated with any international boycott as defined in Section 999 of the
Code.
(k) Parachute Payments. No payment required or
contemplated to be made by Seller will be characterized as an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code.
(l) S Corporation. Seller has not made an election to be
taxed as an "S" corporation under Section 1362(a) of the Code.
(m) Personal Holding Companies. Seller is not or has not
been a personal holding company within the meaning of Section 542 of the Code.
Section 5.32 Related Party Arrangements. Schedule 5.32 hereto
sets forth a description of any interest held, directly or indirectly, by any
General Partner of Seller in any property, real or personal or mixed, tangible
or intangible, used in or pertaining to Seller's Business and any arrangement
or agreement with any such person concerning the provision of goods or services
or other matters pertaining to Seller's Business. There is no commitment to,
and no income reflected in Seller Financial Statements that has been derived
from, an Affiliate, and following the Closing, Seller shall not have any
obligation of any kind or designation to any such Affiliate.
Section 5.33 Banking Relations. Set forth in Schedule 5.33 hereto
is a complete and accurate list of all borrowing and investing arrangements
that Seller has with any bank or other financial institution, indicating with
respect to each relationship, the type of arrangement maintained (such as
checking account, borrowing arrangements, safe deposit box, etc.) and the
Person or Persons authorized in respect thereof.
Section 5.34 Fraud and Abuse and Self Referral. Neither Seller
nor any of the General Partners has engaged, and, to the best knowledge of
Seller, no Persons and entities providing professional services for or on
behalf of Seller have engaged, in any activities which are prohibited under 42
U.S.C. 1320a 7, 7a or 7b, or 42 U.S.C. 1395nn, or (subject to the exceptions or
safe harbor provisions set forth in such legislation) the regulations
promulgated thereunder or pursuant to any similar state or local statutes or
regulations, or which are prohibited by applicable rules of professional
conduct.
Section 5.35 Restrictions on Business Activities. Except as
disclosed in Schedule 5.14 or Schedule 5.35 hereto, there is no material
agreement, judgment, injunction, order or decree binding upon Seller or the
General Partners, or, to the best knowledge of Seller and the General Partners,
key employee of Seller, which has or reasonably could be expected to have a
Material Adverse Effect on the Business.
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Section 5.36 Agreements in Full Force and Effect. Except as
expressly set forth in Seller's Schedules to this Agreement, to the best
knowledge of Seller and the General Partners, all contracts, agreements, plans,
leases, policies and licenses referred to, or required to be referred to, in
Seller's Schedules delivered hereunder are valid and binding, and are in full
force and effect, and are enforceable in accordance with their terms, except to
the extent that the validity or enforceability thereof may be limited by
bankruptcy or other laws affecting the enforcement of creditors' rights
generally, or by general equity principles, or by public policy. To the best
knowledge of Seller and the General Partners, there is no pending or threatened
bankruptcy, insolvency or similar proceeding with respect to any other party to
such agreements, and no event has occurred which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute a material default thereunder by Seller or any other party thereto.
Section 5.37 Statements True and Correct. No representation or
warranty made herein by Seller or any General Partner, nor any statement,
certificate, exhibit or instrument to be furnished by Seller or any General
Partner, to APPM or Buyer pursuant to this Agreement, contains, or will contain
as of the Effective Time, any untrue statement of material fact, or omits, or
will omit as of the Effective Time, to state a material fact necessary to make
the statements contained herein and therein not misleading.
Section 5.38 Schedules. All Schedules required by this Article V
and attached hereto are true, correct and complete in all material respects as
of the date of this Agreement.
Section 5.39 Finders' Fees. No investment banker, broker, finder
or other intermediary has been retained by, or is authorized to act on behalf
of, Seller or any General Partner who is entitled to any fee or commission upon
consummation of the transactions contemplated by this Agreement or referred to
herein.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER AND APPM
Buyer and APPM each represents and warrants to Seller as follows:
Section 6.1 Organization and Good Standing; Qualification. Each of
Buyer and APPM is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware, with all requisite corporate
power and authority to own, operate and lease its assets and properties and to
carry on its business as currently conducted. Each of Buyer and APPM is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except where
such failure to be so qualified or in good standing would not have a Material
Adverse Effect on Buyer or APPM. Copies of the certificate of incorporation
and all amendments thereto of Buyer and APPM and the bylaws of Buyer and APPM,
as amended, and
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copies of the corporate minutes of Buyer and APPM regarding this transaction,
all of which have been or will be made available to Seller for review, are
true, correct and complete as in effect on the date of this Agreement, and
accurately reflect all material proceedings of the stockholders and directors
of Buyer and APPM (and all committees thereof) regarding this transaction.
Section 6.2 Authorization and Validity. Each of Buyer and APPM
has all requisite corporate power to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by Buyer and APPM of this Agreement and the agreements provided for
herein, and the consummation by Buyer and APPM of the transactions contemplated
hereby and thereby, are within Buyer's and APPM's respective corporate powers
and have been duly authorized by all necessary action on the part of Buyer's
and APPM's respective Board of Directors. This Agreement has been duly
executed by Buyer and APPM. This Agreement, and all other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby and thereby to which Buyer and APPM is a party, constitute,
or upon execution will constitute, valid and binding agreements of Buyer and
APPM (as the case may be), enforceable against it in accordance with their
respective terms, except as may be limited by bankruptcy or other laws
affecting creditors' rights generally, or by general equity principles, or by
public policy.
Section 6.3 Consents and Approvals. No consent, approval or
authorization of, notice to, or declaration, filing or registration with, any
governmental entity or any other person or entity is required to be made or
obtained by Buyer or APPM in connection with its respective execution, delivery
and performance of this Agreement and its consummation of the transactions
contemplated hereby.
Section 6.4 Governmental Authorization. Other than consents,
filings or notifications required to be made or obtained by Seller, to the best
knowledge of APPM and Buyer, the execution, delivery and performance by Buyer
and APPM of this Agreement and the agreements provided for herein, and the
consummation of the transactions contemplated hereby and thereby by Buyer and
APPM, require no action by or in respect of, or filing with, any governmental
body, agency, official or authority.
Section 6.5 Absence of Conflicting Agreements or Required
Consents. The execution, delivery and performance of this Agreement by Buyer
and/or APPM and any other documents contemplated hereby (with or without the
giving of notice, the lapse of time, or both): (i) do not require the consent
of any governmental or regulatory body or authority or any other third party
except for such consents for which the failure to obtain would not reasonably
be expected to result in a Material Adverse Effect on Buyer or APPM; (ii) will
not conflict with any provision of Buyer's or APPM's respective certificate of
incorporation or bylaws; (iii) to the best knowledge of APPM and Buyer, will
not conflict with, result in a violation of, or constitute a default under, any
law, ordinance, regulation, ruling, judgment, order or injunction of any court
or governmental instrumentality to which Buyer or APPM is a party or by which
Buyer or APPM or their or its properties are subject or bound; (iv) will not
conflict with, constitute grounds for termination of, result in a breach of,
constitute a default under, require any notice under, or accelerate or permit
the acceleration of any performance required by the terms of, any agreement,
instrument, license or
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permit material to this transaction, to which Buyer or APPM is a party or by
which Buyer or APPM or any of their or its respective properties are subject or
bound except for such conflict, termination, breach or default, the occurrence
of which would not reasonably be expected to result in a Material Adverse
Effect on Buyer or APPM; and (v) will not create any Encumbrance or restriction
upon any of the assets or properties of Buyer or APPM.
Section 6.6 Statements True and Correct. No representation or
warranty made herein by Buyer or APPM, nor any statement, certificate or
instrument to be furnished by Buyer or APPM to Seller pursuant to this
Agreement, contains, or will contain as of the Effective Time, any untrue
statement of material fact, or omits, or will omit as of the Effective Time, to
state a material fact necessary to make the statements contained herein and
therein not misleading.
Section 6.7 Schedules. All Schedules required by this Article VI
and attached hereto are true, correct and complete in all material respects as
of the date of this Agreement.
Section 6.8 Finder's Fees. No investment banker, broker, finder
or other intermediary has been retained by, or is authorized to act on behalf
of, Buyer or APPM, who is entitled to any fee or commission upon consummation
of the transactions contemplated by this Agreement or referred to herein.
Section 6.9 Litigation and Claims. There are no claims,
lawsuits, actions, arbitrations, administrative or other proceedings,
governmental investigations or inquiries pending, or, to the best knowledge of
Buyer and APPM threatened, against Buyer or APPM which could materially
adversely affect the ability of Buyer or APPM to effect the transactions
contemplated hereby.
Section 6.10 APPM Common Stock. The APPM Common Stock issued to
Seller (or its Partners) pursuant hereto, has been validly issued by APPM, is
fully paid and non-assessable, and to APPM's best knowledge, based on
representations made by Seller and/or its Partners to APPM, is exempt from
registration under federal securities laws.
ARTICLE VII
POST-CLOSING COVENANTS OF SELLER
Section 7.1 Lock-up Agreements from Partners. Prior to
distributing the APPM Stock (as defined on Exhibit A) to the Partners, Seller
shall cause each Partner to execute and deliver to APPM a lock-up agreement in
the form attached hereto as Exhibit C.
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ARTICLE VIII
PRE-CLOSING COVENANTS OF APPM AND BUYER
[Intentionally Omitted]
ARTICLE IX
CONDITIONS PRECEDENT OF APPM AND BUYER
[Intentionally Omitted]
ARTICLE X
[Intentionally Omitted]
ARTICLE XI
CLOSING DELIVERIES
Section 11.1 Deliveries of Seller. Seller hereby delivers to
Buyer the following:
(a) a copy of resolutions of Seller authorizing the
execution, delivery and performance of this Agreement and all related documents
and agreements, and the consummation of the transactions contemplated hereby;
(b) [intentionally omitted];
(c) [intentionally omitted];
(d) a certificate, dated within thirty (30) days prior to
the Closing Date, of the Maryland State Department of Assessments and Taxation
for Seller establishing that Seller is in existence, has paid all franchise or
similar taxes, if any, and, if applicable, otherwise is in good standing to
transact business in the state of Maryland;
(e) all authorizations, consents, approvals, permits and
licenses referenced in Section 5.28;
(f) an assignment to Buyer of (i) each lease for personal
property described on Schedule 5.20 (the "Lease Assignments"), (ii) all
contracts described on Schedule 5.14 which can be assigned to Buyer ("Non-Payor
Contract Assignments"), and (iii) all contracts described in Schedule 5.14
which cannot be assigned to Buyer ("Payor Contract Assignments"); and
(g) [intentionally omitted].
Section 11.2 Deliveries of Buyer and APPM. At or prior to the
Closing Date, each of Buyer and APPM shall deliver to Seller the following, all
of which shall be in a form reasonably satisfactory to Seller:
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(a) a copy of resolutions of the Board of Directors of
APPM or Buyer, as applicable, authorizing the execution, delivery and
performance of this Agreement, and all related documents and agreements,
certified by APPM's or Buyer's Secretary as being true and correct copies of
the originals thereof subject to no modifications or amendments;
(b) the Consideration in accordance with Exhibit A
hereto;
(c) [intentionally omitted];
(d) [intentionally omitted];
(e) a certificate of the Secretary of APPM or Buyer, as
may be applicable, certifying as to the incumbency of the officers of Buyer and
APPM who have executed documents delivered at the Closing on behalf of Buyer;
(f) a certificate, dated within ten (10) days prior to
the Closing Date, of the Secretary of State of Delaware establishing that Buyer
and APPM each is in existence, has paid all franchise or similar taxes, if any,
and, if applicable, otherwise is in good standing to transact business in the
state of Delaware;
(g) certificates (or photocopies thereof), dated within
ten (10) days prior to the Closing Date, of the State of Maryland Department of
Assessments and Taxation, to the effect that Buyer is qualified to do business,
and, if applicable, is in good standing as a foreign corporation in such state;
and
(h) the executed Lease Assignments, Non-Payor Contract
Assignments and Payor Contract Assignments.
ARTICLE XII
CERTAIN ADDITIONAL AGREEMENTS OF THE PARTIES
[Intentionally Omitted]
ARTICLE XIII
POST CLOSING MATTERS
Section 13.1 Further Instruments of Transfer. During a reasonable
period following the Closing, at the request of APPM, Seller and the General
Partners shall deliver any further instruments of transfer and take all
reasonable action as may be necessary or appropriate to carry out the purpose
and intent of this Agreement and the Transactions. During a reasonable period
following the Closing, at the request of Seller, APPM and Ormond shall deliver
any further
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instruments of transfer and take all reasonable action as may be necessary or
appropriate to carry out the purpose and intent of this Agreement and the
Transactions.
Section 13.2 Survival of Article XIV. Notwithstanding any other
provision of this Agreement to the contrary, Article XIV of this Agreement
shall survive the Closing.
ARTICLE XIV
REMEDIES
Section 14.1 Indemnification by Seller and the General Partners.
Subject to the terms and conditions of this Article XIV, Seller and the General
Partners shall indemnify, defend and hold APPM and Buyer and their respective
directors, officers, members, managers, employees, agents, attorneys and
Affiliates harmless from and against all losses, claims, obligations, demands,
assessments, penalties, liabilities, costs, damages, reasonable attorneys' fees
and expenses (collectively, "Damages") asserted against or incurred by such
indemnitees arising out of or resulting from:
(a) a breach of any representation or warranty or
covenant of Seller contained herein or in any Schedule or certificate delivered
hereunder;
(b) any violation (or alleged violation) by Seller and/or
any of its past or present, partners, managers, employees, agents, consultants
and Affiliates of state or federal laws governing health care fraud and abuse
(including, but not limited to, fraud and abuse in the Medicare and Medicaid
Programs) occurring on or before the Closing Date, or any overpayment or
obligation (or alleged overpayment or obligation) arising out of or resulting
from claims submitted to any Payor on or before the Closing Date and for which
Seller or the Partners received payment on or before the Effective Date
("Healthcare Fraud"); and
(c) the ownership, possession, use, sale, licensing or
leasing of the Purchased Assets by Seller at or before the Effective Time or
the non-payment (including untimely payment) or non-performance of the
Unassumed Liabilities by Seller.
Section 14.2 Indemnification by APPM and Buyer. Subject to the
terms and conditions of this Article XIV, APPM and Buyer, jointly and
severally, shall indemnify, defend and hold Seller and its partners, managers,
employees, agents, attorneys and Affiliates harmless from and against all
Damages asserted against or incurred by such indemnitees arising out of or
resulting from:
(a) a breach by APPM or Buyer of any representation or
warranty or covenant of APPM or Buyer contained herein or in any Schedule or
certificate delivered hereunder; and
(b) all Assumed Liabilities.
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Section 14.3 Conditions of Indemnification. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement
(an "Indemnified Party") shall promptly (and, in any event, at least ten (10)
days prior to the due date for any responsive pleadings, filings or other
documents) (i) notify the party from whom indemnification is sought (the
"Indemnifying Party") of any third-party claim or claims asserted against the
Indemnified Party ("Third Party Claim") that could give rise to a right of
indemnification under this Agreement, and (ii) transmit to the Indemnifying
Party a written notice ("Claim Notice") describing in reasonable detail the
nature of the Third Party Claim, a copy of all papers served with respect to
such claim (if any), an estimate of the amount of Damages attributable to the
Third Party Claim, and the basis of the Indemnified Party's request for
indemnification under this Agreement. Except as set forth in Section 14.6, the
failure to promptly deliver a Claim Notice shall not relieve the Indemnifying
Party of its obligations to the Indemnified Party with respect to the related
Third Party Claim except to the extent that the resulting delay is materially
prejudicial to the defense of such claim. Any damages ultimately awarded shall
be reduced by the costs incurred as a result of such delay.
Within thirty (30) days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the Indemnified Party
(i) whether the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article XIV with respect to such Third Party
Claim, and (ii) whether the Indemnifying Party desires, at the sole cost and
expense of the Indemnifying Party, to defend the Indemnified Party against such
Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnified
Party within the Election Period that the Indemnifying Party elects to assume
the defense of the Third Party Claim, then the Indemnifying Party shall have
the right to defend, at its sole cost and expense, such Third Party Claim by
all appropriate proceedings, which proceedings shall be prosecuted diligently
by the Indemnifying Party to a final conclusion or settled at the discretion of
the Indemnifying Party in accordance with this Section 14.3(b). The
Indemnifying Party shall have full control of such defense and proceedings,
including any compromise or settlement thereof. The Indemnified Party is
hereby authorized, at the sole cost and expense of the Indemnifying Party (but
only if the Indemnified Party is entitled to indemnification hereunder), to
file, during the Election Period, any motion, answer or other pleadings that
the Indemnified Party reasonably shall deem necessary or appropriate to protect
its interests or those of the Indemnifying Party and not prejudicial to the
Indemnifying Party (it being understood and agreed that if an Indemnified Party
takes any such action that is prejudicial and causes a final adjudication that
is adverse to the Indemnifying Party, the Indemnifying Party shall be relieved
of its obligations hereunder with respect to such Third Party Claim). If
requested by the Indemnifying Party, the Indemnified Party agrees, at the sole
cost and expense of the Indemnifying Party, to cooperate with the Indemnifying
Party and its counsel in contesting any Third Party Claim that the Indemnifying
Party elects to contest, including, without limitation, the making of any
related counterclaim against the person asserting the Third Party Claim or any
cross-complaint against any person. The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this Section 14.3(b) and shall bear its
own costs and expenses with respect to such participation; provided, however,
that if the
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named parties to any such action (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party, and the Indemnified Party has
been advised by counsel that there may be one or more legal defenses available
to it that are different from or additional to those available to the
Indemnifying Party, then the Indemnified Party may employ separate counsel at
the expense of the Indemnifying Party, and upon written notification thereof,
the Indemnifying Party shall not have the right to assume the defense of such
action on behalf of the Indemnified Party; provided further that the
Indemnifying Party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for the Indemnified Party, which firm shall be designated in writing by
the Indemnified Party. Notwithstanding the foregoing, the Indemnifying Party
shall be prohibited from confessing or settling any criminal allegations
brought against the Indemnified Party without the express written consent of
the Indemnified Party.
(c) If the Indemnifying Party fails to notify the
Indemnified Party within the Election Period that the Indemnifying Party elects
to defend the Indemnified Party pursuant to Section 14.3(b), or if the
Indemnifying Party elects to defend the Indemnified Party pursuant to Section
14.3(b) but fails diligently and promptly to prosecute or settle the Third
Party Claim, then the Indemnified Party shall have the right to defend, at the
sole cost and expense of the Indemnifying Party (if the Indemnified Party is
entitled to indemnification hereunder), the Third Party Claim by all
appropriate proceedings, which proceedings shall be promptly and vigorously
prosecuted by the Indemnified Party to a final conclusion or settled. The
Indemnified Party shall have full control of such defense and proceedings,
provided, however, that the Indemnified Party may not enter into, without the
Indemnifying Party's consent, which shall not be unreasonably withheld, any
compromise or settlement of such Third Party Claim. Notwithstanding the
foregoing, if the Indemnifying Party has delivered a written notice to the
Indemnified Party to the effect that the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Article XIV and if such
dispute is resolved in favor of the Indemnifying Party, the Indemnifying Party
shall not be required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this Section or of the Indemnifying Party's participation
therein at the Indemnified Party's request, and the Indemnified Party shall
reimburse the Indemnifying Party in full for all costs and expenses of such
litigation. The Indemnifying Party may participate in, but not control, any
defense or settlement controlled by the Indemnified Party pursuant to this
Section 14.3(c), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation; provided, however, that if the
named parties to any such action (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party, and the Indemnifying Party
has been advised by counsel that there may be one or more legal defenses
available to it that are different from or additional to those available to the
Indemnified Party, then the Indemnifying Party may employ separate counsel and,
upon written notification thereof, the Indemnified Party shall not have the
right to assume the defense of such action on behalf of the Indemnifying Party.
(d) In the event any Indemnified Party should have a
claim against any Indemnifying Party hereunder that does not involve a Third
Party Claim, the Indemnified Party shall transmit to the Indemnifying Party a
written notice (the "Indemnity Notice") describing in reasonable detail the
nature of the claim, an estimate of the amount of damages attributable to such
claim, and
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the basis of the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not notify the Indemnified Party
within sixty (60) days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes such claim, the claim specified by the Indemnified
Party in the Indemnity Notice shall be deemed a liability of the Indemnifying
Party hereunder. If the Indemnifying Party has timely disputed such claim, as
provided above, such dispute shall be resolved by litigation in an appropriate
court of competent jurisdiction if the parties do not reach a settlement of
such dispute within thirty (30) days after notice of a dispute is given.
(e) Payments of all amounts owing by an Indemnifying
Party pursuant to this Article XIV relating to a Third Party Claim shall be
made within thirty (30) days after the latest of (i) the settlement of such
Third Party Claim, (ii) the expiration of the period for appeal of a final
adjudication of such Third Party Claim, or (iii) the expiration of the period
for appeal of a final adjudication of the Indemnifying Party's liability to the
Indemnified Party under this Agreement. Payments of all amounts owing by an
Indemnifying Party pursuant to Section 14.3(d) shall be made within 30 days
after the later of (i) the expiration of the 60-day Indemnity Notice period or
(ii) the expiration of the period for appeal of a final adjudication of the
Indemnifying Party's liability to the Indemnified Party under this Agreement.
(f) The Indemnifying Party shall provide the Indemnified
Party with written notice of any firm offer that is made to settle or
compromise a Third Party Claim against an Indemnified Party. If a firm offer
is made to settle such a claim solely by the payment of money damages and such
offer is contingent only upon the acceptance by the Indemnifying Party, and the
Indemnifying Party notifies the Indemnified Party in writing that the
Indemnifying Party agrees to such settlement, but the Indemnified Party elects
not to accept and agree to it, the Indemnified Party may continue to contest or
defend such Third Party Claim and, in such event, the total maximum liability
of the Indemnifying Party to indemnify or otherwise reimburse the Indemnified
Party hereunder with respect to such a claim shall be limited to and shall not
exceed the amount of such settlement offer, plus reasonable out-of-pocket costs
and reasonable expenses (including reasonable attorneys' fees and
disbursements) to the date of notice that the Indemnifying Party desired to
accept such settlement.
(g) Notwithstanding any provision herein to the contrary,
the obligation of APPM or Buyer on the one hand, or Seller, on the other hand,
to provide indemnification for breach of any representation or warranty or
covenants as provided in Section 14.1(a) or 14.2(a) hereof, shall not take
effect unless and until the Damages asserted against or incurred in the
aggregate and on a collective basis by APPM or Buyer, on the one hand, or
Seller, on the other hand, as a result of such a breach or breaches exceeds
$15,000 (but expressly excluding any such claims involving fraud, intentional
misrepresentation, title to the Purchased Assets, Taxes, Litigation or
Healthcare Fraud).
Section 14.4 Remedies Exclusive. The remedies provided in this
Agreement shall be exclusive of any other rights or remedies available to one
party against the other, either at law or in equity, except that this section
shall not limit any party's right to equitable relief, to the extent and as
appropriate, with respect to fraud, intentional misrepresentations, title to
the Purchased Assets, Taxes, Litigation or Healthcare Fraud.
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Section 14.5 Costs, Expenses and Legal Fees. Whether or not the
transactions contemplated hereby are consummated, each party hereto shall bear
its own costs and expenses (including attorneys' fees), except that each party
hereto agrees to pay the costs and expenses (including reasonable attorneys'
fees and expenses) incurred by the other parties in successfully (a) enforcing
any of the terms of this Agreement or (b) proving that another party breached
any of the terms of this Agreement.
Section 14.6 Tax Benefits; Insurance Proceeds. The total amount
of any indemnity payments owed by one party to another party to this Agreement
shall be reduced by any correlative tax benefit received by the party to be
indemnified or the net proceeds received by the party to be indemnified with
respect to recovery from third parties or insurance proceeds, and such
correlative insurance benefit shall be net of the insurance premium, if any,
that becomes due as a result of such claim.
Section 14.7 Survival.
(a) All of the respective obligations of the parties
contained in this Agreement or in any other document delivered in accordance
with and pursuant to this Agreement, including without limitation all
covenants, agreements, indemnities, representations (other than with respect to
the due authority of a party), and warranties (other than with respect to the
due authority of a party), shall survive Closing for a period of twenty-four
(24) months; provided, however, that the limitation of this clause (a) shall
not apply to claims involving fraud, intentional misrepresentations, title to
the Purchased Assets, Taxes, Litigation or Healthcare Fraud, for which the
period for making such claims shall expire on the date which is six (6) months
after the termination of the applicable statute of limitations relating
thereto.
(b) If, within such twenty-four (24) month period (or
longer period, if applicable), no written notice is given by one party to the
other party of any alleged breach of a covenant, agreement, indemnification,
representation, or warranty of the other party under this Agreement, then all
liability of the other party, except as otherwise provided in this Agreement,
shall terminate. If written notice of any alleged breach of a covenant,
agreement, indemnification, warranty, or obligation is given to the other party
within such twenty-four (24) month period (or longer period, if applicable),
then the liability of the other party shall survive as to the matter(s) in
question in such notice, and the liability of the other party as to all other
matters shall cease.
Section 14.8 Breach by Partner. The parties agree that,
notwithstanding any other provision of this Agreement to the contrary, if and
in the event a right of indemnification under this Agreement arises in favor of
APPM as a result of a breach by a specific Partner of a representation,
warranty, or covenant particular to that Partner, then APPM shall first seek to
enforce its rights of indemnification against, and indemnification from, the
Partner who is in breach, and second, seek to enforce its rights of
indemnification against, and indemnification from, the other Partners.
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ARTICLE XV
TERMINATION
[Intentionally Omitted]
ARTICLE XVI
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
[Intentionally Omitted]
ARTICLE XVII
MISCELLANEOUS
Section 17.1 Amendment; Waivers. This Agreement may be amended,
modified or supplemented only by an instrument in writing executed by all the
parties hereto. Any waiver of any terms and conditions hereof must be in
writing, and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
Section 17.2 Assignment. Neither this Agreement nor any right
created hereby or in any agreement entered into in connection with the
transactions contemplated hereby shall be assignable by any party hereto,
except by APPM to a wholly owned subsidiary of APPM; provided that any such
assignment shall not relieve APPM of its obligations hereunder.
Section 17.3 Parties in Interest; No Third Party Beneficiaries.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto.
Neither this Agreement nor any other agreement contemplated hereby shall be
deemed to confer upon any person not a party hereto or thereto any rights or
remedies hereunder or thereunder.
Section 17.4 Entire Agreement. Except as is expressly provided in
writing, this Agreement and the agreements contemplated hereby constitute the
entire agreement of the parties regarding the subject matter hereof, and
supersede all prior agreements and understandings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof.
Section 17.5 Severability. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision
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as similar in its terms to such illegal, invalid or unenforceable provision as
may be possible and be legal, valid and enforceable.
Section 17.6 Survival of Representations, Warranties and
Covenants. The representations, warranties and covenants contained herein
shall survive the Closing in accordance with the provisions of Section 14.7,
and all statements contained in any certificate, exhibit or other instrument
delivered by or on behalf of Seller, the General Partners, APPM or Buyer
pursuant to this Agreement shall be deemed to have been representations and
warranties by Seller, the General Partners, APPM or Buyer, as may be the case.
Section 17.7 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF MARYLAND.
Section 17.8 Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of
the terms or provisions hereof.
Section 17.9 Gender and Number. When the context requires, the
gender of all words used herein shall include the masculine, feminine and
neuter, and the number of all words shall include the singular and plural.
Section 17.10 Reference to Agreement. Use of the words "herein,"
"hereof," "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.
Section 17.11 Confidentiality; Publicity and Disclosures. Each
party shall keep this Agreement and its terms confidential, and shall make no
press release or public disclosure, either written or oral, regarding the
transactions contemplated by this Agreement without the prior knowledge and
consent of the other parties hereto except (a) to authorized representatives of
said party and (b) to counsel, other advisers and immediate family members to
said party provided that such advisers and immediate family members (other than
counsel) agree to the confidentiality provisions of this Section 17.11, unless
(i) such information becomes available to or known by the public generally
through no fault of APPM, Buyer, Seller or the Partners, as the case may be,
(ii) disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information pursuant
to this clause (ii) APPM, Buyer, Seller or the Partners, as the case may be,
shall, if possible, give prior written notice thereof to the other parties and
provide the other parties with the opportunity to contest such disclosure,
(iii) the disclosing party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party, or
(iv) the disclosing party is the sole and exclusive owner of such confidential
information as a result of the transactions hereunder; provided that the
foregoing shall not prohibit any disclosure by press release, filing or
otherwise that APPM has determined in its good faith judgment to be required by
federal securities laws or the rules of the Securities and Exchange Commission
or the National Association of Securities Dealers.
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<PAGE> 40
Section 17.12 Notice. Whenever this Agreement requires or permits
any notice, request, or demand from one party to another, the notice, request
or demand must be in writing to be effective and shall be deemed to be
delivered and received (i) if personally delivered, when actually received by
the party to whom notice is sent, or (ii) if delivered by mail (whether
actually received or not), at the close of business on the third business day
next following the day when placed in the mail, postage prepaid, certified or
registered, or (iii) if delivered by nationally- recognized overnight courier,
at the close of the next business day following delivery to said overnight
courier, addressed to the appropriate party or parties, at the address of such
party set forth below (or at such other address as such party may designate by
written notice to all other parties in accordance herewith):
If to APPM and Buyer: American Physician Partners, Inc.
3600 Chase Tower
2200 Ross Avenue
Dallas, Texas 75201
Attn: Mark L. Wagar, President
Paul M. Jolas, General Counsel
with a copy to: Haynes and Boone, L.L.P.
901 Main Street, Suite 3100
Dallas, Texas 75202
Attn: Kenneth K. Bezozo, Esq.
If to Seller Magnetic Resonance Imaging Associates
or any General Partner: Limited Partnership
1020 Duke Street
Alexandria, Virginia 22314-3512
Attn: Paul T. Lubar, M.D.
with a copy to: Sherman, Meehan, Curtin & Ain
1900 M Street, NW
Suite 600
Washington, DC 20036
Attn: Sam H. Roberson, Esq.
Section 17.13 No Waiver; Remedies. No party hereto shall by any
act (except by written instrument pursuant to Section 17.1 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default in or breach of any of the terms
and conditions hereof. No failure to exercise, nor any delay in exercising, on
the part of any party hereto, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. No remedy set forth in
this Agreement or otherwise conferred upon or reserved to any party shall be
considered exclusive of any other remedy available to any party, but the same
shall be distinct, separate and cumulative and may be exercised from time to
time as often as occasion may arise or as may be deemed expedient.
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<PAGE> 41
Section 17.14 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
Section 17.15 Defined Terms. Terms used in the attached Exhibits
and the Schedules attached hereto with their initial letter capitalized and not
otherwise defined therein shall have the meanings as assigned to such terms in
this Agreement.
Section 17.16 Schedules and Exhibits. The Schedules and Exhibits
attached to this Agreement are by this reference incorporated herein and made a
part hereof.
* * * * *
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<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
APPM:
AMERICAN PHYSICIAN PARTNERS, INC.
By:
---------------------------------------
Paul M. Jolas, Senior Vice President
BUYER:
ORMOND IMAGING PARTNERS, INC.
By:
---------------------------------------
Paul M. Jolas, Senior Vice President
SELLER:
MAGNETIC RESONANCE IMAGING
ASSOCIATES LIMITED PARTNERSHIP
By:
---------------------------------------
Name:
----------------------------------
Its: Managing General Partner
GENERAL PARTNERS:
---------------------------------------------
Paul T. Lubar
---------------------------------------------
Stanley M. Perl
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<PAGE> 43
---------------------------------------------
Michael S. Usher
---------------------------------------------
John B. DeGrazia
---------------------------------------------
Larry W. Busching
---------------------------------------------
Vimla Bhooshan
---------------------------------------------
William P. O'Grady
---------------------------------------------
Robert A. Olshaker
---------------------------------------------
Calvin D. Neithamer
42
<PAGE> 1
EXHIBIT 2.53
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
dated as of
September 1, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.
(a Delaware corporation),
ORMOND IMAGING PARTNERS, INC.
(a Delaware corporation),
DUKE ASSOCIATES LIMITED PARTNERSHIP
(a Virginia limited partnership),
and
PAUL T. LUBAR, STANLEY M. PERL, MICHAEL S. USHER,
JOHN B. DEGRAZIA, LARRY W. BUSCHING,
VIMLA BHOOSHAN, WILLIAM P. O'GRADY, EDWIN GOLDSTEIN,
ROBERT A. OLSHAKER, CALVIN D. NEITHAMER AND ALAN J. KRONTHAL
- --------------------------------------------------------------------------------
<PAGE> 2
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of September
1, 1998, is by and among AMERICAN PHYSICIAN PARTNERS, INC., a Delaware
corporation ("APPM"), ORMOND IMAGING PARTNERS, INC., a Delaware corporation and
a wholly-owned subsidiary of APPM ("Buyer"), DUKE ASSOCIATES LIMITED
PARTNERSHIP, a Virginia limited partnership ("Seller"), and Paul T. Lubar,
Stanley M. Perl, Michael S. Usher, John B. DeGrazia, Larry W. Busching, Vimla
Bhooshan, William P. O'Grady, Edwin Goldstein, Robert A. Olshaker, Calvin D.
Neithamer and Alan J. Kronthal (collectively, the "Partners").
RECITALS
A. Seller owns and operates a business that provides, among other
things, billing and management services for radiology groups (the "Business").
B. Buyer is a wholly-owned subsidiary of APPM. APPM is engaged in
the business of owning, operating and acquiring the assets of, and managing the
non-medical aspects of, radiology practices and diagnostic imaging centers.
C. Buyer desires (i) to purchase from Seller certain of the assets
and other rights related to the Business which Seller desires to sell to Buyer
(said assets and rights are defined in Section 2.1 as the "Purchased Assets"),
and (ii) to assume certain liabilities of Seller relating thereto as set forth
herein, on the terms and conditions specified in this Agreement.
The Partners acknowledge that they have received adequate consideration for
entering into this Agreement and performing their obligations under this
Agreement, and that they will be benefited by the transactions contemplated by
this Agreement. The Partners acknowledge that APPM and Buyer have relied on the
Partners' participation in this Agreement in connection with APPM's and Buyer's
entering into this Agreement and consummating the transactions provided for in
this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the preceding recitals and the
mutual representations, warranties, covenants and agreements set forth herein,
the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
"Affiliate" with respect to any Person shall mean a Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"APPM" shall have the meaning set forth in the preamble to this
Agreement.
<PAGE> 3
"Best knowledge of Seller" and similar phrases shall mean the knowledge
of Larry W. Busching in his capacity as a General Partner of Seller, with the
obligation and duty to investigate and review the records and files pertaining
to Seller, but without further investigation.
"Best knowledge of Buyer" and similar phrases shall mean the knowledge
of Paul M. Jolas, in his capacity as senior vice president of Buyer, with the
obligation and duty to investigate and review the records and files pertaining
to Buyer, but without further investigation.
"Best knowledge of Partners" and similar phrases shall mean the
knowledge of each respective Partner, without further investigation.
"Buyer" shall have the meaning set forth in the preamble to this
Agreement.
"Claim Notice" shall have the meaning set forth in Section 14.3(a).
"Closing" shall mean the closing of the transactions contemplated by
this Agreement as set forth in Article IV.
"Closing Date" shall have the meaning set forth in Section 4.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidential Information" shall mean all trade secrets and other
confidential and/or proprietary information of the particular Person, including,
but not limited to, information derived from reports, processes, data, know-how,
software programs, improvements, inventions, strategies, compensation
structures, reports, investigations, research, work in progress, codes,
marketing and sales programs and plans, financial projections, cost summaries,
formulae, contract analyses, financial information, forecasts, confidential
filings with any state or federal agency, and all other confidential concepts,
methods of doing business, ideas, materials or information prepared or performed
for, by or on behalf of such Person by its employees, officers, directors,
agents, representatives, or consultants.
"Controlled Group" shall have the meaning set forth in Section 5.19(g).
"Damages" shall have the meaning set forth in Section 14.1.
"Election Period" shall have the meaning set forth in Section 14.3(a).
"Employee Benefit Plans" shall have the meaning set forth in Section
5.19(a).
"Encumbrance" shall mean any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income or exercise of any other
attribute of ownership.
"Environmental Laws" shall have the meaning set forth in Section
5.22(e).
"ERISA" shall have the meaning set forth in Section 5.17.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Assets" shall have the meaning set forth in Section 2.2.
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<PAGE> 4
"General Partner" shall have the meaning set forth in the preamble to
this Agreement.
"Indemnified Party" shall have the meaning set forth in Section
14.3(a).
"Indemnifying Party" shall have the meaning set forth in Section
14.3(a).
"Indemnity Notice" shall have the meaning set forth in Section 14.3(d).
"Insurance Policies" shall have the meaning set forth in Section 5.24.
"IRS" shall mean the Internal Revenue Service.
"Lease Assignments" shall have the meaning set forth in Section
11.1(f).
"Lease Agreements" shall have the meaning set forth in Section 5.20.
"Limited Partners" shall mean all of the limited partners of Seller.
"Material Adverse Effect" shall mean a material adverse effect on the
assets, properties, business, operations, condition (financial or otherwise),
liabilities or results of operations of the Person or Persons being referred to,
taken as a whole, in consideration of all relevant facts and circumstances.
"Medical Waste" shall mean (i) pathological waste, (ii) blood, (iii)
sharps, (iv) wastes from surgery or autopsy, (v) dialysis waste, including
contaminated disposable equipment and supplies, (vi) cultures and stocks of
infectious agents and associated biological agents, (vii) contaminated animals,
(viii) isolation wastes, (ix) contaminated equipment, (x) laboratory waste, (xi)
any substance, pollutant, material, or contaminant listed or regulated under any
Medical Waste Law, and (xii) other biological waste and discarded materials
contaminated with or exposed to blood, excretion, or secretions from human
beings or animals.
"Medical Waste Laws" shall mean the following, including regulations
promulgated and orders issued thereunder, as in effect of the date hereof and
the Closing Date: (i) the MWTA, (ii) the U.S. Public Vessel Medical Waste
Anti-Dumping Act of 1988, 33 USCA 2501 et seq., (iii) the Marine Protection,
Research, and Sanctuaries Act of 1972, 33 USCA 1401 et seq., (iv) The
Occupational Safety and Health Act, 29 USCA 651 et seq., (v) the United States
Department of Health and Human Services, National Institute for Occupational
Safety and Health, Infectious Waste Disposal Guidelines, Publication No. 88-119,
and (vi) any other federal, state, regional, county, municipal, or other local
laws, regulations, and ordinances insofar as they are applicable to any Seller's
assets or operations and purport to regulate Medical Waste or impose
requirements related to Medical Waste.
"MWTA" shall mean the Medical Waste Tracking Act of 1988, 42 U.S.C.
6992, et seq.
"Ordinary course of business" shall mean the usual and customary way in
which the particular entity has conducted its business in the past.
"Partners" shall mean the General Partner and the Limited Partners.
"Payors" shall mean any and all third-party payors including, but not
limited to, Medicare and Medicaid Programs (as defined in Section 5.28(a)),
insurance companies, health maintenance organizations, preferred provider
organizations, independent practice associations, hospitals, hospital systems,
integrated
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<PAGE> 5
delivery systems, CHAMPUS, and any and all other private or governmental
entities rendering payment to Seller for professional medical or technical
services.
"Person" shall mean any natural person, corporation, partnership, joint
venture, limited liability company, association, group, organization or other
entity.
"Purchased Assets" shall have the meaning set forth in Section 2.1.
"Regulated Activity" shall have the meaning set forth in Section
5.22(e).
"Schedules" shall mean the schedules attached hereto as of the date
hereof or otherwise delivered by any party hereto pursuant to the terms hereof,
as such may be amended or supplemented from time to time pursuant to the
provisions hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in the preamble to this
Agreement.
"Seller Annual Financial Statements" shall have the meaning set forth
in Section 5.10.
"Seller Current Balance Sheet" shall have the meaning set forth in
Section 5.10.
"Seller Current Financial Statements" shall have the meaning set forth
in Section 5.10.
"Seller Financial Statements" shall have the meaning set forth in
Section 5.10.
"Tax Returns" shall include all federal, state, local or foreign
income, excise, corporate, franchise, property, sales, use, payroll,
withholding, provider, environmental, duties, value added and other tax returns
(including information returns).
"Third Party Claim" shall have the meaning set forth in Section
14.3(a).
Section 1.2 Rules Of Interpretation. The definitions set forth in
Section 1.1 shall be equally applicable to both the singular and the plural
forms of the terms therein defined and shall cover both genders.
Unless otherwise indicated "herein," "hereby," "hereunder," "hereof,"
"hereinabove," "hereinafter" and other equivalent words refer to this Agreement
and not solely to the particular Article, Section or subdivision hereof in which
such word is used.
This Agreement occasionally omits the modifying words "all" and "any"
and the articles "the" and "an," but the fact that a modifier or an article is
absent from one statement and appears in another is not intended to affect the
interpretation of either statement.
Unless otherwise indicated, reference herein to an Article number
(e.g., Article IV) or a Section number (e.g., Section 6.2) shall be construed to
be a reference to the designated Article number or Section number of this
Agreement.
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<PAGE> 6
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.1 Purchased Assets. Seller hereby sells, assigns,
transfers, conveys and delivers to Buyer, and Buyer hereby purchases, all right,
title and interest of Seller in and to the following assets, rights and
interests used in the operation of the Business, of every kind and description,
wherever located, whether tangible or intangible, excluding the Excluded Assets
(as such term is defined in Section 2.2 below), including, without limitation,
the following assets, rights and interests (collectively, the "Purchased
Assets"):
(a) Leasehold Improvements. All improvements, other
constructions, construction-in-progress and non-landlord owned fixtures
(collectively, the "Improvements") owned by Seller and located on the Real
Property (as defined in Section 2.2 hereof) including, without limitation, the
Improvements as listed in Schedule 2.1(a) hereto;
(b) Personal Property. All tangible personal property
(collectively, the "Personal Property") of every kind and nature (other than
items of tangible personal property that are consumed, disposed of, or held for
sale, or are inventoried in the ordinary course of business), including, without
limitation, all furniture, machinery, owned or licensed computer systems, and
equipment, including, without limitation, the Personal Property listed in
Schedule 2.1(b) hereto;
(c) Inventory. All inventories of supplies, drugs, food,
janitorial and office supplies, maintenance and shop supplies, and other
disposables which are existing as of the Closing Date (the "Inventory"). A list
of Inventory as of the date of this Agreement is attached as Schedule 2.1(c)
hereto;
(d) Intangible Assets. All intangible property
(collectively, the "Intangible Assets") of every kind and nature, including,
without limitation, the following:
(i) All patents, trademarks, trade names, business
names (including all names associated with specialty programs or
services operated by Seller), service marks, logos, trade secrets,
copyrights, and all applications and registrations therefor that are
owned by Seller, and licenses thereof pursuant to which Seller has any
right to the use or benefit of, or other rights with respect to, any of
the foregoing (collectively, the "Intellectual Property"), including,
without limitation, the items identified in Schedule 2.1(d)(i) hereto;
(ii) All telephone numbers;
(iii) All licenses, permits, certificates,
franchises, registrations, authorizations, filings, consents,
accreditations, approvals and other indicia of authority relating to
the operation of the Business as presently conducted by Seller
(collectively, the "Governmental Licenses and Permits"), which
Governmental Licenses and Permits are listed in Schedule 2.1(d)(iii)
hereto. In the event the sale, transfer, assignment, or conveyance of
any of the Governmental Licenses and Permits is unlawful or is not
permissible under any agreement, or federal, state, or local law, rule,
or regulation, then the terms "sale, transfer or assignment", for the
purposes of this Agreement with respect to any such Governmental
Licenses and Permits, shall be deemed to mean and require (1) Seller's
relinquishment of all of its right, title and interest in, to and under
such Governmental Licenses and Permits as of the Closing Date to the
fullest extent necessary or appropriate to enable Buyer to acquire such
Governmental Licenses and Permits, and (2) the issuance or grant to
Buyer by the appropriate third party or federal, state, or local
governmental authority of all right, title and interest in, to and
under such Governmental Licenses and Permits as of the Closing Date
reasonably
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<PAGE> 7
equivalent to that relinquished by the Seller, including, but not
limited to, the right, authority, and approval for Buyer to provide
services at the Business from and after the Closing Date in a
reasonably equivalent manner as the Seller prior to the Closing Date;
(iv) All benefits, proceeds or any other amounts
payable under any policy of insurance maintained by Seller with respect
to destruction of, damage to, or loss of use of any of the Purchased
Assets including, without limitation, the items set forth in Schedule
2.1(d)(iv);
(v) All deposits or prepayments (the "Deposits")
held by Seller in connection with future services to be rendered by
Seller, delivered by Payors under any payor agreements including,
without limitation, the Deposits set forth in Schedule 2.1(d)(v);
(vi) Those advance payments, prepayments, prepaid
expenses, deposits and the like (the "Prepaids") which are existing as
of the Closing Date, and which were made by Seller solely with respect
to its operation of the Business (the "Purchased Prepaids") subject to
any applicable prorations as specified in this Agreement, the current
categories and amounts of which are set forth in Schedule 2.1(d)(vi)
hereto;
(vii) Seller's goodwill associated with the Purchased
Assets;
(viii) All interests in joint ventures, partnerships,
corporations and limited liability companies, other than any such
interests or any marketable and investment securities identified in
Schedule 2.2 as Excluded Assets (as defined in Section 2.2) (provided
that the failure of Seller to list publicly-traded securities in such
Schedule shall not cause same to be among the Purchased Assets),
including, without limitation, the interests identified in Schedule
2.1(d)(viii) hereto; and
(ix) To the extent assignable, all warranties,
guarantees and covenants not to compete with respect to the Business
including, without limitation, the arrangements identified in Schedule
2.1(d)(ix) hereto;
(e) Purchased Contracts. All right, title and interest of
Seller in, to and under the leases, contracts and agreements to which Seller is
a party or a beneficiary and which relate to or are necessary for the Business
(collectively, the "Purchased Contracts"). Schedule 2.1(e) hereto contains a
list of all leases, contracts and agreements to which Seller is a party or a
beneficiary, which relate to or are necessary for the Business and which either
(i) involve the payment or receipt by Seller of any form of services or
consideration in any 12-month period in excess of $10,000, or (ii) which will
extend beyond the Closing and that are not terminable or cancelable upon 60
days' notice;
(f) Books and Records. Seller shall make available to Buyer
and, at the Closing Date, Buyer shall take possession of, all of Seller's books,
records, papers, computer tapes, disks or data and instruments related to the
Business or the Purchased Assets or which are required or necessary in order for
Buyer to conduct the Business from and after the Closing Date including all
operating data and records pertaining to the assets, properties, business,
operations, accounts, financial condition, customers or suppliers of the
Business (collectively, "Books and Records"), including, without limitation, the
following:
(i) subject to any applicable federal and state
law, patient and medical records and all other medical and financial
information regarding patients of the Business;
(ii) patient lists;
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<PAGE> 8
(iii) employment and personnel records relating to
retained employees;
(iv) personnel policies and manuals, electronic data
processing materials, books of account, accounting books, financial
records, sales records, sales and payroll tax returns, customer data,
journals and ledgers; and
(v) all material, documents, and information
relating to the Personal Property and the Lease Agreements, all
property use and operational material, contracts, correspondence, and
governmental material (i.e., licenses, permits, notices, and other
matters with respect to governmental authorities), information and
notices. Seller shall be entitled to retain copies of any of the Books
and Records and shall be responsible for all costs and expenses
relating to such copies, Buyer also agrees to make the Books and
Records available for inspection and copying by Seller, at Seller's
expense, after Closing, during normal business hours and upon
reasonable advance notice in connection with any audit, inquiry, or
litigation to which Seller may be made a party or in connection with
any tax or other governmental filing that Seller is required to make;
(g) Accounts Receivable. Accounts receivable arising on or
subsequent to the Closing Date; and
(h) Residual Assets. All other assets of Seller other than
the Excluded Assets (as such term is defined in Section 2.2 below).
Section 2.2 Excluded Assets. Notwithstanding Section 2.1(a), the
definition of "Purchased Assets" shall exclude all assets, rights and interests
identified on Schedule 2.2 hereto (collectively, the "Excluded Assets"). The
Excluded Assets shall not be transferred by Seller to Buyer. In connection with
the foregoing, Buyer and Seller each confirms and agrees that Seller presently
owns that real property known as and located at 1020 Duke Street, Alexandria,
Virginia and Units 101, 102 and 105, 2616 Sherwood Hall Lane, Alexandria,
Virginia, which, together with all buildings and landlord improvements thereon
and appurtenances thereto, is hereafter referred to as the "Real Property." The
Real Property is used in connection with the Business. On the Closing Date,
Seller shall enter into a lease, in form and substance acceptable to Seller and
Buyer, for the rental of the real property to Buyer.
Section 2.3 Subsequent Actions. If, during a reasonable time
following the Closing Date, APPM or Buyer shall consider or be advised that any
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in
Buyer its right, title or interest in, to or under any of the Purchased Assets
or otherwise to carry out the transactions described in this Agreement, Seller
shall, at the sole cost and expense of Buyer, execute and deliver all such bills
of sale, assignments and assurances and shall take and do all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under the Purchased Assets or otherwise
to carry out the transactions described in this Agreement; provided, however,
that the same do not increase Seller's obligations or liabilities beyond those
created by this Agreement.
ARTICLE III
ASSUMED LIABILITIES
Section 3.1 Assumed Liabilities. As of the Closing, Buyer hereby
agrees to assume, satisfy or perform when due only those liabilities and
obligations of Seller relating to operation of the Business as set forth on
Schedule 3.1 hereto (the "Assumed Liabilities"). Other than the Assumed
Liabilities, Buyer shall
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<PAGE> 9
not assume, nor shall APPM or Buyer or any of their respective affiliates or
subsidiaries be deemed to have assumed, guaranteed, agreed to perform or
otherwise be bound by, or be responsible or otherwise liable for, any liability
or obligation of any nature of Seller (whether or not related to the Business),
or claims for such liability or obligation, whether accrued, matured or
unmatured, liquidated or unliquidated, fixed or contingent, known or unknown
(the "Unassumed Liabilities"). Specifically, and without limiting the generality
of the foregoing, other than the Assumed Liabilities, neither APPM nor Buyer nor
any of their respective Affiliates or subsidiaries shall have any liability or
obligation with respect to or arising out of: (a) acts or omissions of Seller,
its partners, agents or employees whether prior to or subsequent to the Closing
Date, and whether or not in the ordinary course of business; (b) liabilities or
obligations relating to or secured by any portion of either the Purchased Assets
or the Business prior to the Closing; (c) employee related liabilities
(including accrued wages, vacation, employee-related insurance or deferred
compensation claimed by any person in connection with his or her employment by,
or termination of employment with, Seller, or payroll taxes payable or
liabilities arising under any Employee Benefit Plan maintained by Seller); (d)
liabilities or obligations of Seller, including those for attorneys' fees,
arising out of any litigation or other proceeding pending as of the Closing Date
in connection with the Business or any claim, whether or not asserted and
whether or not liquidated or contingent, with respect to the Business arising
from acts or the failure to take any action by Seller or any of its partners,
agents or employees prior to the Closing Date; (e) liabilities for any income or
other tax, whether disputed or not, attributable to Seller and/or the Business
for any period or transaction through the Closing; (f) except as set forth on
Schedule 3.1, trade payables which arise prior to the Closing; (g) claims by any
Payor or patient with respect to any matter or billing occurring prior to the
Closing and for which payment is received by Seller prior to the Closing; and
(h) any other liability or obligation of Seller. Buyer shall be responsible for
all refunds required by Payors in the event such refund relates to the accounts
receivable purchased by Buyer (but not to exceed the purchase price, determined
on a pro rata basis, that Buyer paid for the particular accounts receivable
required to be refunded); provided, however, that Seller shall remain
responsible for all other refunds which relate to revenue collected prior to
Closing. A list of all refunds and credits due as of the Closing Date shall be
set forth on Schedule 3.1 hereto and such refunds and credits shall be deemed
Unassumed Liabilities. All employment tax liabilities of Seller shall remain the
Seller's responsibility for collection, remittance and tax filing purposes for
the period through the Closing. Seller shall supply confirmation that all past
and current employment taxes through the Closing have been remitted to the
appropriate agencies in a timely manner.
ARTICLE IV
PURCHASE PRICE AND CLOSING
Section 4.1 Purchase Price.
(a) Aggregate Purchase Price. The aggregate purchase price
(the "Purchase Price") for the sale, transfer, assignment, conveyance and
delivery of the Purchased Assets from Seller to Buyer shall consist of all of
the consideration set forth on Exhibit A hereto (the "Consideration").
(b) Allocation of Purchase Price. The Purchase Price shall
be allocated by Buyer and Seller in accordance with Schedule 4.1(b) hereto.
Section 4.2 Closing and Effective Time. The closing of the
transactions contemplated under this Agreement (the "Closing") shall take place
at the offices of Sherman, Meehan, Curtin & Ain, on September 22, 1998,
effective as of September 1, 1998 or on such other date as the parties may
mutually agree in writing.
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The transfer of the Purchased Assets by Seller to Buyer and Buyer's
assumption of the Assumed Liabilities shall be deemed effective as of 12:01 a.m.
on September 1, 1998 (the "Effective Time"). The obligations and proceeds from
the operations of the Business shall be deemed to be the property of Buyer from
and after the Effective Time, and Buyer and Seller shall take any and all
actions reasonably necessary to carry out the intent of this Section 4.2.
Section 4.3 Closing Deliveries.
(a) Seller. At the Closing, Seller shall execute and
deliver to Buyer: (i) a Bill of Sale substantially in the form attached as
Exhibit B hereto ("Bill of Sale"); (ii) the documents required to be delivered
pursuant to Section 11.1 hereof; and (iii) such other instruments as shall be
reasonably requested by Buyer to vest in Buyer title in and to the Purchased
Assets. Buyer shall have possession of the tangible Purchased Assets and the
Books and Records immediately upon Closing.
(b) Buyer. At the Closing, Buyer shall deliver to Seller:
(i) the cash portion of the Consideration in immediately available funds; (ii)
the shares of APPM common stock constituting a portion of the Consideration as
specified in Exhibit A; (iii) the documents required to be delivered pursuant to
Section 11.2 hereof; and (iv) such other instruments as shall be reasonably
requested by Seller to complete the assumption of the Assumed Liabilities by
Buyer.
Section 4.4 Certain Prorations.
(a) The items set forth on Schedule 4.4(a) shall be
prorated or adjusted between the parties hereto as of the Effective Time.
(b) At Closing, each party shall pay or credit to the other
party all sums required to effectuate the prorations and adjustments
contemplated by the provisions of this Section 4.4. If final figures have not
been calculated on any of the adjustments, prorations or reimbursements as of
the Closing, then the parties hereto shall close this transaction using
estimated adjustments, prorations and reimbursements which shall be subject to
later readjustment when such final figures have been calculated. The parties
hereto shall seek to determine the amounts of all prorations, adjustments and
reimbursements required hereunder on or before the Closing, if possible, and no
later than six (6) months following the Closing.
Section 4.5 Inventory. Seller shall cause an inventory to be taken
of the Inventory as near in time as possible to the Closing with the results
extended and adjusted through the Closing Date. Such inventory process shall be
subject to audit.
Section 4.6 Closing Expenses.
(a) Seller shall be responsible for the following expenses
(i) obtaining, filing and recording any and all releases, satisfactions, UCC
termination statements and similar documents required in order to cause title to
the Purchased Assets to be free, clear and unencumbered except for Permitted
Encumbrances (as defined in Section 5.3 hereof); and (ii) all sales, use,
transfer and other taxes, if any, required by or imposed as a result of the
transactions contemplated hereby.
(b) Each party shall be responsible for its own attorneys',
accountants' and other advisory fees associated with the closing of the
transactions contemplated by this Agreement.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE PARTNERS
As an inducement to APPM and to Buyer to enter into this Agreement and
except as set forth and referenced in the Schedules, Seller and the Partners
each represent and warrant, jointly and severally, to APPM and to Buyer as
follows:
Section 5.1 Organization and Good Standing; Qualification. Seller
is a limited partnership that has been duly organized and is validly existing
under the laws of the Commonwealth of Virginia, with all requisite power and
authority (i) to own, operate and lease its assets and properties, (ii) to carry
on its business as currently conducted and as now contemplated, (iii) to execute
and deliver this Agreement, and (iv) to consummate the transactions contemplated
by this Agreement. Seller is not qualified to do business in any foreign
jurisdiction because it is not required to be qualified in any other
jurisdiction.
Section 5.2 Authorization and Validity. Seller has all requisite
power to enter into this Agreement and all other agreements entered into in
connection with the transactions contemplated hereby, and to consummate the
transactions contemplated hereby. The execution, delivery, and performance by
Seller of this Agreement and the agreements contemplated herein, and the
consummation by Seller of the transactions contemplated hereby and thereby, are
within Seller's powers and have been duly authorized and approved by all
necessary action on the part of Seller's Partners. This Agreement has been duly
executed by Seller, and this Agreement and all other agreements and obligations
entered into and undertaken in connection with the transactions contemplated
hereby to which Seller is a party, constitute, or upon execution will
constitute, valid and binding agreements of Seller, enforceable against it in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy or other laws affecting the enforcement of creditors' rights
generally, or by general equity principles, or by public policy.
Section 5.3 Title to Purchased Assets.
(a) Schedule 5.3(a) hereto sets forth a true, correct and
complete list of all claims, liabilities, liens, pledges, options, charges,
adverse claims, leases, licenses, rights to use or occupancy, security
interests, restrictions and encumbrances of any kind affecting the Purchased
Assets (collectively, the "Encumbrances").
(b) Seller has good, clear, record and marketable title to,
or valid leasehold interests in, all of the Purchased Assets, free and clear of
all Encumbrances, except as set forth in Schedule 5.3(b) hereto (the "Permitted
Encumbrances"), and, subject to the Permitted Encumbrances, Seller has full
power and right to sell, assign and deliver the Purchased Assets in accordance
with the terms of this Agreement. The delivery to Buyer of the instruments of
transfer of ownership contemplated by this Agreement shall vest valid and
marketable title to the Purchased Assets in the Buyer, free and clear of all
Encumbrances, except for the Permitted Encumbrances. Except for Excluded Assets,
there are no material assets used in the Business which are not Purchased
Assets.
Section 5.4 Condition of Tangible Assets. Except as set forth on
Schedule 5.4 hereto, the tangible Personal Property and any other tangible
Purchased Assets are in reasonable operating condition and are sufficient for
the operation of the Business as presently conducted, and, to the best knowledge
of Seller and the Partners, are in conformity with all applicable laws,
ordinances, orders, regulations and other requirements (including, without
limitation, applicable occupational safety and health laws and regulations)
relating thereto currently in effect.
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Section 5.5 Consents and Approvals. Except as set forth on Schedule
5.5 hereto or addressed in Section 5.6, no consent, approval or authorization
of, notice to, or declaration, filing or registration with, any person or entity
is required to be made or obtained by Seller in connection with its execution,
delivery and performance of this Agreement and its consummation of the
transactions contemplated hereby.
Section 5.6 Governmental Authorization. Except as expressly set
forth in Schedule 5.6 hereto, and other than consents, filings or notifications
required to be made or obtained by Buyer or APPM, to the best knowledge of
Seller and the Partners, the execution, delivery and performance by Seller of
this Agreement and the agreements provided for herein, and the consummation of
the transactions contemplated hereby and thereby by Seller, require no action by
or in respect of, or filing with, any governmental body, agency, official or
authority.
Section 5.7 Continuity of Business Enterprise. Except as set forth
in Schedule 5.7 hereto, and except with respect to the Real Estate as referenced
in Section 2.2 hereof, there has not been any sale, distribution or spin-off of
significant assets of Seller other than in the ordinary course of business
within the two years preceding the date of this Agreement.
Section 5.8 Subsidiaries and Investments. Except as set forth in
Schedule 5.8 hereto, Seller does not own, directly or indirectly, any capital
stock or other equity, ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity (each a "Seller
Subsidiary").
Section 5.9 Absence of Conflicting Agreements or Required Consents.
Subject to approval of this Agreement by the Partners of Seller, the execution,
delivery and performance by Seller of this Agreement and any other documents
contemplated hereby (with or without the giving of notice, the lapse of time, or
both): (i) except as set forth in Schedule 5.5, Schedule 5.6 or Schedule 5.9
hereto, do not require the consent of any governmental or regulatory body or
authority or any other third party, except for such consents for which the
failure to obtain would not reasonably be expected to result in a Material
Adverse Effect on the Business and the Purchased Assets; (ii) will not conflict
with or result in a violation of any provision of Seller's limited partnership
agreement; (iii) will not conflict with, result in a violation of, or constitute
a default under, any law, rule, ordinance, or regulation, or any ruling, decree,
determination, award, judgment, order or injunction of any court or governmental
instrumentality which is applicable to Seller or by which Seller or its
properties are subject or bound, except for such conflict, violation or default
the occurrence of which would not reasonably be expected to result in a Material
Adverse Effect on the Business and the Purchased Assets; (iv) except as set
forth in Schedule 5.9, will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, require any
notice under, or accelerate or modify, or permit any person to accelerate or
modify, any performance required by the terms of, any agreement, instrument,
license or permit material to this transaction, to which Seller is a party or by
which Seller or any of its properties are subject or bound, except for such
conflict, termination, breach, or default, the occurrence of which would not
reasonably be expected to result in a Material Adverse Effect on the Business
and the Purchased Assets; and (v) will not create any Encumbrance or restriction
upon any of the assets or properties of Seller.
Section 5.10 Seller Financial Statements. Attached hereto as
Schedule 5.10 are (i) the compiled statements of assets, liabilities, and
partners' capital, income tax basis, of the Company as of December 31, 1997, and
the related statements of revenues, expenses, partners' capital and cash flows,
income tax basis for the year ended December 31, 1997 (collectively, the "Seller
Annual Financial Statements") and (ii) the compiled consolidated statement of
assets, liabilities, partners' capital as of June 30, 1998 (the "Seller Current
Balance Sheet") and the related statements of income, and statements of cash
flows of Seller for the six (6) month period then ended (collectively, the
"Seller Current Financial Statements"). Seller Annual Financial Statements and
Seller Current Financial Statements are sometimes collectively referred to
herein
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as the "Seller Financial Statements." Seller Annual Financial Statements (a)
have been prepared in accordance with the cash method of accounting (except as
may be indicated therein or in the notes thereto), (b) present fairly the
financial position of Seller as of the dates indicated and present fairly the
results of Seller's operations for the periods then ended, and (c) are in
accordance with the books and records of Seller, which have been properly
maintained and are complete and correct in all material respects. Seller Current
Financial Statements present fairly the financial position of Seller as at the
dates thereof and the results of its operations and changes in financial
position for the periods then ended, subject to normal year-end adjustments (the
effect of which will not individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on Seller) and lack of footnotes
thereto.
Section 5.11 No Undisclosed Liabilities. Except as listed in
Schedule 5.11 hereto, Seller does not have any liabilities or obligations of any
nature, whether known or unknown and whether accrued, absolute, contingent or
otherwise, asserted or unasserted except for liabilities or obligations
reflected or reserved against in Seller's Current Balance Sheet.
Section 5.12 Litigation and Claims. Except as listed in Schedule
5.12 hereto, there are no claims, lawsuits, actions, arbitrations,
administrative or other proceedings, governmental investigations or inquiries
pending or, to the best knowledge of Seller and the Partners, threatened,
against Seller that could adversely affect the operations, business condition
(financial or otherwise), or results of operations or the prospects of Seller
and which (i) if successful, individually or in the aggregate, reasonably would
be expected to have a Material Adverse Effect on Seller, or (ii) if successful,
reasonably would be expected to materially adversely affect the ability of
Seller to effect the transactions contemplated hereby. There are no unsatisfied
judgments against Seller or any consent decrees to which Seller is subject.
Except as set forth in Schedule 5.12, each of the matters, if any, set forth in
Schedule 5.12 (collectively, the "Litigation") is fully covered by policies of
insurance of Seller as in effect on the date hereof.
Section 5.13 No Violation of Law. Seller has not been, nor shall be
as of the Closing Date (by virtue of any action, omission to act, contract to
which it is a party, or any occurrence or state of facts whatsoever), in
violation of any applicable local, state or federal law, ordinance, regulation,
order, injunction or decree, or any other requirement of any governmental body,
agency, authority or court binding on it, or relating to its properties, assets
or business or its advertising, sales or pricing practices, except for
violations which reasonably, individually or in the aggregate, would not have a
Material Adverse Effect on Seller.
Section 5.14 Contracts and Commitments.
(a) Schedule 5.14 contains a true, accurate and complete
list, and Seller has delivered to Buyer true and complete copies, of each
contract, agreement and other instrument (other than insurance contracts
identified in Schedule 5.24 or Lease Agreements identified in Schedule 5.20), to
which Seller is a party or by which it or any of its properties or assets are
bound including, without limitation, (i) all agreements between Seller, on the
one hand, then in effect, and any Payor, government entity, provider, hospital,
health maintenance organization, other managed care organization or other
third-party provider, on the other hand, relating to the provision of medical,
diagnostic imaging or consulting services, treatments, patient referrals or
other similar activities, (ii) all indentures, mortgages, notes, loan or credit
agreements and other agreements and obligations relating to the borrowing of
money or to the direct or indirect guarantee or assumption of obligations of
third parties requiring Seller to make, or setting forth conditions under which
Seller would be required to make, future payments in excess of $10,000 in any
fiscal year or $25,000 in the aggregate, (iii) all agreements for capital
improvements or acquisitions involving an amount of $10,000 in any fiscal
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year or $25,000 in the aggregate, (iv) all agreements containing a covenant
limiting the freedom of Seller to compete in any line of business with any
person or entity or in any geographic area, or (v) all written contracts and
commitments providing for future payments by Seller in excess of $10,000 in any
fiscal year or $25,000 in the aggregate and that are not cancelable by providing
notice of sixty (60) days or less. Except as noted in Schedule 5.14, (1) no
party to any such contract, agreement, or other instrument has delivered written
notification to any other party challenging its effectiveness or validity; (2)
to the best knowledge of Seller and the Partners, there has been no threatened
cancellation thereof; (3) there are no outstanding disputes thereunder; (4) each
is with unrelated third parties and was entered into on an arms-length basis in
the ordinary course of business; and (5) assuming the receipt of the appropriate
consents, each constituting an Assumed Contract, will continue to be in full
force and effect and binding in accordance with their terms after consummation
of the transaction contemplated herein, except as enforceability may be limited
by bankruptcy or other laws affecting the enforcement of creditor's rights
generally, or by general equity principles, or by public policy. Except as noted
in Schedule 5.14, there are no contracts, agreements or other instruments to
which Seller is a party or is bound (other than physician employment contracts,
insurance policies and the lease agreements) which could, either singularly or
in the aggregate, be reasonably expected to have a Material Adverse Effect on
the value to Buyer of the Purchased Assets, or which could inhibit or prevent
Seller from transferring to or vesting in Buyer good and sufficient title to the
Purchased Assets. Notwithstanding the foregoing, Seller shall not transfer to
Buyer any contracts or agreements relating to the provision of professional
medical services or other such agreements and contracts that Buyer consents to
in writing to be retained by Seller. Except as set forth in Schedule 5.14, no
contract with a health care provider or Payor has been materially amended or
terminated within the last twelve (12) months.
(b) Except as disclosed in Schedule 5.14, (i) Seller has
not received written notice of any plan or intention of any other party to
exercise any right to cancel or terminate such contract, agreement or
instrument, and, to the best knowledge of Seller and the Partners, Seller is not
aware of any fact(s) that would justify the exercise of such a right; and (ii)
Seller does not currently contemplate, and, to the best knowledge of Seller and
the Partners, no other Person currently contemplates, any amendment or change to
any such contract, agreement or instrument.
Section 5.15 No Brokers. Seller has not entered into and will not
enter into any agreement, arrangement or understanding with any Person or firm
which will result in the obligation of Buyer to pay any finder's fee, brokerage
commission or similar payment.
Section 5.16 No Other Agreements to Sell the Assets of the Business.
Seller does not have any legal obligation, absolute or contingent, to any other
individual or entity to sell any of the Purchased Assets (other than agreements
for the sale of Inventory in the ordinary course), or to effect any sale of the
Business or to enter into any agreement with respect thereto.
Section 5.17 Employee Matters.
(a) Employment Contracts. Except as set forth in Schedule
5.17 and Schedule 5.19 hereto, Seller is not currently a party to any employment
contract (except for oral employment agreements which are terminable at will),
consulting or collective bargaining contracts, deferred compensation, pension
plan (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended, and all rules and regulations from time to time promulgated
thereunder ("ERISA")), profit sharing, bonus, stock option, stock purchase or
other nonqualified benefit or compensation commitments, benefit plans,
arrangements or plans (whether written or oral), including all welfare plans (as
defined in Section 3(1) of ERISA) of or pertaining to Seller and any of its
present or former employees, or any predecessors in interest.
(b) Employees. As of August 15, 1998, Seller employed no
full-time employees. Schedule 5.17 lists each employee of, or consultant to,
Seller who received combined salary, benefits and bonuses for 1997 in excess of
$50,000 or who is expected to receive combined salary, benefits and bonuses in
1998 in excess of $50,000. Seller is not delinquent in payment to any of its
employees for wages, salaries,
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bonuses or other direct compensation for any services performed for it to the
date hereof or amounts required to be reimbursed to such employees.
(c) Severance Arrangements. Except as set forth on Schedule
5.17, upon termination of employment of any employee, no severance or other
payments will become due, and Seller has no policy, past practice, or plan of
paying severance on termination of employment.
Section 5.18 Labor Relations. Except to the extent set forth in
Schedule 5.18 hereto:
(a) To the best knowledge of Seller and the Partners, no
executive, key employee or group of employees has any plans to terminate
employment with Seller, except by reason of terminating such relationship by
becoming an employee of Buyer in connection with Buyer's purchase of the
Business pursuant hereto;
(b) There is no unfair labor practice, charge or complaint
or any other employment-related matter against or involving Seller pending, or,
to the best knowledge of Seller and the Partners, threatened, before the
National Labor Relations Board or any other federal, state or local agency,
authority or court;
(c) There are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including discrimination
based upon sex, age, marital status, race, national origin, the making of
workers' compensation claims, sexual preference, handicap or veteran status)
pending, or, to the best knowledge of Seller and the Partners, threatened,
before the Equal Employment Opportunity Commission or any other federal, state
or local agency or court against Seller. There have been no governmental audits
of the equal employment opportunity practices of Seller, and, to the best
knowledge of Seller and the Partners, no basis for any such audit exists; and
(d) To the best knowledge of Seller and the Partners, there
are no inquiries, investigations or monitoring activities of any licensed,
registered, or certified professional personnel employed or retained by Seller
pending or threatened by any state professional board or agency charged with
regulating the professional activities of health care practitioners.
Section 5.19 Employee Benefit Plans.
(a) Identification. Schedule 5.19 hereto contains a
complete and accurate list and description of all employee benefit plans (within
the meaning of Section 3(3) of ERISA) sponsored by Seller or to which Seller
contributes on behalf of its employees and all employee benefit plans previously
sponsored or contributed to on behalf of its employees within the three years
preceding the date hereof (the "Employee Benefit Plans"). Seller has provided to
Buyer copies of all current plan documents (as they may have been amended to the
date hereof), determination letters, pending determination letter applications,
trust instruments, insurance contracts or policies related to an Employee
Benefit Plan, administrative services contracts, annual reports for the
immediately preceding three (3) years, actuarial valuations, summary plan
descriptions, summaries of material modifications, administrative forms and
other documents that constitute a part of or are incident to the administration
of the Employee Benefit Plans. Except as set forth in Schedule 5.19 and subject
to the requirements of ERISA, each of the Employee Benefit Plans can be
terminated or amended at will by Seller without any further liability or
obligation on the part of Seller to make further contributions or payments in
connection therewith following such termination except to the extent of any
benefits accrued through the date of termination which accrued benefits shall be
paid by Seller. Except as set forth in Schedule 5.19, no unwritten amendment
exists with respect to any Employee Benefit Plan.
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(b) Administration. Each Employee Benefit Plan has been
administered and maintained in compliance with all applicable laws, rules and
regulations, except where the failure to be in compliance would not,
individually or in the aggregate, result in a Material Adverse Effect.
(c) Examinations. Except as set forth in Schedule 5.19,
neither Seller nor any Partner has received any written notice that any Employee
Benefit Plan is currently the subject of an audit, investigation, enforcement
action or other similar proceeding conducted by any state or federal agency or
authority.
(d) Prohibited Transactions. No prohibited transactions
(within the meaning of Section 4975 of the Code or Section 406 of ERISA) have
occurred with respect to any Employee Benefit Plan. There has been no breach of
any duty under ERISA or applicable law (including, without limitation, any
health care contractor requirements or any other tax law requirements, or
conditions to favorable tax treatment, applicable to such plan), which would be
reasonably likely to result, directly or indirectly (including through any
obligation of indemnification or contribution), in any taxes, penalties or other
liability to APPM or any of its Affiliates.
(e) Claims and Litigation. Except as set forth in Schedule
5.19, no pending, or, to the best knowledge of Seller and the Partners,
threatened, claims, suits or other proceedings exist with respect to any
Employee Benefit Plan other than normal benefit claims filed by participants or
beneficiaries.
(f) Qualification. Except as set forth on Schedule 5.19,
Seller has received a favorable determination letter or ruling from the IRS for
each of the Employee Benefit Plans intended to be qualified within the meaning
of Section 401(a) or 501(c)(9) of the Code and/or tax-exempt within the meaning
of Section 501(a) of the Code, and, to the best knowledge of Seller and the
Partners, such Employee Benefit Plan has been continually qualified under the
applicable Section of the Code since the effective date of such Employee Benefit
Plan. No proceedings are pending, or, to the best knowledge of Seller and the
Partners, have been threatened, that could result in the revocation of any such
favorable determination letter or ruling.
(g) Funding Status. Except as set forth in Schedule 5.19,
no accumulated funding deficiency (within the meaning of Section 412 of the
Code), whether waived or unwaived, exists with respect to any Employee Benefit
Plan or any plan sponsored by any member of a controlled group (within the
meaning of Section 412(n)(6)(B) of the Code) in which Seller is a member (a
"Controlled Group"). Neither Seller nor any member of a Controlled Group
maintains or has ever maintained an Employee Benefit Plan subject to Title IV of
ERISA or an Employee Benefit Plan described in Section 501(c)(9) of the Code.
(h) Excise Taxes. Neither Seller nor any member of a
Controlled Group has any liability to pay excise taxes with respect to any
Employee Benefit Plan under applicable provisions of the Code or ERISA.
(i) Multi-employer Plans. Neither Seller nor any member of
a Controlled Group is or ever has been obligated to contribute to a
multi-employer plan within the meaning of Section 3(37) of ERISA or any other
Employee Benefit Plan which has been subject to Title IV of ERISA or Section 412
of the Code.
(j) PBGC. No facts or circumstances are known to Seller or
the Partners that would be reasonably likely to result in the imposition of
liability against APPM, Buyer or any of its Affiliates by the Pension Benefit
Guaranty Corporation ("PBGC") as a result of any act or omission by Seller or
any member of a Controlled Group. To the best knowledge of Seller and the
Partners, no reportable event (within the meaning of Section 4043 of ERISA), for
which the notice requirement has not been waived, has occurred with respect to
any Employee Benefit Plan subject to the requirements of Title IV of ERISA.
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(k) Retirees. Seller has no obligation or commitment to
provide medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired except
as may be required pursuant to the continuation of coverage provisions of
Section 4980B of the Code and the applicable provisions of ERISA.
(l) Other Compensation Arrangements. Except as set forth in
Schedule 5.19, Seller is not a party to any compensation or debt arrangement
with any person relating to the provision of health care related services other
than arrangements with Seller or to which Seller is a party.
Section 5.20 Lease Agreements. Schedule 5.20 hereto contains a true,
accurate and complete list of all the lease agreements and license agreements to
which Seller is a party and pursuant to which Seller leases (whether as lessor
or lessee) or licenses (whether as licensor or licensee) any real or personal
property related to the operation of its business and which requires payments in
excess of $10,000 per year (the "Lease Agreements"). Seller has delivered to
Buyer true and complete copies of all of the Lease Agreements. There is not
under any Lease Agreement (i) any existing or claimed material default by
Seller, or event which, with notice or lapse of time, or both, would constitute
a material default by Seller, which, individually or in the aggregate, may
reasonably be expected to result in a Material Adverse Effect on Seller, or (ii)
to the best knowledge of Seller and the Partners, any existing material default
by any other party under any of the Lease Agreements or any event which, with
notice or lapse of time, or both, would constitute a material default by any
such party. There is no pending, or, to the best knowledge of Seller and the
Partners, threatened, reassessment of any property covered by the Lease
Agreements. Seller has a good, clear, valid and enforceable, except as
enforceability may be limited by bankruptcy or other laws affecting the
enforcement of creditors' rights generally, or by general equity principles, or
by public policy, leasehold interest under each of the Lease Agreements. The
Lease Agreements are in compliance with all applicable safe harbor provisions
promulgated by the Department of Health and Human Services in connection with
the enforcement of the federal Fraud and Abuse Statute, 42 CFR Part 1001 and any
similar applicable state law safe harbor or other exemption provisions. Neither
Seller nor, to the best knowledge of Seller and the Partners, any other party
thereto, has challenged the validity or effectiveness of any Lease Agreement.
Section 5.21 Real and Personal Property.
(a) Except for the Real Property, Seller does not own any
interest in real property.
(b) Except as set forth in Schedule 5.3 hereto and except
for the Real Property excluded in accordance with Section 2.2 hereof, Seller (i)
has good and marketable title to all of its properties and assets (real,
personal and mixed, tangible and intangible) and any rights or interests therein
which it purports to own including, without limitation, all the property and
assets reflected in Seller Financial Statements; and (ii) owns such rights,
interests, assets and property free and clear of all Encumbrances, title defects
or objections (except for taxes not yet due and payable and the Permitted
Encumbrances). Seller Financial Statements reflect all personal property used in
connection with the operation of the Business subject to disposition in the
ordinary course of business and such personal property are the necessary assets
to continue operation of Seller.
Section 5.22 Environmental Matters.
(a) Seller has not, within the five (5) years preceding the
date hereof through the Effective Time, received from any federal, state or
local governmental body, agency, authority or entity, or any other Person, any
written notice, demand, citation, summons, complaint or order or any written
notice of any penalty, lien or assessment, and, to the best knowledge of Seller
and the Partners, no investigation or
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review is pending by any governmental entity, with respect to any (i) alleged
violation by Seller of any Environmental Law (as defined in subsection (e)
below); (ii) alleged failure by Seller to have any environmental permit,
certificate, license, approval, registration or authorization required pursuant
to any Environmental Law in connection with the conduct of its Business; or
(iii) alleged illegal Regulated Activity (as defined in subsection (e) below) by
Seller.
(b) Seller has not used, transported, disposed of, or
arranged for the disposal of (as those terms are defined in and construed under
the Comprehensive Environmental Response, Compensation and Liability Act), any
Hazardous Substance (as defined herein) in a manner that would be reasonably
likely to give rise to any Environmental Liabilities (as defined in subsection
(e) below) for Seller under any applicable Environmental Law that had, or would
reasonably be likely to have, a Material Adverse Effect on Seller. Seller has
not engaged in any activity, or failed to undertake any activity, which action
or failure to act has given, or would reasonably be likely to give, rise to any
Environmental Liabilities or enforcement action by any federal, state or local
regulatory agency or authority, or has resulted, or would reasonably be likely
to result, in any fine or penalty imposed pursuant to any Environmental Law that
had, or would reasonably be likely to have, a Material Adverse Effect on Seller.
Schedule 5.22 hereto discloses, to the best knowledge of Seller and the
Partners, any presence of asbestos in or on Seller's owned or leased premises.
(c) To the best knowledge of Seller and the Partners, no
soil or water in or under any assets currently or formerly held for use or sale
by Seller is or has been contaminated by any Hazardous Substance while such
assets or premises were owned, leased, operated or managed, directly or
indirectly, by Seller where such contamination had, or would be reasonably
likely to have, a Material Adverse Effect on Seller.
(d) Schedule 5.22 contains a list of all environmental
audits and other similar reports which have been prepared by, for, or, to the
best knowledge of Seller and the Partners, concerning, Seller, within the five
(5) years preceding the date hereof through the Effective Time, with respect to
any real property now or previously owned or leased by Seller, or any of its
predecessors, true and complete copies of which have been provided to Buyer.
(e) For the purposes of this Section 5.22, the following
terms have the following meanings:
"Environmental Laws" shall mean any and all domestic, federal,
state and local laws (including case law), regulations, ordinances,
rules, judgments, orders, decrees, codes, injunctions and permits
relating to the environment or to emissions, discharges or releases of
Hazardous Substances into the environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances or the clean-up
or other remediation thereof.
"Environmental Liabilities" shall mean all liabilities of
Seller, whether contingent or fixed, which (i) have arisen, or would
reasonably be likely to arise, under Environmental Laws and (ii) relate
to actions occurring or conditions existing on or prior to the date
hereof or the Effective Time.
"Hazardous Substances" shall mean any air pollution, toxic,
radioactive, caustic or otherwise hazardous substance regulated by any
Environmental Law, (including but not limited to (i) Medical Waste and
(ii) petroleum, its derivatives, by-products and other hydrocarbons),
and any material constituent elements thereof displaying any of the
foregoing characteristics.
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"Regulated Activity" shall mean any generation, treatment,
storage, recycling, transportation, disposal or release of any
Hazardous Substances.
Section 5.23 Filing Reports. All returns, reports, plans and filings
of any kind or nature necessary to be filed by Seller with any governmental
agency or authority have been properly completed and timely filed in compliance
with all applicable requirements, except where failure to so file would not have
a Material Adverse Effect on Seller.
Section 5.24 Insurance Policies. Schedule 5.24 hereto lists and
briefly describes Seller's policies of insurance to which Seller is a party or
under which Seller is or has been covered at any time during the last five (5)
years preceding the date of this Agreement relating to the Business of Seller
(the "Insurance Policies"). All premiums with respect to the Insurance Policies
are currently paid. All Insurance Policies currently maintained by Seller
("Current Policies"), taken together, (i) are sufficient for compliance with
legal and contractual requirements to which Seller is a party or by which Seller
may be bound, and (ii) shall be maintained in force (including the payment of
all premiums and compliance with their terms) without interruption up to and
including the Closing Date. True, complete and correct copies of all Current
Policies have been provided to Buyer. Except as set forth in Schedule 5.24,
Seller has not received any written notice or other written communication from
any issuer of any Current Policy canceling such policy, materially increasing
any deductibles or retained amounts thereunder, or materially increasing the
annual or other premiums payable thereunder, and, to the best knowledge of
Seller and the Partners, no such cancellation or increase of deductibles,
retainages or premiums is threatened. Except as set forth in Schedule 5.24,
there are no outstanding claims, settlements or premiums owed against any
Insurance Policy, and all required notices have been given, and all known
potential or actual claims under any Insurance Policy have been presented, in
due and timely fashion. Except as set forth in Schedule 5.24, since January 1,
1993, neither Seller nor any Affiliate thereof has filed a written application
for any professional liability insurance coverage which has been denied by an
insurance agency or carrier. Schedule 5.24 also sets forth a list of all claims
under any Insurance Policy in excess of $10,000 per occurrence filed by Seller
during the immediately preceding three-year period.
Section 5.25 Accounts Receivable; Payors.
(a) Attached hereto as Schedule 5.25(a) is a list and aging
of all accounts receivable of Seller as of August 31, 1998, which list is
complete, true and accurate in all material respects. All such accounts
receivable arose in the ordinary course of business and have not been previously
written off as bad debts, and, are, to the extent still uncollected, collectible
in the ordinary course of business, net of reserves for doubtful and
uncollectible accounts shown in Seller Financial Statements or on the accounting
records of Seller (which reserves are adequate and calculated consistent with
past practice). Nothing contained herein shall be deemed a guarantee of
collection with respect to the accounts receivable.
(b) Schedule 5.25(b) hereto sets forth a true, correct and
complete list of the names and addresses of each Payor including, but not
limited to, all private-pay patients as a single Payor, of Seller which
accounted for more than five percent (5%) of the revenues of Seller in the
fiscal year ended December 31, 1997, or which is reasonably expected to account
for more than five percent (5%) of the revenues of Seller for the fiscal year to
end December 31, 1998. Except as set forth in Schedule 5.25(b), Seller has
satisfactory relations with such Payors, and, to the best knowledge of Seller
and the Partners, none of such Payors has notified Seller that it intends to
discontinue its relationship with Seller or to deny any payments due from, or
any claims for payment submitted to, any such party.
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Section 5.26 Accounts Payable; Suppliers.
(a) Attached hereto as Schedule 5.26(a) is a true and
complete (i) list of the accounts payable of Seller as of August 31, 1998, and
(ii) list of each individual indebtedness of $10,000 or more, setting forth the
payee and the amount of indebtedness.
(b) Schedule 5.26(b) sets forth a true, correct and
complete list of the names and addresses of each of the providers/suppliers of
products or services to Seller which accounted for a dollar volume of purchases
paid for by Seller in excess of $10,000 for the fiscal year ended December 31,
1997, or which is reasonably expected to account for a dollar volume of
purchases paid for by Seller in excess of $10,000 for the fiscal year to end
December 31, 1998.
Section 5.27 Inventory. All items of inventory on Seller Current
Balance Sheet contained in Seller Financial Statements consisted, and all such
items on hand on the date of this Agreement consist, net of all applicable
reserves with respect thereto (calculated consistent with past practice), of
items of a quality and a quantity usable and saleable in the ordinary course of
Seller's Business and conform to generally accepted standards in the industry of
which Seller is a part. The amount of Seller's inventory is reasonably
consistent with Seller's inventory levels over the twelve (12) month period
immediately preceding the Effective Date. The value of the inventories reflected
on Seller Current Balance Sheet contained in Seller Financial Statements are net
of adequate reserves for damaged, excess, and unusable items. Purchase
commitments of Seller for inventory are not materially in excess of normal
requirements, and, to the best knowledge of Seller and the Partners, none of
such purchase commitments are at prices materially in excess of prevailing
market prices at the time of such purchase commitment.
Section 5.28 Licenses, Authorization and Provider Programs.
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(a) Except as listed in Schedule 5.28(a) hereto, Seller,
and, to the best knowledge of Seller and the Partners, each licensed employee or
independent contractor of Seller, (i) is the holder of all valid licenses,
approvals, orders, consents, permits, registrations, qualifications and other
rights and authorizations required by law, ordinance, regulation or ruling of
any governmental regulatory authority necessary to operate its/his/her business,
and (ii) is eligible to participate under Titles XVIII and XIX of the Social
Security Act for Maryland, Virginia and Washington, D.C. (the "Medicare and
Medicaid Programs") (Medicare and Medicaid Programs and such other similar
federal, state or local reimbursement or governmental programs for which Seller
is eligible are hereinafter referred to, collectively, as the "Governmental
Programs"), and (iii) has current provider numbers for such Governmental
Programs and with such private non-governmental programs (including without
limitation any private insurance program) under which Seller is presently
receiving payments directly or indirectly from any Payor for patient care (such
non-governmental programs herein referred to as "Private Programs"). A true,
correct and complete list of such licenses, permits and other authorizations,
and provider agreements, is set forth in Schedule 5.28(a), true, complete and
correct copies of which have been provided to APPM. No violation, default, order
or deficiency exists with respect to any of the items listed in Schedule 5.28(a)
except for such violations, defaults, orders or deficiencies which would not be
reasonably likely to have a Material Adverse Effect on Seller, and there is no
action pending, or, to the best knowledge of Seller and the Partners,
threatened, by any state or federal agencies having jurisdiction over the items
listed in Schedule 5.28(a), either to revoke, withdraw or suspend any material
license or to terminate the participation of Seller in any Governmental Program
or Private Program, and, to the best knowledge of Seller and the Partners, no
event has occurred which, with or without notice or lapse of time, or both,
would constitute grounds for a violation, order or deficiency with respect to
any of the items listed in Schedule 5.28(a) or to revoke, withdraw or suspend
any material license to operate its Business as is presently being conducted by
it. To the best knowledge of Seller and the Partners, there has been no decision
not to renew any existing agreement with any provider or Payor relating to
Seller's Business as presently being conducted by it. Except as set forth in
Schedule 5.28(a) or Schedule 5.12, neither Seller nor the Business (i) has had
his/her/its professional license, Drug Enforcement Agency number,
Medicare/Medicaid provider status or staff privileges at any hospital or
diagnostic imaging center suspended, relinquished, terminated or revoked, (ii)
has been reprimanded, sentenced, or disciplined by any licensing board, state
agency, regulatory body or authority, hospital, Payor or specialty board, or
(iii) has had a final judgment or settlement entered against him/her/its in
connection with a malpractice or similar action.
(b) Except as set forth in Schedule 5.28(b), Seller is not
required, and for the 72-month period prior to the Effective Time was not
required, to file any cost reports or other reports with any Governmental
Program or Private Program.
Section 5.29 Inspections and Investigations. Neither the right of
Seller, nor, to the best knowledge of Seller and the Partners, the right of any
licensed professional or other individual employed or retained by Seller, to
receive reimbursements pursuant to any Governmental Program or Private Program
has been terminated or otherwise materially and adversely affected as a result
of any investigation or action whether by any federal or state governmental
regulatory authority or other third party. Except as set forth and described in
Schedule 5.29 hereto, to the best knowledge of Seller and the Partners, no
licensed professional or other individual affiliated with the Business has,
during the past three (3) years prior to the Effective Time, had their
professional license suspended or revoked by any governmental regulatory
authority or agency, hospital, integrated delivery system, trade association,
professional review organization, accrediting organization or certifying agency.
True, correct and complete copies of all reports, correspondence, notices and
other documents relating to any matter described or referenced in Schedule 5.29
have been provided to Buyer.
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Section 5.30 Proprietary Rights and Information.
(a) Set forth in Schedule 5.30(a) hereto are a complete and
accurate list and summary description of the following: (i) all trademarks
(registered and unregistered), trade names, service marks and other trade
designations, including common law rights, registrations and applications
therefor, currently owned in whole or part, or used by Seller, (ii) all patents
and applications therefor, and inventions and discoveries that may be
patentable, currently owned, in whole or in part, or used by Seller, (iii) all
licenses, royalties, and assignments thereof to which Seller is a party, (iv)
all copyrights (for published and unpublished works) currently owned, in whole
or part, or used by Seller, and (v) other similar agreements relating to the
foregoing to which Seller is a party (including expiration date if applicable)
(collectively, the "Proprietary Rights").
(b) Schedule 5.30(b) contains a complete and accurate list
and summary description of all agreements relating to technology, trade secrets,
know-how or processes that Seller is licensed or authorized to use by others
(other than technology, know-how or processes generally available to other
health care providers) or which it licenses or authorizes others to use; true,
correct and complete copies of which have been provided to Buyer or APPM. There
are no outstanding, and, to the best knowledge of Seller and the Partners, no
threatened, disputes or disagreements with respect to any such agreement.
(c) Seller owns or has the legal right to use the
Proprietary Rights without conflicting with, infringing or violating the rights
of any other person. Except as disclosed in Schedule 5.30(c), no consent of any
Person will be required for the use thereof by Buyer or APPM upon consummation
of the transactions contemplated hereby and the Proprietary Rights are freely
transferable. To the best knowledge of Seller and the Partners, no claim has
been asserted by any person to the ownership of, or for infringement by Seller
of, any Proprietary Right of any other Person, and Seller is not aware of any
valid basis for any such claim. To the best knowledge of Seller and the
Partners, no proceedings have been threatened which challenge the Proprietary
Rights of Seller. Seller has the right to use, free and clear of any adverse
claims or rights of others, all trade secrets, customer lists and proprietary
information required for the performance and marketing of all merchandise and
services formerly or presently sold or marketed by Seller.
Section 5.31 Taxes.
(a) Filing of Tax Returns. Seller has duly and timely filed
(in accordance with any extensions duly granted by the appropriate governmental
agency, if applicable) with the appropriate governmental agencies all Tax
Returns required to be filed by the United States or any state or any political
subdivision thereof or any foreign jurisdiction. All such Tax Returns are
complete and accurate in all material respects and properly reflect the taxes of
Seller for the periods covered thereby.
(b) Payment of Taxes. Except for such items as Seller may
be disputing in good faith by proceedings in compliance with applicable law,
which are described in Schedule 5.31(b) hereto, (i) Seller has paid all taxes,
penalties, assessments and interest that have become due with respect to any Tax
Returns that it has filed ("Taxes"), and has properly accrued on its books and
records in accordance with the cash method of accounting for all of the same
that have not yet become due and payable, and (ii) Seller is not delinquent in
the payment of any tax, assessment or governmental charge.
(c) No Pending Deficiencies, Delinquencies, Assessments or
Audits. Except as set forth in Schedule 5.31(c) hereto, Seller has not received
any notice that any tax deficiency or delinquency has been asserted against
Seller, and, to the best knowledge of Seller and the Partners, there is no
threat of such assertion. There is no unpaid assessment, proposal for additional
taxes, deficiency, or delinquency in the payment of any of the taxes of Seller
that could reasonably be likely to be asserted by any taxing
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authority. There is no taxing authority audit of Seller pending, or to the best
knowledge of Seller and the Partners, threatened, and the results of any
completed audits are properly reflected in Seller Financial Statements. Seller
has not violated any applicable federal, state, local or foreign tax law. There
are no security interests or liens on any assets of Seller which have resulted
from any failure to pay (or alleged failure to pay) taxes.
(d) No Extension of Limitation Period. Seller has not
granted an extension to any taxing authority of the statute of limitation period
during which any tax liability may be assessed or collected.
(e) All Withholding Requirements Satisfied. All monies
required to be withheld by Seller and paid to governmental agencies for all
income, social security, unemployment insurance, sales, excise, use, and other
taxes have been collected or withheld and paid to the respective governmental
agencies.
(f) Foreign Person. Neither Seller nor any Partner is a
foreign person, as such term is referred to in Section 1445(f)(3) of the Code
and Treasury Regulations Section 1.1445-2.
(g) Safe Harbor Lease. None of the properties or assets of
Seller constitutes property that Seller, APPM, Buyer or any Affiliate of APPM,
will be required to treat as being owned by another person pursuant to the "Safe
Harbor Lease" provisions of Section 168(f)(8) of the Code prior to repeal by the
Tax Equity and Fiscal Responsibility Act of 1982.
(h) Tax Exempt Entity. None of the assets or properties of
Seller are subject to a lease to a "tax exempt entity" as such term is defined
in Section 168(h)(2) of the Code.
(i) Collapsible Corporation. Seller has not at any time
consented to have the provisions of Section 341(f)(2) of the Code apply to it.
(j) Boycotts. Seller has not at any time participated in or
cooperated with any international boycott as defined in Section 999 of the Code.
(k) Parachute Payments. No payment required or contemplated
to be made by Seller will be characterized as an "excess parachute payment"
within the meaning of Section 280G(b)(1) of the Code.
(l) S Corporation. Seller has not made an election to be
taxed as an "S" corporation under Section 1362(a) of the Code.
(m) Personal Holding Companies. Seller is not or has not
been a personal holding company within the meaning of Section 542 of the Code.
Section 5.32 Related Party Arrangements. Schedule 5.32 hereto sets
forth a description of any interest held, directly or indirectly, by any Partner
of Seller in any property, real or personal or mixed, tangible or intangible,
used in or pertaining to Seller's Business and any arrangement or agreement with
any such person concerning the provision of goods or services or other matters
pertaining to Seller's Business. There is no commitment to, and no income
reflected in Seller Financial Statements that has been derived from, an
Affiliate, and following the Closing, Seller shall not have any obligation of
any kind or designation to any such Affiliate.
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Section 5.33 Banking Relations. Set forth in Schedule 5.33 hereto is
a complete and accurate list of all borrowing and investing arrangements that
Seller has with any bank or other financial institution, indicating with respect
to each relationship, the type of arrangement maintained (such as checking
account, borrowing arrangements, safe deposit box, etc.) and the Person or
Persons authorized in respect thereof.
Section 5.34 Fraud and Abuse and Self Referral. Neither Seller nor
any of the Partners has engaged, and, to the best knowledge of Seller, no
Persons and entities providing professional services for or on behalf of Seller
have engaged, in any activities which are prohibited under 42 U.S.C. 1320a 7, 7a
or 7b, or 42 U.S.C. 1395nn, or (subject to the exceptions or safe harbor
provisions set forth in such legislation) the regulations promulgated thereunder
or pursuant to any similar state or local statutes or regulations, or which are
prohibited by applicable rules of professional conduct.
Section 5.35 Restrictions on Business Activities. Except as
disclosed in Schedule 5.14 or Schedule 5.35 hereto, there is no material
agreement, judgment, injunction, order or decree binding upon Seller or the
Partners, or, to the best knowledge of Seller and the Partners, key employee of
Seller, which has or reasonably could be expected to have a Material Adverse
Effect on the Business.
Section 5.36 Agreements in Full Force and Effect. Except as
expressly set forth in Seller's Schedules to this Agreement, to the best
knowledge of Seller and the Partners, all contracts, agreements, plans, leases,
policies and licenses referred to, or required to be referred to, in Seller's
Schedules delivered hereunder are valid and binding, and are in full force and
effect, and are enforceable in accordance with their terms, except to the extent
that the validity or enforceability thereof may be limited by bankruptcy or
other laws affecting the enforcement of creditors' rights generally, or by
general equity principles, or by public policy. To the best knowledge of Seller
and the Partners, there is no pending or threatened bankruptcy, insolvency or
similar proceeding with respect to any other party to such agreements, and no
event has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a material default
thereunder by Seller or any other party thereto.
Section 5.37 Statements True and Correct. No representation or
warranty made herein by Seller or any Partner, nor any statement, certificate,
exhibit or instrument to be furnished by Seller or any Partner, to APPM or Buyer
pursuant to this Agreement, contains, or will contain as of the Effective Time,
any untrue statement of material fact, or omits, or will omit as of the
Effective Time, to state a material fact necessary to make the statements
contained herein and therein not misleading.
Section 5.38 Schedules. All Schedules required by this Article V and
attached hereto are true, correct and complete in all material respects as of
the date of this Agreement.
Section 5.39 Finders' Fees. No investment banker, broker, finder or
other intermediary has been retained by, or is authorized to act on behalf of,
Seller or any Partner who is entitled to any fee or commission upon consummation
of the transactions contemplated by this Agreement or referred to herein.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER AND APPM
Buyer and APPM each represents and warrants to Seller as follows:
Section 6.1 Organization and Good Standing; Qualification. Each of
Buyer and APPM is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware, with all requisite corporate
power and authority to own, operate and lease its assets and properties and to
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carry on its business as currently conducted. Each of Buyer and APPM is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except where
such failure to be so qualified or in good standing would not have a Material
Adverse Effect on Buyer or APPM. Copies of the certificate of incorporation and
all amendments thereto of Buyer and APPM and the bylaws of Buyer and APPM, as
amended, and copies of the corporate minutes of Buyer and APPM regarding this
transaction, all of which have been or will be made available to Seller for
review, are true, correct and complete as in effect on the date of this
Agreement, and accurately reflect all material proceedings of the stockholders
and directors of Buyer and APPM (and all committees thereof) regarding this
transaction.
Section 6.2 Authorization and Validity. Each of Buyer and APPM has
all requisite corporate power to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by Buyer and APPM of this Agreement and the agreements provided for
herein, and the consummation by Buyer and APPM of the transactions contemplated
hereby and thereby, are within Buyer's and APPM's respective corporate powers
and have been duly authorized by all necessary action on the part of Buyer's and
APPM's respective Board of Directors. This Agreement has been duly executed by
Buyer and APPM. This Agreement, and all other agreements and obligations entered
into and undertaken in connection with the transactions contemplated hereby and
thereby to which Buyer and APPM is a party, constitute, or upon execution will
constitute, valid and binding agreements of Buyer and APPM (as the case may be),
enforceable against it in accordance with their respective terms, except as may
be limited by bankruptcy or other laws affecting creditors' rights generally, or
by general equity principles, or by public policy.
Section 6.3 Consents and Approvals. No consent, approval or
authorization of, notice to, or declaration, filing or registration with, any
governmental entity or any other person or entity is required to be made or
obtained by Buyer or APPM in connection with its respective execution, delivery
and performance of this Agreement and its consummation of the transactions
contemplated hereby.
Section 6.4 Governmental Authorization. Other than consents,
filings or notifications required to be made or obtained by Seller, to the best
knowledge of APPM and Buyer, the execution, delivery and performance by Buyer
and APPM of this Agreement and the agreements provided for herein, and the
consummation of the transactions contemplated hereby and thereby by Buyer and
APPM, require no action by or in respect of, or filing with, any governmental
body, agency, official or authority.
Section 6.5 Absence of Conflicting Agreements or Required Consents.
The execution, delivery and performance of this Agreement by Buyer and/or APPM
and any other documents contemplated hereby (with or without the giving of
notice, the lapse of time, or both): (i) do not require the consent of any
governmental or regulatory body or authority or any other third party except for
such consents for which the failure to obtain would not reasonably be expected
to result in a Material Adverse Effect on Buyer or APPM; (ii) will not conflict
with any provision of Buyer's or APPM's respective certificate of incorporation
or bylaws; (iii) to the best knowledge of APPM and Buyer, will not conflict
with, result in a violation of, or constitute a default under, any law,
ordinance, regulation, ruling, judgment, order or injunction of any court or
governmental instrumentality to which Buyer or APPM is a party or by which Buyer
or APPM or their or its properties are subject or bound; (iv) will not conflict
with, constitute grounds for termination of, result in a breach of, constitute a
default under, require any notice under, or accelerate or permit the
acceleration of any performance required by the terms of, any agreement,
instrument, license or permit material to this transaction, to which Buyer or
APPM is a party or by which Buyer or APPM or any of their or its respective
properties are subject or bound except for such conflict, termination, breach or
default, the occurrence of which would not reasonably be expected to result in a
Material Adverse Effect on Buyer or APPM; and (v) will not create any
Encumbrance or restriction upon any of the assets or properties of Buyer or
APPM.
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Section 6.6 Statements True and Correct. No representation or
warranty made herein by Buyer or APPM, nor any statement, certificate or
instrument to be furnished by Buyer or APPM to Seller pursuant to this
Agreement, contains, or will contain as of the Effective Time, any untrue
statement of material fact, or omits, or will omit as of the Effective Time, to
state a material fact necessary to make the statements contained herein and
therein not misleading.
Section 6.7 Schedules. All Schedules required by this Article VI
and attached hereto are true, correct and complete in all material respects as
of the date of this Agreement.
Section 6.8 Finder's Fees. No investment banker, broker, finder or
other intermediary has been retained by, or is authorized to act on behalf of,
Buyer or APPM, who is entitled to any fee or commission upon consummation of the
transactions contemplated by this Agreement or referred to herein.
Section 6.9 Litigation and Claims. There are no claims, lawsuits,
actions, arbitrations, administrative or other proceedings, governmental
investigations or inquiries pending, or, to the best knowledge of Buyer and APPM
threatened, against Buyer or APPM which could materially adversely affect the
ability of Buyer or APPM to effect the transactions contemplated hereby.
Section 6.10 APPM Common Stock. The APPM Common Stock issued to
Seller (or its Partners) pursuant hereto, has been validly issued by APPM, is
fully paid and non-assessable, and to APPM's best knowledge, based on
representations made by Seller and/or its Partners to APPM, is exempt from
registration under federal securities laws.
ARTICLE VII
POST-CLOSING COVENANTS OF SELLER
Section 7.1 Lock-up Agreements from Partners. Prior to distributing
the APPM Stock (as defined on Exhibit A) to the Partners, Seller shall cause
each Partner to execute and deliver to APPM a lock-up agreement in the form
attached hereto as Exhibit C.
ARTICLE VIII
PRE-CLOSING COVENANTS OF APPM AND BUYER
[Intentionally Omitted]
ARTICLE IX
CONDITIONS PRECEDENT OF APPM AND BUYER
[Intentionally Omitted]
ARTICLE X
[Intentionally Omitted]
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ARTICLE XI
CLOSING DELIVERIES
Section 11.1 Deliveries of Seller. Seller hereby delivers to Buyer
the following:
(a) a copy of resolutions of Seller authorizing the
execution, delivery and performance of this Agreement and all related documents
and agreements, and the consummation of the transactions contemplated hereby;
(b) [intentionally omitted];
(c) [intentionally omitted];
(d) a certificate, dated within thirty (30) days prior to
the Closing Date, of the Virginia Commonwealth Department of Assessments and
Taxation for Seller establishing that Seller is in existence, has paid all
franchise or similar taxes, if any, and, if applicable, otherwise is in good
standing to transact business in the Commonwealth of Virginia;
(e) all authorizations, consents, approvals, permits and
licenses referenced in Section 5.28;
(f) an assignment to Buyer of (i) each lease for personal
property described on Schedule 5.20 (the "Lease Assignments"), (ii) all
contracts described on Schedule 5.14 which can be assigned to Buyer ("Non-Payor
Contract Assignments"), and (iii) all contracts described in Schedule 5.14 which
cannot be assigned to Buyer ("Payor Contract Assignments"); and
(g) [intentionally omitted].
Section 11.2 Deliveries of Buyer and APPM. At or prior to the
Closing Date, each of Buyer and APPM shall deliver to Seller the following, all
of which shall be in a form reasonably satisfactory to Seller:
(a) a copy of resolutions of the Board of Directors of APPM
or Buyer, as applicable, authorizing the execution, delivery and performance of
this Agreement, and all related documents and agreements, certified by APPM's or
Buyer's Secretary as being true and correct copies of the originals thereof
subject to no modifications or amendments;
(b) the Consideration in accordance with Exhibit A hereto;
(c) [intentionally omitted];
(d) [intentionally omitted];
(e) a certificate of the Secretary of APPM or Buyer, as may
be applicable, certifying as to the incumbency of the officers of Buyer and APPM
who have executed documents delivered at the Closing on behalf of Buyer;
(f) a certificate, dated within ten (10) days prior to the
Closing Date, of the Secretary of State of Delaware establishing that Buyer and
APPM each is in existence, has paid all franchise or similar taxes, if any, and,
if applicable, otherwise is in good standing to transact business in the state
of Delaware;
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<PAGE> 28
(g) certificates (or photocopies thereof), dated within ten
(10) days prior to the Closing Date, of the Commonwealth of Virginia Department
of Assessment and Taxation, to the effect that Buyer is qualified to do
business, and, if applicable, is in good standing as a foreign corporation in
such state; and
(h) the executed Lease Assignments, Non-Payor Contract
Assignments and Payor Contract Assignments.
ARTICLE XII
CERTAIN ADDITIONAL AGREEMENTS OF THE PARTIES
[Intentionally Omitted]
ARTICLE XIII
POST CLOSING MATTERS
Section 13.1 Further Instruments of Transfer. During a reasonable
period following the Closing, at the request of APPM, Seller and the Partners
shall deliver any further instruments of transfer and take all reasonable action
as may be necessary or appropriate to carry out the purpose and intent of this
Agreement and the Transactions. During a reasonable period following the
Closing, at the request of Seller, APPM and Ormond shall deliver any further
instruments of transfer and take all reasonable action as may be necessary or
appropriate to carry out the purpose and intent of this Agreement and the
Transactions.
Section 13.2 Survival of Article XIV. Notwithstanding any other
provision of this Agreement to the contrary, Article XIV of this Agreement shall
survive the Closing.
ARTICLE XIV
REMEDIES
Section 14.1 Indemnification by Seller and the Partners. Subject to
the terms and conditions of this Article XIV, Seller and the General Partners
shall indemnify, defend and hold APPM and Buyer and their respective directors,
officers, members, managers, employees, agents, attorneys and Affiliates
harmless from and against all losses, claims, obligations, demands, assessments,
penalties, liabilities, costs, damages, reasonable attorneys' fees and expenses
(collectively, "Damages") asserted against or incurred by such indemnitees
arising out of or resulting from:
(a) a breach of any representation or warranty or covenant
of Seller contained herein or in any Schedule or certificate delivered
hereunder;
(b) any violation (or alleged violation) by Seller and/or
any of its past or present, partners, managers, employees, agents, consultants
and Affiliates of state or federal laws governing health care fraud and abuse
(including, but not limited to, fraud and abuse in the Medicare and Medicaid
Programs) occurring on or before the Closing Date, or any overpayment or
obligation (or alleged overpayment or obligation) arising out of or resulting
from claims submitted to any Payor on or before the Closing Date and for which
Seller or the Partners received payment on or before the Effective Date
("Healthcare Fraud"); and
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<PAGE> 29
(c) the ownership, possession, use, sale, licensing or
leasing of the Purchased Assets by Seller at or before the Effective Time or the
non-payment (including untimely payment) or non-performance of the Unassumed
Liabilities by Seller.
Section 14.2 Indemnification by APPM and Buyer. Subject to the terms
and conditions of this Article XIV, APPM and Buyer, jointly and severally, shall
indemnify, defend and hold Seller and its partners, managers, employees, agents,
attorneys and Affiliates harmless from and against all Damages asserted against
or incurred by such indemnitees arising out of or resulting from:
(a) a breach by APPM or Buyer of any representation or
warranty or covenant of APPM or Buyer contained herein or in any Schedule or
certificate delivered hereunder; and
(b) all Assumed Liabilities.
Section 14.3 Conditions of Indemnification. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement
(an "Indemnified Party") shall promptly (and, in any event, at least ten (10)
days prior to the due date for any responsive pleadings, filings or other
documents) (i) notify the party from whom indemnification is sought (the
"Indemnifying Party") of any third-party claim or claims asserted against the
Indemnified Party ("Third Party Claim") that could give rise to a right of
indemnification under this Agreement, and (ii) transmit to the Indemnifying
Party a written notice ("Claim Notice") describing in reasonable detail the
nature of the Third Party Claim, a copy of all papers served with respect to
such claim (if any), an estimate of the amount of Damages attributable to the
Third Party Claim, and the basis of the Indemnified Party's request for
indemnification under this Agreement. Except as set forth in Section 14.6, the
failure to promptly deliver a Claim Notice shall not relieve the Indemnifying
Party of its obligations to the Indemnified Party with respect to the related
Third Party Claim except to the extent that the resulting delay is materially
prejudicial to the defense of such claim. Any damages ultimately awarded shall
be reduced by the costs incurred as a result of such delay.
Within thirty (30) days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall notify the Indemnified Party
(i) whether the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article XIV with respect to such Third Party Claim,
and (ii) whether the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against such Third Party
Claim.
(b) If the Indemnifying Party notifies the Indemnified
Party within the Election Period that the Indemnifying Party elects to assume
the defense of the Third Party Claim, then the Indemnifying Party shall have the
right to defend, at its sole cost and expense, such Third Party Claim by all
appropriate proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 14.3(b). The Indemnifying
Party shall have full control of such defense and proceedings, including any
compromise or settlement thereof. The Indemnified Party is hereby authorized, at
the sole cost and expense of the Indemnifying Party (but only if the Indemnified
Party is entitled to indemnification hereunder), to file, during the Election
Period, any motion, answer or other pleadings that the Indemnified Party
reasonably shall deem necessary or appropriate to protect its interests or those
of the Indemnifying Party and not prejudicial to the Indemnifying Party (it
being understood and agreed that if an Indemnified Party takes any such action
that is prejudicial and causes a final adjudication that is adverse to the
Indemnifying Party, the Indemnifying Party shall be relieved of its obligations
hereunder with respect to such Third Party Claim). If requested by the
Indemnifying Party, the Indemnified Party agrees, at the sole cost and expense
of the Indemnifying Party, to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim that the
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<PAGE> 30
Indemnifying Party elects to contest, including, without limitation, the making
of any related counterclaim against the person asserting the Third Party Claim
or any cross-complaint against any person. The Indemnified Party may participate
in, but not control, any defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to this Section 14.3(b) and shall
bear its own costs and expenses with respect to such participation; provided,
however, that if the named parties to any such action (including any impleaded
parties) include both the Indemnifying Party and the Indemnified Party, and the
Indemnified Party has been advised by counsel that there may be one or more
legal defenses available to it that are different from or additional to those
available to the Indemnifying Party, then the Indemnified Party may employ
separate counsel at the expense of the Indemnifying Party, and upon written
notification thereof, the Indemnifying Party shall not have the right to assume
the defense of such action on behalf of the Indemnified Party; provided further
that the Indemnifying Party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for the Indemnified Party, which firm shall be designated in writing by the
Indemnified Party. Notwithstanding the foregoing, the Indemnifying Party shall
be prohibited from confessing or settling any criminal allegations brought
against the Indemnified Party without the express written consent of the
Indemnified Party.
(c) If the Indemnifying Party fails to notify the
Indemnified Party within the Election Period that the Indemnifying Party elects
to defend the Indemnified Party pursuant to Section 14.3(b), or if the
Indemnifying Party elects to defend the Indemnified Party pursuant to Section
14.3(b) but fails diligently and promptly to prosecute or settle the Third Party
Claim, then the Indemnified Party shall have the right to defend, at the sole
cost and expense of the Indemnifying Party (if the Indemnified Party is entitled
to indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings, provided, however, that
the Indemnified Party may not enter into, without the Indemnifying Party's
consent, which shall not be unreasonably withheld, any compromise or settlement
of such Third Party Claim. Notwithstanding the foregoing, if the Indemnifying
Party has delivered a written notice to the Indemnified Party to the effect that
the Indemnifying Party disputes its potential liability to the Indemnified Party
under this Article XIV and if such dispute is resolved in favor of the
Indemnifying Party, the Indemnifying Party shall not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant to this Section
or of the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all costs and expenses of such litigation. The Indemnifying Party may
participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 14.3(c), and the Indemnifying Party
shall bear its own costs and expenses with respect to such participation;
provided, however, that if the named parties to any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party, and the Indemnifying Party has been advised by counsel that there may be
one or more legal defenses available to it that are different from or additional
to those available to the Indemnified Party, then the Indemnifying Party may
employ separate counsel and, upon written notification thereof, the Indemnified
Party shall not have the right to assume the defense of such action on behalf of
the Indemnifying Party.
(d) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of damages attributable to such claim, and
the basis of the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not notify the Indemnified Party
within sixty (60) days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes such claim, the claim specified by the Indemnified
Party in the Indemnity Notice shall be deemed
29
<PAGE> 31
a liability of the Indemnifying Party hereunder. If the Indemnifying Party has
timely disputed such claim, as provided above, such dispute shall be resolved by
litigation in an appropriate court of competent jurisdiction if the parties do
not reach a settlement of such dispute within thirty (30) days after notice of a
dispute is given.
(e) Payments of all amounts owing by an Indemnifying Party
pursuant to this Article XIV relating to a Third Party Claim shall be made
within thirty (30) days after the latest of (i) the settlement of such Third
Party Claim, (ii) the expiration of the period for appeal of a final
adjudication of such Third Party Claim, or (iii) the expiration of the period
for appeal of a final adjudication of the Indemnifying Party's liability to the
Indemnified Party under this Agreement. Payments of all amounts owing by an
Indemnifying Party pursuant to Section 14.3(d) shall be made within 30 days
after the later of (i) the expiration of the 60-day Indemnity Notice period or
(ii) the expiration of the period for appeal of a final adjudication of the
Indemnifying Party's liability to the Indemnified Party under this Agreement.
(f) The Indemnifying Party shall provide the Indemnified
Party with written notice of any firm offer that is made to settle or compromise
a Third Party Claim against an Indemnified Party. If a firm offer is made to
settle such a claim solely by the payment of money damages and such offer is
contingent only upon the acceptance by the Indemnifying Party, and the
Indemnifying Party notifies the Indemnified Party in writing that the
Indemnifying Party agrees to such settlement, but the Indemnified Party elects
not to accept and agree to it, the Indemnified Party may continue to contest or
defend such Third Party Claim and, in such event, the total maximum liability of
the Indemnifying Party to indemnify or otherwise reimburse the Indemnified Party
hereunder with respect to such a claim shall be limited to and shall not exceed
the amount of such settlement offer, plus reasonable out-of-pocket costs and
reasonable expenses (including reasonable attorneys' fees and disbursements) to
the date of notice that the Indemnifying Party desired to accept such
settlement.
(g) Notwithstanding any provision herein to the contrary,
the obligation of APPM or Buyer on the one hand, or Seller, on the other hand,
to provide indemnification for breach of any representation or warranty or
covenants as provided in Section 14.1(a) or 14.2(a) hereof, shall not take
effect unless and until the Damages asserted against or incurred in the
aggregate and on a collective basis by APPM or Buyer, on the one hand, or
Seller, on the other hand, as a result of such a breach or breaches exceeds
$15,000 (but expressly excluding any such claims involving fraud, intentional
misrepresentation, title to the Purchased Assets, Taxes, Litigation or
Healthcare Fraud).
Section 14.4 Remedies Exclusive. The remedies provided in this
Agreement shall be exclusive of any other rights or remedies available to one
party against the other, either at law or in equity, except that this section
shall not limit any party's right to equitable relief, to the extent and as
appropriate, with respect to fraud, intentional misrepresentations, title to the
Purchased Assets, Taxes, Litigation or Healthcare Fraud.
Section 14.5 Costs, Expenses and Legal Fees. Whether or not the
transactions contemplated hereby are consummated, each party hereto shall bear
its own costs and expenses (including attorneys' fees), except that each party
hereto agrees to pay the costs and expenses (including reasonable attorneys'
fees and expenses) incurred by the other parties in successfully (a) enforcing
any of the terms of this Agreement or (b) proving that another party breached
any of the terms of this Agreement.
Section 14.6 Tax Benefits; Insurance Proceeds. The total amount of
any indemnity payments owed by one party to another party to this Agreement
shall be reduced by any correlative tax benefit received by the party to be
indemnified or the net proceeds received by the party to be indemnified with
respect to recovery from third parties or insurance proceeds, and such
correlative insurance benefit shall be net of the insurance premium, if any,
that becomes due as a result of such claim.
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Section 14.7 Survival.
(a) All of the respective obligations of the parties
contained in this Agreement or in any other document delivered in accordance
with and pursuant to this Agreement, including without limitation all covenants,
agreements, indemnities, representations (other than with respect to the due
authority of a party), and warranties (other than with respect to the due
authority of a party), shall survive Closing for a period of twenty-four (24)
months; provided, however, that the limitation of this clause (a) shall not
apply to claims involving fraud, intentional misrepresentations, title to the
Purchased Assets, Taxes, Litigation or Healthcare Fraud, for which the period
for making such claims shall expire on the date which is six (6) months after
the termination of the applicable statute of limitations relating thereto.
(b) If, within such twenty-four (24) month period (or
longer period, if applicable), no written notice is given by one party to the
other party of any alleged breach of a covenant, agreement, indemnification,
representation, or warranty of the other party under this Agreement, then all
liability of the other party, except as otherwise provided in this Agreement,
shall terminate. If written notice of any alleged breach of a covenant,
agreement, indemnification, warranty, or obligation is given to the other party
within such twenty-four (24) month period (or longer period, if applicable),
then the liability of the other party shall survive as to the matter(s) in
question in such notice, and the liability of the other party as to all other
matters shall cease.
Section 14.8 Breach by Partner. The parties agree that,
notwithstanding any other provision of this Agreement to the contrary, if and in
the event a right of indemnification under this Agreement arises in favor of
APPM as a result of a breach by a specific Partner of a representation,
warranty, or covenant particular to that Partner, then APPM shall first seek to
enforce its rights of indemnification against, and indemnification from, the
Partner who is in breach, and second, seek to enforce its rights of
indemnification against, and indemnification from, the other Partners.
ARTICLE XV
TERMINATION
[Intentionally Omitted]
ARTICLE XVI
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
[Intentionally Omitted]
ARTICLE XVII
MISCELLANEOUS
Section 17.1 Amendment; Waivers. This Agreement may be amended,
modified or supplemented only by an instrument in writing executed by all the
parties hereto. Any waiver of any terms and conditions hereof must be in
writing, and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
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Section 17.2 Assignment. Neither this Agreement nor any right
created hereby or in any agreement entered into in connection with the
transactions contemplated hereby shall be assignable by any party hereto, except
by APPM to a wholly owned subsidiary of APPM; provided that any such assignment
shall not relieve APPM of its obligations hereunder.
Section 17.3 Parties in Interest; No Third Party Beneficiaries.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto. Neither
this Agreement nor any other agreement contemplated hereby shall be deemed to
confer upon any person not a party hereto or thereto any rights or remedies
hereunder or thereunder.
Section 17.4 Entire Agreement. Except as is expressly provided in
writing, this Agreement and the agreements contemplated hereby constitute the
entire agreement of the parties regarding the subject matter hereof, and
supersede all prior agreements and understandings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof.
Section 17.5 Severability. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
Section 17.6 Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants contained herein shall survive the
Closing in accordance with the provisions of Section 14.7, and all statements
contained in any certificate, exhibit or other instrument delivered by or on
behalf of Seller, the General Partners, APPM or Buyer pursuant to this Agreement
shall be deemed to have been representations and warranties by Seller, the
General Partners, APPM or Buyer, as may be the case.
Section 17.7 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING
CONFLICTS OF LAWS) OF THE COMMONWEALTH OF VIRGINIA.
Section 17.8 Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
Section 17.9 Gender and Number. When the context requires, the
gender of all words used herein shall include the masculine, feminine and
neuter, and the number of all words shall include the singular and plural.
Section 17.10 Reference to Agreement. Use of the words "herein,"
"hereof," "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.
Section 17.11 Confidentiality; Publicity and Disclosures. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
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<PAGE> 34
other parties hereto except (a) to authorized representatives of said party and
(b) to counsel, other advisers and immediate family members to said party
provided that such advisers and immediate family members (other than counsel)
agree to the confidentiality provisions of this Section 17.11, unless (i) such
information becomes available to or known by the public generally through no
fault of the APPM, Buyer, Seller or the Partners, as the case may be, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, that prior to disclosing any information pursuant to
this clause (ii) APPM, Buyer, Seller or the Partners, as the case may be, shall,
if possible, give prior written notice thereof to the other parties and provide
the other parties with the opportunity to contest such disclosure, (iii) the
disclosing party reasonably believes that such disclosure is required in
connection with the defense of a lawsuit against the disclosing party, or (iv)
the disclosing party is the sole and exclusive owner of such confidential
information as a result of the transactions hereunder; provided that the
foregoing shall not prohibit any disclosure by press release, filing or
otherwise that APPM has determined in its good faith judgment to be required by
federal securities laws or the rules of the Securities and Exchange Commission
or the National Association of Securities Dealers.
Section 17.12 Notice. Whenever this Agreement requires or permits any
notice, request, or demand from one party to another, the notice, request or
demand must be in writing to be effective and shall be deemed to be delivered
and received (i) if personally delivered, when actually received by the party to
whom notice is sent, or (ii) if delivered by mail (whether actually received or
not), at the close of business on the third business day next following the day
when placed in the mail, postage prepaid, certified or registered, or (iii) if
delivered by nationally-recognized overnight courier, at the close of the next
business day following delivery to said overnight courier, addressed to the
appropriate party or parties, at the address of such party set forth below (or
at such other address as such party may designate by written notice to all other
parties in accordance herewith):
If to APPM and Buyer: American Physician Partners, Inc.
3600 Chase Tower
2200 Ross Avenue
Dallas, Texas 75201
Attn: Mark L. Wagar, President
Paul M. Jolas, General Counsel
with a copy to: Haynes and Boone, L.L.P.
901 Main Street, Suite 3100
Dallas, Texas 75202
Attn: Kenneth K. Bezozo, Esq.
If to Seller Magnetic Resonance Imaging Associates Limited
or any General Partner: Partnership
1020 Duke Street
Alexandria, Virginia 22314-3512
Attn: Paul T. Lubar, M.D.
with a copy to: Sherman, Meehan, Curtin & Ain
1900 M Street, NW
Suite 600
Washington, DC 20036
Attn: Sam H. Roberson, Esq.
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Section 17.13 No Waiver; Remedies. No party hereto shall by any act
(except by written instrument pursuant to Section 17.1 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default in or breach of any of the terms
and conditions hereof. No failure to exercise, nor any delay in exercising, on
the part of any party hereto, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. No remedy set forth in this
Agreement or otherwise conferred upon or reserved to any party shall be
considered exclusive of any other remedy available to any party, but the same
shall be distinct, separate and cumulative and may be exercised from time to
time as often as occasion may arise or as may be deemed expedient.
Section 17.14 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
Section 17.15 Defined Terms. Terms used in the attached Exhibits and
the Schedules attached hereto with their initial letter capitalized and not
otherwise defined therein shall have the meanings as assigned to such terms in
this Agreement.
Section 17.16 Schedules and Exhibits. The Schedules and Exhibits
attached to this Agreement are by this reference incorporated herein and made a
part hereof.
* * * * *
34
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
APPM:
AMERICAN PHYSICIAN PARTNERS, INC.
By:
-------------------------------------
Paul M. Jolas, Senior Vice President
BUYER:
ORMOND IMAGING PARTNERS, INC.
By:
-------------------------------------
Paul M. Jolas, Senior Vice President
SELLER:
MAGNETIC RESONANCE IMAGING ASSOCIATES
LIMITED PARTNERSHIP
By:
-------------------------------------
Name:
--------------------------------
Its: Managing General Partner
GENERAL PARTNERS:
----------------------------------------
Paul T. Lubar
----------------------------------------
Stanley M. Perl
----------------------------------------
Michael S. Usher
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<PAGE> 37
----------------------------------------
John B. DeGrazia
----------------------------------------
Larry W. Busching
----------------------------------------
Vimla Bhooshan
----------------------------------------
William P. O'Grady
----------------------------------------
Edwin Goldstein
----------------------------------------
Robert A. Olshaker
----------------------------------------
Calvin D. Neithamer
----------------------------------------
Alan J. Kronthal
36
<PAGE> 1
EXHIBIT 10.41
================================================================================
SERVICE AGREEMENT
Dated as of the 1st day of September, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.,
WB&A Imaging Partners, Inc.
and
WB&A Imaging, P.C.
================================================================================
<PAGE> 2
SERVICE AGREEMENT
This Service Agreement (this "Agreement"), dated effective as of
September 1, 1998, is entered into by and among American Physician Partners,
Inc., a Delaware corporation ("Parent"), WB&A Imaging Partners, Inc., (formerly
known as Drs. Werner, Boyle & Associates, P.A.), a wholly-owned subsidiary of
Parent ("Administrator"), and WB&A Imaging, P.C., a Maryland professional
corporation ("Group").
R E C I T A L S:
A. The Group owns and operates a radiology medical practice and
provides professional and technical radiology services to the general public
through individual physicians who are licensed to practice medicine in the
Commonwealth of Virginia, the State of Maryland and/or the District of Columbia
and who are employed or otherwise retained by the Group.
B. Administrator is in the business of owning certain non-medical
assets of medical practices and providing management, administrative, and other
non-medical radiological support services to radiological medical practices
including, without limitation, furnishing necessary facilities, equipment,
non-physician personnel, supplies and non-physician support staff services.
C. The Group desires to obtain the services of Administrator in
performing such non- medical business functions so as to permit the Group to
devote its full professional time and attention to the rendering of
professional and technical radiology and related services to its patients.
D. The Group and Administrator have determined a fair market
value for the services to be rendered by Administrator, and based on this fair
market value, have developed a procedure for compensation of Administrator, all
as more particularly set forth in this Agreement.
E. Administrator is willing to commit significant management and
capital resources to the Group to allow for the Group's further growth, all as
provided in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, and on the terms and
subject to the conditions herein set forth, the parties hereto agree as
follows:
ARTICLE I
Definitions
Section 1.1 Definitions. For the purposes of this Agreement, the
following definitions shall apply:
<PAGE> 3
EXHIBIT 10.42
BASIC LEASE INFORMATION
Lease Date: , 1996
---------------
Tenant: Fibreboard Corporation
Tenant's Address: 2121 N. California Boulevard
Suite 560
Walnut Creek, California 94596
Contact: Mike Douglas Telephone: (510) 274-0700
Landlord: The Equitable-Nissei Dallas Company,
a joint venture
Landlord's Address: 2200 Ross Avenue, Suite 3700
Dallas, Texas 75201
Contact: Ray Mackey
Telephone: 214-979-6100
Premises: Suite No. 3600 in the office building (the
"Building") located on the land described
as City Block 256, Dallas, Dallas County,
Texas and whose street address is 2200 Ross
Avenue, Dallas, Texas (the "Land"). The
Premises are outlined on the plan attached to
the Lease as Exhibit A.
Term: 180 months, commencing September 1, 1996 (the
"Commencement Date") and ending at 5:00 p.m.
August 31, 2011, subject to adjustment and
earlier termination as provided in the Lease.
Basic
Rental: $31,590.29 per month for the first 5 years of
the Term; $35,005.46 per month for the next 5
years of the Term; and $40,128.21 per month
for the next 5 years of the Term.
Rent: Basic Rental, Tenant's Proportionate Share of
Electrical Costs, Tenant's share of Excess,
and all other sums that Tenant may owe to
Landlord under the Lease.
Permitted Use: General Office
Tenant's
Proportionate
Share: 1.7413%, which is the percentage obtained by
dividing (i) the 20,491 rentable square feet
in the Premises by (ii) the 1,176,736 rentable
square feet in the Building.
Expense Stop: 1996 base year.
Initial Liability
Insurance Amount: $5,000,000.
Maximum
Construction
Allowance: $12.00 per rentable square foot.
The foregoing Basic Lease Information is incorporated into and made a part of
the Lease identified above. If any conflict exists between any Basic Lease
Information and the Lease, then the Lease shall control.
<PAGE> 4
<TABLE>
<CAPTION>
LANDLORD: TENANT:
- -------- ------
<S> <C>
THE EQUITABLE-NISSEI DALLAS COMPANY, FIBREBOARD CORPORATION,
a joint venture a Delaware corporation
By: The Equitable Life Assurance By:_________________________
Society of the United States, Name:_______________________
a New York corporation, Title:______________________
its Managing Venturer
By:___________________________
Name:_________________________
Title:________________________
</TABLE>
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
DEFINITIONS AND BASIC PROVISIONS. . . . . . . . . . . . . . . . . . 1
LEASE GRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
a. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 1
b. Intentionally Deleted . . . . . . . . . . . . . . . . . . . 2
c. Electrical Costs . . . . . . . . . . . . . . . . . . . . . 2
d. Annual Cost Statement . . . . . . . . . . . . . . . . . . . 2
e. Adjustments to Electrical Costs . . . . . . . . . . . . . . 2
DELINQUENT PAYMENT; HANDLING CHARGES. . . . . . . . . . . . . . . . 2
LANDLORD'S OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . 2
a. Services . . . . . . . . . . . . . . . . . . . . . . . . . 2
b. Excess Utility Use . . . . . . . . . . . . . . . . . . . . 3
c. Discontinuance . . . . . . . . . . . . . . . . . . . . . . 3
d. Restoration of Services; Abatement . . . . . . . . . . . . 4
IMPROVEMENTS;ALTERATIONS; REPAIRS; MAINTENANCE. . . . . . . . . . . 4
a. Improvements; Alterations . . . . . . . . . . . . . . . . . 4
b. Repairs; Maintenance . . . . . . . . . . . . . . . . . . . 5
c. Performance of Work . . . . . . . . . . . . . . . . . . . . 5
d. Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . 5
USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . 6
a. Transfers; Consent . . . . . . . . . . . . . . . . . . . . 6
b. [Intentionally Deleted.] . . . . . . . . . . . . . . . . . 6
c. Additional Compensation. . . . . . . . . . . . . . . . . . 6
INSURANCE; WAIVERS; SUBROGATION; INDEMNITY. . . . . . . . . . . . . 6
a. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 6
b. Waiver of Negligence Claims; No Subrogation . . . . . . . . 7
c. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 7
SUBORDINATION ATTORNMENT; NOTICE TO LANDLORD'S MORTGAGEE. . . . . . 8
a. Subordination . . . . . . . . . . . . . . . . . . . . . . . 8
b. Attornment . . . . . . . . . . . . . . . . . . . . . . . . 8
c. Notice to Landlord's Mortgagee . . . . . . . . . . . . . . 8
RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . 8
CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
a. Taking - Landlord's and Tenant's Rights . . . . . . . . . . 8
b. Taking - Landlord's Rights . . . . . . . . . . . . . . . . 8
c. Award . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FIRE OR OTHER CASUALTY. . . . . . . . . . . . . . . . . . . . . . . 9
a. Repair Estimate . . . . . . . . . . . . . . . . . . . . . . 9
b. Landlord's and Tenant's Rights . . . . . . . . . . . . . . 9
c. Landlord's Rights . . . . . . . . . . . . . . . . . . . . . 9
d. Repair Obligation . . . . . . . . . . . . . . . . . . . . . 9
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PAYMENT BY TENANT; NON-WAIVER . . . . . . . . . . . . . . . . . . . 11
a. Payment by Tenant . . . . . . . . . . . . . . . . . . . . . 11
b. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 12
SURRENDER OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . 12
HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
CERTAIN RIGHTS RESERVED BY LANDLORD . . . . . . . . . . . . . . . . 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
a. Landlord Transfer . . . . . . . . . . . . . . . . . . . . . 13
b. Landlord's Liability . . . . . . . . . . . . . . . . . . . 13
c. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . 13
d. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . 13
e. Estoppel Certificates . . . . . . . . . . . . . . . . . . . 14
f. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 14
g. Separability . . . . . . . . . . . . . . . . . . . . . . . 14
h. Amendments; and Binding Effect . . . . . . . . . . . . . . 14
i. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . 14
j. Joint and Several Liability . . . . . . . . . . . . . . . . 14
k. Captions . . . . . . . . . . . . . . . . . . . . . . . . . 14
l. No Merger . . . . . . . . . . . . . . . . . . . . . . . . . 15
m. No Offer . . . . . . . . . . . . . . . . . . . . . . . . . 15
n. Tax Protest . . . . . . . . . . . . . . . . . . . . . . . . 15
o. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 16
p. Entire Agreement . . . . . . . . . . . . . . . . . . . . . 16
SPECIAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 7
LEASE
THIS LEASE AGREEMENT (this "Lease") is entered into as of , 1996,
between THE EQUITABLE-NISSEI DALLAS COMPANY, a joint venture ("Landlord"),
and FIBREBOARD CORPORATION, a Delaware corporation ("Tenant").
DEFINITIONS AND
BASIC PROVISIONS
1. The definitions and basic provisions set forth in the Basic Lease
Information (the "Basic Lease Information") executed by Landlord and Tenant
contemporaneously herewith are incorporated herein by reference for all
purposes.
LEASE GRANT
2. Subject to the terms of this Lease, Landlord leases to Tenant, and
Tenant leases from Landlord, the Premises.
TERM
3. If the Commencement Date is not the first day of a calendar month,
then the Term shall be extended by the time between the Commencement Date and
the first day of the next month. If this Lease is executed before the
Premises become vacant or otherwise available and ready for occupancy by
Tenant, or if any present occupant of the Premises holds over and Landlord
cannot acquire possession of the Premises before the Commencement Date, then
(a) Tenant's obligation to pay Rent hereunder shall be waived until Landlord
tenders possession of the Premises to Tenant, (b) the Term shall be extended
by the time between the scheduled Commencement Date and the date on which
Landlord tenders possession of the Premises to Tenant (which date will then
be defined as the Commencement Date), (c) Landlord shall not be in default
hereunder or be liable for damages therefor, and (d) Tenant shall accept
possession of the Premises when Landlord tenders possession thereof to
Tenant. By occupying the Premises, Tenant shall be deemed to have accepted
the Premises in their condition as of the date of such occupancy, subject to
the performance of punch-list items that remain to be performed by Landlord,
if any. Tenant shall execute and deliver to Landlord, within ten days after
Landlord has requested same, a letter confirming (i) the Commencement Date,
(ii) that Tenant has accepted the Premises, and (iii) that Landlord has
performed all of its obligations with respect to the Premises (except for
punch-list items specified in such letter). Notwithstanding anything herein
to the contrary, Landlord shall make the portion of the Premises designated
as "Area A" on Exhibit H available for the commencement of the Work (as
defined in Exhibit D) no later than July 15, 1996, and shall make the portion
of the Premises designated as "Area B" on Exhibit H available for the
performance of the Work no later than August 12, 1996.
RENT
4. a. Payment. Tenant shall timely pay to Landlord the Basic Rental and
all additional sums to be paid by Tenant to Landlord under this Lease,
including the amounts set forth in Exhibit C, without deduction or set off,
at Landlord's Address (or such other address as Landlord may from time to
time designate in writing to Tenant). Basic Rental, adjusted as herein
provided, shall be payable monthly in advance. The first monthly installment
of Basic Rental shall be payable on the Commencement Date; thereafter,
monthly installments of Basic Rental shall be due on the first day of the
second full calendar month of the Term and continuing on the first day of
each succeeding calendar month during the Term. Basic Rental for any
fractional month at the beginning of the Term shall be prorated based on
1/365 of the current annual Basic Rental for each day of the partial month
this Lease is in effect, and shall be due on the Commencement Date.
<PAGE> 8
b. [Intentionally Deleted.]
c. Electrical Costs. Tenant shall pay to Landlord an amount equal to
the product of (i) the cost of all electricity used by the Building except
for excess electrical use reimbursed to Landlord by tenants ("Electrical
Costs"), multiplied by (ii) Tenant's Proportionate Share. Such amount shall
be payable monthly based on Landlord's estimate of the amount due for each
month, and shall be due on the Commencement Date and on the first day of each
calendar month thereafter unless Landlord has theretofore furnished Tenant
with information indicating the amount due, in which event such amount shall
be due within ten days after Landlord has delivered to Tenant an invoice
therefor.
d. Annual Cost Statement. By April 1 of each calendar year, or as soon
thereafter as practicable, Landlord shall furnish to Tenant a statement of
Landlord's actual Electrical Costs (the "Annual Cost Statement") for the
previous year adjusted as provided in Section 4.e. If the Annual Cost
Statement reveals that Tenant paid more for Electrical Costs than Tenant's
Proportionate Share of Electrical Costs in the year for which such statement
was prepared, then Landlord shall promptly reimburse or credit Tenant such
excess; likewise, if Tenant paid less than Tenant's Proportionate Share of
Electrical Costs, then Tenant shall promptly pay Landlord such deficiency.
e. Adjustments to Electrical Costs. With respect to any calendar year
or partial calendar year in which the Building is not occupied to the extent
of 95% of the rentable area thereof, the Electrical Costs for such period
shall, for the purposes hereof, be increased to the amount which would have
been incurred had the Building been occupied to the extent of 95% of the
rentable area thereof.
DELINQUENT
PAYMENT;
HANDLING CHARGES
5. All payments required of Tenant hereunder shall bear interest from
the date due until paid at the per annum rate of three percent (3%) in excess
of the Prime Rate. In no event, however, shall the charges permitted under
this Section 5 or elsewhere in this Lease, to the extent the same are
considered to be interest under applicable law, exceed the maximum lawful
rate of interest.
6. [Intentionally Deleted.]
LANDLORD'S
OBLIGATIONS
7. a. Services. Provided no Event of Default exists, Landlord shall use
all reasonable efforts to furnish to Tenant (i) water (hot and cold) at those
points of supply provided for general use of tenants of the Building; (ii)
heated and refrigerated air conditioning as appropriate, at such times as
Landlord normally furnishes these services to all tenants of the Building,
and at such temperatures and in such amounts as are reasonably considered by
Landlord to be standard; (iii) janitorial service to the Premises on weekdays
other than holidays for Building-standard installations (Landlord reserves
the right to bill Tenant separately for extra janitorial service required for
non-standard installations) and such window washing as may from time to time
in Landlord's judgment be reasonably required; (iv) elevators for ingress and
egress to the floor on which the Premises are located, in common with other
tenants, provided that Landlord may reasonably limit the number of elevators
to be in operation at times other than during customary business hours and on
holidays; (v) replacement of Building-standard light bulbs
<PAGE> 9
and fluorescent tubes, provided that Landlord's standard charge for such
bulbs and tubes shall be paid by Tenant; and (vi) electrical current during
normal business hours other than for special lighting, equipment that
requires more than 110 volts, or other equipment whose electrical energy
consumption exceeds normal office usage. Landlord shall maintain the common
areas of the Building in reasonably good order and condition, except for
damage occasioned by Tenant, or its employees, agents or invitees. If
Tenant desires any of the services specified in this Section 7.a at any
time other than times herein designated, such services shall be supplied to
Tenant upon the written request of Tenant delivered to Landlord before 3:00
p.m. on the business day preceding such extra usage, and Tenant shall pay
to Landlord the reasonable cost of such services within ten days after
Landlord has delivered to Tenant an invoice therefor.
b. Excess Utility Use. Landlord shall use reasonable efforts to furnish
electrical current for computers, electronic data processing equipment,
special lighting, equipment that requires more than 110 volts, or other
equipment whose electrical energy consumption exceeds normal office usage
through the then-existing feeders and risers serving the Building and the
Premises, and Tenant shall pay to Landlord the cost of such service within
ten days after Landlord has delivered to Tenant an invoice therefor. Landlord
may determine the amount of such additional consumption and potential
consumption by a separate meter in the Premises installed, maintained, and
read by Landlord, at Tenant's expense. Tenant shall not install any
electrical equipment requiring special wiring or requiring voltage in excess
of 110 volts or otherwise exceeding Building capacity unless approved in
advance by Landlord, which consent shall not be unreasonably withheld or
delayed. The use of electricity in the Premises shall not exceed the capacity
of existing feeders and risers to or wiring in the Premises. Any risers or
wiring required to meet Tenant's excess electrical requirements shall, upon
Tenant's written request, be installed by Landlord, at Tenant's cost, if, in
Landlord's sole and absolute judgment, the same are necessary and shall not
cause permanent damage or injury to the Building or the Premises, cause or
create a dangerous or hazardous condition, entail excessive or unreasonable
alterations, repairs, or expenses, or interfere with or disturb other tenants
of the Building. If Tenant uses machines or equipment (other than general
office machines, excluding computers and electronic data processing
equipment) in the Premises which affect the temperature otherwise maintained
by the air conditioning system or otherwise overload any utility, Landlord
may install supplemental air conditioning units or other supplemental
equipment in the Premises, and the reasonable cost thereof, including the
cost of installation, operation, use, and maintenance, shall be paid by
Tenant to Landlord within ten days after Landlord has delivered to Tenant an
invoice therefor.
c. Discontinuance. Landlord's obligation to furnish services under
Section 7.a shall be subject to the rules and regulations of the supplier of
such services and governmental rules and regulations. If required by law or
the supplier of a service, Landlord may, upon not less than 30-days' prior
written notice to Tenant, discontinue any such service to the Premises,
provided Landlord first arranges for a direct connection thereof through the
supplier of such service. Tenant shall, however, be responsible for
contracting with the supplier of such service and for paying all deposits
for, and costs relating to, such service.
<PAGE> 10
d. Restoration of Services; Abatement. Landlord shall use reasonable
efforts to restore any service that becomes unavailable; however, such
unavailability shall not render Landlord liable for any damages caused
thereby, be a constructive eviction of Tenant, constitute a breach of any
implied warranty, or, except as provided below, entitle Tenant to any
abatement of Tenant's obligations hereunder. However, if Tenant is prevented
from making reasonable use of the Premises for more than 15 consecutive days
because of the unavailability of any such service, Tenant shall, as its
exclusive remedy therefor, be entitled to a reasonable abatement of Rent for
each consecutive day (after such 15 day period) that Tenant is so prevented
from making reasonable use of the Premises. In the event (i) such
unavailability of services (A) was not the result of a casualty described in
Section 15 of this Lease, (B) was not caused in whole or in part by Tenant or
Tenant's agents, employees or contractors, and (C) Tenant is prevented from
making reasonable use of the Premises, (ii) the curing of such unavailability
of services is within the reasonable control of Landlord, and (iii) such
unavailablity of services shall not be cured within sixty (60) days following
the occurrence of such event, Tenant shall have the right to terminate this
Lease by delivering to Landlord written notice of such termination prior to
the restoration of such services.
IMPROVEMENTS;
ALTERATIONS;
REPAIRS;
MAINTENANCE
8. a. Improvements; Alterations. Improvements to the Premises shall be
installed at the expense of Tenant only in accordance with plans and
specifications which have been previously submitted to and approved in
writing by Landlord, which approval shall not be unreasonably withheld or
delayed. After the initial Tenant improvements are made, no alterations or
physical additions in or to the Premises may be made without Landlord's prior
written consent. Landlord agrees not to unreasonably withhold or delay its
consent with respect to non-structural alterations which do not affect the
Building systems and are not visible from the exterior of the Premises.
Tenant shall not paint or install lighting or decorations, signs, window or
door lettering, or advertising media of any type on or about the Premises
without the prior written consent of Landlord. Landlord agrees not to
unreasonably withhold or delay its consent with respect to such items that
are not visible from the exterior of the Premises. All alterations,
additions, or improvements (whether temporary or permanent in character, and
including without limitation all air-conditioning equipment and all other
equipment that is in any manner connected to the Building's plumbing system)
made in or upon the Premises, either by Landlord or Tenant, shall be
Landlord's property at the end of the Term and shall remain on the Premises
without compensation to Tenant. Approval by Landlord of any of Tenant's
drawings and plans and specifications prepared in connection with any
improvements in the Premises shall not constitute a representation or
warranty of Landlord as to the adequacy or sufficiency of such drawings,
plans and specifications, or the improvements to which they relate, for any
use, purpose, or condition, but such approval shall merely be the consent of
Landlord as required hereunder. Notwithstanding anything in this Lease to the
contrary, with respect to the Premises Tenant shall be responsible for
complying with the Americans with Disabilities Act of 1990, and all rules,
regulations, and guidelines promulgated thereunder, as the same may be
amended from time to time (collectively, the "ADA"). Landlord shall be
responsible for complying with the ADA with respect to the common areas of
the Building.
<PAGE> 11
b. Repairs; Maintenance. Tenant shall maintain the Premises in a clean,
safe, operable, attractive condition, and shall not permit or allow to remain
any waste or damage to any portion of the Premises. Tenant shall repair or
replace, subject to Landlord's direction and supervision, any damage to the
Building caused by Tenant or Tenant's agents, contractors, or invitees. If
Tenant fails to make such repairs or replacements within 15 days after the
occurrence of such damage, then Landlord may make the same at Tenant's cost.
In lieu of having Tenant repair any such damage outside of the Premises,
Landlord may repair such damage at Tenant's cost. The reasonable cost of any
repair or replacement work performed by Landlord under this Section 8 shall
be paid by Tenant to Landlord within ten days after Landlord has delivered to
Tenant an invoice therefor.
c. Performance of Work. All work described in this Section 8 shall be
performed only by Landlord or by contractors and subcontractors approved in
writing by Landlord, which approval shall not be unreasonably withheld or
delayed. Tenant shall cause all contractors and subcontractors to procure and
maintain insurance coverage against such risks, in such amounts, and with
such companies as Landlord may reasonably require, and to procure payment and
performance bonds reasonably satisfactory to Landlord covering the cost of
the work. All such work shall be performed in accordance with all legal
requirements and in a good and workmanlike manner so as not to damage the
Premises, the primary structure or structural qualities of the Building, or
plumbing, electrical lines, or other utility transmission facility. All such
work which may affect the HVAC, electrical system, or plumbing must be
approved by the Building's engineer of record, which approval shall not be
unreasonably withheld or delayed.
d. Mechanic's Liens. Tenant shall not permit any mechanic's liens to be
filed against the Premises or the Building for any work performed, materials
furnished, or obligation incurred by or at the request of Tenant. If such a
lien is filed, then Tenant shall, within ten days after Landlord has
delivered notice of the filing to Tenant, either pay the amount of the lien
or diligently contest such lien and deliver to Landlord a bond or other
security reasonably satisfactory to Landlord. If Tenant fails to timely take
either such action, then Landlord may pay the lien claim without inquiry as
to the validity thereof, and any amounts so paid, including reasonable
expenses and interest, shall be paid by Tenant to Landlord within ten days
after Landlord has delivered to Tenant an invoice therefor.
USE
9. Tenant shall continuously occupy and use the Premises only for the
Permitted Use and shall comply with all laws, orders, rules, and regulations
relating to the use, condition, and occupancy of the Premises. The Premises
shall not be used for any use which is disreputable or creates extraordinary
fire hazards or results in an increased rate of insurance on the Building or
its contents or the storage of any hazardous materials or substances. If,
because of Tenant's acts, the rate of insurance on the Building or its
contents increases, then Tenant shall pay to Landlord the amount of such
increase on demand, and acceptance of such payment shall not constitute a
waiver of any of Landlord's other rights. Tenant shall conduct its business
and control its agents, employees, and invitees in such a manner as not to
create any nuisance or interfere with other tenants or Landlord in its
management of the Building.
<PAGE> 12
ASSIGNMENT AND
SUBLETTING
10. a. Transfers; Consent. Tenant shall not, without the prior written
consent of Landlord (which consent shall not be unreasonably withheld or
delayed), (i) advertise that any portion of the Premises is available for
lease, (ii) assign, transfer, or encumber this Lease or any estate or
interest herein, whether directly or by operation of law, (iii) permit any
other entity to become Tenant hereunder by merger, consolidation, or other
reorganization, (iv) if Tenant is an entity other than a corporation whose
stock is publicly traded, permit the transfer of an ownership interest in
Tenant so as to result in a change in the current control of Tenant, (v)
sublet any portion of the Premises, (vi) grant any license, concession, or
other right of occupancy of any portion of the Premises, or (vii) permit the
use of the Premises by any parties other than Tenant (any of the events
listed in clauses (ii) through (vii) being a "Transfer"). If Tenant requests
Landlord's consent to a Transfer, then Tenant shall provide Landlord with a
written description of all terms and conditions of the proposed Transfer,
copies of the proposed documentation, and the following information about the
proposed transferee: name and address; reasonably satisfactory information
about its business and business history; its proposed use of the Premises;
banking, financial, and other credit information; and general references
sufficient to enable Landlord to determine the proposed transferee's
creditworthiness and character. Tenant shall reimburse Landlord for its
reasnable attorneys' fees and other expenses incurred in connection with
considering any request for its consent to a Transfer. Landlord shall have a
period of seven (7) calendar days following receipt of such notice within
which to notify Tenant in writing that Landlord either agrees to such
transfer or the basis for Landlord's decision not to approve of such
Transfer. If Landlord consents to a proposed Transfer, then the proposed
transferee shall deliver to Landlord a written agreement whereby it expressly
assumes the Tenant's obligations hereunder; however, any transferee of less
than all of the space in the Premises shall be liable only for obligations
under this Lease that are properly allocable to the space subject to the
Transfer, and only to the extent of the rent it has agreed to pay Tenant
therefor. Landlord's consent to a Transfer shall not release Tenant from
performing its obligations under this Lease, but rather Tenant and its
transferee shall be jointly and severally liable therefor. Landlord's consent
to any Transfer shall not waive Landlord's rights as to any subsequent
Transfers. If an Event of Default occurs while the Premises or any part
thereof are subject to a Transfer, then Landlord, in addition to its other
remedies, may collect directly from such transferee all rents becoming due to
Tenant and apply such rents against Rent. Tenant authorizes its transferees
to make payments of rent directly to Landlord upon receipt of notice from
Landlord to do so.
b. [Intentionally Deleted.]
c. Additional Compensation. Tenant shall pay to Landlord, immediately
upon receipt thereof, 50% of all compensation received by Tenant for a
Transfer that exceeds the Basic Rental and Tenant's share of Electrical Costs
and Excess allocable to the portion of the Premises covered thereby.
INSURANCE;
WAIVERS;
SUBROGATION;
INDEMNITY
11. a. Insurance. Tenant shall at its expense procure and maintain
throughout the Term the following
<PAGE> 13
insurance policies: (i) comprehensive general liability insurance in
amounts of not less than a combined single limit of $5,000,000 (the
"Initial Liability Insurance Amount") or such other amounts as Landlord may
from time to time reasonably require, insuring Tenant, Landlord, and
Landlord's agents against all liability for injury to or death of a person
or persons or damage to property arising from the use and occupancy of the
Premises, (ii) contractual liability insurance coverage sufficient to cover
Tenant's indemnity obligations hereunder, (iii) insurance covering the full
value of Tenant's property and improvements, and other property (including
property of others), in the Premises, and (iv) workman's compensation
insurance, containing a waiver of subrogation endorsement reasonably
acceptable to Landlord. Tenant's insurance shall provide primary coverage
to Landlord when any policy issued to Landlord provides duplicate or
similar coverage, and in such circumstance Landlord's policy will be excess
over Tenant's policy. Tenant shall furnish certificates of such insurance
and such other evidence satisfactory to Landlord of the maintenance of all
insurance coverages required hereunder, and Tenant shall obtain a written
obligation on the part of each insurance company to notify Landlord at
least 30 days before cancellation or a material change of any such
insurance. All such insurance policies shall be in form, and issued by
companies, reasonably satisfactory to Landlord.
b. Waiver of Negligence Claims; No Subrogation. Landlord shall not be
liable to Tenant or those claiming by, through, or under Tenant for any
injury to or death of any person or persons or the damage to or theft,
destruction, loss, or loss of use of any property or inconvenience (a "Loss")
caused by casualty, theft, fire, third parties, or any other matter
(including Losses arising through repair or alteration of any part of the
Building, or failure to make repairs, or from any other cause), regardless of
whether the negligence of any party caused such Loss in whole or in part.
Landlord and Tenant each waives any claim it might have against the other for
any damage to or theft, destruction, loss, or loss of use of any property, to
the extent the same is insured against under any insurance policy that covers
the Building, the Premises, Landlord's or Tenant's fixtures, personal
property, leasehold improvements, or business, or, in the case of Tenant's
waiver, is required to be insured against under the terms hereof, regardless
of whether the negligence or fault of the other party caused such loss;
however, Landlord's waiver shall not include any deductible amounts on
insurance policies carried by Landlord or apply to any coinsurance penalty
which Landlord might sustain. Each party shall cause its insurance carrier to
endorse all applicable policies waiving the carrier's rights of recovery
under subrogation or otherwise against the other party.
c. Indemnity. Subject to Section 11.b, Tenant shall defend, indemnify,
and hold harmless Landlord and its agents from and against all claims,
demands, liabilities, causes of action, suits, judgments, and expenses
(including reasonable attorneys' fees) for any Loss arising from any
occurrence on the Premises or from Tenant's failure to perform its
obligations under this Lease (except to the extent a Loss arises from the
gross negligence or willful misconduct of Landlord or its agents). This
indemnity provision shall survive termination or expiration of this Lease.
Subject to Section 11.b., Landlord shall defend, indemnify, and hold harmless
Tenant and its officers, directors, employees and agents from and against all
claims, demands, liabilities, causes of action, suits,
<PAGE> 14
judgments, and expenses (including reasonable attorneys' fees) for any Loss
arising from Landlord's or its agents' gross negligence or willful
misconduct. This indemnity provision shall survive the termination or
expiration of this Lease.
SUBORDINATION
ATTORNMENT;
NOTICE TO
LANDLORD'S
MORTGAGEE
12. a. Subordination. This Lease shall be subordinate to any deed of
trust, mortgage, or other security instrument (a "Mortgage"), or any ground
lease, master lease, or primary lease (a "Primary Lease"), that now or
hereafter covers all or any part of the Premises (the mortgagee under any
Mortgage or the lessor under any Primary Lease is referred to herein as
"Landlord's Mortgagee").
b. Attornment. Tenant shall attorn to any party succeeding to
Landlord's interest in the Premises, whether by purchase, foreclosure, deed
in lieu of foreclosure, power of sale, termination of lease, or otherwise,
upon such party's request, and shall execute such agreements confirming such
attornment as such party may reasonably request.
c. Notice to Landlord's Mortgagee. Tenant shall not seek to enforce any
remedy it may have for any default on the part of the Landlord without first
giving written notice by certified mail, return receipt requested, specifying
the default in reasonable detail, to any Landlord's Mortgagee whose address
has been given to Tenant, and affording such Landlord's Mortgagee a
reasonable opportunity to perform Landlord's obligations hereunder.
RULES AND
REGULATIONS
13. Tenant shall comply with the rules and regulations of the Building
which are attached hereto as Exhibit B. Landlord may, from time to time,
change such rules and regulations for the safety, care, or cleanliness of the
Building and related facilities, provided that such changes are applicable to
all tenants of the Building and will not unreasonably interfere with Tenant's
use of the Premises. Tenant shall be responsible for the compliance with such
rules and regulations by its employees, agents, and invitees.
CONDEMNATION
14. a. Taking - Landlord's and Tenant's Rights. If any part of the
Building is taken by right of eminent domain or conveyed in lieu thereof (a
"Taking"), and such Taking prevents Tenant from conducting its business in
the Premises in a manner reasonably comparable to that conducted immediately
before such Taking, then Tenant may terminate this Lease as of the date of
such Taking by giving written notice to Landlord within 60 days after the
Taking, and Rent shall be apportioned as of the date of such Taking. If
Tenant does not terminate this Lease, then Rent shall be abated on a
reasonable basis as to that portion of the Premises rendered untenantable by
the Taking.
b. Taking - Landlord's Rights. If any material portion, but less than
all, of the Building becomes subject to a Taking, or if Landlord is required
to pay any of the proceeds received for a Taking to Landlord's Mortgagee,
then this Lease, at the option of Landlord, exercised by written notice to
Tenant within 30 days after such Taking, shall terminate and Rent shall be
apportioned as of the date of such Taking. If Landlord does not so terminate
<PAGE> 15
this Lease, then this Lease will continue, but if any portion of the Premises
has been taken, Basic Rental shall abate as provided in the last sentence of
Section 14.a.
c. Award. If any Taking occurs, then Landlord shall receive the entire
award or other compensation for the Land, the Building, and other
improvements taken, and Tenant may separately pursue a claim against the
condemnor for the value of Tenant's personal property which Tenant is
entitled to remove under this Lease, moving costs, loss of business, and
other claims it may have.
FIRE OR OTHER
CASUALTY
15. a. Repair Estimate. If the Premises or the Building are damaged by
fire or other casualty (a "Casualty"), Landlord shall, within 30 days after
such Casualty, deliver to Tenant a good faith estimate (the "Damage Notice")
of the time needed to repair the damage caused by such Casualty.
b. Landlord's and Tenant's Rights. If a material portion of the
Premises or the Building is damaged by Casualty such that Tenant is prevented
from conducting its business in the Premises in a manner reasonably
comparable to that conducted immediately before such Casualty and Landlord
estimates that the damage caused thereby cannot be repaired within 135 days
after the date of the Casualty, then Tenant may terminate this Lease by
delivering written notice to Landlord of its election to terminate within 30
days after the Damage Notice has been delivered to Tenant. If Tenant does not
terminate this Lease, then (subject to Landlord's rights under Section 15.c)
Landlord shall repair the Building or the Premises, as the case may be, as
provided below, and Rent for the portion of the Premises rendered
untenantable by the damage shall be abated on a reasonable basis from the
date of damage until the completion of the repair, unless Tenant caused such
damage, in which case, Tenant shall continue to pay Rent without abatement.
c. Landlord's Rights. If a Casualty damages a material portion of the
Building, and Landlord makes a good faith determination that restoring the
Premises would be uneconomical, or if Landlord is required to pay any
insurance proceeds arising out of the Casualty to Landlord's Mortgagee, then
Landlord may terminate this Lease by giving written notice of its election to
terminate within 30 days after the Damage Notice has been delivered to
Tenant, and Basic Rental hereunder shall be abated as of the date of the
Casualty.
d. Repair Obligation. If neither party elects to terminate this Lease
following a Casualty, then Landlord shall, within a reasonable time after
such Casualty, commence to repair the Building and the Premises and shall
proceed with reasonable diligence to restore the Building and Premises to
substantially the same condition as they existed immediately before such
Casualty; however, Landlord shall not be required to repair or replace any
part of the furniture, equipment, fixtures, and other improvements which may
have been placed by, or at the request of, Tenant or other occupants in the
Building or the Premises, and Landlord's obligation to repair or restore the
Building or Premises shall be limited to the extent of the insurance proceeds
actually received by Landlord for the Casualty in question.
TAXES
16. Tenant shall be liable for all taxes levied or assessed against
personal property, furniture, or fixtures placed by Tenant in the Premises.
If any taxes for which
<PAGE> 16
Tenant is liable are levied or assessed against Landlord or Landlord's
property or if the assessed value of Landlord's property is increased by
inclusion of such personal property, furniture or fixtures, then Tenant
shall, within ten (10) days after Landlord has delivered notice of such
taxes to Tenant, either pay the amount of such taxes or diligently contest
such taxes and deliver to Landlord a bond or other security reasonably
satisfactory to Landlord. If Tenant fails to timely take either such
action, then Landlord may pay such taxes and Tenant shall pay to Landlord,
upon demand, that part of such taxes for which Tenant is primarily liable
hereunder.
EVENTS OF DEFAULT
17. Each of the following occurrences shall constitute an "Event of
Default":
a. Tenant's failure to pay Rent, or any other sums due from Tenant to
Landlord under the Lease (or any other lease executed by Tenant for space in
the Building), upon the expiration of a period of ten (10) days following
written notice to Tenant of such failure; provided, however, that Landlord
shall not be required to send such written notice to Tenant more than twice
in any one calendar year and after such two (2) written notices, Landlord
shall have no obligation to give Tenant written notice of any subsequent
default during the remainder of such calendar year and Tenant's failure or
refusal to timely pay Rent or other sums hereunder when due during the
remainder of such calendar year shall constitute an Event of Default;
b. Tenant's failure to perform, comply with, or observe any other
agreement or obligation of Tenant under this Lease (or any other lease
executed by Tenant for space in the Building) within 10 days following
written notice thereof to Tenant; provided, however, that in the event
Tenant's failure to perform, comply with, or observe any other agreement or
obligation of Tenant under this Lease cannot reasonably be cured within ten
(10) days following written notice to Tenant, Tenant shall not be in default
if Tenant commences to cure same within the ten (10) day period and
thereafter diligently prosecutes the curing thereof;
c. The filing of a petition by or against Tenant (the term "Tenant"
shall include, for the purpose of this Section 17.c, any guarantor of the
Tenant's obligations hereunder) (i) in any bankruptcy or other insolvency
proceeding; (ii) seeking any relief under any state or federal debtor relief
law; (iii) for the appointment of a liquidator or receiver for all or
substantially all of Tenant's property or for Tenant's interest in this
Lease; or (iv) for the reorganization or modification of Tenant's capital
structure, which petition remains undischarged for a period of sixty (60)
days;
d. Tenant shall desert or vacate any portion of the Premises for a
continuous period in excess of seven (7) days following written notice to
Tenant; provided, however, that such desertion or vacation shall not be a
default pursuant to this Lease so long as (i) Tenant performs all of its
obligations in accordance with this Lease, and (ii) so long as the Premises
are left in good condition and repair and in a clean condition which does not
detract from the appearance of the Building or the Premises; and
e. The admission by Tenant that it cannot meet its obligations as they
become due or the making by Tenant of an assignment for the benefit of its
creditors.
<PAGE> 17
REMEDIES
18. Upon any Event of Default, Landlord may, in addition to all other
rights and remedies afforded Landlord hereunder or by law or equity, take any
of the following actions:
a. Terminate this Lease by giving Tenant written notice thereof, in
which event, Tenant shall pay to Landlord the sum of (i) all Rent accrued
hereunder through the date of termination, (ii) all amounts due under Section
19.a., and (iii) an amount equal to (A) the total Rent that Tenant would have
been required to pay for the remainder of the Term discounted to present
value at a per annum rate equal to the "Prime Rate" as published on the date
this Lease is terminated by The Wall Street Journal, Southwest Edition, in
its listing of "Money Rates", minus (B) the then present fair rental value of
the Premises for such period, similarly discounted; or
b. Terminate Tenant's right to possession of the Premises without
terminating this Lease by giving written notice thereof to Tenant, in which
event Tenant shall pay to Landlord (i) all Rent and other amounts accrued
hereunder to the date of termination of possession, (ii) all amounts due from
time to time under Section 19.a., and (iii) all Rent and other sums required
hereunder to be paid by Tenant during the remainder of the Term, diminished
by any net sums thereafter received by Landlord through reletting the
Premises during such period. Landlord shall use reasonable efforts to relet
the Premises on such terms and conditions as Landlord in its sole discretion
may determine (including a term different from the Term, rental concessions,
and alterations to, and improvement of, the Premises); however, Landlord
shall not be obligated to relet the Premises before leasing other portions of
the Building. Landlord shall not be liable for, nor shall Tenant's
obligations hereunder be diminished because of, Landlord's failure to relet
the Premises or to collect rent due for such reletting. Tenant shall not be
entitled to the excess of any consideration obtained by reletting over the
Rent due hereunder. Reentry by Landlord in the Premises shall not affect
Tenant's obligations hereunder for the unexpired Term; rather, Landlord may,
from time to time, bring action against Tenant to collect amounts due by
Tenant, without the necessity of Landlord's waiting until the expiration of
the Term. Unless Landlord delivers written notice to Tenant expressly stating
that it has elected to terminate this Lease, all actions taken by Landlord to
exclude or dispossess Tenant of the Premises shall be deemed to be taken
under this Section 18.b. If Landlord elects to proceed under this Section
18.b., it may at any time elect to terminate this Lease under Section 18.a.
Additionally, without notice, Landlord may alter locks or other security
devices at the Premises to deprive Tenant of access thereto, and
Landlord shall not be required to provide a new key or right of access to
Tenant.
PAYMENT BY TENANT;
NON-WAIVER
19. a. Payment by Tenant. Upon any Event of Default, Tenant shall pay
to Landlord all reasonable costs incurred by Landlord (including court costs
and reasonable attorneys' fees and expenses) in (i) obtaining possession of
the Premises, (ii) removing and storing Tenant's or any other occupant's
property, (iii) repairing, restoring, altering, remodeling, or otherwise
putting the Premises into condition acceptable to a new tenant, excluding any
costs of tenant improvements, tenant moving allowances or tenant finish work,
(iv) if Tenant is dispossessed of the Premises and this Lease is not
terminated, reletting all or
<PAGE> 18
any part of the Premises (including reasonable brokerage commissions, and
other reasonable costs incidental to such reletting), (v) performing
Tenant's obligations which Tenant failed to perform, and (vi) enforcing, or
advising Landlord of, its rights, remedies, and recourses arising out of
the Event of Default.
b. No Waiver. Landlord's acceptance of Rent following an Event of
Default shall not waive Landlord's rights regarding such Event of Default. No
waiver by Landlord of any violation or breach of any of the terms contained
herein shall waive Landlord's rights regarding any future violation of such
term or violation of any other term.
20. [Intentionally Deleted.]
SURRENDER OF
PREMISES
21. No act by Landlord shall be deemed an acceptance of a surrender of
the Premises, and no agreement to accept a surrender of the Premises shall be
valid unless the same is made in writing and signed by Landlord. At the
expiration or termination of this Lease, Tenant shall deliver to Landlord the
Premises with all improvements located thereon in good repair and condition,
reasonable wear and tear (and condemnation and fire or other casualty damage
not caused by Tenant, as to which Sections 14 and 15 shall control) excepted,
and shall deliver to Landlord all keys to the Premises. Provided that Tenant
has performed all of its obligations hereunder, Tenant may remove all trade
fixtures, furniture, and personal property placed in the Premises by Tenant
(but Tenant shall not remove any such item which was paid for, in whole or in
part, by Landlord). Additionally, Tenant shall remove such alterations,
additions, improvements, trade fixtures, equipment, wiring and furniture as
Landlord may request. Tenant shall repair all damage caused by such removal.
All items not so removed shall be deemed to have been abandoned by Tenant and
may be appropriated, sold, stored, destroyed, or otherwise disposed of by
Landlord without notice to Tenant and without any obligation to account for
such items. The provisions of this Section 21 shall survive the end of the
Term.
HOLDING OVER
22. If Tenant fails to vacate the Premises at the end of the Term, then
Tenant shall be a tenant at will and, in addition to all other damages and
remedies to which Landlord may be entitled for such holding over, Tenant
shall pay, in addition to the other Rent, a daily Basic Rental equal to the
greater of (a) 135% of the daily Basic Rental payable during the last month
of the Term, or (b) the prevailing market rental rate in the Building for
similar space.
CERTAIN RIGHTS
RESERVED BY
LANDLORD
23. Provided that the exercise of such rights does not unreasonably
interfere with Tenant's occupancy and quiet enjoyment of the Premises,
Landlord shall have the following rights:
a. To make reasonable inspections, repairs, alterations, additions,
changes, or improvements, whether structural or otherwise, in and about the
Building, or any part thereof; for such purposes, to enter upon the Premises
and, during the continuance of any such work, to temporarily close doors,
entryways, public space, and corridors in the Building; to interrupt or
temporarily suspend Building services and facilities; and to change the
arrangement and location of entrances or passageways, doors, and doorways,
corridors, elevators, stairs, restrooms, or other public parts of the
Building;
<PAGE> 19
b. To take such reasonable measures as Landlord deems advisable for the
security of the Building and its occupants, including without limitation
searching all persons entering or leaving the Building; evacuating the
Building for cause, suspected cause, or for drill purposes; temporarily
denying access to the Building; and closing the Building after normal
business hours and on Saturdays, Sundays, and holidays, subject, however, to
Tenant's right to enter when the Building is closed after normal business
hours under such reasonable regulations as Landlord may prescribe from time
to time which may include by way of example, but not of limitation, that
persons entering or leaving the Building, whether or not during normal
business hours, identify themselves to a security officer by registration or
otherwise and that such persons establish their right to enter or leave the
Building;
c. To change the name by which the Building is designated; and
d. To enter the Premises at all reasonable hours after reasonable prior
notice (which notice may be oral or written) to show the Premises to
prospective purchasers, lenders, or tenants.
24. [Intentionally Deleted.]
MISCELLANEOUS
25. a. Landlord Transfer. Landlord may transfer, in whole or in part,
the Building and any of its rights under this Lease. If Landlord assigns its
rights under this Lease and the transferee assumes all obligations of
Landlord hereunder, then Landlord shall thereby be released from any further
obligations hereunder.
b. Landlord's Liability. The liability of Landlord to Tenant for any
default by Landlord under the terms of this Lease shall be limited to
Tenant's actual direct, but not consequential, damages therefor and shall be
recoverable from the interest of Landlord in the Building and the Land, and
Landlord shall not be personally liable for any deficiency. This section
shall not be deemed to limit or deny any remedies which Tenant may have in
the event of default by Landlord hereunder which do not involve the personal
liability of Landlord.
c. Force Majeure. Other than for Tenant's monetary obligations under
this Lease and obligations which can be cured by the payment of money (e.g.,
maintaining insurance), whenever a period of time is herein prescribed for
action to be taken by either party hereto, such party shall not be liable or
responsible for, and there shall be excluded from the computation for any
such period of time, any delays due to strikes, riots, acts of God, shortages
of labor or materials, war, governmental laws, regulations, or restrictions,
or any other causes of any kind whatsoever which are beyond the control of
such party.
d. Brokerage. Except for Crawford & Co. and Trammell Crow Dallas/Ft.
Worth, Inc., who shall be paid by Landlord pursuant to separate agreements,
Landlord and Tenant each warrant to the other that it has not dealt with any
broker or agent in connection with the negotiation or execution of this
Lease. Tenant and Landlord shall each indemnify the other against all
reasonable costs, expenses, attorneys' fees, and other liability for
commissions or other compensation claimed by any broker or agent claiming the
same by, through, or under the indemnifying party.
<PAGE> 20
e. Estoppel Certificates. From time to time, Tenant shall furnish to
any party designated by Landlord, within ten days after Landlord has made a
request therefor, a certificate signed by Tenant confirming and containing
such factual certifications and representations as to this Lease as Landlord
may reasonably request.
f. Notices. All notices and other communications given pursuant to this
Lease shall be in writing and shall be (i) mailed by first class, United
States Mail, postage prepaid, certified, with return receipt requested, and
addressed to the parties hereto at the address specified in the Basic Lease
Information, (ii) hand delivered to the intended address, or (iii) sent by
prepaid telegram, cable, facsimile transmission, or telex followed by a
confirmatory letter. Notice sent by certified mail, postage prepaid, shall be
effective three business days after being deposited in the United States
Mail; all other notices shall be effective upon delivery to the address of
the addressee. The parties hereto may change their addresses by giving notice
thereof to the other in conformity with this provision.
g. Separability. If any clause or provision of this Lease is illegal,
invalid, or unenforceable under present or future laws, then the remainder of
this Lease shall not be affected thereby and in lieu of such clause or
provision, there shall be added as a part of this Lease a clause or provision
as similar in terms to such illegal, invalid, or unenforceable clause or
provision as may be possible and be legal, valid, and enforceable.
h. Amendments; and Binding Effect. This Lease may not be amended except
by instrument in writing signed by Landlord and Tenant. No provision of this
Lease shall be deemed to have been waived by Landlord unless such waiver is
in writing signed by Landlord, and no custom or practice which may evolve
between the parties in the administration of the terms hereof shall waive or
diminish the right of Landlord to insist upon the performance by Tenant in
strict accordance with the terms hereof. The terms and conditions contained
in this Lease shall inure to the benefit of and be binding upon the parties
hereto, and upon their respective successors in interest and legal
representatives, except as otherwise herein expressly provided. This Lease is
for the sole benefit of Landlord and Tenant, and, other than Landlord's
Mortgagee, no third party shall be deemed a third party beneficiary hereof.
i. Quiet Enjoyment. Provided Tenant has performed all of the terms and
conditions of this Lease to be performed by Tenant, Tenant shall peaceably
and quietly hold and enjoy the Premises for the Term, without hindrance from
Landlord or any party claiming by, through, or under Landlord, subject to the
terms and conditions of this Lease.
j. Joint and Several Liability. If there is more than one Tenant, then
the obligations hereunder imposed upon Tenant shall be joint and several. If
there is a guarantor of Tenant's obligations hereunder, then the obligations
hereunder imposed upon Tenant shall be the joint and several obligations of
Tenant and such guarantor, and Landlord need not first proceed against Tenant
before proceeding against such guarantor nor shall any such guarantor be
released from its guaranty for any reason whatsoever.
k. Captions. The captions contained in this Lease are for convenience
of reference only, and do not limit or enlarge the terms and conditions of
this Lease.
<PAGE> 21
l. No Merger. There shall be no merger of the leasehold estate hereby
created with the fee estate in the Premises or any part thereof if the same
person acquires or holds, directly or indirectly, this Lease or any interest
in this Lease and the fee estate in the leasehold Premises or any interest in
such fee estate.
m. No Offer. The submission of this Lease to Tenant shall not be
construed as an offer, nor shall Tenant have any rights under this Lease
unless Landlord executes a copy of this Lease and delivers it to Tenant.
n. Tax Protest. Except for taxes set forth in Section 16, Tenant has no
right to protest the real estate tax rate assessed against the Project and/or
the appraised value of the Project determined by any appraisal review board
or other taxing entity with authority to determine tax rates and/or appraised
values (each a "Taxing Authority"). Tenant hereby knowingly, voluntarily and
intentionally waives and releases any right, whether created by law or
otherwise, to (a) file or otherwise protest before any Taxing Authority any
such rate or value determination even though Landlord may elect not to file
any such protest; (b) receive, or otherwise require Landlord to deliver, a
copy of any reappraisal notice received by Landlord from any Taxing
Authority; and (c) appeal any order of a Taxing Authority which determines
any such protest. The foregoing waiver and release covers and includes any
and all rights, remedies and recourse of Tenant, now or at any time
hereafter, under Section 41.413 and Section 42.015 of the Texas Tax Code (as
currently enacted or hereafter modified) together with any other or further
laws, rules or regulations covering the subject matter thereof. Tenant
acknowledges and agrees that the foregoing waiver and release was bargained
for by Landlord and Landlord would not have agreed to enter into this Lease
in the absence of this waiver and release. If, notwithstanding any such
waiver and release, Tenant files or otherwise appeals any such protest, then
Tenant will be in default under this Lease and, in addition to Landlord's
other rights and remedies, Tenant must pay or otherwise reimburse Landlord
for all reasonable costs, charges and expenses incurred by, or otherwise
asserted against, Landlord as a result of any tax protest or appeal by
Tenant, including, reasonable appraisal costs, tax consultant charges and
attorneys' fees (collectively, the "Tax Protest Costs"). If, as a result of
Tenant's tax protest or appeal, the appraised value for the Project is
increased above that previously determined by the Taxing Authority (such
increase, the "Value Increase") for the year covered by such tax protest or
appeal (such year, the "Protest Year"), then Tenant must pay Landlord, in
addition to all Tax Protest Costs, an amount (the "Additional Taxes") equal
to the sum of the following: (i) the product of the Value Increase multiplied
by the tax rate in effect for the Protest Year; plus (ii) the amount of
additional taxes payable during the five (5) year period following the
Protest Year, such amount to be calculated based upon the Value Increase
multiplied by the tax rate estimated to be in effect for each year during
such five (5) year period. Tenant must pay all Additional Taxes - even those
in excess of Tenant's proportionate share and which may relate to years
beyond the term of this Lease. The Additional Taxes will be conclusively
determined by a tax consultant selected by Landlord, without regard to
whether and to what extent Landlord may be able in years following the
Protest Year to reduce or otherwise eliminate any Value Increase. All Tax
Protest Costs and Additional Taxes must be paid by Tenant within five (5)
days following written demand by Landlord.
<PAGE> 22
o. Exhibits. All exhibits and attachments attached hereto are
incorporated herein by this reference.
Exhibit A - Outline of Premises
Exhibit B - Building Rules and Regulations
Exhibit C - Operating Expense Escalator
Exhibit D - Tenant Finish Work: Allowance
Exhibit E - Parking
Exhibit F - Extension Option
Exhibit G - Tenant's Preferential Right to
Lease
Exhibit H - Areas A and B
p. Entire Agreement. This Lease constitutes the entire agreement
between Landlord and Tenant regarding the subject matter hereof and
supersedes all oral statements and prior writings relating thereto. Except
for those set forth in this Lease, no representations, warranties, or
agreements have been made by Landlord or Tenant to the other with respect to
this Lease or the obligations of Landlord or Tenant in connection therewith.
SPECIAL PROVISIONS
26. a. Moving Allowance. Landlord shall pay to Tenant a moving
allowance equal to those costs and expenses which are actually incurred by
Tenant if such costs and expenses are due and payable to third parties and
are necessary to effectuate Tenant's relocation to the Premises; provided,
however, that Landlord shall not be obligated to pay an amount in excess of
the product of (i) the number of rentable square feet in the Premises
multiplied by (ii) $3.00. Such allowance shall be due and payable 30 days
after Tenant's delivery to Landlord of the paid invoices evidencing such
expense. In the event the moving expenses do not exceed the moving allowance,
Tenant may use such excess moving allowance to pay for the costs of
constructing the Work (as defined in Exhibit D hereof).
b. Lobby Improvements. Landlord shall re-paint and re-carpet the
elevator lobby on the 36th floor of the Building with matching paint and
carpet which Tenant selects with respect to the Premises, provided that
Landlord determines, in its sole discretion, that such paint and carpet
selected by Tenant is appropriate for a class A office building multi-tenant
elevator lobby.
c. Refurbishment Allowance. Provided there is then no uncured Event of
Default, upon the expiration of the seventh year of the Term of the Lease,
Landlord shall provide Tenant with a refurbishment allowance (the
"Refurbishment Allowance") in an amount equal to the product of $5.00
multiplied by the number of rentable square feet of area then in the
Premises, to improve and refurbish the Premises pursuant to plans and
specifications approved by Landlord and Tenant and such refurbishment work to
be performed by contractors approved by Landlord and Tenant. The
Refurbishment Allowance shall not be disbursed to Tenant in cash, but shall
be paid by Landlord if, as, and when such costs are actually incurred.
EXCEPT AS EXPRESLLY SET FORTH TO THE CONTRARY IN THIS LEASE, LANDLORD AND
TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE
SUITABLE FOR TENANT'S INTENDED COMMERCIAL PURPOSE, AND TENANT'S OBLIGATION
TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES
OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT,
WITHOUT ABATEMENT, SETOFF, DEDUCTION, NOTWITHSTANDING ANY BREACH BY
LANDLORD OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR
IMPLIED.
<PAGE> 23
DATED as of the date first above written.
<TABLE>
<CAPTION>
LANDLORD: TENANT:
- -------- ------
<S> <C>
THE EQUITABLE-NISSEI DALLAS COMPANY, FIBREBOARD CORPORATION,
a joint venture a Delaware corporation
By: The Equitable Life Assurance By:_________________________
Society of the United States, Name:_______________________
a New York corporation, Title:______________________
its Managing Venturer
By:___________________________
Name:_________________________
Title:________________________
</TABLE>
<PAGE> 24
"Acquisition" shall mean the acquisition described in the Acquisition
Agreement.
"Acquisition Agreement" shall mean the Stock Purchase Agreement, dated
September 1, 1998, by and among Parent, Administrator and Vimla Bhooshan, John
B. DeGrazia, Edwin Goldstein, Paul T. Lubar, Calvin D. Neithamer, William P.
O'Grady, Robert A. Olshaker, Stanley M. Perl, Michael S. Usher, Alan J.
Kronthal, Steven A. Meyers, Victor A. Bracey, and Larry W. Busching, and those
certain Asset Purchase Agreements, dated September 1, 1998, by and among
Parent, Ormond Imaging Partners, Inc. and (i) Magnetic Resonance Imaging
Associates Limited Partnership and Paul T. Lubar, Stanley M. Perl, Michael S.
Usher, John B. DeGrazia, Larry W. Busching, Vimla Bhooshan, William P. O'Grady,
Robert A. Olshaker, and Calvin D. Neithamer and (ii) Duke Associates Limited
Partnership and Paul T. Lubar, Stanley M. Perl, Michael S. Usher, John B.
DeGrazia, William P. O'Grady, Calvin D. Neithamer, Vimla Bhooshan, Robert A.
Olshaker, Edwin Goldstein, and Larry W. Busching.
"Acquisition Consideration" shall mean the Parent Common Stock and
other consideration furnished pursuant to the Acquisition Agreement by Parent
in connection with the Acquisition.
"Acquisition Effective Date" shall mean the date the Acquisition is
effective pursuant to the terms of the Acquisition Agreement.
"Adjustments" shall mean any adjustments on an accrual basis for
uncollectible accounts receivable or discounts and allowances, including but
not limited to, Medicare and Medicaid disallowances or other third-party
contractual allowances, workers' compensation, employee/dependent health care
benefit programs, professional courtesies, and other activities to the extent
they do not generate a collectible fee or offset a fee previously recorded.
"Administrator" shall have the meaning set forth in the first
paragraph hereof.
"Administrator Account" shall have the meaning set forth in Section
3.2(b)(ii).
"Administrator Expenses" shall mean, as determined pursuant to GAAP
applied on a consistent basis, any expenses of Administrator or Parent or any
of their Affiliates not incurred specifically for providing services to the
Practice including, without limitation: (i) any legal, accounting or other
professional expenses incurred by Administrator, Parent or any of their
Affiliates including those in connection with the Acquisition, (ii) any
expenses pertaining to the coordination of qualified retirement and benefit
plans of the Group, Parent, Administrator and their Affiliates incurred by
Administrator, Parent or any of their Affiliates in connection with the
Acquisition and pertaining to the transfer of Group's employees to
Administrator or Parent as a result of the Acquisition; and (iii) all taxes of
Administrator, Parent or any Affiliate not incurred on behalf of Practice
including, without limitation, income taxes of Administrator, Parent or any
Affiliate (but specifically excluding any sales and use taxes related to the
Practice which shall be a Practice Expense).
2
<PAGE> 25
EXHIBIT 10.43
SUBLEASE AGREEMENT
This Agreement of Sublease ("Sublease"), made as of the 13th day of July, 1998,
by and between FIBREBOARD CORPORATION, a Delaware Corporation, One Owens
Corning Parkway, Toledo, Ohio (hereinafter referred to as "Sublessor") and
AMERICAN PHYSICIAN PARTNERS, INC., a Delaware corporation, 2301 NationsBank
Plaza, 901 Main Street, Dallas, Texas 75202-3721 (hereinafter referred to as
"Sublessee").
W I T N E S S E T H:
WHEREAS, The Equitable - Nissei Dallas Company, a joint venture, as Lessor
("Lessor") and Fibreboard Corporation, as Lessee, entered into that certain
lease (the "Lease") dated June 10, 1996 regarding 2200 Ross Avenue, Suite 3600,
Dallas, Texas (the "Premises");
WHEREAS, the Lease is attached hereto as Exhibit A hereof and is hereinafter
referred to as the "Dominant Lease"; and
WHEREAS, the Lessor and the Lessee entered into that certain First Amendment of
Lease dated April 17, 1997, pursuant to which Lessee leased from Lessor an
additional 5,321 square feet of rentable area at 2200 Ross Avenue, Suite 3600,
Dallas, Texas, and, as a result, the "Subleased Premises," as defined and used
herein, includes the additional 5,321 square feet so that the "Subleased
Premises" consists of approximately 25,812 square feet of rentable area located
on the 36th Floor of 2200 Ross Avenue; and
WHEREAS, Sublessor is desirous of subletting to Sublessee the Subleased
Premises;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual promises
hereinafter made and other good and valuable consideration, the parties agree
as follows:
1. SUBLEASE OF SUBLEASED PREMISES. Sublessor, in consideration of the
sub-rents to be paid and the agreements to be performed by Sublessee,
and subject to and upon all of the terms and conditions hereof, does
hereby sublease to Sublessee, and Sublessee hereby Subleases from
Sublessor, the Subleased Premises. Sublessee shall use the Subleased
Premises only as is permitted in Section 9 of the Dominant Lease.
2. TERM. The term of this Sublease ("Term") shall be for a period of one
hundred fifty-seven (157) months commencing on August 1, 1998 (the
"Commencement Date") and ending August 31, 2011 ("Expiration Date").
3. NET RENT. Sublessee shall pay to Sublessor monthly rent in advance, on
the first day of each month during the Term, in accordance with the
Rent Schedule attached hereto as Exhibit B. Rent under this Sublease
shall be paid without deduction or set-off, except to the extent
allowed "Lessee" in the Dominant Lease, in which event there shall be
a dollar-for-dollar reduction in the amount of rent payable hereunder
during any period of the Term when rent is not payable by Sublessor
thereunder. Prior to the Commencement Date, Sublessor shall permit
Sublessee without payment of rent to have access (with keys) and to
occupy for the purpose of inspecting the Subleased Premises and, at
Sublessee's expense and risk, the Subleased Premises (i) to begin work
on cabling and other computer-related
<PAGE> 26
installation; (ii) to move certain personalty of Sublessee's into the
Subleased Premises; and (ii) for storage use and fixturing prior to
the Commencement Date. Should the Commencement Date occur on other
than the 1st day of a calendar month or should the Expiration Date
occur on any day except the last day of a calendar month, the monthly
rent for that month shall be prorated based on the number of days
Sublessee actually occupies the Subleased premises. Upon Commencement
Date, Sublessee shall have the right to fully occupy the entire
Subleased Premises consisting of 25,812 rentable square feet;
provided, however, Sublessee intends, and shall have the right, to
advertise for and subsublease the approximately 5,300 square foot
portion of the Subleased Premises which has its own separate entrances
and exits (the "5,300 feet"). Any rentals received by Sublessee from
the 5,300 Feet from any subsubtenant shall belong solely to Sublessee,
notwithstanding anything to the contrary contained in this Sublease or
the Dominant Lease.
4. ADDITIONAL RENTAL.
A) Sublessee shall also pay to Sublessor monthly as additional
rental the amount of electrical costs charged to Sublessor
pursuant to Section 4.C. of the Dominant Lease.
B) Sublessee shall also pay to Sublessor monthly as additional
rent all operating expense escalations charged to Sublessor
pursuant to Exhibit C of the Dominant Lease.
C) Notwithstanding anything contained in this Sublease or in the
Dominant Lease to the contrary, Sublessee shall not be
responsible for the payment of any additional rentals to the
Sublessor for the period of September 1, 1998 through November
30, 1999.
5. SECURITY DEPOSIT. On the date of execution of this Sublease by
Sublessee, there shall be due and payable by Sublessee to Sublessor a
Security Deposit in an amount equal to $79,587.00 to be held by
Sublessor for the performance by Sublessee of Sublessee's covenants
and obligations under this Sublease and Dominant Lease. Upon the
confirmed occurrence of any event of default by Sublessee, Sublessor
may, from time to time, without notice or prejudice to any other
remedy, use said Security Deposit to the extent necessary to make good
any arrears of rent or any other damage, injury, expense or liability
caused to Sublessor by such default or misuse. Any remaining balance
of Security Deposit shall be returned to Sublessee at the end of the
first four (4) years of the Term if there is then no default
hereunder, and otherwise upon satisfactory compliance with the terms
herein, inspection and acceptance by Sublessor of the vacated
Subleased Premises.
6. INCORPORATION AND OBSERVANCE OF DOMINANT LEASE. Sublessee accepts,
assumes and agrees to perform and be bound by all the terms, covenants
and conditions of the Dominant Lease which obligate the "Lessee"
thereunder unless this Sublease expressly provides for terms,
covenants or conditions which conflict with those of the "Lessee"
under the Dominant Lease; all terms of the Dominant Lease being
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<PAGE> 27
incorporated herein by reference as though fully set forth herein.
Sublessor agrees to exert reasonable efforts to obtain the performance
of all the covenants of the "Lessor" pursuant to the provisions of
said Dominant Lease. In the event of conflict between the terms of
this Sublease and those of the Dominant Lease, as between the
Sublessor and Sublessee, the terms of this Sublease Agreement shall
control.
7. INSURANCE. Sublessee agrees to keep the Subleased Premises insured
with a reputable insurance company pursuant to a Tenants Comprehensive
General Liability Insurance policy with a minimum limit of $1,000,000
and All Risk Property policy insuring the contents contained within
the Premises. Such policies shall name Sublessor and Lessor as their
interests may appear, as additional insureds under the policies and
Sublessee shall provide Sublessor with a certificate evidencing such
insurance. The policies shall contain an agreement by the insurer
that such policies cannot be canceled or materially changed without at
least thirty (30) day's prior written notice to Sublessor.
8. DEFAULT. In addition to any default incorporated herein pursuant to
Paragraph 6 above, Sublessee shall be in default under this Sublease
if (a) Sublessee shall fail to pay, except as otherwise expressly
provided herein, when due any monthly rent payment within the time and
subject to the conditions applicable to Sublessor under the Dominant
Lease; or (b) Sublessee shall fail to perform any of its other
obligations under this Sublease after the same should have been
performed in accordance with the terms hereof within the time and
subject to the conditions applicable to Sublessor under the Dominant
Lease.
9. REMEDIES. If Sublessee shall be in default hereunder after having
been given notice of the existence of such default but with Sublessee
not having cured such default within thirty (30) days after receipt of
such notice, in addition to any other remedies that may be available
to Sublessor at law or in equity, Sublessor shall have the right to
immediately terminate this Sublease by written notice thereof to
Sublessee. In such event, Sublessee shall immediately quit and
surrender the Subleased Premises upon the date set forth in such
notice.
10. INDEMNITY. Sublessee shall indemnify and hold harmless Sublessor and
Sublessor's affiliates, and their respective directors, officers,
shareholders, employees, representatives and agents, from and against
any and all damages, losses, costs, claims, liabilities and expense
(including, without limitation, reasonable attorney's fees and
disbursements) incurred in connection with or otherwise arising from
(a) the occupancy and use of the Subleased Premises by Sublessee; and
(b) the breach or default by Sublessee of any of its obligations or
duties hereunder.
11. CONDITION OF SUBLEASED PREMISES AND ALTERATIONS. Sublessor Shall
deliver the Subleased Premises to Sublessee clean and free of debris
on the Commencement Date. Sublessor has no duty to construct or
improve the Subleased Premises and the Sublease Premises shall be
taken by Sublessee "As Is".
-3-
<PAGE> 28
12. SURRENDER OF SUBLEASED PREMISES. Subject to the requirements of
Section 6 above, at the termination of this Sublease, by lapse of time
or otherwise, Sublessee shall deliver up the Subleased Premises to
Sublessor in as good condition as existed on the date of possession by
Sublessee, ordinary wear and tear only excepted. Upon such
termination of this Sublease, Sublessor shall have the right to
re-enter and resume possession of the Subleased Premises.
13. ALTERATIONS TO SUBLEASED PREMISES. The Sublessee may, with the prior
written consent of the Sublessor and the Lessor, which consent shall
not be unreasonably withheld by the Sublessor and subject to the terms
of the Dominant Lease, at any time and from time to time during the
Term of this Sublease, make such changes and alterations, structural
or otherwise, to the Subleased Premises as the Sublessee shall deem
necessary or desirable in its sole discretion in connection with the
operation of Sublessee's business; provided that:
A) No change or alteration shall materially weaken, either
temporarily or permanently, the structure of the Subleased
Premises or, when completed, be of such character as to:
i) affect adversely the value of the Subleased Premises
in a material manner;
ii) reduce the cubic content of the Building; or
iii) reduce the general utility of the Subleased Premises.
B) Full sets of plans and specifications for any such changes and
alterations shall be supplied to the Sublessor and the Lessor.
C) Any interior or exterior structural alterations to the
Subleased Premises which are performed, or caused to be
performed, by the Sublessee shall become at once a part of the
realty and belong to Lessor. Lessor under the Dominant Lease
may, however, at its discretion, require that any such
alterations be removed upon surrender of the Subleased
Premises by the Sublessee, without expense to Sublessor or to
Lessor, and that the Subleased Premises be restored to its
condition, as it existed prior to such alteration at
Sublessee's sole cost and expense. Sublessee shall own and
retain title to all other leasehold improvements, moveable
furniture, trade fixtures, furnishings and equipment,
including those presently existing in the Subleased Premises
(collectively, the "Personalty"), providing Sublessee is not
in default under the terms of the Agreements. Sublessee shall
be responsible for all personal property taxes with respect to
the Personalty from and after the effective date of this
Sublease, with such taxes prorated for the 1998 tax year.
D) Any such alteration or change must be completed in a
professional and workmanlike manner, and must be completed in
full compliance with all applicable laws, regulations and
building codes.
14. HOLDOVER. If this Sublease is terminated for any reason and Sublessee
fails or refuses to vacate the Subleased Premises within five (5) days
of such termination, Sublessor, in
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<PAGE> 29
addition to any other remedies available to it, shall be entitled to
receive 135% of the rental due during the period in which Sublessee
remains on the Subleased Premises in violation of this provision.
There are no renewal options granted to Sublessee hereunder or under
the Dominant Lease.
15. BROKERS. Only Fischer & Company was instrumental in arranging this
Sublease, and Sublessee indemnifies and holds harmless Sublessor and
Lessor from any claim for commission by any other broker, and
Sublessor is solely responsible for any commission due to Fischer &
Company as a result of this Sublease.
16. NOTICES. All notices required or permitted to be given hereunder
shall be given in writing and, if not delivered by hand, shall be
deposited, either registered or certified, in the United States mail,
postage prepaid, and addressed to Sublessor or Sublessee, as the case
may be, at its above address.
17. HAZARDOUS MATERIALS. SUBLESSEE SHALL NOT CONDUCT ANY ACTIVITIES ON OR
ABOUT THE SUBLEASED PREMISES WHICH RESULT IN THE GENERATION, STORAGE
OR RELEASE OF ANY TOXIC, HAZARDOUS OR SIMILAR SUBSTANCES (AS SUCH
TERMS MAY BE DEFINED FROM TIME TO TIME BY ANY FEDERAL, STATE OR LOCAL
LAW, RULE OR REGULATION). SUBLESSEE SPECIFICALLY AGREES TO INDEMNIFY,
DEFEND AND HOLD SUBLESSOR AND LESSOR HARMLESS FROM AND AGAINST ANY AND
ALL CLAIMS, DAMAGES, LIABILITIES AND LOSES ARISING AS A RESULT OF
SUBLESSEE'S BREACH OF THE FOREGOING PROHIBITION.
18. ASSIGNMENT. Sublessee shall not assign this Sublease nor sublet all
or any part of the Subleased Premises without the prior written
consent of Sublessor, which consent shall not be unreasonably
withheld; provided that, Sublessee may sublet subject to the terms,
covenants and conditions of this Sublease all or any part of the 5,300
feet, provided Sublessee remains obligated to Sublessor for the rental
and other obligations of Sublessee hereunder respecting the 5,300
Feet. With respect to any proposed subletting, Sublessee shall notify
Sublessor in writing at least forty-five (45) days prior to the
proposed commencement date of the new tenant's occupancy, and identify
the tenant, the nature of the tenant's business and the proposed use
of the new tenant's space. Sublessor shall approve or disapprove of
the proposed subletting in writing within fifteen (15) days after
receipt of Sublessee's notice. However, Sublessor shall have the
right, at any time, to assign this Sublease to any other party without
the consent of Sublessee.
19. LESSOR'S CONSENT. Sublessor and Sublessee each acknowledge and agree
that this Sublease is subject to the Sublessor obtaining the prior
written consent of Lessor in accordance with the terms of the Dominant
Lease. Such written consent shall be accompanied by the Lessor's
acknowledgment that there are no defaults by or offsets against
Sublessor under the Dominant Lease. In the event that such consent is
not obtained within thirty (30) days following the date hereof, but in
any event prior to the Commencement Date, this Sublease shall
terminate and neither party shall have any liability to the other
hereunder.
-5-
<PAGE> 30
20. SUBLESSOR'S OBLIGATIONS. Sublessor agrees during the Term to:
A) Promptly provide Sublessee any notice or other communications
respecting the Dominant Lease received by Sublessor from
Landlord or any mortgagee of Landlord.
B) Cooperate with and assist Sublessee to perform Sublessee's
obligations under the Dominant Lease in any endeavor, such as
in the event of condemnation or casualty proceeds, wherein
Sublessor's participation is necessary in Sublessor's name
either under the Dominant Lease or by law.
21. SUBLESSOR'S REPRESENTATIONS. Sublessor represents that:
A) Sublessor will pay any amounts to be paid to Landlord under
subparagraph 10.a. of the Dominant Lease.
B) Sublessor will indemnify Sublessee for damages resulting from
Sublessor's default under the Dominant Lease through no fault
of Sublessee, including but not limited to, Sublessor's acts
or omissions of the type specified in subparagraph 11.c. of
the Dominant Lease.
C) This Sublease does not violate the terms of any mortgage
encumbering the Premises, those of any agreement between
Sublessor and any mortgagee of Landlord, nor those of any
other agreement with any other creditor of Sublessor's holding
a lien against or a security interest in the Premises.
D) All payments due and owing under the Dominant Lease have been
made, and Sublessor is not in default thereunder.
E) It will provide Sublessee by the Commencement Date an estoppel
letter from Lessor, specifying the address for monthly rent
due hereunder, approving this Sublease, and acknowledging that
so long as Sublessee is not in default hereunder, a default
under the Dominant Lease by Sublessor will not result in the
termination of Sublessee's tenancy so long as Sublessee
attorns to Lessor under the terms hereof.
F) The Subleased Premises comply with the Americans With
Disabilities Act.
22. SUBLESSEE'S RIGHT TO TERMINATE. Sublessee shall have the same rights
to terminate this Sublease as Sublessor would have under the Dominant
Lease for Landlord's acts or omissions as are specified in the
Dominant Lease or as otherwise provided to Sublessor by Law.
-6-
<PAGE> 31
23. REFURBISHMENT AND CONSTRUCTION ALLOWANCE. On the seventh (7th)
anniversary of the Commencement Date of the Dominant Lease, Sublessor
shall pay to Sublessee a lump sum of $102,455.00 in cash as an
allowance to refurbish the Subleased Premises, as such sum becomes
available to Sublessor under the Dominant Lease and any amendments
thereto. In addition, from and after the Commencement Date of this
Sublease, Sublessor shall make available the sum of $53,210 to
Sublease as a construction allowance to be disbursed to Sublessee from
time to time during the Term of this Sublease (if not utilized within
the first six months after the Commencement Date by Sublessee) for
Sublessee's improvements to the Subleased Premises.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
-7-
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
the day and year first above written.
SUBLESSOR: FIBREBOARD CORPORATION
By:
------------------------------------------
Title:
---------------------------------------
Date:
----------------------------------------
SUBLESSEE: AMERICAN PHYSICIAN PARTNERS, INC.
By:
------------------------------------------
Title:
---------------------------------------
Date:
----------------------------------------
LESSOR: The EQUITABLE-NISSEI DALLAS COMPANY, a
joint venture
By:
------------------------------------------
Title:
---------------------------------------
Date:
----------------------------------------
-8-
<PAGE> 33
"Affiliate" with respect to any person shall mean a person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such person. Neither
Administrator nor the Group is deemed to be an Affiliate of the other.
"Agreement" shall mean this Service Agreement, as amended from time to
time.
"Allocable Expenses" shall mean those Practice Expenses which are
attributable in part to both Technical Expenses and Professional Expenses, and
which shall be allocated as provided in Exhibit 1.1 attached hereto.
"APPM Group" shall mean Administrator, Parent and their Affiliates and
all professional associations or corporations or other entities to which
Administrator, Parent, or their Affiliates provide management services.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidential and Proprietary Information" shall have the meaning set
forth in Section 6.1(d).
"Deposit Account" shall mean the bank account established for the
Group to deposit any and all payments intended for the payment of global fees,
professional fees and technical fees related to the Practice.
"ERISA" shall have the meaning set forth in Section 4.9.
"Excluded Practice Expenses" shall mean, as determined pursuant to
GAAP applied on a consistent basis: (i) any salaries, benefits, payroll taxes,
or other distributions made to Group Physician Stockholders, Physician
Employees and Physician Extender Employees; (ii) any federal, state or other
income taxes applicable to the Group; (iii) all professional related expenses
of the physicians, including but not limited to, professional meetings,
seminars, dues and subscriptions other than such seminars or meetings that
Administrator or Parent requests that any Physician Employees or Physician
Extender Employees attend; (iv) all costs and expenses associated with the
performance of professional services to or for the benefit of the Group by
legal, accounting, investment, financial or other advisors specifically
retained by the Group including, without limitation, all such costs and
expenses incurred by the Group in connection with the Acquisition; and (v) such
other professional expenses incurred by the Practice which are not Practice
Expenses or Administrator Expenses.
"Fair Market Value" shall mean as to any asset, the fair market value
of such asset as mutually determined by an Independent Financial Expert
selected by Administrator and an Independent Financial Expert selected by the
Group, provided further that in the event that the Independent Financial
Experts selected by Administrator and the Group cannot agree on the Fair Market
Value within ninety (90) days prior to the Purchase Closing then the two (2)
Independent Financial Experts shall mutually select a third Independent
Financial Expert to determine the Fair Market Value which determination shall
be binding on the parties hereto. Each such Independent
3
<PAGE> 34
Financial Expert may use any customary and generally accepted method of
determining fair market values, and shall take into account the effect of any
liabilities, liens, claims or encumbrances that may reasonably be expected to
have an effect on the Fair Market Value. The cost of any Independent Financial
Experts retained by any person hereunder shall be paid one-half by
Administrator and one-half by the Group.
"Full-time Physician Employee" shall mean any Physician Employee who
would be eligible to participate in any qualified employee benefit plan of the
Group.
"GAAP" shall mean generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board and Securities and
Exchange Commission or their respective successors.
"Group" shall have the meaning set forth in the first paragraph
hereof.
"Group Account" shall mean the bank account established by the Group
solely for the benefit of the Group and into which Administrator shall deposit
the residual amounts to which the Group is entitled following the application
of the priority of payments set forth in Section 7.6 below.
"Group Physician Stockholders" shall mean those Physician Employees
and Physician Extender Employees who own an interest, directly or indirectly,
in the equity capital of the Group.
"HCFA" shall mean the Health Care Financing Administration or any
successor.
"Independent Financial Expert" shall mean any nationally-recognized
accounting or investment banking firm regularly engaged in the business of
evaluating assets of medical practices and associated businesses which (i) does
not (and whose directors, officers, employees, Affiliates or stockholders do
not) have a material direct or indirect financial interest in Administrator,
Parent or any of their Affiliates or in the Group or any of its Affiliates,
(ii) has not been, and at the time it is called upon to give independent
financial advice to the parties hereto is not (and none of whose directors,
officers, employees, Affiliates or stockholders is) a promoter, director or
officer of Administrator, Parent or any of their Affiliates or of the Group or
any of their Affiliates, and (iii) has not been retained to render advice,
service or an opinion to Administrator, Parent or the Group or any of their
Affiliates within the past five-year period except as an Independent Financial
Expert for purposes of this Agreement. Notwithstanding the preceding, prior
retention of any accounting or investment banking firm by Administrator, Parent
or the Group or any of its Affiliates shall not disqualify such firm from
serving as an Independent Financial Expert pursuant to this Agreement;
provided, that (i) such firm was retained solely to evaluate the fair market
value of assets of other medical practices and (ii) the individuals providing
services to Independent Financial Expert are not the same as those previously
rendering services and such firm establishes appropriate procedures to prevent
disclosure of any confidential information. Any individual performing services
on behalf of an Independent Financial Expert shall have at least five (5) years
of experience in evaluating the fair market value of assets of medical
practices and associated businesses.
"IRS" shall mean the Internal Revenue Service.
4
<PAGE> 35
"Joint Planning Board" shall mean the joint board described in, and
established pursuant to, Section 5.1.
"Managed Care Contracts" shall have the meaning set forth in Section
3.7.
"Managed Care Payors" shall have the meaning set forth in Section 3.7.
"Parent" shall have the meaning set forth in the first paragraph
hereof.
"Parent Common Stock" shall mean the common stock, $0.0001 par value
per share, of Parent.
"Payment Date" shall have the meaning set forth in Section 7.2.
"Personal Property" shall have the meaning set forth in Section
3.3(b).
"Physician Employee Employment Agreements" shall mean the employment
agreements entered into between the Group and each Physician Employee.
"Physician Employees" shall mean those individuals who are physicians
employed by the Group, or by shareholders, members or partners of the Group, or
who are otherwise under contract or associated with the Group from time to time
to provide professional medical services to patients of the Practice.
"Physician Extender Employees" shall mean those individuals who are
employed by or otherwise under contract or associated with the Practice from
time to time such as advanced practice nurses (APNs), physician assistants
(PAs), or any other position that generates a professional charge.
"Practice" shall mean all business operations conducted by or
attributable to the Group and shall include, without limitation, (i) the
Technical Operations and (ii) the Professional Operations.
"Practice Expenses" shall mean, as determined pursuant to GAAP applied
on a consistent basis, all operating and non-operating expenses of the Group,
Administrator and/or Parent or their Affiliates (including, without limitation,
Allocable Expenses)(for purposes of this paragraph, Affiliates shall exclude
entities not under the common ownership or control of Parent), on an accrual
basis and without mark-up, incurred in connection with the management,
administration or operation of the Professional Operations and the Technical
Operations. Provided, however, that, notwithstanding anything contained herein
to the contrary, (i) Administrator Expenses and Excluded Practice Expenses
shall not be included in Practice Expenses, and (ii) only expenses incurred by
Administrator and/or Parent with respect to the provision of non-medical
business services relating to the operation of the Practice shall be deemed
Practice Expenses.
"Practice Related Liabilities" shall have the meaning set forth in
Section 10.6(b).
"Practice Site(s)" shall mean any facilities, including satellite
locations at which the Group provides care to patients.
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"Premises" shall mean the premises provided to the Practice pursuant
to Section 3.3(a).
"Professional Expenses" shall mean all operating and non-operating
Practice Expenses, determined on an accrual basis and without mark-up, incurred
by Administrator and/or Parent or their Affiliates (for purposes of this
paragraph, Affiliates shall exclude entities not under the common ownership or
control of Parent) to the extent incurred in connection with the Professional
Operations including, without limitation: (i) salaries, benefits and other
direct costs of employees of Administrator who perform services for the
Professional Operations; (ii) direct costs of all employees of Administrator
engaged to provide services to improve performance of the Professional
Operations, provided such costs are approved in advance by the Joint Planning
Board; (iii) leases for assets utilized for the benefit of the Professional
Operations; (iv) personal and property taxes assessed against Administrator's
assets utilized for the benefit of Professional Operations; (v) interest on
indebtedness assumed by Administrator as a result of the Acquisition, or
incurred by Administrator to finance or refinance such indebtedness, and/or in
connection with making advances and capital available to the Practice, in each
case, for the benefit of the Professional Operations; (vi) any provider tax
assessed against the Professional Operations and any sales and use tax related
to the Professional Operations; (vii) direct expenses of requisite and
obligatory professional licensing and insurance costs related to the
Professional Operations; (viii) any amortization of any intangible asset set
forth on Parent's, Administrator's or their applicable Affiliates' financial
statements (as applicable) used in connection with the Professional Operations,
excluding any amortization associated with the Acquisition; (ix) any
depreciation of assets to the extent used in connection with the Professional
Operations; and (x) other reasonable expenses incurred by Administrator in
providing services for the direct benefit of the Professional Operations;
provided, however, that Administrator Expenses, Excluded Practice Expenses and
Technical Expenses shall not be included in Professional Expenses.
"Professional Operations" shall mean all business and operations
conducted by the Group including, without limitation, the provision of
professional medical services to patients by Physician Employees and Physician
Extender Employees at any Practice Site, but specifically excluding Technical
Operations.
"Professional Revenues" for any month shall mean all fees and income
of the Practice, as determined pursuant to GAAP applied on a consistent basis,
recorded each month (net of Adjustments) by or on behalf of the Practice,
generated by the Professional Operations including, but not limited to, any
fees generated by Physician Employees and Physician Extender Employees in their
professional capacity such as medical director fees, consulting fees, and fees
for expert testimony, but excluding any income derived by any such Physician
Employee from any outside medical activity or related source not required to be
assigned to the Group or the Practice as described in Section 6.2 hereof.
Global-fee Practice revenues shall be allocated between Professional Revenues
and Technical Revenues based upon the RVUs. To the extent RVUs or similar
measures are no longer established by HCFA, global-fee Practice revenues shall
be allocated between Professional Revenues and Technical Revenues based upon
the last available RVU allocation percentages on a modality-by- modality basis.
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<PAGE> 37
"Purchase Assets" shall have the meaning set forth in Section 10.6(a).
"Purchase Closing" shall have the meaning set forth in Section 10.7.
"Purchase Price" shall have the meaning set forth in Section 10.6(c).
"Restrictive Covenants" shall have the meaning set forth in Section
6.2.
"RVUs" shall mean the relative value units in effect from time to time
as established by HCFA.
"Security Agreement" shall have the meaning set forth in Section 7.4.
"Stockholder Employment Agreements" shall mean the employment
agreements entered into between the Group and each Group Physician Stockholder.
"Tax Returns" shall include all federal, state, local, franchise,
property and other tax returns.
"Technical Employees" shall mean those persons who are employed or
otherwise under contract as employees of the Technical Operations from time to
time including, without limitation, technologists who provide services in the
diagnostic or therapeutic areas of the Practice.
"Technical Expenses" shall mean all operating and non-operating
expenses, determined on an accrual basis and without mark-up, incurred by
Administrator and/or Parent or their Affiliates (for purposes of this
paragraph, Affiliates shall exclude entities not under the common ownership or
control of Parent) to the extent incurred in connection with the Technical
Operations including, without limitation: (i) salaries, benefits and other
direct costs of employees of Administrator who perform services for the
Technical Operations, and all salaries and benefits of Technical Employees;
(ii) direct costs of all employees of Administrator engaged to provide services
to improve performance of the Technical Operations, provided such costs are
approved in advance by the Joint Planning Board; (iii) leases for assets
utilized for the benefit of the Technical Operations; (iv) personal and
property taxes assessed against Administrator's assets utilized for the benefit
of the Technical Operations; (v) interest on indebtedness incurred by
Administrator in connection with making advances and capital available to the
Technical Operations; (vi) any provider tax assessed against the Technical
Operations and any sales and use tax related to the Technical Operations; (vii)
direct expenses of requisite and obligatory licensing and insurance costs
related to the Technical Operations; (viii) any amortization of any intangible
asset set forth on Parent's, Administrator's or their applicable Affiliates'
financial statements (as applicable) to the extent used in connection with the
Technical Operations, excluding any amortization associated with the
Acquisition; (ix) any depreciation of assets to the extent used in connection
with the Technical Operations; and (x) other reasonable expenses incurred by
Administrator in providing services for the direct benefit of the Technical
Operations; provided, however, that Administrator Expenses, Professional
Expenses and Excluded Practice Expenses shall not be included in Technical
Expenses.
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"Technical Operations" shall mean outpatient imaging centers and/or
radiation oncology centers, hospital radiology departments, mobile imaging
services or any other operations utilizing facilities or equipment owned or
managed by Administrator, Parent or any of their Affiliates, or in which
Administrator, Parent or any of their Affiliates hold or own an ownership or
equity interest in, and which generate Technical Revenues.
"Technical Revenues" shall mean all fees and income of the Practice,
as determined pursuant to GAAP applied on a consistent basis, that are recorded
each month (net of Adjustments) by or on behalf of the Practice, for the use of
Administrator's facilities and equipment, net of any Professional Revenues.
Global-fee Practice revenues shall be allocated between Professional Revenues
and Technical Revenues based upon RVUs. To the extent RVUs or similar measures
are no longer established by HCFA, global-fee Practice revenues shall be
allocated between Professional Revenues and Technical Revenues based upon the
last available RVU allocation percentages on a modality-by-modality basis.
"Termination Date" shall have the meaning set forth in Section 10.5.
"Termination Notice" shall have the meaning set forth in Section
10.5(a).
ARTICLE II
Relationship of the Parties
Section 2.1 Independent Contractors. The Group and
Administrator/Parent are, and intend to act and perform as, independent
contractors, and the provisions hereof are not intended to create any
partnership, joint venture, agency or employment relationship between the
parties. The Group shall retain the exclusive authority to direct the medical,
professional, and ethical aspects of its medical practice. Neither Parent nor
Administrator shall exercise control or direction over the medical methods,
procedures or decisions or interfere with the physician-patient relationships
of the Group, which shall be maintained strictly between the Group, Physician
Employees and/or Physician Extender Employees and their patients.
Section 2.2 Practice of Medicine. Neither Administrator nor
Parent is authorized or qualified to engage in any activity which may be
construed or deemed to constitute the practice of medicine and nothing herein
shall be construed as the practice of medicine by Administrator or Parent. To
the extent any act or service required of Administrator is construed or deemed
to constitute the practice of medicine, Administrator is released from any
obligation to provide, and the Group shall be deemed not to have requested
Administrator to provide, such act or service without otherwise affecting the
other terms of this Agreement.
Section 2.3 No Payment or Other Compensation for Referrals. The
benefits to the Group hereunder do not require, are not payment or compensation
in cash or in kind for, and are not in any way contingent upon the admission,
referral or any other arrangement for the provision of any item or service
offered by Administrator, Parent or any of its Affiliates to any of the Group's
patients in any facility controlled, managed or operated by Administrator.
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Section 2.4 Group's Internal Matters. The Group shall be solely
responsible for matters involving its corporate governance, employees and
similar internal matters, including, but not limited to, preparation and
contents of such reports to regulatory authorities governing the Professional
Operations that the Group is required by law to provide, and distribution of
salaries, benefits and professional fee income among the Group Physician
Stockholders, Physician Employees and Physician Extender Employees.
Administrator shall assist the Group, where necessary and appropriate, by
providing the information and data to be included in such reports.
ARTICLE III
Services to be Provided by Administrator
Section 3.1 General. Administrator shall provide or arrange for
the services set forth in this Article III, and the reasonable costs, fees,
expenses and other disbursements incurred by Administrator or Parent in
connection therewith shall be included in Practice Expenses, except to the
extent such costs, fees or expenses are expressly included in Excluded Practice
Expenses or Administrator Expenses. Administrator is authorized to perform its
services hereunder as is necessary or appropriate for the efficient operation
of the Practice, including, without limitation, performance of some of the
business office functions at locations other than the Practice. Except to the
extent necessary to comply with applicable laws, regulations or professional
ethical standards, the Group will not act in a manner which would prevent
Administrator from performing its duties hereunder and will provide such
information and assistance to Administrator as is reasonably required by
Administrator to perform its services hereunder. Administrator shall cause its
employees to comply with all applicable federal, state and local laws, rules
and regulations in Administrator's provision of services hereunder.
Section 3.2 General Administrative Services.
(a) Exclusive Management Services; Scope of Services.
During the term of this Agreement, the Group hereby engages Administrator to
serve as its exclusive manager and administrator of non-medical business
services relating to the operation of the Practice, subject to matters reserved
for the Group or referred to the Joint Planning Board as herein contemplated,
and Administrator shall have all necessary authority and hereby agrees to
perform such services. The Group agrees that the purpose and intent of this
Agreement is to relieve the Group to the maximum extent possible of the
administrative, accounting, purchasing, non-physician personnel and other
non-medical business aspects of the Practice. Administrator agrees that the
Group, Physician Employees and Physician Extender Employees, and only the
Group, Physician Employees and Physician Extender Employees, will perform the
professional medical functions of the Practice. Administrator shall have no
authority, directly or indirectly, to perform, and shall not perform, any
professional medical function. Administrator may, however, advise the Group as
to the relationship between the Group's performance of professional medical
functions and the overall administrative and business functions of the Practice
to the extent permitted by applicable law.
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(b) Billing and Collection.
(i) Administrator shall, in the name of and on
behalf of the Group, bill patients, insurance companies, Managed Care
Payors, and other third-party payors and collect all fees for services
rendered in connection with the Practice at the Premises or any
Practice Site(s) (including all fees generated by both the Technical
Operations and the Professional Operations), for services performed
outside the Practice for its hospitalized patients, and for all other
professional and Practice services. The Group hereby appoints
Administrator for the term of this Agreement to be its true and lawful
attorney-in-fact, for the following purposes:
(A) to timely bill patients, insurance
companies, Managed Care Payors, and other third-party payors
in the Group's name and on its behalf;
(B) to collect accounts receivable
resulting from such billing not otherwise purchased by
Administrator (as provided for in Section 3.2(e) hereof) in
the Group's name and on its behalf, and to deposit such
collections in the Deposit Account;
(C) to receive payments on behalf of the
Group from insurance companies, prepayments received from
health care plans, Medicare, Medicaid, Managed Care Payors and
all other third-party payors, and to deposit such payments in
the Deposit Account;
(D) to ensure the collection and receipt
in Administrator's name and for Administrator's account of all
accounts receivable of the Practice purchased by
Administrator, and to deposit such collections in the
Administrator Account;
(E) to take possession of and endorse in
the name of the Group and deposit into the Deposit Account
(and/or in the name of an individual physician, such payment
intended for purpose of payment of professional fees related
to the Practice) any notes, checks, money orders, insurance
payments and other instruments received in payment of accounts
receivable of the Group not otherwise purchased by
Administrator; and
(F) upon the prior consent of the Group,
which consent shall not be unreasonably withheld or delayed,
to initiate the institution of legal proceedings in the name
of the Group or a Physician Employee to collect any accounts
and monies owed to the Group or the Physician Employee, to
enforce the rights of the Group or the Physician Employee, as
the case may be, as creditor under any contract or in
connection with the rendering of any service, and to contest
adjustments and denials by governmental agencies (or their
fiscal intermediaries) as third-party payors.
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In performing the foregoing billing practices,
Administrator shall implement, or cause to be implemented, and
maintain, or cause to be maintained, a comprehensive billing
compliance program to ensure that billing codes and other matters
relating to billing for and on behalf of the Practice, including for
and on behalf of the Group, are accurate, consistent with applicable
standards in the industry and handled by trained personnel who are
subject to periodic review and appropriate supervision. The Group
agrees to participate in and comply with any programs established by
Administrator or Parent to ensure that billing codes and other matters
relating to billing for and on behalf of the Practice are accurate and
consistent with applicable standards in the industry.
(ii) The Group hereby appoints Administrator as
its true and lawful attorney-in-fact to deposit into the Deposit
Account all Professional Revenues and Technical Revenues collected by
Administrator as provided for in this Section 3.2(b). The Group
covenants, and shall cause all Physician Employees and Physician
Extender Employees to covenant, to forward any payments received with
respect to any Professional Revenues or Technical Revenues generated
for services provided by the Group or any of its Physician Employees
and Physician Extender Employees to Administrator for deposit.
Administrator shall have the right to withdraw funds from the Deposit
Account and all owners of the Deposit Account shall execute a
revocable standing transfer order (the "Transfer Order") under which
the bank maintaining the Deposit Account shall periodically transfer
the entire balance of the Deposit Account to a separate bank account
owned solely by Administrator (the "Administrator Account"). The
Group and Administrator hereby agree to execute from time to time such
documents and instructions as shall be required by the bank
maintaining the Deposit Account and mutually agreed upon to effectuate
the foregoing provisions and to extend or amend such documents and
instructions. Any action by the Group that materially interferes with
the operation of this Section, including but not limited to, any
failure to deposit or to have Administrator deposit any Professional
Revenues and/or Technical Revenues into the Deposit Account, any
withdrawal of any funds from the Deposit Account not authorized by the
express terms of this Agreement or any other written agreement
executed by each of the parties, or any revocation of or attempt to
revoke the Transfer Order (otherwise than upon expiration or
termination of this Agreement), will constitute a breach of this
Agreement and will entitle Administrator, in addition to any other
remedies it may have at law or in equity, to seek a court ordered
assignment of the rights provided to Administrator pursuant to
subparagraph (i) above.
(iii) All monies shall be accounted for by
Administrator as being distinctly attributable to the Group. The
Group may perform the functions or exercise the rights set forth in
this Section 3.2(b) only with the prior written consent of
Administrator. The Group shall execute such documents in form and
substance as approved by Administrator and its legal counsel to permit
Administrator to exercise the rights and powers granted to
Administrator pursuant to this Section 3.2(b). The Group shall
cooperate with, and at the request of Administrator shall provide
reasonable assistance to, Administrator with the functions set forth
herein. In the performance of the services described in this Section
3.2(b), Administrator shall use commercially reasonable efforts to
collect such professional fees and
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shall comply with all applicable Managed Care Contracts and all
applicable laws, rules and regulations.
(iv) In the event the Group reasonably determines
that its funds have been mishandled by Administrator, and
Administrator and Parent have been unable to explain any discrepancy
to the reasonable satisfaction of the Group within ten (10) business
days of receipt of written notice by the Group indicating the specific
discrepancy, the Joint Planning Board shall appoint an independent
accountant or other entity to manage the business and financial
records of the Group and the Practice, including, in particular,
collections and receivables, until the conclusion of an investigation
by, or on behalf of, the Joint Planning Board, but not more than
twenty (20) days after the initial notice.
(c) Accounting. Administrator shall administer and
maintain the operation of an appropriate accounting system with respect to the
operation of the Practice, and Administrator shall perform all bookkeeping and
accounting services necessary or appropriate for the efficient operation of the
Practice, including the maintenance, custody and supervision of business
records, ledgers and reports; the establishment, administration and
implementation of accounting procedures, controls and systems; and
implementation and management of computer-based management information systems.
The Group and its authorized representatives shall have the right to review all
financial books and records maintained by Administrator relating to the
operation of the Practice and to the cash management transfer and uses
contemplated by Section 3.2(d) hereof. Such information shall be provided by
Administrator to the Group in any media reasonably requested upon reimbursement
of Administrator's actual cost.
(d) Cash Management. Administrator shall manage the cash
and cash equivalents of the Group, and Administrator shall be entitled (and is
hereby authorized) to transfer such cash to the Administrator Account and to
use such cash only for purposes consistent with the terms and provisions of
this Agreement.
(e) Purchase of Accounts Receivable and Right of Offset.
Effective each business day of the month and subject to applicable law,
Administrator shall purchase all accounts receivable of the Group arising
during the day or days just ended and shall make payment to Group therefor or
offset, without further notice or authorization, sums owed Administrator by
Group as the parties have agreed herein. The purchase price shall be an amount
equal to the aggregate face amount of the accounts receivable being sold less
"Adjustments" and estimated allowances for bad debt as determined from time to
time based on recent historical collection experience of one year or less.
Administrator shall make appropriate adjustments for bad debt and contractual
allowances following the close of each fiscal quarter of the Administrator.
(f) Obligations of Administrator. Administrator shall
supply to the Group all ordinary, necessary or appropriate services for the
timely and efficient operation of the Practice, including without limitation,
billing and collection, clerical, accounting, purchasing, payroll, legal,
bookkeeping and computer services, information management, preparation of Tax
Returns, printing, postage and duplication services and medical transcribing
services; provided, however, that the Group may elect to prepare its own Tax
Returns, in which case, the cost of preparing such Tax
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Returns in excess of $2,500 (or such greater amount as quoted by
Administrator's independent accounting firm) per annum shall be included in
Excluded Practice Expenses. Administrator shall prepare monthly unaudited
accrual or cash-basis (as designated by the Group) financial statements for the
Group containing a balance sheet, income statement and monthly operational
reports which detail payments, charges and accounts receivable statistics,
monthly reconciliation reports on cash management and any other financial
reports reasonably requested by a member of the Joint Planning Board designated
by the Group, which shall be delivered to the Group as soon as practicable, but
no later than thirty (30) days after the end of each calendar month. The Group
may elect to have an audit conducted with respect to such financial statements
by an accounting firm selected by Group in its sole discretion, in which case
the cost of such audit, including the Administrator's actual costs, shall be
included in Excluded Practice Expenses.
(g) Records and Files.
(i) Administrator's Business and Financial
Records. At all times during and after the term of this Agreement,
including any extensions or renewals hereof, all business records,
including but not limited to, business agreements, books of account,
personnel records, general administrative records and all information
generated under or contained in the management information system
pertaining to Administrator's obligations hereunder, and other
business information of Administrator of any kind or nature, except
for the "Group's Records" (as defined in subparagraph (ii) below),
shall be and remain the sole property of Administrator; provided that
during and after termination of this Agreement, the Group shall be
entitled to reasonable access to such records and information,
including the right to obtain copies thereof in any media reasonably
requested by the Group, for any purpose related to patient care or the
defense of any claim relating to patient care or the business of
Administrator or the Group or to the relationships of the parties
hereto, and the Administrator agrees to safeguard such records for
such period as may be required by applicable federal or state law
following termination of this Agreement, but in no event less than six
(6) years or such longer period as determined by the Joint Planning
Board.
(ii) The Group's Records. At all times during and
after the term of this Agreement, the business agreements, financial,
operational, corporate and personnel records and information relating
exclusively to the internal business and activities of the Group and
patient medical records and charts (hereinafter referred to as the
"Group's Records") shall be and remain the sole property of the Group.
At all times during and after the term of this Agreement,
Administrator shall provide storage space and related management
services in connection with patient medical records, as a Practice
Expense, including, storage of such records on- and off-site for such
periods of time as determined by the Joint Planning Board.
Administrator hereby agrees to preserve the confidentiality of such
patient medical records and to use the information in such records
only for the limited purposes necessary to perform management services
and, within the limits of its responsibilities hereunder, to ensure
that provision is made for appropriate care for patients of the
Practice.
(iii) Access to Records. At all times during and
after the term of this Agreement, each party and its authorized agents
shall be entitled, upon written request and with reasonable advance
notice, to obtain access (within not more than 30 days following
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<PAGE> 44
receipt of such notice by the other party or parties) to all records
of the other party directly related to the performance of such party's
obligations pursuant to this Agreement; provided, however, that such
right shall not allow for access to patient, medical and other records
that must be kept confidential as required by law. Either party, at
its expense, shall have the right to make copies in any media of any
records to which it has access pursuant to this subparagraph (iii).
(iv) Compliance with Law. The management of all
files and records by Administrator and the Group shall comply with all
applicable federal, state and local statutes and regulations.
(h) Collections. Subject to the consent requirement
contained in Section 3.2(b)(i)(F), Administrator shall take such action as is
reasonably or lawfully necessary in the name of and on behalf of the Group to
collect fees and pay in a timely manner on behalf of Group all Practice
Expenses, except as otherwise agreed between Administrator and the Group.
Section 3.3 Facilities.
(a) Premises. Administrator shall make available to the
Group the Premises that are described in Exhibit 3.3(a) attached hereto and
such other improvements made by Administrator or Parent for the use of the
Group hereunder. The Premises shall be subject to such expansion or reduction
as reviewed and approved by the Joint Planning Board. Administrator shall
obtain for the Group all utilities reasonably required in connection with the
use of the Premises and shall provide for the proper cleanliness of the
Premises, including normal janitorial and maintenance services and refuse
disposal, including medical waste. Administrator shall maintain the Premises
in good condition and make or cause to be made all necessary repairs thereto.
(b) Personal Property. Administrator shall provide the
Group with the use of the equipment, furniture, fixtures, furnishings and other
personal property acquired in the Acquisition or any replacements thereto,
together with such other equipment, furniture, fixtures, furnishings and other
personal property necessary or appropriate or reasonably requested by the Group
for the efficient operation of the Practice acquired by Administrator or Parent
(subject to review and approval of the Joint Planning Board) for the use of the
Group pursuant to the terms hereof (collectively, the "Personal Property"), in
a manner consistent with community standards in the greater Washington
metropolitan area. Administrator shall maintain the Personal Property in good
condition and make or cause to be made all necessary repairs thereto.
(c) Expenses. All costs, fees, expenses and other
disbursements incurred by Administrator, Parent or their Affiliates in
connection with the Premises and the Personal Property, including, without
limitation, all reasonably necessary costs of repairs, maintenance and
improvements, utility expenses (i.e., telephone, electric, gas and water),
janitorial services, refuse disposal, real or personal property lease cost
payments and expenses, interest, refinancing expenses, depreciation, loss on
disposition of assets, taxes and casualty, liability and other insurance, shall
be included in Practice Expenses. To the extent the Premises or Personal
Property are used in connection with the Professional Operations, the costs and
expenses associated with such usage shall
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<PAGE> 45
be allocated between Professional Expenses and Technical Expenses as approved
by the Joint Planning Board.
(d) Disposition. Subject to provisions contained in
existing agreements to which Administrator or Parent is or becomes a party and,
where necessary and appropriate for the efficient operation of the Practice,
nothing herein shall be construed as precluding Administrator or Parent from
selling, leasing or otherwise disposing of all or any part of the Premises,
Personal Property, real property, improvements, trade names, trademarks and
other intangible property; provided, however, any such sale, lease or
disposition shall be subject to the prior review and approval of the Joint
Planning Board.
(e) No Warranties or Representations. The Group
acknowledges that Administrator makes no warranties or representations, express
or implied, as to the fitness, suitability or adequacy of the Premises or the
Personal Property, or any other property furnished under this Agreement, for
the conduct of a medical practice or for any other particular purpose.
Section 3.4 Acquisition and Assistance.
(a) Employment of Physicians. Subject to consultation
with (but not approval of) the Joint Planning Board, in the event a decision is
made by the Group to employ additional physicians, if requested by the Group,
Administrator will assist the Group in the identification and selection of
physicians or physician groups or practices that may be beneficial in the
operation of the Practice. Subject to consultation with (but not approval of)
the Joint Planning Board, in the event that a decision is made by the Group to
pursue the employment of selected physicians, if requested by the Group,
Administrator will provide recruiting, consulting, negotiating and other
advisory services in connection with such transaction. Notwithstanding the
preceding, as set forth in and subject to the provisions of Section 4.1 hereof,
the Group shall have complete control of and responsibility for the hiring of
all Physician Employees and Physician Extender Employees.
(b) Acquisitions. In the event that the Group
contemplates acquiring or affiliating with a physician group, practice or other
entity, and such acquisition or affiliation involves the use or expenditure of
Administrator's and/or Parent's cash or other resources including the
assumption of any Practice Expenses or liabilities incurred or reasonably
expected to be incurred as a result of such an acquisition or affiliation
including, without limitation, capital and personnel (collectively, the
"Resources"), then the Group shall first consult with the Joint Planning Board
and Administrator. Any decision to make such affiliation or acquisition shall
be subject to prior approval of Administrator. Administrator's decision shall
be made following a satisfactory review of the physician group, practice or
other entity to be acquired or affiliated with and the terms and provisions of
the proposed affiliation or acquisition, and in any event, within 30 days
following notification of the proposed transaction and receipt of all necessary
information related thereto. If such contemplated acquisition or affiliation
does not involve the use or expenditure of any of Administrator's and/or
Parent's Resources, then such decision shall be in the sole discretion of the
Group. Notwithstanding any provision contained herein to the contrary, any
person or entity with which the Group affiliates or acquires shall be subject
to the terms and conditions of this Agreement. If a decision is made to
proceed with any affiliation or acquisition of a physician group or practice,
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<PAGE> 46
the Group may seek from Administrator, and if so, Administrator shall provide
the Group with, consulting, negotiation and other services including without
limitation, legal, accounting and other professional advisory services in
connection with such affiliation or acquisition, provided, however, that if the
Group does not utilize the Resources, the transaction costs including legal,
accounting or other advisory services of such affiliation or acquisition shall
be the sole responsibility of the Group.
Section 3.5 Financial Planning and Budgeting.
(a) Budgeting. Administrator shall collaborate with the
Group and the Joint Planning Board in the preparation of all annual capital and
operating budgets. These annual budgets shall be subject to the review,
amendment and approval or disapproval of the Joint Planning Board. For
purposes of developing the initial annual operating budget, the Administrator
shall take into account the categories of expenses determined by Joint Planning
Board. The projected annual operating budget for each subsequent year shall be
subject to the approval of the Joint Planning Board and shall reflect the
Group's anticipated staffing requirements for the next fiscal year, as well as
other anticipated expenses of the Practice. For this purpose, the annual
capital budget will include amounts for any anticipated expansion of existing
facilities, acquisition of new facilities, acquisition or upgrades of
equipment, any practice asset acquisitions, and any other anticipated capital
expenses of the Practice necessary or appropriate to maintain and continue the
Practice.
(b) Capital Expenditures. Subject to the terms contained
herein, Administrator will make funds available for capital expenditures and
improvements by Administrator on behalf of the Practice as follows:
(i) Budgeted Expenditures. All budgeted capital
expenditures and improvement projects shall be subject to final review
and approval by the Joint Planning Board prior to the making of any
actual expenditure. Such review and approval shall be based on
confirming that the assumption, facts and circumstances on which the
decision to budget for such expenditure was based still support and
justify the actual expenditures.
(ii) Non-Budgeted Expenditures. Requests for
non-budgeted capital expenditures and improvement projects shall be
evaluated and prepared by the Joint Planning Board in consultation
with the Group and Administrator. All requests for non-budgeted
capital expenditures and improvements at or for the benefit of the
Practice in excess of the greater of either $75,000 individually or an
aggregate amount equivalent to $5,000 multiplied by the number of
Full-time Physician Employees employed at the time the capital budget
for such Group for the applicable year is determined (provided,
however, that such aggregate amount shall not exceed $250,000 for any
calendar year) must be approved by the Board of Directors of Parent or
by any committee specifically designated by the Board of Directors of
Parent for such purposes. Following the tenth (10th) anniversary of
this Agreement, the Group may request an increase in the limits set
forth in this paragraph. In connection with its review, Parent and/or
Administrator shall consider all relevant factors, including the
amounts provided in service agreements entered into with other Groups
at that time.
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(c) Capital Improvements and Expansion. Subject to
Section 3.5(b), any Practice Site or Premises renovation, expansion or
reduction plans and/or capital equipment expenditures with respect to the
Practice shall be reviewed and approved by the Joint Planning Board and shall
be based upon economic feasibility, productivity and then current market
conditions in light of both the particular project and the needs of the Group
as a whole.
Section 3.6 Personnel. Administrator shall provide non-physician
professional support (other than Physician Extender Employees) including,
without limitation, nurses, technologists, physicists and administrative,
clerical, secretarial, bookkeeping and collection personnel as is reasonably
necessary for the efficient conduct of the Practice's operations, as determined
by the Joint Planning Board. All such personnel shall be duly qualified by
education or experience for their respective positions and shall possess all
licenses which may be required by law. Such personnel shall be employees of
Administrator, and Administrator shall determine and cause to be paid the
salaries and benefits of all such personnel. Such personnel shall be
supervised by and comply with the directions and orders of Administrator,
except as otherwise required by applicable law.
Section 3.7 Provider and Payor Relationships. Upon request of
the Group, Administrator shall provide financial and business assistance to the
Group in the negotiation, establishment, supervision and maintenance of
contracts and relationships (collectively, the "Managed Care Contracts") with
all managed care, institutional health care providers and payors, health
maintenance organizations, preferred provider organizations, exclusive provider
organizations, Medicare, Medicaid, insurance companies, hospitals and other
similar persons (collectively, "Managed Care Payors"). Approval, disapproval,
termination or amendment of any contract or relationship of such Managed Care
Payors with the Group shall, after consultation with (but not approval of) the
Joint Planning Board, be the sole responsibility of the Group. Notwithstanding
the preceding language, if a contract or relationship between any Managed Care
Payor and the Group involves or affects a contract or relationship with any
other physician group or practice serviced or managed by Administrator, Parent
or any of their Affiliates (the "Other Practices") and a consensus among the
Group and the Other Practices cannot be reached regarding the contract or
relationship, then the ultimate decision as to the approval, disapproval,
termination or amendment of such contract or relationship involving the Group,
the Other Practices and such Managed Care Payor shall be determined by the
affirmative vote of the "Physician Board Members" (as defined below) who hold a
majority of the Group Voting Power (as defined below). For purposes of this
Section 3.7, (i) the term "Physician Board Members" shall mean (a) those
members appointed by the Group who serve on the Joint Planning Board and (b)
those persons appointed by the Other Practices who serve on the Other
Practices' joint boards (in a similar capacity to the Joint Planning Board) as
part of their contractual relationship with Parent, Administrator or any of
their Affiliates, and (ii) the term "Group Voting Power" shall mean the total
voting percentage which may be cast by the Physician Board Members on a
collective basis, with the percentage of votes able to be cast by any Group or
Other Practice, as applicable, shall be equal to the quotient determined by
dividing (x) the total estimated annual professional revenues to be generated
by the Group from such Managed Care Contract as determined by Administrator,
Parent or their Affiliates, as appropriate, in its sole discretion, by (y) the
total estimated annual professional revenues to be generated by the Group and
all Other Practices from such Managed Care Contract as determined by the
Administrator, Parent or their Affiliates, as appropriate, in its sole
discretion.
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Section 3.8 Inventory and Supplies. Administrator shall order,
purchase and provide to the Group on a timely basis inventory and supplies, and
such other ordinary, necessary or appropriate materials which are requested by
the Group and which the Group shall reasonably determine to be necessary in the
operation of the Practice on the same terms commercially available to
Administrator. Such inventory, supplies and other materials shall be included
in Practice Expenses at their cost to Parent or Administrator, as the case may
be.
Section 3.9 Advertising and Public Relations. At the direction
of the Joint Planning Board, Administrator shall implement (and design where
requested) an appropriate local public relations or advertising program on
behalf of the Practice, with appropriate emphasis on public awareness of the
availability of services at the Practice. Prior to publication or distribution
of such marketing or public relations material or information, Administrator
shall submit such material to the Group for its review and approval, which
shall not be unreasonably withheld. Administrator shall also design and
implement all national or other non-local public relations or advertising
programs on behalf of the Practice, the cost of which shall be included in
Administrator Expenses, except to the extent such national programs are
reasonably designed to replace or supplement the marketing benefits derived
from local public relations or advertising programs, in which case, a pro rata
share of such costs will be included in Practice Expenses as determined by the
Joint Planning Board. The parties hereto agree that all public relations and
advertising programs shall be conducted in compliance with applicable standards
of medical ethics and Federal and state laws and regulations.
Section 3.10 Quality Assurance. Subject to Article II,
Administrator, when reasonably requested by Group, shall assist the Group in
fulfilling its obligations to its patients to maintain a high quality of
medical and professional services. Any expenses that are related to the
overall maintenance of Administrator's quality assurance program shall be
included in Administrator Expenses; provided, however, that any expenses
related to such program that are incurred for services provided solely for the
direct benefit of the Practice shall be included in Practice Expenses.
Section 3.11 Other Consulting and Advisory Services.
Administrator will provide such consulting and other advisory services as
reasonably requested by the Group in all areas of the Group's business
functions, including, without limitation, financial planning, acquisition and
expansion strategies, development of long-term business objectives and other
related matters.
Section 3.12 Events Excusing Performance. In the event of
strikes, lock-outs, calamities, acts of God, unavailability of supplies as a
result of no material involvement of Parent or Administrator, or other events
over which Administrator has no control, Administrator shall not be liable to
the Group for failure to perform any of the services required hereunder as may
be materially restricted by any such event and the Group shall not have the
right to terminate this Agreement pursuant to Section 10.3(b), for so long as
such events continue and for a reasonable period of time thereafter; provided
however that if such events continue and Administrator is not able to perform
any material portion of the services required hereunder for a period of 120
consecutive days or more, either Administrator or Group may terminate this
Agreement by written notice to the other.
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Section 3.13 Compliance with Laws. Administrator and Parent
shall use their best efforts to comply with all applicable federal, state and
local laws, rules, regulations and restrictions in the conduct of their
services provided in connection with the Practice's business. Without limiting
the generality of the foregoing, Administrator and Parent shall use their best
efforts to avoid, and to prohibit any employee of Administrator or Parent from:
(a) entering into any contract, lease, agreement or
arrangement, including, but not limited to, any joint venture or consulting
agreement, to provide services, lease space, lease equipment or engage in any
other venture or activity with any physician, hospital, pharmacy, home health
agency or other person or entity which is in a position to make or influence
referrals to, or otherwise generate business for, the Practice, if such
transaction is in violation of any applicable law, rule or regulation;
(b) knowingly and willfully making or causing to be made
a false statement or representation of a material fact in any application for
any benefit or payment from a Managed Care Payor or any other payor;
(c) knowingly and willfully making or causing to be made
a false statement or representation of a material fact for use in determining
rights to any benefit or payment from a Managed Care Payor or any other payor;
(d) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with intent to
fraudulently secure such benefit or payment;
(e) knowingly and willfully paying, soliciting or
receiving any remuneration (including any kickback, bribe, or rebate), directly
or indirectly, overtly or covertly, in cash or in kind or offering to pay or
receive such remuneration (i) in return for referring an individual to a person
for the furnishing or arranging for the furnishing of any item or service for
which payment may be made in whole or in part by Medicare or Medicaid, or (ii)
in return for purchasing, leasing, or ordering, or arranging for or
recommending purchasing, leasing, or ordering any good, facility, service, or
item for which payment may be made in whole or in part by Medicare or Medicaid;
and
(f) undertaking any action that is not in accord with the
regulatory compliance plans, policies and manuals developed by or in
conjunction with Administrator or Parent.
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ARTICLE IV
Obligations of the Group
Section 4.1 Employment of Physician Employees and Physician
Extender Employees. Except as set forth in Article V, the Group shall have
complete control of and responsibility for the hiring, compensation,
supervision, training, evaluation and termination of its Physician Employees
and Physician Extender Employees. The Group shall conduct an appropriate and
reasonable due diligence review in connection with the hiring of any physician
or the acquisition of any physician group or practice. Although Administrator
may provide payroll and other related services to the Group, the Group shall be
solely responsible for the payment of such Physician Employees' and Physician
Extender Employees' salaries and wages, benefits, payroll taxes and all other
taxes now or hereafter applicable to their employment. The Group and its
Physician Employees and Physician Extender Employees shall not have any claim
under this Agreement or otherwise against Administrator or Parent for workers'
compensation, unemployment compensation or Social Security benefits, all of
which shall be the sole responsibility of the Group. The Group shall only
employ or contract with licensed physicians or other persons meeting applicable
credentialing guidelines established by the Group after consultation with (but
not subject to) the Joint Planning Board. The Group shall cooperate in the
obtaining and retaining of professional liability insurance by ensuring that
its Physician Employees and Physician Extender Employees, and other employees
who may have malpractice exposure or liability, are insurable and by
participating in an ongoing risk management program.
Section 4.2 Professional Services. The Group shall provide
professional services to its patients in compliance at all times with ethical
standards, laws, rules and regulations applicable to the operations of the
Practice, the Physician Employees and Physician Extender Employees. The Group
shall ensure that each Physician Employee and each Physician Extender Employee
has all required licenses, credentials, approvals or other certifications to
perform his or her duties and services for the Practice and, in the event that
the Group becomes aware of any disciplinary actions or medical malpractice
actions initiated against any Physician Employee or Physician Extender
Employee, the Group shall promptly inform Administrator of such action and the
underlying facts and circumstances. If required by applicable law, any state
or federal regulatory agency or any contractual obligations, the Group shall
carry out a program to monitor the quality of medical care practiced at the
Practice. The Group shall employ Physician Employees and Physician Extender
Employees as is necessary to provide efficient medical care to patients of the
Practice.
Section 4.3 Medical Practice. The Group shall use and occupy the
Premises exclusively for the practice of medicine and for providing other
related services and products. Unless otherwise approved in writing in advance
by Joint Planning Board, which approval shall not be unreasonably withheld or
delayed, it is expressly acknowledged by the parties hereto that the
professional medical practice or practices conducted at the Premises shall be
conducted solely by Physician Employees, and, no other physician or medical
practitioner shall be permitted to use or occupy the Premises; provided,
however, if any test or procedure is required to be performed jointly with
another physician who is not a Physician Employee or Physician Extender
Employee, then such physician may use and occupy the Premises for purposes of
performing such procedure or test so long as the
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Group receives usual and customary fees in connection with such procedure or
test. The Group shall be solely and exclusively in control of all aspects of
the practice of medicine and the delivery of medical services at the Practice
Sites. The rendition of all professional medical services, including, but not
limited to, diagnosis, treatment, therapy, the prescription of medicine and
drugs, and the supervision and preparation of medical reports shall be the sole
responsibility of the Group. From time to time the Group, after consultation
with (but not subject to approval of) the Joint Planning Board, will adopt and
implement fee schedules for (i) non-prepaid patients which shall be reasonable
in relation to fees generally being charged in the same or similar market areas
and (ii) for all rebillings and recovery items on prepaid Managed Care
Contracts which are authorized and permitted by such contracts. A copy of such
agreements and any amendment thereto shall be provided to Administrator no
later than thirty (30) days prior to the proposed effective date thereof.
Section 4.4 Group's Internal Matters. The Group shall be
responsible for matters involving its corporate governance, employees and
similar internal matters, including, but not limited to, preparation and
contents of such reports to regulatory authorities governing the Group that the
Group is required by law to provide, distribution of professional fee income
among the Group Physician Stockholders, disposition of the Group's property and
stock (subject to any restrictions contained herein), hiring and firing of its
employees, licensing and implementing all compliance plans and procedures as
described in Section 4.6. Except for the expenses attributable to the
distribution of professional fee income among the Group Physician Stockholders,
which will be included in Excluded Practice Expenses, the costs incurred in
connection with the foregoing matters shall be Practice Expenses.
Section 4.5 Name. Group shall be entitled to use on a
non-exclusive and non-transferable basis for the term of this Agreement the
names set forth on Exhibit 4.5 as may be necessary or appropriate in the
performance of the Group's services and obligations hereunder.
Section 4.6 Compliance with Laws. The Group shall use its best
efforts to, and to cause the Physician Employees, Physician Extender Employees
and other employees of the Group to, comply with all applicable federal, state
and local laws, rules, regulations and restrictions in the conduct of the
medical services provided in connection with the Practice's business. Without
limiting the generality of the foregoing, the Group shall comply and shall
cause each Physician Employee, Physician Extender Employee and other employee
of the Group to comply, with all laws applicable to the operation of the
Practice in the generation, transportation, treatment, storage, disposal or
other handling of radioactive, medical, biological or hazardous materials or
waste, and the Group shall use its best efforts to prohibit any Physician
Employee, Physician Extender Employee and any employee of the Group from:
(a) entering into any contract, lease, agreement or
arrangement, including, but not limited to, any joint venture or consulting
agreement, to provide services, lease space, lease equipment or engage in any
other venture or activity with any physician, hospital, pharmacy, home health
agency or other person or entity which is in a position to make or influence
referrals to, or otherwise generate business for, the Practice, if such
transaction is in violation of any applicable law, rule or regulation;
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(b) knowingly and willfully making or causing to be made
a false statement or representation of a material fact in any application for
any benefit or payment from a Managed Care Payor or any other payor;
(c) knowingly and willfully making or causing to be made
a false statement or representation of a material fact for use in determining
rights to any benefit or payment from a Managed Care Payor or any other payor;
(d) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with intent to
fraudulently secure such benefit or payment;
(e) knowingly and willfully paying, soliciting or
receiving any remuneration (including any kickback, bribe, or rebate), directly
or indirectly, overtly or covertly, in cash or in kind or offering to pay or
receive such remuneration (i) in return for referring an individual to a person
for the furnishing or arranging for the furnishing of any item or service for
which payment may be made in whole or in part by Medicare or Medicaid, or (ii)
in return for purchasing, leasing, or ordering, or arranging for or
recommending purchasing, leasing, or ordering any good, facility, service, or
item for which payment may be made in whole or in part by Medicare or Medicaid;
and
(f) referring a patient for health services or products
to or providing health services to a patient upon a referral from an entity or
person with which the physician or an immediate family member has a financial
relationship, other than as permitted by exceptions set forth in federal or
state anti-referral laws or regulations; and
(g) undertaking any action that is not in accord with the
regulatory compliance plans, policies and manuals developed by or in
conjunction with Administrator or Parent.
Section 4.7 Ancillary Services. Except as set forth in Section
3.4(b), the Group shall not acquire, establish or commence the operation of any
satellite location, medical office, imaging center, health maintenance
organization, preferred provider organization, exclusive provider organization
or similar entity or organization established or operated by the Group after
the date hereof without the prior written consent of Joint Planning Board.
Section 4.8 Premises and Personal Property. The Group shall use
its best efforts to prevent damage, excessive wear and tear, and malfunction or
other breakdown of the Premises and Personal Property or any part thereof by
the Physician Employees and Physician Extender Employees or other employees of
the Group. The Group shall promptly inform Administrator both orally and in
writing of any and all necessary replacements, repairs or maintenance to any of
the Premises or Personal Property and any failures of equipment of which it
becomes aware. The Group shall comply with all covenants and provisions set
forth in any leases or subleases for the Premises entered into or assumed by
Administrator and Administrator agrees to make available to the Group copies of
all such leases to the Group.
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Section 4.9 Practice Employee Benefit Plans. The Group shall not
enter into or offer to any Physician Employee or other employee of the Group or
Administrator any "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) without
the express written consent of Administrator, which consent shall not be
unreasonably withheld.
Section 4.10 Events Excusing Performance. In the event of
strikes, lock-outs, calamities, acts of God, unavailability of supplies as a
result of no material involvement of Group, or other events over which the
Group has no control, the Group shall not be liable to Administrator, Parent or
their Affiliates for failure to perform any of its obligations required
hereunder as may be materially restricted by any such event and Administrator
shall not have the right to terminate this Agreement pursuant to Section
10.4(a), for so long as such events continue and for a reasonable period of
time thereafter; provided however that if such events continue and the Group is
not able to perform any material portion of its obligations required hereunder
for a period of 120 consecutive days or more, either the Group or Administrator
may terminate this Agreement by written notice to the other.
ARTICLE V
Joint Planning Board
Section 5.1 Formation and Operation of the Joint Planning Board.
(a) The parties hereto shall establish the Joint Planning
Board which shall be responsible for developing long-term strategic planning
objectives and management policies for the overall operation of the Practice
and shall facilitate communication and interaction between Administrator and
the Practice. The Joint Planning Board shall consist of no less than three (3)
or more than six (6) members. Administrator shall designate, in its sole
discretion, two (2) members of the Joint Planning Board, who shall serve at the
pleasure of Administrator and who may be removed or replaced by Administrator
at any time. The Group shall designate, in its sole discretion, no less than
one (1) or more than four (4) members of the Joint Planning Board, who shall
serve at the pleasure of the Group and who may be removed and replaced by the
Group at any time. Each member appointed by Administrator shall be entitled to
one (1) vote per member, and each member appointed by the Group shall be
entitled to that number of votes equal to the quotient determined by dividing
(x) two (2) votes by (y) the number of members designated by the Group to the
Joint Planning Board. The act of the members holding a majority of the voting
power of the Joint Planning Board shall be the act of the Joint Planning Board.
(b) Each member of the Joint Planning Board shall have
the right to vote on every matter either in person, by telephone, by written
consent or by one or more agents, who are also members of the Joint Planning
Board, authorized by a written proxy signed by the member and filed with the
Joint Planning Board. A proxy shall state that it either shall be voted for or
against a specific matter or matters identified in the proxy or shall be voted
identically to the vote of the agent specified in the proxy on any and all
matters that may come before and be voted on by the Joint Planning Board. A
validly executed proxy which does not state that it is irrevocable shall
continue
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in full force and effect unless (i) revoked by the member executing it, before
the vote pursuant to that proxy, by a writing delivered to the Joint Planning
Board stating that the proxy is revoked, or by a subsequent proxy executed by,
or attendance at the meeting and voting in person by, the member executing the
proxy; or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the Joint Planning Board before the vote pursuant to that
proxy is counted; provided, however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy, unless otherwise
provided in the proxy.
Section 5.2 Duties and Responsibilities of the Joint Planning
Board. The Joint Planning Board shall advise the Group on the following
matters:
(a) Capital Improvements and Expansion. Subject to
Section 3.5(b), any site or Premises renovation, expansion or reduction plans
and/or capital equipment expenditures with respect to the Practice shall be
reviewed and approved by the Joint Planning Board and shall be based upon
economic feasibility, productivity and then current market conditions in light
of both the particular project and the Group as a whole.
(b) Annual Budgets. The Joint Planning Board shall
review and approve all annual capital and operating budgets prepared by
Administrator, as set forth in Section 3.5 and after the annual capital and
operating budgets have been approved as provided in Section 3.5, no substantial
changes may be made in such budgets without the approval of the Joint Planning
Board. For purposes of this Section 5.2, substantial means any change
individually or in the aggregate which would result in a change in excess of
five percent (5%) to the annual capital or operating budgets.
(c) Advertising. The Joint Planning Board shall consult
with Administrator on all local advertising and other marketing services
performed at the request of the Group.
(d) Patient Fees. As a part of the annual operating
budget, in consultation with and upon recommendation of the Joint Planning
Board, the Group shall review and adopt the fee schedule for all professional
services rendered by the Practice.
(e) Ancillary Services and Fees. The Joint Planning
Board shall approve Practice-provided non- medical ancillary services
(including, without limitation, fees for technical services which do not
generate Professional Revenues) based upon the pricing, access to, and quality
of such services and shall review and adopt the fee schedule for all ancillary
services.
(f) Provider and Payor Relationships. Subject to Section
3.7, decisions regarding the establishment or maintenance of relationships with
institutional health care providers and payors shall be approved by the Group
after consultation with the Joint Planning Board.
(g) Strategic Planning. The Joint Planning Board shall
develop a plan which depicts the strategic direction of the Practice, as
updated from time to time. Such plan will, among other things, identify
opportunities, objectives, and the resources required to effect such plan.
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(h) Capital Expenditures. The Joint Planning Board shall
determine the priority of capital expenditures in accordance with Section
3.5(b) hereof.
(i) Provider Hiring. The Joint Planning Board shall
consult with the Group to recommend the number and type of Physician Employees
and Physician Extender Employees required for the efficient operation of the
Practice.
(j) Non-Physician Personnel. The Joint Planning Board
shall consult with Administrator to recommend the number and type of
non-physician employees required for the efficient operation of the Practice.
Section 5.3 Acts of the Joint Planning Board. Except as
otherwise specifically provided herein, the act of the members holding a
majority of the voting power of the Joint Planning Board shall be the act of
the Joint Planning Board. The Group agrees that, unless the following are
approved in advance by the Joint Planning Board, it shall take no action or
implement any decision that would (i) require Administrator to expend funds or
incur obligations beyond those set forth under Sections 3.5 or 5.2 of this
Agreement; (ii) have a material adverse effect on the amount of Administrator's
management fee under Article VII; or (iii) otherwise have a material adverse
effect on Administrator's financial interests under this Agreement. The
Administrator and Parent agree that, unless the following are approved in
advance by the Joint Planning Board, they shall take no action or implement any
decision that would (a) have a material adverse effect on the balance due to
the Group under Article VII; or (b) otherwise have a material adverse effect on
the Group's financial interests under this Agreement. Except as provided in
the prior two sentences, the Group and Administrator hereby agree to be bound
by the act of the Joint Planning Board if such act is authorized by the members
holding a majority of the voting power of the Joint Planning Board present or
represented by proxy at the applicable meeting. In the event that a matter
cannot be resolved by the Joint Planning Board due to a tie vote, and no
compromise can be reached, then either (x) the Board of Directors of Parent or
(y) a committee designated by the Board of Directors of Parent containing at
least one (1) physician member will make a final determination on the matter in
dispute provided that both the Group and Administrator shall have had an
opportunity to make a presentation to the Board of Directors of Parent or a
committee thereof, as applicable. A quorum of the Joint Planning Board shall
consist of the members holding a majority of the voting power, present in
person, by telephone, or by proxy and the quorum must remain for the duration
of the meeting.
Section 5.4 Joint Planning Board Meetings. Meetings of the Joint
Planning Board may be held by telephone or similar communication equipment so
long as all members participating in a meeting can hear and speak to each
other. The Joint Planning Board shall prepare and maintain written minutes of
all meetings and shall provide a copy of the minutes to the members within
fifteen (15) business days following each meeting.
(a) Regular Meetings. The Joint Planning Board shall
hold not less than four (4) regular meetings each year, at such specific times
and places as the members may determine.
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(b) Special Meetings. A special meeting of the Joint
Planning Board may be called by fifty percent (50%) of the votes.
(c) Notice Requirement. A member calling a special
meeting must provide all other members with ten (10) days' advance written or
telephonic notice. Notice must be given or sent to the member's address or
telephone number as shown on the records of the Joint Planning Board. Notice
may be delivered directly to each member or to a person at the member's
principal place of business who would reasonably be expected to communicate
that notice promptly to the member.
(d) Waiver of Notice Requirement.
(i) Written Waiver, Consent or Approval. Notice
of a special meeting need not be given to any member who, either
before or after the meeting, signs a waiver of notice or a written
consent to the holding of the special meeting, or an approval of the
minutes of the special meeting. Such waiver, consent or approval need
not specify the purpose of the special meeting. All such waivers,
consents, and approvals shall be filed with the Joint Planning Board
records or made a part of the minutes of the special meetings.
(ii) Failure to Object. Notice of special meeting
need not be given to any member who attends the special meeting and
does not protest before or at the commencement of the special meeting
such lack of notice.
(e) Quorum. The smallest number of members that hold
votes that exceed fifty percent (50%) of all voting power shall constitute a
quorum of the Joint Planning Board.
(f) Proxies. The Joint Planning Board shall provide for
the use of proxies, telephonic conference calls, written consents or other
appropriate methods by which the full participation of the Group members and
Administrator members can be assured.
ARTICLE VI
Restrictive Covenants
The parties recognize that the services to be provided by
Administrator hereunder shall be feasible only if the Group operates active
Professional Operations and Technical Operations to which the physicians
associated with the Practice devote their full medical time and attention.
Accordingly, the parties hereto agree as follows:
Section 6.1 Restrictive Covenants of the Group.
(a) Noncompetition. During the term of this Agreement,
the Group shall not, without the prior written consent of Administrator, (i)
establish, operate or provide professional radiology, radiation oncology or
diagnostic services at any medical office, practice or other health care
facility (other than a Practice Site) providing services similar to those
provided by the Practice or enter into an agreement with any third party payor
to provide such services, (ii) enter into any
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other management or administrative services agreement or other arrangement with
any other person or entity (other than with Administrator) for purposes of
obtaining management, administrative or other support services, or (iii) engage
or participate in any business which engages in competition with the business
conducted by the APPM Group anywhere within 15 miles of any location at which
any member of the APPM Group conducts business.
(b) Covenant Not to Solicit. During the term of this
Agreement and for twenty-four (24) months following the termination of this
Agreement, the Group shall not, without the prior written consent of
Administrator: (i) unless the Group acquires the Practice Assets pursuant to
Article X, directly or indirectly recruit or hire, or induce any party to
recruit or hire any person who is an employee of, or who has entered into an
independent contractor arrangement with, any member of the APPM Group; (ii)
directly or indirectly, whether for itself or for any other person or entity,
call upon, solicit, divert or take away, or attempt to solicit, call upon,
divert or take away any customers, business, or clients of any member of the
APPM Group; (iii) directly or indirectly solicit, or induce any party to
solicit, any contractors of any member of the APPM Group, to enter into the
same or a similar type of contract with any other party; or (iv) disrupt,
damage, impair or interfere with the business of any member of the APPM Group.
(c) Engagement of Administrator. If (i) this Agreement
is terminated pursuant to Section 10.4(a) or (c), and (ii) the Group does not
acquire the Purchase Assets as provided in Article X, then if the Group
establishes, operates or provides professional services at any office,
practice, diagnostic imaging center, hospital or other health care facility
providing services substantially similar to those provided by the Practice
pursuant to this Agreement anywhere within 15 miles of any location of any
Practice Site(s), the Group or any successor thereto shall engage Administrator
as the sole and exclusive manager and administrator of the nonprofessional
functions and services of such other office, practice, hospital or health care
facility on the same terms and conditions as contained herein.
(d) Administrator's Obligations Regarding Proprietary Information.
(i) Acknowledgment of Proprietary Information.
Administrator, Parent and their Affiliates hereto recognize the
proprietary interest of the Group in any Confidential and Proprietary
Information (as hereinafter defined). Administrator, Parent and their
Affiliates acknowledge and agree that any and all Confidential and
Proprietary Information of the Group ("Group's Confidential and
Proprietary Information") communicated to, learned of, developed or
otherwise acquired by Administrator, Parent and their Affiliates
during the term of this Agreement shall be the property of the Group.
Administrator, Parent and their Affiliates further acknowledge and
understand that disclosure of any of Group's Confidential and
Proprietary Information will result in irreparable injury and damage
to the Group. As used herein, "Group's Confidential and Proprietary
Information" means all trade secrets and other confidential and/or
proprietary information of the Group, including information derived
from reports, investigations, research, work in progress, codes,
marketing and sales programs, financial projections, cost summaries,
pricing formula, contract analyses, financial information,
projections, confidential filings with any state or federal agency,
and all other confidential concepts, methods of doing business, ideas,
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materials or information prepared or performed for, by or on behalf of
the parties hereto by its employees, officers, directors, agents,
representatives, or consultants. Group's Confidential and Proprietary
Information shall not include any information which: (i) was known to
Administrator, Parent or their Affiliates prior to its disclosure by
the Group; (ii) is or becomes publicly known through no wrongful act
of Administrator, Parent or their Affiliates or any of their
employees; (iii) is disclosed pursuant to a statute, regulation or the
order of a court of competent jurisdiction, provided that the
Administrator, Parent or their Affiliates provide prior notice to the
Group.
(ii) Covenant Not-to-Divulge Confidential and
Proprietary Information. Administrator, Parent and their Affiliates
acknowledge and agree that the Group is entitled to prevent the
disclosure of Group's Confidential and Proprietary Information.
Administrator, Parent and their Affiliates agree at all times during
the term of this Agreement and thereafter to hold in strictest
confidence and not to disclose to any person, firm or corporation,
except as may be necessary for the discharge of its obligations under
this Agreement, and not to use, except in the pursuit of the business
of the Practice, Group's Confidential and Proprietary Information,
without the prior written consent of the Group; unless (i) such
information becomes known or available to the public generally through
no wrongful act of Administrator, Parent or their Affiliates or their
employees or (ii) disclosure is required by law or the rule,
regulation or order of any governmental authority under color of law;
provided, that prior to disclosing any Group's Confidential and
Proprietary Information pursuant to this clause (iii), Administrator,
Parent or their Affiliates shall, if possible, give prior written
notice thereof to the Group and provide the Group with the opportunity
to contest such disclosure. Administrator, Parent and their
Affiliates shall take all necessary and proper precautions against
disclosure of any of Group's Confidential and Proprietary Information
to unauthorized persons by any of its officers, directors, employees
or agents. All officers, directors, employees, and agents of
Administrator, Parent and their Affiliates who will have access to all
or any part of the Group's Confidential and Proprietary Information
will be required to execute an agreement upon request, valid under the
law of the jurisdiction in which such agreement is executed, and in a
form acceptable to Group and its counsel, committing themselves to
maintain the Group's Confidential and Proprietary Information in
strict confidence and not to disclose it to any unauthorized person or
entity. Upon termination of this Agreement for any reason, the
Administrator, Parent and their Affiliates and their employees shall
cease all use of any of the Group's Confidential and Proprietary
Information and shall execute such documents as may be reasonably
necessary to evidence their abandonment of any claim thereto.
(iii) Return of Materials. In the event of any
termination of this Agreement for any reason whatsoever, or at any
time upon the request of the Group, the Administrator, Parent and
their Affiliates will promptly deliver or cause to be delivered to the
Group all documents, data and other information in their possession
that contain any Group's Confidential and Proprietary Information.
The Administrator, Parent and their Affiliates shall not take or
retain any documents or other information, or any reproduction or
excerpt thereof, containing any Group's Confidential and Proprietary
Information, unless otherwise authorized in writing by the Group. In
the event of termination of this Agreement,
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Administrator, Parent and their Affiliates will deliver to the Group
all documents and data pertaining to Group's Confidential and
Proprietary Information not otherwise purchased as part of the
Acquisition.
(e) Group's Obligations Regarding Proprietary
Information.
(i) Acknowledgment of Proprietary Information.
The Group recognizes the proprietary interest of the Administrator,
Parent and their Affiliates in any Confidential and Proprietary
Information (as hereinafter defined). The Group acknowledges and
agrees that any and all Confidential and Proprietary Information of
Administrator, Parent or their Affiliates ("Administrators's
Confidential and Proprietary Information") communicated to, learned
of, developed or otherwise acquired by the Group during the term of
this Agreement shall be the property of Administrator, Parent or their
Affiliates. The Group further acknowledges and understands that its
disclosure of Administrator's Confidential and Proprietary Information
will result in irreparable injury and damage to Administrator, Parent
or their Affiliates. As used herein, "Confidential and Proprietary
Information" means all trade secrets and other confidential and/or
proprietary information of the Administrator, Parent or their
Affiliates, including information derived from reports,
investigations, research, work in progress, codes, marketing and sales
programs, financial projections, cost summaries, pricing formula,
contract analyses, financial information, projections, confidential
filings with any state or federal agency, and all other confidential
concepts, methods of doing business, ideas, materials or information
(other than the Group's patient records) prepared or performed for, by
or on behalf of the parties hereto by its employees, officers,
directors, agents, representatives, or consultants. Confidential and
Proprietary Information shall not include any information which: (i)
was known to the parties hereto prior to its disclosure by the
Administrator, Parent or their Affiliate; (ii) is or becomes publicly
known through no wrongful act of the Group or any of its employees;
(iii) is disclosed pursuant to a statute, regulation or the order of a
court of competent jurisdiction, provided that the Group provides
prior notice to Administrator, Parent or their Affiliates.
(ii) Covenant Not-to-Divulge Confidential and
Proprietary Information. The Group acknowledges and agrees that
Administrator, Parent or their Affiliates are entitled to prevent the
disclosure of Confidential and Proprietary Information. The Group
agrees at all times during the term of this Agreement and thereafter
to hold in strictest confidence and not to disclose to any person,
firm or corporation, except as may be necessary for the discharge of
its obligations under this Agreement, and not to use, except in the
pursuit of the business of the Practice, Administrator's Confidential
and Proprietary Information, without the prior written consent of
Administrator, Parent and their Affiliates; unless (i) such
information becomes known or available to the public generally through
no wrongful act of the Group or its employees or (ii) disclosure is
required by law or the rule, regulation or order of any governmental
authority under color of law; provided, that prior to disclosing any
Administrator's Confidential and Proprietary Information pursuant to
this clause (iii), the Group shall, if possible, give prior written
notice thereof to Administrator, Parent and their Affiliates and
provide such parties with the opportunity to contest such disclosure.
The Group shall take all necessary and proper precautions against
disclosure of any
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Administrator's Confidential and Proprietary Information to
unauthorized persons by any of its officers, directors, employees or
agents. All officers, directors, employees, and agents of the Group
who will have access to all or any part of the Administrator's
Confidential and Proprietary Information will be required to execute
an agreement upon request, valid under the law of the jurisdiction in
which such agreement is executed, and in a form acceptable to
Administrator, Parent and their Affiliates and its counsel, committing
themselves to maintain the Administrator's Confidential and
Proprietary Information in strict confidence and not to disclose it to
any unauthorized person or entity. Upon termination of this Agreement
for any reason, the Group and their employees shall cease all use of
any of the Administrator's Confidential and Proprietary Information
and shall execute such documents as may be reasonably necessary to
evidence their abandonment of any claim thereto.
(iii) Return of Materials. In the event of any
termination of this Agreement for any reason whatsoever, or at any
time upon the request of Administrator, Parent or their Affiliates,
the Group will promptly deliver or cause to be delivered to
Administrator, Parent and their Affiliates all documents, data and
other information in their possession that contains any
Administrator's Confidential and Proprietary Information regarding
Administrator, Parent and their Affiliates. The Group shall not take
or retain any documents or other information, or any reproduction or
excerpt thereof, containing any Administrator's Confidential and
Proprietary Information, unless otherwise authorized in writing by the
party possessing such Administrator's Confidential and Proprietary
Information. In the event of termination of this Agreement, the Group
will deliver to Administrator, Parent and their Affiliates all
documents and data pertaining to Administrator's Confidential and
Proprietary Information of the other parties not otherwise purchased
as part of the Purchased Assets.
(f) Third Party Beneficiaries. The members of the APPM
Group not party to this Agreement are hereby specifically made third party
beneficiaries of this Section 6.1, with the power to enforce the provisions
hereof.
Section 6.2 Restrictive Covenants. The Group shall obtain and
enforce formal agreements with each Physician Employee who is either (i) a
Group Physician Stockholder or (ii), to the extent permitted under applicable
law, a Full-time Physician Employee which each contain certain restrictive
covenants thereof pertaining to covenants not to compete and/or solicit with
and not to divulge the Confidential and Proprietary Information of any member
of the APPM Group or the Practice (the "Restrictive Covenants"). Except as
otherwise approved by the Joint Planning Board, each Group Physician
Stockholder or Full-time Physician Employee shall agree, during the term of
his/her employment or contractor agreement with the Practice and for a period
of twenty-four (24) months after any termination of such agreement: (i) not to
establish, operate or provide professional radiology services at any office,
practice, hospital or health care facility providing services substantially
similar to those provided by the Practice pursuant to this Agreement within 15
miles of any location of any Practice Site(s) and (ii) to be bound by
non-solicitation, noncompetition and nondisclosure of confidential/proprietary
information and engagement of Administrator covenants similar to those
applicable to the Group as contained in Section 6.1 hereof, provided, however,
that for purposes of Section 6.2, noncompetition restrictions shall be limited
to
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the area within 15 miles of any Practice Site. Except as otherwise approved by
the Joint Planning Board, each Group Physician Stockholder or Full-time
Physician Employee shall agree, during the term of his/her employment or
contractor agreement with the Group, (w) not to practice radiological medicine
other than at the Premises or such other location or Practice Site(s) as
approved by the Joint Planning Board; (x) to devote substantially all of his or
her professional time, effort and ability to the Practice; (y) to request in
writing and receive in writing prior approval from the Joint Planning Board to
engage in any outside medical activities; and (z) to turn over to the Practice,
to be included in Professional Revenues attributed to the Practice, any income
derived by such Group Physician Stockholder or Full-time Physician Employee
from any outside medical activity or related source including, but not limited
to, the following medically-related activities: teaching, consulting, medical
research, inventions developed utilizing the Group's or the Practice's time and
material, testimony for litigation, and insurance examinations. The Group
shall not amend, alter or otherwise change any term or provision of any
Stockholder Employment Agreement or Physician Employee Employment Agreement
relating to the foregoing covenants in this Section 6.2 without the prior
written consent of Joint Planning Board. Notwithstanding the foregoing, any
such amendment, alteration or change shall not be inconsistent with the terms
or provisions of this Agreement. Following termination of this Agreement, the
Group shall not amend, alter or otherwise change any term or provision of the
Restrictive Covenants, unless such provisions are no longer in force and effect
pursuant to the terms of the applicable Stockholder Employment Agreement or
Physician Employee Employment Agreement at the time of termination of this
Agreement. In the event the Purchase Assets are acquired by the Group pursuant
to Article X or this Agreement is terminated pursuant to Section 10.3, the
Restrictive Covenants shall be limited to non- solicitation and nondisclosure
of confidential/proprietary information covenants.
Section 6.3 Enforcement of Restrictive Covenants and Other
Provisions. The Group shall enforce the Stockholder Employment Agreements and,
to the extent permitted under applicable law, the Physician Employee Employment
Agreements, including, without limitation, the Restrictive Covenants. The
costs and expenses of such enforcement shall be included in Professional
Expenses and all damages and other amounts recovered thereby shall be included
in Professional Revenues. In the event that, after a request by Administrator,
the Group does not pursue any remedy that may be available to it by reason of a
breach or default of the Restrictive Covenants and, to the extent permitted
under applicable law, the Physician Employee Employment Agreements, upon the
request of Administrator, the Group shall assign to Administrator such causes
of action and/or other rights it has related to such breach or default and
shall cooperate with and provide reasonable assistance to Administrator with
respect thereto; in which case, all costs and expenses incurred in connection
therewith shall be borne by Administrator and shall be included in
Administrator Expenses, and Administrator shall be entitled to all damages and
other amounts recovered thereby. In the event the Purchase Assets are acquired
by the Group pursuant to Article X or this Agreement is terminated pursuant to
section 10.3, the Restrictive Covenants shall be limited to non-solicitation
and nondisclosure of confidential/proprietary information covenants.
Section 6.4 Remedies. Administrator and the Group acknowledge
and agree that a remedy at law for any breach or attempted breach of the
provisions of this Article VI shall be inadequate, and therefore, either party
shall be entitled to specific performance and injunctive or other equitable
relief in the event of any such breach or attempted breach, in addition to any
other
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rights or remedies available to either party at law or in equity. Each party
hereto waives any requirement for the securing or posting of any bond in
connection with the obtaining of any such injunctive or other equitable relief.
If any provision of the Restrictive Covenants or this Article VI relating to
the restrictive period, scope of activity restricted and/or the territory
described therein shall be declared by a court of competent jurisdiction to
exceed the maximum time period, scope of activity restricted or geographical
area such court deems reasonable and enforceable under applicable law, the time
period, scope of activity restricted and/or area of restriction held reasonable
and enforceable by the court shall thereafter be the restrictive period, scope
of activity restricted and/or the geographical area applicable to such
provision of the Restrictive Covenants or this Article VI. The invalidity or
non-enforceability of any provision of the Restrictive Covenants or this
Article VI in any respect shall not affect the validity or enforceability of
the remainder of the Restrictive Covenants or this Article VI or of any other
provisions of this Agreement.
Section 6.5 Condition Precedent to Release of Obligations. In
the event a Group Physician Stockholder or Full-time Physician Employee
terminates his/her employment agreement with the Group, the Group shall be
entitled to release (with the consent of the Joint Planning Board) such Group
Physician Stockholder or Full-time Physician Employee from the restrictive
covenants contained in Section 6.2, above. In the event the Group elects to
release such Group Physician Stockholder or Full-time Physician Employee, the
Group hereby covenants that it shall obtain a formal agreement between each
Group Physician Stockholder or Full-time Physician Employee, as the case may
be, and Administrator which provides that, for a period of two (2) years
following termination of any employment agreement with the Group, such Group
Physician Stockholder or Full-time Physician Employee agrees to (a) engage
Administrator as the sole and exclusive manager and administrator of the
non-medical functions and services of said Group Physician Stockholder's or
Full-time Physician Employee's medical practice and (b) pay to Administrator
the identical amount of revenues paid by the Group to the Administrator
attributable to such Group Physician Stockholder or Full-time Physician
Employee derived from such Group Physician Stockholder's or Full-time Physician
Employee's performance of professional medical services within 15 miles of any
Practice Site.
Section 6.6 Survival of Certain Covenants. If this Agreement is
terminated pursuant to Section 10.4 (a), (b) or (c), the provisions of Section
6.2 and Section 6.3 shall survive such termination if the actions or events
giving rise to a breach of the Restrictive Covenants or other provisions
occurred prior to such termination. If the Agreement is terminated as
specified in the preceding sentence, all of the provisions of Section 6.1 shall
survive. However, regardless of the reason for termination, or upon expiration
of this Agreement, the provisions of Section 6.1 (d), (e), and (f) shall
survive such termination or expiration indefinitely unless otherwise expressly
limited as to a period of time.
Section 6.7 Definition. The term "Full-time Physician Employee"
as used in Sections 6.2 and 6.5 of this Article VI only, shall mean a Full-time
Physician Employee who shall have been employed by the Group for two (2) years;
provided, that such Full-time Physician Employee shall enter into a written
agreement at the commencement of the later of (i) his/her employment or (ii)
the Acquisition, which includes the provisions set forth in Sections 6.2 and
6.5, above, and acknowledges his/her understanding that such provisions will be
enforceable against such Full-time
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Physician Employee following such two (2) year period. Notwithstanding the
foregoing, the Group shall be entitled to apply to the Joint Planning Board for
the purpose of requesting that a particular Full-time Physician Employee not be
required to execute an employment agreement that contains the provisions
contained in Sections 6.2 and 6.5, which such release by Administrator shall
not be unreasonably withheld.
Section 6.8 Service Area Rights and Obligations.
(a) Primary Service Area. During the term of this Agreement and
within any Primary Service Area, Parent, Administrator or their Affiliates
shall not, without the prior written consent of the Group, (i) acquire or lease
the non-medical assets (through an asset acquisition, merger or other
consolidation or otherwise) of any Radiologist, group of Radiologists or
professional corporation or association (or other professional entity) whose
owners are Radiologists, (ii) acquire any imaging center where, within a
reasonable time period following such acquisition, the Group will not be
entitled to provide professional Radiology services for such imaging center, or
(iii) contract to provide management and administrative services similar to
those provided under this Agreement to any Radiologist, group of Radiologists
or professional corporation or association (or other professional entity) whose
owners are Radiologists. Following a request for written consent by
Administrator, Parent or their Affiliates hereunder, the Group shall respond
upon the earlier of (i) within thirty (30) days from receipt of such request
and all other necessary information related thereto or (ii) one-half of the
time during which Administrator, Parent or their Affiliates must respond. In
the event the Group, Parent, Administrator or their Affiliates acquire a
Professional Service Opportunity, the Group shall accept such Professional
Service Opportunity and shall perform any and all professional Radiology
services that are reasonably required at such location(s) in accordance with
the terms and provisions of this Agreement; provided (x) that the professional
reimbursement for such services is reasonable in relation to the overall market
environment and work effort required and (y) the Group shall not be required to
employ any Radiologist previously associated with such Professional Service
Opportunity.
(b) Secondary Service Area. During the term of this Agreement and
within any Secondary Service Area, Parent, Administrator or their Affiliates
shall first offer to the Group any New Professional Service Opportunity;
provided, however, that this provision shall not be applicable to any merger of
a Radiologist, group of Radiologists or professional corporation or association
(or other professional entity) whose owners are Radiologists with the Group.
Administrator shall give written notice (the "Administrator Notice") to the
Group describing the New Professional Service Opportunity. Within the earlier
of (i) thirty (30) days or (ii) one-half of the time during which the
Administrator, Parent or their Affiliates must respond to an offer described in
the Administrator's Notice, the Group shall deliver to Administrator a written
notice stating whether or not the Group elects to accept or reject the New
Professional Service Opportunity which election shall be binding on the Group.
If the Group does not elect to exercise the right or fails to provide the
notice to Administrator within the time frame herein provided, Administrator
shall be released from the right of first offer with respect to that particular
New Professional Service Opportunity. Prior to consummating any asset
acquisition, merger or other consolidation of any Radiologist, group of
Radiologists, or professional corporation or association (or other professional
entity) whose owners
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are Radiologists within any Secondary Service Area, Administrator shall first
consult with the Joint Planning Board.
(c) Determination of Primary and Secondary Service Area. The
existence and location of each of the Group's Primary Services Areas and
Secondary Services Areas shall be determined each time the Group, Parent,
Administrator or their Affiliates propose an acquisition, management
relationship, Professional Service Opportunity or New Professional Service
Opportunity as contemplated in subsections (a) and (b) above.
(d) Dispute Resolution. Any disputes regarding the interpretation
of the provisions of this Section 6.8 shall be referred to and decided by the
Joint Planning Board as provided in Section 5.3 of this Agreement.
(e) Definitions. The definitions utilized in connection with this
Section 6.8 shall have the following meanings:
"New Professional Service Opportunity" shall mean a
Professional Service Opportunity pursuant to which the Group or any other
member of an APPM Group managed by Parent, Administrator or their Affiliates is
not currently providing professional Radiology services.
"Primary Service Area" shall mean that area within a five (5)
mile radius from any imaging center owned, operated or managed by
Administrator, Parent or their Affiliates for which the Group provides
professional Radiology services or any hospital at which on-site professional
Radiology services are then provided by Physician Employee(s) or Physician
Extender Employee(s) of the Group.
"Professional Service Opportunity" shall mean any opportunity
to perform professional Radiology services for any hospital, hospital system or
imaging center under a formal agreement with such entity.
"Radiologist" shall mean and include both radiologists and
radiation oncologists.
"Radiology" shall mean and include diagnostic imaging,
interventional radiology and radiation oncology services.
"Secondary Service Area" shall mean that area which extends
five (5) miles beyond the boundary of any Primary Service Area.
ARTICLE VII
Financial and Security Arrangements
Section 7.1 Service Fee. The Group and Administrator agree that
the compensation set forth in this Article VII is being paid to Administrator
in consideration of the services provided and the substantial commitment and
effort made by Administrator hereunder and that such fees have been negotiated
at arms' length and are fair, reasonable and consistent with fair market value.
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Administrator shall be paid the service fee (the "Service Fee") as set forth on
Exhibit 7.1 hereto. Payment of the Service Fee is not intended to and shall
not be interpreted or implied as permitting Administrator to share in the
Group's fees for medical services but is acknowledged as the negotiated fair
market value compensation to Administrator considering the scope of services
and the business risks assumed by Administrator.
Section 7.2 Payments. Except as otherwise set forth on Exhibit
7.1 hereto, the amounts to be paid to Administrator under this Article VII
shall be calculated by Administrator on the accrual basis of accounting and
shall be payable monthly. Payments due for any Service Fee shall be made by
the Group each calendar month as provided herein and shall be paid on the 15th
day following the end of such month (or the first preceding day that is a
business day if the 15th day is not a business day) (a "Payment Date"). Except
as otherwise set forth on Exhibit 7.1, such amounts paid shall be estimates
based upon available information for such month, and adjustments to the
estimated payments shall be made to reconcile final amounts due under Section
7.1 on the next Payment Date.
Section 7.3 Advances. The Group shall be entitled to an advance
from Administrator of such additional sums, over and above the Group's right to
the amounts otherwise set forth in this Article VII, as shall be required by
the Group to pay Practice Expenses (excluding Technical Expenses) consistent
with the annual capital and operating budgets of the Practice (prepared as
provided in Section 3.5 hereof), the Service Fee as provided in Exhibit 7.1
hereto and Excluded Practice Expenses at the discretion of Administrator. Any
amounts advanced to the Group pursuant to this Section 7.3 shall be repaid by
the Group in such priority as set forth in Section 7.6 below and shall bear
interest at Parent's then available, borrowing rate offered by Administrator's
or Parent's senior lender (which rate shall be charged consistently to each
physician group who enters into a Service Agreement with Administrator) until
all such amounts of principal and interest are repaid to Administrator as
provided herein. Notwithstanding the foregoing, no interest shall accrue or be
paid by the Group for amounts advanced to the Group pursuant to this Section
7.3 during the forty-five (45)-day period immediately following the Acquisition
Effective Date.
Section 7.4 Security Agreement. In order to enforce its rights
granted hereunder and subject to applicable law, the Group shall execute a
Security Agreement in substantially the form attached hereto as Exhibit 7.4
(the "Security Agreement"), which Security Agreement grants a security interest
in all of the Group's accounts receivable (as more fully described in the
Security Agreement) to Administrator. In addition, the Group shall cooperate
with Administrator and execute all necessary documents in connection with the
pledge of such accounts receivable to Administrator or at Administrator's
option, its lenders.
Section 7.5 Adjustment of Fees. In addition to the adjustments
provided for in Section 7.2, Service Fees payable by Group pursuant to this
Article VII shall be adjusted as appropriate upon agreement of the parties upon
the divestiture or acquisition by the Group of, or affiliation with, a
radiology or diagnostic practice group. Whether or not Parent capital stock or
funds are utilized to fund the acquisition or affiliation, the Service Fee and
other related provisions of this Agreement shall be adjusted as agreed upon by
the parties on a case by case basis. Under either acquisition or affiliation
model, the precise adjustment to the Service Fee and to other related
provisions of this Agreement shall be a joint decision of the parties, shall be
memorialized in a written amendment to
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this Agreement, and shall be based upon the methodology used to generally
determine Services Fees hereunder.
Section 7.6 Priority of Payments. Administrator shall administer
and make disbursements from amounts deposited into the Deposit Account or
transferred from the Deposit Account to pay (including, without limitation the
making of advances as provided in Section 7.3) the Practice Expenses and
Excluded Practice Expenses as the same become due and payable, and for which
the Group shall remain responsible; provided, however, that if Technical
Expenses exceed Technical Revenues, then the amount by which Technical Expenses
exceed Technical Revenues shall be excluded for purposes of the priority of
payments set forth below and the Group shall not be responsible for such
amount. In performing its obligations pursuant to Article III, on the
fifteenth (15th) day following the end of each calendar month, Administrator
shall apply an amount equal to the aggregate face amount of the prior month's
accounts receivables, less Adjustments and estimated allowances for bad debt as
determined in accordance with Section 3.2(e), in the following order of
priority:
(a) payment of all accrued Practice Expenses for the prior month
(subject to the provision in the preceding sentence);
(b) payment of the accrued Service Fee for the prior month;
(c) payment of outstanding balance of all amounts advanced to the
Group through the end of the prior month, and applicable
interest thereon (as contemplated in Section 7.3); and
(d) payment of all Excluded Practice Expenses.
Any amounts which remain following the payment of the items set forth in
subparagraphs (a) through (d) above shall be deposited into the Group Account
on the fifteenth (15th) day following the end of each calendar month (or the
first preceding day if the 15th day is not a business day).
ARTICLE VIII
[Intentionally Omitted]
ARTICLE IX
Insurance and Indemnification
Section 9.1 Insurance to be Maintained by the Group.
(a) During the term of this Agreement, the Group shall
maintain comprehensive professional medical/malpractice liability insurance
with such carrier as determined by the Joint Planning Board with minimum legal
limits or such higher limits as shall be required under the
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Group's contracts with hospitals or other third parties. Such insurance shall
be on a per claim and per physician basis and a separate limit for the Group to
the extent available and permitted by law with such deductible as is mutually
agreeable by Administrator and the Group. All comprehensive professional
medical/malpractice liability insurance premiums and deductibles shall be
included in Practice Expenses; provided, that if the Group elects to maintain
coverage that exceeds minimum requirements, such additional premiums shall be
included in Excluded Practice Expenses. All costs, expenses and liabilities
incurred by the Group in excess of the limits of such policies identified in
the preceding sentence shall be included in Excluded Practice Expenses.
Administrator, Parent or their Affiliates shall attempt to secure excess
liability for the types of coverages contemplated by this Section 9.1(a). If
successful, the Group shall have the opportunity to purchase at Administrator's
cost, as an Excluded Practice Expense, such coverage to the extent permitted by
the then-applicable restrictions set forth in such policy.
(b) The Group, Administrator and Parent each waives any
right one may have against the other, to the extent allowed by the waiving
party's insurance coverage, on account of any loss or damage occasioned to any
party by another party, their respective real and personal property, the
Premises or its contents, arising from any risk generally covered by fire and
extended coverage insurance or from vandalism or malicious mischief; and the
parties, on behalf of their respective insurance companies, waive any right to
subrogation, except when such loss or damage is due to the gross negligence or
willful misconduct of the other party.
Section 9.2 Insurance to be Maintained by Administrator. During
the term of this Agreement, Administrator will provide and maintain (i) as a
Technical Expense, comprehensive professional medical/malpractice liability
insurance for all applicable employees of Administrator and (ii) as a Practice
Expense, comprehensive general liability and property insurance covering the
Practice's premises (including, without limitation, the Premises), personal
property and operations with such limits and coverages as a reasonable business
person under similar circumstances would maintain. All costs, expenses and
liabilities incurred by Administrator in excess of the limits of such policies
identified in subsections (i) and (ii) hereof shall be included in
Administrator Expenses.
Section 9.3 Continuing Liability Insurance Coverage. The Group
shall obtain or require each of its Physician Employees and Physician Extender
Employees to obtain continuing liability insurance coverage under either a
"tail policy" or a "prior acts policy," with the same limits and deductibles as
the insurance coverage provided pursuant to Section 9.1 upon the termination of
such physician's relationship with the Group for any reason, unless such
physician was covered with an occurrence-based policy while employed or
retained by the Group. In the event that the Group, any Physician Employee or
Physician Extender Employees fails to obtain such continuing liability
insurance coverage, Administrator may do so. The cost of such continuing
liability insurance coverage shall be included in Practice Expenses unless such
cost is borne by the Physician Employee.
Section 9.4 Additional Insureds. The Group and Administrator
agree to use their reasonable efforts to have each other named as an additional
insured on the other's respective professional liability insurance programs.
The additional costs, if any, associated therewith shall be a Practice Expense.
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Section 9.5 Indemnification.
(a) By the Group. The Group shall indemnify, defend and
hold Administrator, Parent, their Affiliates and their respective officers,
directors, shareholders, employees, agents, attorneys and consultants (other
than such persons who are also officers, directors, shareholders, employees,
agents or consultants of the Group) harmless, from and against any and all
liabilities, losses, damages, claims, causes of action and expenses (including
reasonable attorneys' fees), not covered by insurance (including self-insured
insurance and reserves), maintained or required to be maintained pursuant to
this Agreement, whenever arising or incurred, that are caused or asserted to
have been caused, directly or indirectly, by or as a result of the performance
of medical services or the performance of any intentional acts, or negligent
acts or omissions by the Group and/or its shareholders, employees and/or
subcontractors (other than Administrator, Parent, Affiliates or their
employees, officers, directors, agents, attorneys and consultants) during the
term of this Agreement. Provided, however, that in the event an
indemnification obligation under the preceding sentence arises as of the result
of any act or omission of a person who is an officer, shareholder or other
equity holder, director, employee, agent, attorney or consultant of
Administrator, Parent or any of their Affiliates such person shall not be
entitled to indemnification in connection therewith and any other adjustment as
is equitable shall be made to the Group's indemnification obligation arising
thereby.
(b) By the Administrator. Administrator and Parent,
jointly and severally, shall indemnify, defend and hold the Group and its
officers, shareholders, directors, employees, agents, attorneys and
consultants, harmless from and against any and all liabilities, losses,
damages, claims, causes of action and expenses (including reasonable attorneys'
fees), not covered by insurance (including self-insured insurance and
reserves), maintained or to be maintained pursuant to this Agreement, whenever
arising or incurred, that are caused or asserted to have been caused, directly
or indirectly, by or as a result of the performance of any intentional acts, or
negligent acts or omissions by Administrator, Parent or Affiliates and/or any
of their respective shareholders, employees and/or subcontractors (other than
the Group or its employees) during the term of this Agreement. Provided,
however that in the event an indemnification obligation under the preceding
sentence arises as a result of any act or omission of a person who is an
officer, shareholder or other equity holder, director, employee, agent,
attorney or consultant of the Group such person shall not be entitled to
indemnification in connection therewith and any other adjustment as is
equitable shall be made to Administrator's or Parent's indemnification
obligation arising thereby.
ARTICLE X
Term and Termination
Section 10.1 Term of Agreement. This Agreement shall commence on
the date hereof and shall expire on the 40th anniversary hereof unless earlier
terminated pursuant to the terms of either Section 10.3 or Section 10.4 or
automatically extended pursuant to the terms of Section 10.2.
Section 10.2 Extended Term. Unless earlier terminated as provided
for in either Section 10.3 or Section 10.4, the term of this Agreement shall be
automatically extended for additional terms of five (5) years each, unless
either party delivers to the other party, not less than twelve (12) months
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nor earlier than fifteen (15) months prior to the expiration of the preceding
term, written notice of such party's intention not to extend the term of this
Agreement.
Section 10.3 Termination by the Group. The Group may, in its sole
discretion, terminate this Agreement by giving written notice thereof to
Administrator (after the giving of any required notices and the expiration of
any applicable waiting periods set forth below) upon the occurrence of any the
following events:
(a) Administrator or Parent shall admit in writing its
inability to generally pay its debts when due, apply for or consent to the
appointment of a receiver, trustee or liquidator of all or substantially all of
its assets, file a petition in bankruptcy or make an assignment for the benefit
of creditors, or upon other action taken or suffered by Administrator or
Parent, voluntarily or involuntarily, under any federal or state law for the
benefit of creditors, except for the filing of a petition in involuntary
bankruptcy against Administrator or Parent which is dismissed within ninety
(90) days thereafter.
(b) Administrator or Parent shall default in the
performance of any material duty or material obligation imposed upon it by this
Agreement (a "Material Administrator Default") and such default shall continue
for a period of sixty (60) days after written notice thereof has been given to
Administrator by the Group with a copy to the financial institution
contemplated in Section 12.1(a) at the address provided by Administrator,
provided that the Group may terminate this Agreement if, and only if, such
termination shall have been approved by the affirmative vote of the holders of
two-thirds of the interests of the equity holders of the Group. The Group
agrees that the financial institution contemplated in Section 12.1(a) shall
have the right, but not the obligation, to cure any Material Administrator
Default. Notwithstanding anything to the contrary in this Agreement, following
receipt by Administrator of the notice of a Material Administrator Default and
until such Material Administrator Default shall be cured, the Group may take
such action as may be reasonably required to cover such Material Administrator
Default so as to maintain for the Group the same level of service as before the
Material Administrator Default, without prejudicing in any way the Group's
other rights and remedies, and may offset all of its costs from the amounts
which may otherwise be due to Administrator under this Agreement.
(c) An independent law firm with nationally recognized
expertise in health care law and acceptable to the parties hereto renders an
opinion to the parties hereto that (i) a material provision of this Agreement
is in violation of applicable law or any court or regulatory agency enters an
order finding a material provision of this Agreement is in violation of
applicable law and (ii) this Agreement can not be amended pursuant to Section
12.6 hereof to cure such violation.
Section 10.4 Termination by Administrator. Administrator may, in
its sole discretion, terminate this Agreement by giving written notice thereof
to the Group (after the giving of any required notices and the expiration of
any applicable waiting periods set forth below) upon the occurrence of any of
the following events:
(a) The Group shall default in the performance of any
material duty or material obligation imposed upon it by this Agreement (a
"Material Group Default") and (i) the Group fails
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to deliver to Administrator within thirty (30) days after written notice of
such Material Group Default has been given to Group a written plan (reasonably
acceptable to Administrator) detailing the methods and procedures that the
Group shall utilize to cure such Material Group Default, (ii) the Group has
delivered a plan but has failed to utilize its best efforts to cure such
Material Group Default within sixty (60) days after written notice thereof has
been given to the Group by Administrator or (iii) the Group has delivered the
plan but, after utilizing its best efforts, is unable to cure such Material
Group Default within ninety (90) days after written notice thereof has been
given to the Group by Administrator. The term "Material Group Default" for
purposes of this Section 10.4 shall include, but not be limited to, (A) the
Group's admission in writing of its inability to generally pay its debts when
due, application for or consent to the appointment of a receiver, trustee or
liquidator of all or substantially all of its assets, filing of a petition in
bankruptcy or making an assignment for the benefit of creditors, or upon other
action taken or suffered by the Group, voluntarily or involuntarily, under any
federal or state law for the benefit of debtors, except for the filing of a
petition in involuntary bankruptcy against the Group which is dismissed within
ninety (90) days thereafter or (B) the Group's or any Physician Employee's (1)
failure to adhere to any compliance plan, policy, or manual as described in
Section 4.6 hereof that has been approved by the Group and made applicable to
all shareholders and employees of the Group, or (2) engaging in any conduct or
being formally accused of conduct for which, in the opinion of the Joint
Planning Board, based on an expedited hearing of the Joint Planning Board at
which evidence of the conduct is presented, together with an opportunity for
the accused party to rebut such evidence, the Group's license, or such
Physician Employee's license, to practice medicine reasonably would be expected
to be subject to revocation or suspension, whether or not actually revoked or
suspended, or (3) being notified in writing of any adverse action by any state
or federal department or agency that has the effect of either excluding the
Group or the individual from participating in or from receiving reimbursement
under any program funded by the federal government or by any state government,
notwithstanding any available post-sanction remedies, or (4) being otherwise
disciplined by any licensing, regulatory or professional entity or institution,
the result of any of which event described in subparagraphs (1) through (4)
above, in the absence of termination of a Physician Employee or a Physician
Extender Employee or other action of the Group to monitor and cure such act or
conduct by such employee, does or reasonably would be expected to materially
and adversely affect the Practice or the Group. Notwithstanding anything to
the contrary in this Agreement, following receipt by the Group of the notice of
a Material Group Default, and until such Material Group Default shall be cured,
the Administrator may take such action as may be reasonably required to cover
such Material Group Default so as to maintain for the Administrator the same
level of service at the Premises as before the Material Group Default, without
prejudicing in any way Administrator other rights and remedies, and may offset
all of its costs of cover from amounts which may otherwise due to the Group
under this Agreement.
(b) An independent law firm with nationally recognized
expertise in health care law and acceptable to the parties hereto renders an
opinion to the parties hereto that (i) a material provision of this Agreement
is in violation of applicable law or any court or regulatory agency enters an
order finding a material provision of this Agreement is in violation of
applicable law and (ii) this Agreement can not be amended pursuant to Section
12.6 hereof to cure such violation.
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(c) At any time during the five-year period following the
Acquisition Effective Date if more than thirty-three and one-third percent (33
1/3%) of the total number of Group Physician Stockholders and Full-time
Physician Employees retained or employed by the Group at the time of the
Acquisition Effective Date are no longer employed or retained by the Group for
reasons other than (i) death, (ii) permanent disability, (iii) loss of a
hospital contract or privileges for reasons other than voluntary resignation by
the Group or a failure to renew or a failure by the Group to respond to a
reasonable proposal to extend the term of such contract or (iv) closing of
facilities by Administrator (after consultation with the Joint Planning Board).
For purposes of this Section 10.4(c), if Parent and/or Administrator are
notified in writing by the Group at or prior to the Acquisition Effective Date
of any Physician Employee [or Physician Extender Employee] that intends to
retire prior to expiration of such five-year period, then such Physician
Employee or Physician Extender Employee shall not be counted for purposes of
determining the above percentage.
Section 10.5 Effective Date of Termination. Any termination of
this Agreement shall be effective (the "Termination Date") as follows:
(a) Immediately upon receipt of a termination notice
pursuant to Section 10.3 or Section 10.4 (a "Termination Notice") and
expiration of applicable cure periods; or
(b) Upon the expiration of this Agreement pursuant to
Sections 10.1 or 10.2.
Section 10.6 Purchase of Assets. Upon the termination of this
Agreement, subject to the provisions of subparagraphs (a) through (e) set forth
below, if Administrator and/or Parent is the defaulting party, the Group shall
have the option to require Administrator and/or Parent to sell to the Group,
and if the Group is the defaulting party, Administrator and/or Parent shall
have the option to require the Group to purchase from Administrator, and/or
Parent the Purchase Assets and assume the Practice Related Liabilities below:
(a) Purchase Assets. The Group shall purchase, free and
clear of all liens and encumbrances other than those arising from Practice
Related Liabilities (as defined below), from Administrator, and/or Parent or
its Affiliates, as the case may be, pursuant to subparagraph (c) below, all
assets, tangible or intangible real or personal, of Administrator, Parent or
their Affiliates that relate primarily to the Practice other than
Administrator's, Parent's or their Affiliates' accounting and financial records
(the "Purchase Assets"), including, but not limited to, without duplication,
(i) all equipment, furniture, fixtures, furnishings, inventory, supplies,
improvements, additions and leasehold improvements utilized by the Practice,
(ii) any real estate owned by Administrator, Parent or Affiliates that is
occupied by or used primarily for the benefit of the Practice, (iii) all
unamortized intangible assets (including, without limitation, goodwill) set
forth on the financial statements of Administrator, Parent or their Affiliates
used in connection with the Practice or otherwise resulting from the
Acquisition, (iv) all Confidential and Proprietary Information that relates
solely to the Practice, and (v) all other assets that would be set forth on a
balance sheet of Administrator, Parent or their Affiliates prepared as of the
date of the Purchase Closing relating primarily to the Practice.
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(b) Practice Related Liabilities. The Group shall assume
all of Administrator's and its Affiliates' liabilities, debt, payables and
other obligations (including lease and other contractual obligations), or
portions thereof, which relate directly or are directly attributable to the
Practice and/or the Purchase Assets other than previously accrued Practice
Expenses (the "Practice Related Liabilities").
(c) Purchase Price. The Purchase Price shall be the
lesser of (i) Fair Market Value of the Purchase Assets subject to the
assumption of the Practice Related Liabilities or (ii) the value of the Actual
Consideration (defined below) (alternatively, the "Purchase Price"); provided,
however, the Purchase Price shall not be less than the net book value of the
Purchase Assets at the Termination Date. The Purchase Price shall be paid
pursuant to Section 10.7. For purposes of this subparagraph (c), the term
"Actual Consideration" shall mean (i) cash consideration paid to the Group
pursuant to the Acquisition Agreement and (ii) an amount equal to the number of
shares of Parent Common Stock (as adjusted for stock splits, stock dividends,
recapitalizations, reorganizations, or any similar transaction whereby the
Parent Common Stock is increased or decreased or exchanged for a different
number or kind of securities) issued pursuant to the Acquisition Agreement
multiplied by the fair market value of Parent Common Stock immediately prior to
the time that a Termination Notice is provided pursuant to Section 10.7. The
Purchase Price shall be appropriately adjusted to offset and account for any
monetary obligations of the Group or Administrator owing to the other as
provided herein.
(d) Exercise of Option.
(i) The Group. Upon a termination of this
Agreement, the Group shall be entitled to exercise its option to
require Administrator, Parent or their Affiliates to sell the Purchase
Assets and shall assume the Practice Related Liabilities pursuant to
this Section 10.6 at any time (unless this Agreement is terminated
pursuant to Section 10.4(a) or 10.4(c)).
(ii) Administrator. Upon termination of this
Agreement, Administrator shall be entitled to exercise its option to
require the Practice to purchase the Purchase Assets and assume the
Practice Related Liabilities pursuant to this Section 10.6 (i) during
the five-year period following the Acquisition Effective Date if this
Agreement is terminated pursuant to Sections 10.4(b) or 10.4(c) and
(ii) at any time in the event of a termination pursuant to Section
10.4(a).
(e) Notice. Each party shall exercise its option under
this Section 10.6 by giving written notice thereof in the Termination Notice,
if applicable, or prior to ninety (90) days before the Termination Date if this
Agreement expires pursuant to Sections 10.1 or 10.2.
Section 10.7 Terms of Purchase. The closing of the transactions
contemplated by Section 10.6 (the "Purchase Closing") shall occur (a) on the
Termination Date if this Agreement expires pursuant to the terms of Sections
10.1 and 10.2, or (b) on a date mutually acceptable to the parties hereto that
shall be within 180 days after receipt of a Termination Notice. The parties
shall enter into an asset purchase agreement containing representations,
warranties and conditions customary to a transaction of this size involving the
purchase and sale of similar businesses. Subject to the
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conditions set forth below, at the Purchase Closing, Administrator and/or its
Affiliates, as the case may be, shall transfer and assign the Purchase Assets
to the Group, and in consideration therefor, the Group shall (a) pay to
Administrator, Parent and/or their Affiliates an amount in cash or, at the
option of the Group (subject to the conditions set forth below), Parent Common
Stock (valued at the fair market value immediately prior to the Purchase
Closing), or some combination of cash and Parent Common Stock equal to the
Purchase Price and (b) assume the Practice Related Liabilities. Each party
shall execute such documents or instruments as are reasonably necessary, in the
opinion of each party and its counsel, to effect the foregoing transaction.
The Group shall, and shall use its best efforts to cause each shareholder of
the Group to, execute such documents or instruments as may be necessary to
cause the Group to assume the Practice Related Liabilities and to release
Administrator, Parent and/or their Affiliates, as the case may be, from any
liability or obligation with respect thereto. In the event the Group desires
to pay all or a portion of the Purchase Price in shares of Parent Common Stock,
such transaction shall be subject to the satisfaction of each of the following
conditions:
(a) The holders of such shares of Parent Common Stock
shall transfer to Administrator, Parent and/or their Affiliates good, valid and
marketable title to the shares of Parent Common Stock, free and clear of all
adverse claims, security interests, liens, claims, proxies, options,
stockholders' agreements and encumbrances (not including any applicable
securities restrictions and lock-up arrangements with the Parent or any
underwriter); and
(b) The holders of such shares of Parent Common Stock
shall make such representations and warranties as to title to the stock,
absences of security interests, liens, claims, proxies, options, stockholders'
agreements and other encumbrances and other matters as reasonably requested by
Administrator, Parent and/or their Affiliates.
Section 10.8 Exception to Purchase. Notwithstanding anything
contained herein to the contrary, Administrator, Parent and/or their Affiliates
shall not be obligated to sell the Purchase Assets to the Group as provided in
Section 10.6(d)(i) above if the Group is not able to pay the Purchase Price
pursuant to the terms set forth above and assume the Practice Related
Liabilities at the Purchase Closing. In such event, the Group shall surrender
the Purchase Assets to Administrator, Parent and/or their Affiliates as of the
Purchase Closing. If the Practice fails to so surrender the Purchase Assets,
Administrator, Parent and/or their Affiliates may, if permitted by applicable
law, without prejudice to any other remedy which it may have hereunder or
otherwise, enter the Premises and take possession of the Purchase Assets and
expel or remove the Group and any other person who may be occupying the
Premises or any part thereof, by force if necessary, without being liable for
prosecution or any claim for damages therefor.
Section 10.9 Effect Upon Termination. Upon the Termination Date,
except as provided below, this Agreement shall terminate and shall be of no
further force and effect and all further obligations of Administrator, Parent
and/or their Affiliates and the Group under this Agreement shall terminate
without further liability of the Administrator or Parent and/or their
Affiliates to the Group or the Group to the Administrator or Parent and/or
their Affiliates (including, without limitation, any liability for loss of
anticipated profits over the remaining term of this Agreement or from a sale of
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the Purchase Assets pursuant to this Article X at less than Fair Market Value),
except with respect to the obligations set forth below. The foregoing to the
contrary notwithstanding:
(a) Administrator and Parent and/or their Affiliates
shall use their best efforts to cooperate with the Group for the appropriate
transfer of management services.
(b) Each party hereto shall provide the other party with
reasonable access to books and records owned by it to permit such requesting
party to satisfy reporting and contractual obligations which may be required of
it.
(c) Any other amounts due and owing but unpaid to either
Administrator, Parent and/or their Affiliates or the Group as of the
Termination Date shall be paid promptly by the appropriate party.
(d) Any and all covenants and obligations of either party
hereto which by their terms or by reasonable implication are to be performed,
in whole or in part, after the termination of this Agreement, shall survive
such termination, including, without limitation, the obligations of the parties
pursuant to the following Sections: 6.1(b), 6.1(c), 6.1(d), 6.1(e), 6.2
(subject to the same survival terms as set forth in 6.2), 6.3 (subject to the
same survival terms as set forth in 6.3), 9.5, Article VIII and the applicable
provisions of Article X and XI.
ARTICLE XI
Dispute Resolution
Section 11.1 Informal Dispute Resolution. In the event of any
claim, controversy, dispute or disagreement between or among the parties hereto
which is not subject to the dispute resolution methodology set forth in Article
V hereof, the parties hereto agree that such other claims, controversies,
disputes or disagreements shall be presented to the Joint Planning Board for
hearing and resolution. In the event the Joint Planning Board is unable to
resolve such matter within a reasonable period following presentation to the
Joint Planning Board, such matter shall be presented to either (a) the Board of
Directors of Parent or (b) a committee designated by the Board of Directors of
Parent which contains at least one (1) physician member. The Board of
Directors of Parent or such committee shall meet within thirty (30) days to
attempt to resolve such claim, controversy, dispute or disagreement.
Section 11.2 Arbitration. If a claim, controversy, dispute or
disagreement arising out of or relating to this Agreement, which is not subject
to the alternative dispute resolution methodology contained in Article V
hereof, cannot be resolved by the informal means set forth in Section 11.1, the
parties hereto agree that any such claim, controversy, dispute or disagreement
between or among any of the parties shall be governed exclusively by the terms
and provisions of this Article XI; provided, however, that within ten (10) days
from the date which any claim, controversy, dispute or disagreement cannot be
resolved by the informal means set forth in Section 11.1 and prior to
commencing an arbitration procedure pursuant to this Article XI, the parties
shall meet to discuss and consider other alternative dispute resolution
procedures other than arbitration, provided,
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however, that if the parties hereto agree to an alternative to arbitration they
may agree to an alternative set of rules, including rules of evidence and
procedure. If at any time prior to the rendering of the decision by the
arbitrator (or pursuant to such other alternative dispute resolution procedure)
as contemplated in this Article XI to the extent a party makes a written offer
to the other party proposing a settlement of the matter(s) at issue and such
offer is rejected, then the party rejecting such offer shall be obligated to
pay the costs and expenses (excluding the amount of the award granted under the
decision) of the party that offered the settlement from the date such offer was
received by such other party if the decision is for a dollar amount that is
less than the amount of such offer to settle. Notwithstanding the foregoing,
the terms and provisions of this Article XI shall not preclude any party hereto
from seeking, or a court of competent jurisdiction from granting, a temporary
restraining order, temporary injunction or other equitable relief for any
breach of (i) any noncompetition or confidentiality covenant or (ii) any duty,
obligation, covenant, representation or warranty, the breach of which may cause
irreparable harm or damage.
ARTICLE XII
General Provisions
Section 12.1 Assignment. Administrator shall have the right to
assign its rights hereunder to Parent or any wholly-owned subsidiary of
Administrator or Parent (that remains a wholly-owned subsidiary of
Administrator or Parent) or to a financial institution as collateral security
for the indebtedness of Parent, Administrator or their Affiliates without the
consent of the Group.
Section 12.2 Amendments. This Agreement shall not be modified or
amended except by a written document executed by all parties to this Agreement,
and such written modification(s) or amendment(s) shall be attached hereto.
Section 12.3 Waiver of Provisions. Any waiver of any terms and
conditions hereof must be in writing, and signed by the parties hereto. The
waiver of any of the terms and conditions of this Agreement shall not be
construed as a waiver of any other terms and conditions hereof.
Section 12.4 Additional Documents. Each of the parties hereto
agrees to execute any document or documents that may be reasonably requested
from time to time by the other party to implement or complete such party's
obligations pursuant to this Agreement.
Section 12.5 Attorneys' Fees. If legal action is commenced by
either party to enforce or defend its rights under this Agreement, the
prevailing party in such action shall be entitled to recover all reasonable
attorneys' fees, costs and expenses including, but not limited to, attorney's
fees, costs and expenses for trial, appellate proceedings and negotiations, in
addition to any other relief granted.
Section 12.6 Contract Modifications for Prospective Legal Events.
In the event any state or federal laws or regulations, now existing or enacted
or promulgated after the date hereof, are interpreted by judicial decision, a
regulatory agency or independent legal counsel in such a manner as to indicate
that this Agreement or any provision hereof may be in violation of such laws or
regulations, the Group and Administrator shall amend this Agreement as
necessary to preserve the
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underlying economic and financial arrangements between the Group and
Administrator and without substantial economic detriment to either party. If
this Agreement cannot be so amended, the terms of Section 10.3(c) and 10.4(b)
shall apply. To the extent any act or service required of Administrator in
this Agreement should be construed or deemed, by any governmental authority,
agency or court to constitute the practice of medicine, the performance of said
act or service by Administrator shall be deemed waived and forever
unenforceable and the provisions of this Section 12.6 shall be applicable.
Neither party shall claim or assert illegality as a defense to the enforcement
of this Agreement or any provision hereof; instead, any such purported
illegality shall be resolved pursuant to the terms of this Section 12.6 and
Section 12.9.
Section 12.7 Parties In Interest; No Third Party Beneficiaries.
Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto.
Except as provided in Section 6.1(g), neither this Agreement nor any other
agreement contemplated hereby shall be deemed to confer upon any person not a
party hereto or thereto any rights or remedies hereunder or thereunder.
Section 12.8 Entire Agreement. This Agreement and the agreements
contemplated hereby constitute the entire agreement of the parties regarding
the subject matter hereof, and supersede all prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.
Section 12.9 Severability. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof, such provision shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
Section 12.10 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULE GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF MARYLAND.
Section 12.11 No Waiver; Remedies Cumulative. No party hereto shall
by any act (except by written instrument pursuant to Section 12.3 hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any default in or breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of any party hereto, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. No
remedy set forth in this Agreement or otherwise conferred upon or reserved to
any party shall be considered
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exclusive of any other remedy available to any party, but the same shall be
distinct, separate and cumulative and may be exercised from time to time as
often as occasion may arise or as may be deemed expedient.
Section 12.12 Communications. The Group and Administrator, Parent
and their Affiliates agree that good communication between the parties is
essential to the successful performance of this Agreement, and each pledges to
communicate fully and clearly with the other on matters relating to the
successful operation of the Practice.
Section 12.13 Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of
the terms or provisions hereof.
Section 12.14 Gender and Number. When the context requires, the
gender of all words used herein shall include the masculine, feminine and
neuter and the number of all words shall include the singular and plural.
Section 12.15 Reference to Agreement. Use of the words "herein",
"hereof', "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Section or provision of this Agreement, unless otherwise noted.
Section 12.16 Notice. Whenever this Agreement requires or permits
any notice, request, or demand from one party to another, the notice, request,
or demand must be in writing to be effective and shall be deemed to be
delivered and received (i) if personally delivered or if delivered by telex,
telegram, facsimile or courier service, when actually received by the party to
whom notice is sent or (ii) if delivered by mail (whether actually received or
not), at the close of business on the third business day next following the day
when placed in the mail, postage prepaid, certified or registered, addressed to
the appropriate party or parties, at the address of such party set forth below
(or at such other address as such party may designate by written notice to all
other parties in accordance herewith):
If to Administrator or Parent: American Physician Partners, Inc.
3600 Chase Tower
2200 Ross Avenue
Dallas, Texas 75201
Fax: (214) 303-2777
Attn: President
If to the Group: WB&A Imaging, P.C.
1020 Duke Street
Alexandria, Virginia 22314-3512
Fax No.: (703) 683-4883
Attn: President
47
<PAGE> 78
Section 12.17 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
Section 12.18 Defined Terms. Terms used in the Exhibits attached
hereto with their initial letter capitalized and not otherwise defined therein
shall have the meanings assigned to such terms in this Agreement.
Section 12.19 Parent Obligations. All of the duties and
obligations of Administrator to the Group under this Agreement shall be deemed
to be the joint and several obligations of Administrator and Parent.
* * * * *
48
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have executed this Service
Agreement as of the date first written above.
GROUP:
WB&A IMAGING, P.C.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
ADMINISTRATOR:
WB&A IMAGING PARTNERS, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
PARENT:
AMERICAN PHYSICIAN PARTNERS, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
49
<PAGE> 1
EXHIBIT 10.42
BASIC LEASE INFORMATION
Lease Date: , 1996
---------------
Tenant: Fibreboard Corporation
Tenant's Address: 2121 N. California Boulevard
Suite 560
Walnut Creek, California 94596
Contact: Mike Douglas Telephone: (510) 274-0700
Landlord: The Equitable-Nissei Dallas Company,
a joint venture
Landlord's Address: 2200 Ross Avenue, Suite 3700
Dallas, Texas 75201
Contact: Ray Mackey
Telephone: 214-979-6100
Premises: Suite No. 3600 in the office building (the
"Building") located on the land described
as City Block 256, Dallas, Dallas County,
Texas and whose street address is 2200 Ross
Avenue, Dallas, Texas (the "Land"). The
Premises are outlined on the plan attached to
the Lease as Exhibit A.
Term: 180 months, commencing September 1, 1996 (the
"Commencement Date") and ending at 5:00 p.m.
August 31, 2011, subject to adjustment and
earlier termination as provided in the Lease.
Basic
Rental: $31,590.29 per month for the first 5 years of
the Term; $35,005.46 per month for the next 5
years of the Term; and $40,128.21 per month
for the next 5 years of the Term.
Rent: Basic Rental, Tenant's Proportionate Share of
Electrical Costs, Tenant's share of Excess,
and all other sums that Tenant may owe to
Landlord under the Lease.
Permitted Use: General Office
Tenant's
Proportionate
Share: 1.7413%, which is the percentage obtained by
dividing (i) the 20,491 rentable square feet
in the Premises by (ii) the 1,176,736 rentable
square feet in the Building.
Expense Stop: 1996 base year.
Initial Liability
Insurance Amount: $5,000,000.
Maximum
Construction
Allowance: $12.00 per rentable square foot.
The foregoing Basic Lease Information is incorporated into and made a part of
the Lease identified above. If any conflict exists between any Basic Lease
Information and the Lease, then the Lease shall control.
<PAGE> 2
<TABLE>
<CAPTION>
LANDLORD: TENANT:
- -------- ------
<S> <C>
THE EQUITABLE-NISSEI DALLAS COMPANY, FIBREBOARD CORPORATION,
a joint venture a Delaware corporation
By: The Equitable Life Assurance By:_________________________
Society of the United States, Name:_______________________
a New York corporation, Title:______________________
its Managing Venturer
By:___________________________
Name:_________________________
Title:________________________
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DEFINITIONS AND BASIC PROVISIONS. . . . . . . . . . . . . . . . . . 1
LEASE GRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
a. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 1
b. Intentionally Deleted . . . . . . . . . . . . . . . . . . . 2
c. Electrical Costs . . . . . . . . . . . . . . . . . . . . . 2
d. Annual Cost Statement . . . . . . . . . . . . . . . . . . . 2
e. Adjustments to Electrical Costs . . . . . . . . . . . . . . 2
DELINQUENT PAYMENT; HANDLING CHARGES. . . . . . . . . . . . . . . . 2
LANDLORD'S OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . 2
a. Services . . . . . . . . . . . . . . . . . . . . . . . . . 2
b. Excess Utility Use . . . . . . . . . . . . . . . . . . . . 3
c. Discontinuance . . . . . . . . . . . . . . . . . . . . . . 3
d. Restoration of Services; Abatement . . . . . . . . . . . . 4
IMPROVEMENTS;ALTERATIONS; REPAIRS; MAINTENANCE. . . . . . . . . . . 4
a. Improvements; Alterations . . . . . . . . . . . . . . . . . 4
b. Repairs; Maintenance . . . . . . . . . . . . . . . . . . . 5
c. Performance of Work . . . . . . . . . . . . . . . . . . . . 5
d. Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . 5
USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . 6
a. Transfers; Consent . . . . . . . . . . . . . . . . . . . . 6
b. [Intentionally Deleted.] . . . . . . . . . . . . . . . . . 6
c. Additional Compensation. . . . . . . . . . . . . . . . . . 6
INSURANCE; WAIVERS; SUBROGATION; INDEMNITY. . . . . . . . . . . . . 6
a. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 6
b. Waiver of Negligence Claims; No Subrogation . . . . . . . . 7
c. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 7
SUBORDINATION ATTORNMENT; NOTICE TO LANDLORD'S MORTGAGEE. . . . . . 8
a. Subordination . . . . . . . . . . . . . . . . . . . . . . . 8
b. Attornment . . . . . . . . . . . . . . . . . . . . . . . . 8
c. Notice to Landlord's Mortgagee . . . . . . . . . . . . . . 8
RULES AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . 8
CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
a. Taking - Landlord's and Tenant's Rights . . . . . . . . . . 8
b. Taking - Landlord's Rights . . . . . . . . . . . . . . . . 8
c. Award . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FIRE OR OTHER CASUALTY. . . . . . . . . . . . . . . . . . . . . . . 9
a. Repair Estimate . . . . . . . . . . . . . . . . . . . . . . 9
b. Landlord's and Tenant's Rights . . . . . . . . . . . . . . 9
c. Landlord's Rights . . . . . . . . . . . . . . . . . . . . . 9
d. Repair Obligation . . . . . . . . . . . . . . . . . . . . . 9
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PAYMENT BY TENANT; NON-WAIVER . . . . . . . . . . . . . . . . . . . 11
a. Payment by Tenant . . . . . . . . . . . . . . . . . . . . . 11
b. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 12
SURRENDER OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . 12
HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
CERTAIN RIGHTS RESERVED BY LANDLORD . . . . . . . . . . . . . . . . 12
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
a. Landlord Transfer . . . . . . . . . . . . . . . . . . . . . 13
b. Landlord's Liability . . . . . . . . . . . . . . . . . . . 13
c. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . 13
d. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . 13
e. Estoppel Certificates . . . . . . . . . . . . . . . . . . . 14
f. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 14
g. Separability . . . . . . . . . . . . . . . . . . . . . . . 14
h. Amendments; and Binding Effect . . . . . . . . . . . . . . 14
i. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . 14
j. Joint and Several Liability . . . . . . . . . . . . . . . . 14
k. Captions . . . . . . . . . . . . . . . . . . . . . . . . . 14
l. No Merger . . . . . . . . . . . . . . . . . . . . . . . . . 15
m. No Offer . . . . . . . . . . . . . . . . . . . . . . . . . 15
n. Tax Protest . . . . . . . . . . . . . . . . . . . . . . . . 15
o. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 16
p. Entire Agreement . . . . . . . . . . . . . . . . . . . . . 16
SPECIAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 5
LEASE
THIS LEASE AGREEMENT (this "Lease") is entered into as of , 1996,
between THE EQUITABLE-NISSEI DALLAS COMPANY, a joint venture ("Landlord"),
and FIBREBOARD CORPORATION, a Delaware corporation ("Tenant").
DEFINITIONS AND
BASIC PROVISIONS
1. The definitions and basic provisions set forth in the Basic Lease
Information (the "Basic Lease Information") executed by Landlord and Tenant
contemporaneously herewith are incorporated herein by reference for all
purposes.
LEASE GRANT
2. Subject to the terms of this Lease, Landlord leases to Tenant, and
Tenant leases from Landlord, the Premises.
TERM
3. If the Commencement Date is not the first day of a calendar month,
then the Term shall be extended by the time between the Commencement Date and
the first day of the next month. If this Lease is executed before the
Premises become vacant or otherwise available and ready for occupancy by
Tenant, or if any present occupant of the Premises holds over and Landlord
cannot acquire possession of the Premises before the Commencement Date, then
(a) Tenant's obligation to pay Rent hereunder shall be waived until Landlord
tenders possession of the Premises to Tenant, (b) the Term shall be extended
by the time between the scheduled Commencement Date and the date on which
Landlord tenders possession of the Premises to Tenant (which date will then
be defined as the Commencement Date), (c) Landlord shall not be in default
hereunder or be liable for damages therefor, and (d) Tenant shall accept
possession of the Premises when Landlord tenders possession thereof to
Tenant. By occupying the Premises, Tenant shall be deemed to have accepted
the Premises in their condition as of the date of such occupancy, subject to
the performance of punch-list items that remain to be performed by Landlord,
if any. Tenant shall execute and deliver to Landlord, within ten days after
Landlord has requested same, a letter confirming (i) the Commencement Date,
(ii) that Tenant has accepted the Premises, and (iii) that Landlord has
performed all of its obligations with respect to the Premises (except for
punch-list items specified in such letter). Notwithstanding anything herein
to the contrary, Landlord shall make the portion of the Premises designated
as "Area A" on Exhibit H available for the commencement of the Work (as
defined in Exhibit D) no later than July 15, 1996, and shall make the portion
of the Premises designated as "Area B" on Exhibit H available for the
performance of the Work no later than August 12, 1996.
RENT
4. a. Payment. Tenant shall timely pay to Landlord the Basic Rental and
all additional sums to be paid by Tenant to Landlord under this Lease,
including the amounts set forth in Exhibit C, without deduction or set off,
at Landlord's Address (or such other address as Landlord may from time to
time designate in writing to Tenant). Basic Rental, adjusted as herein
provided, shall be payable monthly in advance. The first monthly installment
of Basic Rental shall be payable on the Commencement Date; thereafter,
monthly installments of Basic Rental shall be due on the first day of the
second full calendar month of the Term and continuing on the first day of
each succeeding calendar month during the Term. Basic Rental for any
fractional month at the beginning of the Term shall be prorated based on
1/365 of the current annual Basic Rental for each day of the partial month
this Lease is in effect, and shall be due on the Commencement Date.
<PAGE> 6
b. [Intentionally Deleted.]
c. Electrical Costs. Tenant shall pay to Landlord an amount equal to
the product of (i) the cost of all electricity used by the Building except
for excess electrical use reimbursed to Landlord by tenants ("Electrical
Costs"), multiplied by (ii) Tenant's Proportionate Share. Such amount shall
be payable monthly based on Landlord's estimate of the amount due for each
month, and shall be due on the Commencement Date and on the first day of each
calendar month thereafter unless Landlord has theretofore furnished Tenant
with information indicating the amount due, in which event such amount shall
be due within ten days after Landlord has delivered to Tenant an invoice
therefor.
d. Annual Cost Statement. By April 1 of each calendar year, or as soon
thereafter as practicable, Landlord shall furnish to Tenant a statement of
Landlord's actual Electrical Costs (the "Annual Cost Statement") for the
previous year adjusted as provided in Section 4.e. If the Annual Cost
Statement reveals that Tenant paid more for Electrical Costs than Tenant's
Proportionate Share of Electrical Costs in the year for which such statement
was prepared, then Landlord shall promptly reimburse or credit Tenant such
excess; likewise, if Tenant paid less than Tenant's Proportionate Share of
Electrical Costs, then Tenant shall promptly pay Landlord such deficiency.
e. Adjustments to Electrical Costs. With respect to any calendar year
or partial calendar year in which the Building is not occupied to the extent
of 95% of the rentable area thereof, the Electrical Costs for such period
shall, for the purposes hereof, be increased to the amount which would have
been incurred had the Building been occupied to the extent of 95% of the
rentable area thereof.
DELINQUENT
PAYMENT;
HANDLING CHARGES
5. All payments required of Tenant hereunder shall bear interest from
the date due until paid at the per annum rate of three percent (3%) in excess
of the Prime Rate. In no event, however, shall the charges permitted under
this Section 5 or elsewhere in this Lease, to the extent the same are
considered to be interest under applicable law, exceed the maximum lawful
rate of interest.
6. [Intentionally Deleted.]
LANDLORD'S
OBLIGATIONS
7. a. Services. Provided no Event of Default exists, Landlord shall use
all reasonable efforts to furnish to Tenant (i) water (hot and cold) at those
points of supply provided for general use of tenants of the Building; (ii)
heated and refrigerated air conditioning as appropriate, at such times as
Landlord normally furnishes these services to all tenants of the Building,
and at such temperatures and in such amounts as are reasonably considered by
Landlord to be standard; (iii) janitorial service to the Premises on weekdays
other than holidays for Building-standard installations (Landlord reserves
the right to bill Tenant separately for extra janitorial service required for
non-standard installations) and such window washing as may from time to time
in Landlord's judgment be reasonably required; (iv) elevators for ingress and
egress to the floor on which the Premises are located, in common with other
tenants, provided that Landlord may reasonably limit the number of elevators
to be in operation at times other than during customary business hours and on
holidays; (v) replacement of Building-standard light bulbs
<PAGE> 7
and fluorescent tubes, provided that Landlord's standard charge for such
bulbs and tubes shall be paid by Tenant; and (vi) electrical current during
normal business hours other than for special lighting, equipment that
requires more than 110 volts, or other equipment whose electrical energy
consumption exceeds normal office usage. Landlord shall maintain the common
areas of the Building in reasonably good order and condition, except for
damage occasioned by Tenant, or its employees, agents or invitees. If
Tenant desires any of the services specified in this Section 7.a at any
time other than times herein designated, such services shall be supplied to
Tenant upon the written request of Tenant delivered to Landlord before 3:00
p.m. on the business day preceding such extra usage, and Tenant shall pay
to Landlord the reasonable cost of such services within ten days after
Landlord has delivered to Tenant an invoice therefor.
b. Excess Utility Use. Landlord shall use reasonable efforts to furnish
electrical current for computers, electronic data processing equipment,
special lighting, equipment that requires more than 110 volts, or other
equipment whose electrical energy consumption exceeds normal office usage
through the then-existing feeders and risers serving the Building and the
Premises, and Tenant shall pay to Landlord the cost of such service within
ten days after Landlord has delivered to Tenant an invoice therefor. Landlord
may determine the amount of such additional consumption and potential
consumption by a separate meter in the Premises installed, maintained, and
read by Landlord, at Tenant's expense. Tenant shall not install any
electrical equipment requiring special wiring or requiring voltage in excess
of 110 volts or otherwise exceeding Building capacity unless approved in
advance by Landlord, which consent shall not be unreasonably withheld or
delayed. The use of electricity in the Premises shall not exceed the capacity
of existing feeders and risers to or wiring in the Premises. Any risers or
wiring required to meet Tenant's excess electrical requirements shall, upon
Tenant's written request, be installed by Landlord, at Tenant's cost, if, in
Landlord's sole and absolute judgment, the same are necessary and shall not
cause permanent damage or injury to the Building or the Premises, cause or
create a dangerous or hazardous condition, entail excessive or unreasonable
alterations, repairs, or expenses, or interfere with or disturb other tenants
of the Building. If Tenant uses machines or equipment (other than general
office machines, excluding computers and electronic data processing
equipment) in the Premises which affect the temperature otherwise maintained
by the air conditioning system or otherwise overload any utility, Landlord
may install supplemental air conditioning units or other supplemental
equipment in the Premises, and the reasonable cost thereof, including the
cost of installation, operation, use, and maintenance, shall be paid by
Tenant to Landlord within ten days after Landlord has delivered to Tenant an
invoice therefor.
c. Discontinuance. Landlord's obligation to furnish services under
Section 7.a shall be subject to the rules and regulations of the supplier of
such services and governmental rules and regulations. If required by law or
the supplier of a service, Landlord may, upon not less than 30-days' prior
written notice to Tenant, discontinue any such service to the Premises,
provided Landlord first arranges for a direct connection thereof through the
supplier of such service. Tenant shall, however, be responsible for
contracting with the supplier of such service and for paying all deposits
for, and costs relating to, such service.
<PAGE> 8
d. Restoration of Services; Abatement. Landlord shall use reasonable
efforts to restore any service that becomes unavailable; however, such
unavailability shall not render Landlord liable for any damages caused
thereby, be a constructive eviction of Tenant, constitute a breach of any
implied warranty, or, except as provided below, entitle Tenant to any
abatement of Tenant's obligations hereunder. However, if Tenant is prevented
from making reasonable use of the Premises for more than 15 consecutive days
because of the unavailability of any such service, Tenant shall, as its
exclusive remedy therefor, be entitled to a reasonable abatement of Rent for
each consecutive day (after such 15 day period) that Tenant is so prevented
from making reasonable use of the Premises. In the event (i) such
unavailability of services (A) was not the result of a casualty described in
Section 15 of this Lease, (B) was not caused in whole or in part by Tenant or
Tenant's agents, employees or contractors, and (C) Tenant is prevented from
making reasonable use of the Premises, (ii) the curing of such unavailability
of services is within the reasonable control of Landlord, and (iii) such
unavailablity of services shall not be cured within sixty (60) days following
the occurrence of such event, Tenant shall have the right to terminate this
Lease by delivering to Landlord written notice of such termination prior to
the restoration of such services.
IMPROVEMENTS;
ALTERATIONS;
REPAIRS;
MAINTENANCE
8. a. Improvements; Alterations. Improvements to the Premises shall be
installed at the expense of Tenant only in accordance with plans and
specifications which have been previously submitted to and approved in
writing by Landlord, which approval shall not be unreasonably withheld or
delayed. After the initial Tenant improvements are made, no alterations or
physical additions in or to the Premises may be made without Landlord's prior
written consent. Landlord agrees not to unreasonably withhold or delay its
consent with respect to non-structural alterations which do not affect the
Building systems and are not visible from the exterior of the Premises.
Tenant shall not paint or install lighting or decorations, signs, window or
door lettering, or advertising media of any type on or about the Premises
without the prior written consent of Landlord. Landlord agrees not to
unreasonably withhold or delay its consent with respect to such items that
are not visible from the exterior of the Premises. All alterations,
additions, or improvements (whether temporary or permanent in character, and
including without limitation all air-conditioning equipment and all other
equipment that is in any manner connected to the Building's plumbing system)
made in or upon the Premises, either by Landlord or Tenant, shall be
Landlord's property at the end of the Term and shall remain on the Premises
without compensation to Tenant. Approval by Landlord of any of Tenant's
drawings and plans and specifications prepared in connection with any
improvements in the Premises shall not constitute a representation or
warranty of Landlord as to the adequacy or sufficiency of such drawings,
plans and specifications, or the improvements to which they relate, for any
use, purpose, or condition, but such approval shall merely be the consent of
Landlord as required hereunder. Notwithstanding anything in this Lease to the
contrary, with respect to the Premises Tenant shall be responsible for
complying with the Americans with Disabilities Act of 1990, and all rules,
regulations, and guidelines promulgated thereunder, as the same may be
amended from time to time (collectively, the "ADA"). Landlord shall be
responsible for complying with the ADA with respect to the common areas of
the Building.
<PAGE> 9
b. Repairs; Maintenance. Tenant shall maintain the Premises in a clean,
safe, operable, attractive condition, and shall not permit or allow to remain
any waste or damage to any portion of the Premises. Tenant shall repair or
replace, subject to Landlord's direction and supervision, any damage to the
Building caused by Tenant or Tenant's agents, contractors, or invitees. If
Tenant fails to make such repairs or replacements within 15 days after the
occurrence of such damage, then Landlord may make the same at Tenant's cost.
In lieu of having Tenant repair any such damage outside of the Premises,
Landlord may repair such damage at Tenant's cost. The reasonable cost of any
repair or replacement work performed by Landlord under this Section 8 shall
be paid by Tenant to Landlord within ten days after Landlord has delivered to
Tenant an invoice therefor.
c. Performance of Work. All work described in this Section 8 shall be
performed only by Landlord or by contractors and subcontractors approved in
writing by Landlord, which approval shall not be unreasonably withheld or
delayed. Tenant shall cause all contractors and subcontractors to procure and
maintain insurance coverage against such risks, in such amounts, and with
such companies as Landlord may reasonably require, and to procure payment and
performance bonds reasonably satisfactory to Landlord covering the cost of
the work. All such work shall be performed in accordance with all legal
requirements and in a good and workmanlike manner so as not to damage the
Premises, the primary structure or structural qualities of the Building, or
plumbing, electrical lines, or other utility transmission facility. All such
work which may affect the HVAC, electrical system, or plumbing must be
approved by the Building's engineer of record, which approval shall not be
unreasonably withheld or delayed.
d. Mechanic's Liens. Tenant shall not permit any mechanic's liens to be
filed against the Premises or the Building for any work performed, materials
furnished, or obligation incurred by or at the request of Tenant. If such a
lien is filed, then Tenant shall, within ten days after Landlord has
delivered notice of the filing to Tenant, either pay the amount of the lien
or diligently contest such lien and deliver to Landlord a bond or other
security reasonably satisfactory to Landlord. If Tenant fails to timely take
either such action, then Landlord may pay the lien claim without inquiry as
to the validity thereof, and any amounts so paid, including reasonable
expenses and interest, shall be paid by Tenant to Landlord within ten days
after Landlord has delivered to Tenant an invoice therefor.
USE
9. Tenant shall continuously occupy and use the Premises only for the
Permitted Use and shall comply with all laws, orders, rules, and regulations
relating to the use, condition, and occupancy of the Premises. The Premises
shall not be used for any use which is disreputable or creates extraordinary
fire hazards or results in an increased rate of insurance on the Building or
its contents or the storage of any hazardous materials or substances. If,
because of Tenant's acts, the rate of insurance on the Building or its
contents increases, then Tenant shall pay to Landlord the amount of such
increase on demand, and acceptance of such payment shall not constitute a
waiver of any of Landlord's other rights. Tenant shall conduct its business
and control its agents, employees, and invitees in such a manner as not to
create any nuisance or interfere with other tenants or Landlord in its
management of the Building.
<PAGE> 10
ASSIGNMENT AND
SUBLETTING
10. a. Transfers; Consent. Tenant shall not, without the prior written
consent of Landlord (which consent shall not be unreasonably withheld or
delayed), (i) advertise that any portion of the Premises is available for
lease, (ii) assign, transfer, or encumber this Lease or any estate or
interest herein, whether directly or by operation of law, (iii) permit any
other entity to become Tenant hereunder by merger, consolidation, or other
reorganization, (iv) if Tenant is an entity other than a corporation whose
stock is publicly traded, permit the transfer of an ownership interest in
Tenant so as to result in a change in the current control of Tenant, (v)
sublet any portion of the Premises, (vi) grant any license, concession, or
other right of occupancy of any portion of the Premises, or (vii) permit the
use of the Premises by any parties other than Tenant (any of the events
listed in clauses (ii) through (vii) being a "Transfer"). If Tenant requests
Landlord's consent to a Transfer, then Tenant shall provide Landlord with a
written description of all terms and conditions of the proposed Transfer,
copies of the proposed documentation, and the following information about the
proposed transferee: name and address; reasonably satisfactory information
about its business and business history; its proposed use of the Premises;
banking, financial, and other credit information; and general references
sufficient to enable Landlord to determine the proposed transferee's
creditworthiness and character. Tenant shall reimburse Landlord for its
reasnable attorneys' fees and other expenses incurred in connection with
considering any request for its consent to a Transfer. Landlord shall have a
period of seven (7) calendar days following receipt of such notice within
which to notify Tenant in writing that Landlord either agrees to such
transfer or the basis for Landlord's decision not to approve of such
Transfer. If Landlord consents to a proposed Transfer, then the proposed
transferee shall deliver to Landlord a written agreement whereby it expressly
assumes the Tenant's obligations hereunder; however, any transferee of less
than all of the space in the Premises shall be liable only for obligations
under this Lease that are properly allocable to the space subject to the
Transfer, and only to the extent of the rent it has agreed to pay Tenant
therefor. Landlord's consent to a Transfer shall not release Tenant from
performing its obligations under this Lease, but rather Tenant and its
transferee shall be jointly and severally liable therefor. Landlord's consent
to any Transfer shall not waive Landlord's rights as to any subsequent
Transfers. If an Event of Default occurs while the Premises or any part
thereof are subject to a Transfer, then Landlord, in addition to its other
remedies, may collect directly from such transferee all rents becoming due to
Tenant and apply such rents against Rent. Tenant authorizes its transferees
to make payments of rent directly to Landlord upon receipt of notice from
Landlord to do so.
b. [Intentionally Deleted.]
c. Additional Compensation. Tenant shall pay to Landlord, immediately
upon receipt thereof, 50% of all compensation received by Tenant for a
Transfer that exceeds the Basic Rental and Tenant's share of Electrical Costs
and Excess allocable to the portion of the Premises covered thereby.
INSURANCE;
WAIVERS;
SUBROGATION;
INDEMNITY
11. a. Insurance. Tenant shall at its expense procure and maintain
throughout the Term the following
<PAGE> 11
insurance policies: (i) comprehensive general liability insurance in
amounts of not less than a combined single limit of $5,000,000 (the
"Initial Liability Insurance Amount") or such other amounts as Landlord may
from time to time reasonably require, insuring Tenant, Landlord, and
Landlord's agents against all liability for injury to or death of a person
or persons or damage to property arising from the use and occupancy of the
Premises, (ii) contractual liability insurance coverage sufficient to cover
Tenant's indemnity obligations hereunder, (iii) insurance covering the full
value of Tenant's property and improvements, and other property (including
property of others), in the Premises, and (iv) workman's compensation
insurance, containing a waiver of subrogation endorsement reasonably
acceptable to Landlord. Tenant's insurance shall provide primary coverage
to Landlord when any policy issued to Landlord provides duplicate or
similar coverage, and in such circumstance Landlord's policy will be excess
over Tenant's policy. Tenant shall furnish certificates of such insurance
and such other evidence satisfactory to Landlord of the maintenance of all
insurance coverages required hereunder, and Tenant shall obtain a written
obligation on the part of each insurance company to notify Landlord at
least 30 days before cancellation or a material change of any such
insurance. All such insurance policies shall be in form, and issued by
companies, reasonably satisfactory to Landlord.
b. Waiver of Negligence Claims; No Subrogation. Landlord shall not be
liable to Tenant or those claiming by, through, or under Tenant for any
injury to or death of any person or persons or the damage to or theft,
destruction, loss, or loss of use of any property or inconvenience (a "Loss")
caused by casualty, theft, fire, third parties, or any other matter
(including Losses arising through repair or alteration of any part of the
Building, or failure to make repairs, or from any other cause), regardless of
whether the negligence of any party caused such Loss in whole or in part.
Landlord and Tenant each waives any claim it might have against the other for
any damage to or theft, destruction, loss, or loss of use of any property, to
the extent the same is insured against under any insurance policy that covers
the Building, the Premises, Landlord's or Tenant's fixtures, personal
property, leasehold improvements, or business, or, in the case of Tenant's
waiver, is required to be insured against under the terms hereof, regardless
of whether the negligence or fault of the other party caused such loss;
however, Landlord's waiver shall not include any deductible amounts on
insurance policies carried by Landlord or apply to any coinsurance penalty
which Landlord might sustain. Each party shall cause its insurance carrier to
endorse all applicable policies waiving the carrier's rights of recovery
under subrogation or otherwise against the other party.
c. Indemnity. Subject to Section 11.b, Tenant shall defend, indemnify,
and hold harmless Landlord and its agents from and against all claims,
demands, liabilities, causes of action, suits, judgments, and expenses
(including reasonable attorneys' fees) for any Loss arising from any
occurrence on the Premises or from Tenant's failure to perform its
obligations under this Lease (except to the extent a Loss arises from the
gross negligence or willful misconduct of Landlord or its agents). This
indemnity provision shall survive termination or expiration of this Lease.
Subject to Section 11.b., Landlord shall defend, indemnify, and hold harmless
Tenant and its officers, directors, employees and agents from and against all
claims, demands, liabilities, causes of action, suits,
<PAGE> 12
judgments, and expenses (including reasonable attorneys' fees) for any Loss
arising from Landlord's or its agents' gross negligence or willful
misconduct. This indemnity provision shall survive the termination or
expiration of this Lease.
SUBORDINATION
ATTORNMENT;
NOTICE TO
LANDLORD'S
MORTGAGEE
12. a. Subordination. This Lease shall be subordinate to any deed of
trust, mortgage, or other security instrument (a "Mortgage"), or any ground
lease, master lease, or primary lease (a "Primary Lease"), that now or
hereafter covers all or any part of the Premises (the mortgagee under any
Mortgage or the lessor under any Primary Lease is referred to herein as
"Landlord's Mortgagee").
b. Attornment. Tenant shall attorn to any party succeeding to
Landlord's interest in the Premises, whether by purchase, foreclosure, deed
in lieu of foreclosure, power of sale, termination of lease, or otherwise,
upon such party's request, and shall execute such agreements confirming such
attornment as such party may reasonably request.
c. Notice to Landlord's Mortgagee. Tenant shall not seek to enforce any
remedy it may have for any default on the part of the Landlord without first
giving written notice by certified mail, return receipt requested, specifying
the default in reasonable detail, to any Landlord's Mortgagee whose address
has been given to Tenant, and affording such Landlord's Mortgagee a
reasonable opportunity to perform Landlord's obligations hereunder.
RULES AND
REGULATIONS
13. Tenant shall comply with the rules and regulations of the Building
which are attached hereto as Exhibit B. Landlord may, from time to time,
change such rules and regulations for the safety, care, or cleanliness of the
Building and related facilities, provided that such changes are applicable to
all tenants of the Building and will not unreasonably interfere with Tenant's
use of the Premises. Tenant shall be responsible for the compliance with such
rules and regulations by its employees, agents, and invitees.
CONDEMNATION
14. a. Taking - Landlord's and Tenant's Rights. If any part of the
Building is taken by right of eminent domain or conveyed in lieu thereof (a
"Taking"), and such Taking prevents Tenant from conducting its business in
the Premises in a manner reasonably comparable to that conducted immediately
before such Taking, then Tenant may terminate this Lease as of the date of
such Taking by giving written notice to Landlord within 60 days after the
Taking, and Rent shall be apportioned as of the date of such Taking. If
Tenant does not terminate this Lease, then Rent shall be abated on a
reasonable basis as to that portion of the Premises rendered untenantable by
the Taking.
b. Taking - Landlord's Rights. If any material portion, but less than
all, of the Building becomes subject to a Taking, or if Landlord is required
to pay any of the proceeds received for a Taking to Landlord's Mortgagee,
then this Lease, at the option of Landlord, exercised by written notice to
Tenant within 30 days after such Taking, shall terminate and Rent shall be
apportioned as of the date of such Taking. If Landlord does not so terminate
<PAGE> 13
this Lease, then this Lease will continue, but if any portion of the Premises
has been taken, Basic Rental shall abate as provided in the last sentence of
Section 14.a.
c. Award. If any Taking occurs, then Landlord shall receive the entire
award or other compensation for the Land, the Building, and other
improvements taken, and Tenant may separately pursue a claim against the
condemnor for the value of Tenant's personal property which Tenant is
entitled to remove under this Lease, moving costs, loss of business, and
other claims it may have.
FIRE OR OTHER
CASUALTY
15. a. Repair Estimate. If the Premises or the Building are damaged by
fire or other casualty (a "Casualty"), Landlord shall, within 30 days after
such Casualty, deliver to Tenant a good faith estimate (the "Damage Notice")
of the time needed to repair the damage caused by such Casualty.
b. Landlord's and Tenant's Rights. If a material portion of the
Premises or the Building is damaged by Casualty such that Tenant is prevented
from conducting its business in the Premises in a manner reasonably
comparable to that conducted immediately before such Casualty and Landlord
estimates that the damage caused thereby cannot be repaired within 135 days
after the date of the Casualty, then Tenant may terminate this Lease by
delivering written notice to Landlord of its election to terminate within 30
days after the Damage Notice has been delivered to Tenant. If Tenant does not
terminate this Lease, then (subject to Landlord's rights under Section 15.c)
Landlord shall repair the Building or the Premises, as the case may be, as
provided below, and Rent for the portion of the Premises rendered
untenantable by the damage shall be abated on a reasonable basis from the
date of damage until the completion of the repair, unless Tenant caused such
damage, in which case, Tenant shall continue to pay Rent without abatement.
c. Landlord's Rights. If a Casualty damages a material portion of the
Building, and Landlord makes a good faith determination that restoring the
Premises would be uneconomical, or if Landlord is required to pay any
insurance proceeds arising out of the Casualty to Landlord's Mortgagee, then
Landlord may terminate this Lease by giving written notice of its election to
terminate within 30 days after the Damage Notice has been delivered to
Tenant, and Basic Rental hereunder shall be abated as of the date of the
Casualty.
d. Repair Obligation. If neither party elects to terminate this Lease
following a Casualty, then Landlord shall, within a reasonable time after
such Casualty, commence to repair the Building and the Premises and shall
proceed with reasonable diligence to restore the Building and Premises to
substantially the same condition as they existed immediately before such
Casualty; however, Landlord shall not be required to repair or replace any
part of the furniture, equipment, fixtures, and other improvements which may
have been placed by, or at the request of, Tenant or other occupants in the
Building or the Premises, and Landlord's obligation to repair or restore the
Building or Premises shall be limited to the extent of the insurance proceeds
actually received by Landlord for the Casualty in question.
TAXES
16. Tenant shall be liable for all taxes levied or assessed against
personal property, furniture, or fixtures placed by Tenant in the Premises.
If any taxes for which
<PAGE> 14
Tenant is liable are levied or assessed against Landlord or Landlord's
property or if the assessed value of Landlord's property is increased by
inclusion of such personal property, furniture or fixtures, then Tenant
shall, within ten (10) days after Landlord has delivered notice of such
taxes to Tenant, either pay the amount of such taxes or diligently contest
such taxes and deliver to Landlord a bond or other security reasonably
satisfactory to Landlord. If Tenant fails to timely take either such
action, then Landlord may pay such taxes and Tenant shall pay to Landlord,
upon demand, that part of such taxes for which Tenant is primarily liable
hereunder.
EVENTS OF DEFAULT
17. Each of the following occurrences shall constitute an "Event of
Default":
a. Tenant's failure to pay Rent, or any other sums due from Tenant to
Landlord under the Lease (or any other lease executed by Tenant for space in
the Building), upon the expiration of a period of ten (10) days following
written notice to Tenant of such failure; provided, however, that Landlord
shall not be required to send such written notice to Tenant more than twice
in any one calendar year and after such two (2) written notices, Landlord
shall have no obligation to give Tenant written notice of any subsequent
default during the remainder of such calendar year and Tenant's failure or
refusal to timely pay Rent or other sums hereunder when due during the
remainder of such calendar year shall constitute an Event of Default;
b. Tenant's failure to perform, comply with, or observe any other
agreement or obligation of Tenant under this Lease (or any other lease
executed by Tenant for space in the Building) within 10 days following
written notice thereof to Tenant; provided, however, that in the event
Tenant's failure to perform, comply with, or observe any other agreement or
obligation of Tenant under this Lease cannot reasonably be cured within ten
(10) days following written notice to Tenant, Tenant shall not be in default
if Tenant commences to cure same within the ten (10) day period and
thereafter diligently prosecutes the curing thereof;
c. The filing of a petition by or against Tenant (the term "Tenant"
shall include, for the purpose of this Section 17.c, any guarantor of the
Tenant's obligations hereunder) (i) in any bankruptcy or other insolvency
proceeding; (ii) seeking any relief under any state or federal debtor relief
law; (iii) for the appointment of a liquidator or receiver for all or
substantially all of Tenant's property or for Tenant's interest in this
Lease; or (iv) for the reorganization or modification of Tenant's capital
structure, which petition remains undischarged for a period of sixty (60)
days;
d. Tenant shall desert or vacate any portion of the Premises for a
continuous period in excess of seven (7) days following written notice to
Tenant; provided, however, that such desertion or vacation shall not be a
default pursuant to this Lease so long as (i) Tenant performs all of its
obligations in accordance with this Lease, and (ii) so long as the Premises
are left in good condition and repair and in a clean condition which does not
detract from the appearance of the Building or the Premises; and
e. The admission by Tenant that it cannot meet its obligations as they
become due or the making by Tenant of an assignment for the benefit of its
creditors.
<PAGE> 15
REMEDIES
18. Upon any Event of Default, Landlord may, in addition to all other
rights and remedies afforded Landlord hereunder or by law or equity, take any
of the following actions:
a. Terminate this Lease by giving Tenant written notice thereof, in
which event, Tenant shall pay to Landlord the sum of (i) all Rent accrued
hereunder through the date of termination, (ii) all amounts due under Section
19.a., and (iii) an amount equal to (A) the total Rent that Tenant would have
been required to pay for the remainder of the Term discounted to present
value at a per annum rate equal to the "Prime Rate" as published on the date
this Lease is terminated by The Wall Street Journal, Southwest Edition, in
its listing of "Money Rates", minus (B) the then present fair rental value of
the Premises for such period, similarly discounted; or
b. Terminate Tenant's right to possession of the Premises without
terminating this Lease by giving written notice thereof to Tenant, in which
event Tenant shall pay to Landlord (i) all Rent and other amounts accrued
hereunder to the date of termination of possession, (ii) all amounts due from
time to time under Section 19.a., and (iii) all Rent and other sums required
hereunder to be paid by Tenant during the remainder of the Term, diminished
by any net sums thereafter received by Landlord through reletting the
Premises during such period. Landlord shall use reasonable efforts to relet
the Premises on such terms and conditions as Landlord in its sole discretion
may determine (including a term different from the Term, rental concessions,
and alterations to, and improvement of, the Premises); however, Landlord
shall not be obligated to relet the Premises before leasing other portions of
the Building. Landlord shall not be liable for, nor shall Tenant's
obligations hereunder be diminished because of, Landlord's failure to relet
the Premises or to collect rent due for such reletting. Tenant shall not be
entitled to the excess of any consideration obtained by reletting over the
Rent due hereunder. Reentry by Landlord in the Premises shall not affect
Tenant's obligations hereunder for the unexpired Term; rather, Landlord may,
from time to time, bring action against Tenant to collect amounts due by
Tenant, without the necessity of Landlord's waiting until the expiration of
the Term. Unless Landlord delivers written notice to Tenant expressly stating
that it has elected to terminate this Lease, all actions taken by Landlord to
exclude or dispossess Tenant of the Premises shall be deemed to be taken
under this Section 18.b. If Landlord elects to proceed under this Section
18.b., it may at any time elect to terminate this Lease under Section 18.a.
Additionally, without notice, Landlord may alter locks or other security
devices at the Premises to deprive Tenant of access thereto, and
Landlord shall not be required to provide a new key or right of access to
Tenant.
PAYMENT BY TENANT;
NON-WAIVER
19. a. Payment by Tenant. Upon any Event of Default, Tenant shall pay
to Landlord all reasonable costs incurred by Landlord (including court costs
and reasonable attorneys' fees and expenses) in (i) obtaining possession of
the Premises, (ii) removing and storing Tenant's or any other occupant's
property, (iii) repairing, restoring, altering, remodeling, or otherwise
putting the Premises into condition acceptable to a new tenant, excluding any
costs of tenant improvements, tenant moving allowances or tenant finish work,
(iv) if Tenant is dispossessed of the Premises and this Lease is not
terminated, reletting all or
<PAGE> 16
any part of the Premises (including reasonable brokerage commissions, and
other reasonable costs incidental to such reletting), (v) performing
Tenant's obligations which Tenant failed to perform, and (vi) enforcing, or
advising Landlord of, its rights, remedies, and recourses arising out of
the Event of Default.
b. No Waiver. Landlord's acceptance of Rent following an Event of
Default shall not waive Landlord's rights regarding such Event of Default. No
waiver by Landlord of any violation or breach of any of the terms contained
herein shall waive Landlord's rights regarding any future violation of such
term or violation of any other term.
20. [Intentionally Deleted.]
SURRENDER OF
PREMISES
21. No act by Landlord shall be deemed an acceptance of a surrender of
the Premises, and no agreement to accept a surrender of the Premises shall be
valid unless the same is made in writing and signed by Landlord. At the
expiration or termination of this Lease, Tenant shall deliver to Landlord the
Premises with all improvements located thereon in good repair and condition,
reasonable wear and tear (and condemnation and fire or other casualty damage
not caused by Tenant, as to which Sections 14 and 15 shall control) excepted,
and shall deliver to Landlord all keys to the Premises. Provided that Tenant
has performed all of its obligations hereunder, Tenant may remove all trade
fixtures, furniture, and personal property placed in the Premises by Tenant
(but Tenant shall not remove any such item which was paid for, in whole or in
part, by Landlord). Additionally, Tenant shall remove such alterations,
additions, improvements, trade fixtures, equipment, wiring and furniture as
Landlord may request. Tenant shall repair all damage caused by such removal.
All items not so removed shall be deemed to have been abandoned by Tenant and
may be appropriated, sold, stored, destroyed, or otherwise disposed of by
Landlord without notice to Tenant and without any obligation to account for
such items. The provisions of this Section 21 shall survive the end of the
Term.
HOLDING OVER
22. If Tenant fails to vacate the Premises at the end of the Term, then
Tenant shall be a tenant at will and, in addition to all other damages and
remedies to which Landlord may be entitled for such holding over, Tenant
shall pay, in addition to the other Rent, a daily Basic Rental equal to the
greater of (a) 135% of the daily Basic Rental payable during the last month
of the Term, or (b) the prevailing market rental rate in the Building for
similar space.
CERTAIN RIGHTS
RESERVED BY
LANDLORD
23. Provided that the exercise of such rights does not unreasonably
interfere with Tenant's occupancy and quiet enjoyment of the Premises,
Landlord shall have the following rights:
a. To make reasonable inspections, repairs, alterations, additions,
changes, or improvements, whether structural or otherwise, in and about the
Building, or any part thereof; for such purposes, to enter upon the Premises
and, during the continuance of any such work, to temporarily close doors,
entryways, public space, and corridors in the Building; to interrupt or
temporarily suspend Building services and facilities; and to change the
arrangement and location of entrances or passageways, doors, and doorways,
corridors, elevators, stairs, restrooms, or other public parts of the
Building;
<PAGE> 17
b. To take such reasonable measures as Landlord deems advisable for the
security of the Building and its occupants, including without limitation
searching all persons entering or leaving the Building; evacuating the
Building for cause, suspected cause, or for drill purposes; temporarily
denying access to the Building; and closing the Building after normal
business hours and on Saturdays, Sundays, and holidays, subject, however, to
Tenant's right to enter when the Building is closed after normal business
hours under such reasonable regulations as Landlord may prescribe from time
to time which may include by way of example, but not of limitation, that
persons entering or leaving the Building, whether or not during normal
business hours, identify themselves to a security officer by registration or
otherwise and that such persons establish their right to enter or leave the
Building;
c. To change the name by which the Building is designated; and
d. To enter the Premises at all reasonable hours after reasonable prior
notice (which notice may be oral or written) to show the Premises to
prospective purchasers, lenders, or tenants.
24. [Intentionally Deleted.]
MISCELLANEOUS
25. a. Landlord Transfer. Landlord may transfer, in whole or in part,
the Building and any of its rights under this Lease. If Landlord assigns its
rights under this Lease and the transferee assumes all obligations of
Landlord hereunder, then Landlord shall thereby be released from any further
obligations hereunder.
b. Landlord's Liability. The liability of Landlord to Tenant for any
default by Landlord under the terms of this Lease shall be limited to
Tenant's actual direct, but not consequential, damages therefor and shall be
recoverable from the interest of Landlord in the Building and the Land, and
Landlord shall not be personally liable for any deficiency. This section
shall not be deemed to limit or deny any remedies which Tenant may have in
the event of default by Landlord hereunder which do not involve the personal
liability of Landlord.
c. Force Majeure. Other than for Tenant's monetary obligations under
this Lease and obligations which can be cured by the payment of money (e.g.,
maintaining insurance), whenever a period of time is herein prescribed for
action to be taken by either party hereto, such party shall not be liable or
responsible for, and there shall be excluded from the computation for any
such period of time, any delays due to strikes, riots, acts of God, shortages
of labor or materials, war, governmental laws, regulations, or restrictions,
or any other causes of any kind whatsoever which are beyond the control of
such party.
d. Brokerage. Except for Crawford & Co. and Trammell Crow Dallas/Ft.
Worth, Inc., who shall be paid by Landlord pursuant to separate agreements,
Landlord and Tenant each warrant to the other that it has not dealt with any
broker or agent in connection with the negotiation or execution of this
Lease. Tenant and Landlord shall each indemnify the other against all
reasonable costs, expenses, attorneys' fees, and other liability for
commissions or other compensation claimed by any broker or agent claiming the
same by, through, or under the indemnifying party.
<PAGE> 18
e. Estoppel Certificates. From time to time, Tenant shall furnish to
any party designated by Landlord, within ten days after Landlord has made a
request therefor, a certificate signed by Tenant confirming and containing
such factual certifications and representations as to this Lease as Landlord
may reasonably request.
f. Notices. All notices and other communications given pursuant to this
Lease shall be in writing and shall be (i) mailed by first class, United
States Mail, postage prepaid, certified, with return receipt requested, and
addressed to the parties hereto at the address specified in the Basic Lease
Information, (ii) hand delivered to the intended address, or (iii) sent by
prepaid telegram, cable, facsimile transmission, or telex followed by a
confirmatory letter. Notice sent by certified mail, postage prepaid, shall be
effective three business days after being deposited in the United States
Mail; all other notices shall be effective upon delivery to the address of
the addressee. The parties hereto may change their addresses by giving notice
thereof to the other in conformity with this provision.
g. Separability. If any clause or provision of this Lease is illegal,
invalid, or unenforceable under present or future laws, then the remainder of
this Lease shall not be affected thereby and in lieu of such clause or
provision, there shall be added as a part of this Lease a clause or provision
as similar in terms to such illegal, invalid, or unenforceable clause or
provision as may be possible and be legal, valid, and enforceable.
h. Amendments; and Binding Effect. This Lease may not be amended except
by instrument in writing signed by Landlord and Tenant. No provision of this
Lease shall be deemed to have been waived by Landlord unless such waiver is
in writing signed by Landlord, and no custom or practice which may evolve
between the parties in the administration of the terms hereof shall waive or
diminish the right of Landlord to insist upon the performance by Tenant in
strict accordance with the terms hereof. The terms and conditions contained
in this Lease shall inure to the benefit of and be binding upon the parties
hereto, and upon their respective successors in interest and legal
representatives, except as otherwise herein expressly provided. This Lease is
for the sole benefit of Landlord and Tenant, and, other than Landlord's
Mortgagee, no third party shall be deemed a third party beneficiary hereof.
i. Quiet Enjoyment. Provided Tenant has performed all of the terms and
conditions of this Lease to be performed by Tenant, Tenant shall peaceably
and quietly hold and enjoy the Premises for the Term, without hindrance from
Landlord or any party claiming by, through, or under Landlord, subject to the
terms and conditions of this Lease.
j. Joint and Several Liability. If there is more than one Tenant, then
the obligations hereunder imposed upon Tenant shall be joint and several. If
there is a guarantor of Tenant's obligations hereunder, then the obligations
hereunder imposed upon Tenant shall be the joint and several obligations of
Tenant and such guarantor, and Landlord need not first proceed against Tenant
before proceeding against such guarantor nor shall any such guarantor be
released from its guaranty for any reason whatsoever.
k. Captions. The captions contained in this Lease are for convenience
of reference only, and do not limit or enlarge the terms and conditions of
this Lease.
<PAGE> 19
l. No Merger. There shall be no merger of the leasehold estate hereby
created with the fee estate in the Premises or any part thereof if the same
person acquires or holds, directly or indirectly, this Lease or any interest
in this Lease and the fee estate in the leasehold Premises or any interest in
such fee estate.
m. No Offer. The submission of this Lease to Tenant shall not be
construed as an offer, nor shall Tenant have any rights under this Lease
unless Landlord executes a copy of this Lease and delivers it to Tenant.
n. Tax Protest. Except for taxes set forth in Section 16, Tenant has no
right to protest the real estate tax rate assessed against the Project and/or
the appraised value of the Project determined by any appraisal review board
or other taxing entity with authority to determine tax rates and/or appraised
values (each a "Taxing Authority"). Tenant hereby knowingly, voluntarily and
intentionally waives and releases any right, whether created by law or
otherwise, to (a) file or otherwise protest before any Taxing Authority any
such rate or value determination even though Landlord may elect not to file
any such protest; (b) receive, or otherwise require Landlord to deliver, a
copy of any reappraisal notice received by Landlord from any Taxing
Authority; and (c) appeal any order of a Taxing Authority which determines
any such protest. The foregoing waiver and release covers and includes any
and all rights, remedies and recourse of Tenant, now or at any time
hereafter, under Section 41.413 and Section 42.015 of the Texas Tax Code (as
currently enacted or hereafter modified) together with any other or further
laws, rules or regulations covering the subject matter thereof. Tenant
acknowledges and agrees that the foregoing waiver and release was bargained
for by Landlord and Landlord would not have agreed to enter into this Lease
in the absence of this waiver and release. If, notwithstanding any such
waiver and release, Tenant files or otherwise appeals any such protest, then
Tenant will be in default under this Lease and, in addition to Landlord's
other rights and remedies, Tenant must pay or otherwise reimburse Landlord
for all reasonable costs, charges and expenses incurred by, or otherwise
asserted against, Landlord as a result of any tax protest or appeal by
Tenant, including, reasonable appraisal costs, tax consultant charges and
attorneys' fees (collectively, the "Tax Protest Costs"). If, as a result of
Tenant's tax protest or appeal, the appraised value for the Project is
increased above that previously determined by the Taxing Authority (such
increase, the "Value Increase") for the year covered by such tax protest or
appeal (such year, the "Protest Year"), then Tenant must pay Landlord, in
addition to all Tax Protest Costs, an amount (the "Additional Taxes") equal
to the sum of the following: (i) the product of the Value Increase multiplied
by the tax rate in effect for the Protest Year; plus (ii) the amount of
additional taxes payable during the five (5) year period following the
Protest Year, such amount to be calculated based upon the Value Increase
multiplied by the tax rate estimated to be in effect for each year during
such five (5) year period. Tenant must pay all Additional Taxes - even those
in excess of Tenant's proportionate share and which may relate to years
beyond the term of this Lease. The Additional Taxes will be conclusively
determined by a tax consultant selected by Landlord, without regard to
whether and to what extent Landlord may be able in years following the
Protest Year to reduce or otherwise eliminate any Value Increase. All Tax
Protest Costs and Additional Taxes must be paid by Tenant within five (5)
days following written demand by Landlord.
<PAGE> 20
o. Exhibits. All exhibits and attachments attached hereto are
incorporated herein by this reference.
Exhibit A - Outline of Premises
Exhibit B - Building Rules and Regulations
Exhibit C - Operating Expense Escalator
Exhibit D - Tenant Finish Work: Allowance
Exhibit E - Parking
Exhibit F - Extension Option
Exhibit G - Tenant's Preferential Right to
Lease
Exhibit H - Areas A and B
p. Entire Agreement. This Lease constitutes the entire agreement
between Landlord and Tenant regarding the subject matter hereof and
supersedes all oral statements and prior writings relating thereto. Except
for those set forth in this Lease, no representations, warranties, or
agreements have been made by Landlord or Tenant to the other with respect to
this Lease or the obligations of Landlord or Tenant in connection therewith.
SPECIAL PROVISIONS
26. a. Moving Allowance. Landlord shall pay to Tenant a moving
allowance equal to those costs and expenses which are actually incurred by
Tenant if such costs and expenses are due and payable to third parties and
are necessary to effectuate Tenant's relocation to the Premises; provided,
however, that Landlord shall not be obligated to pay an amount in excess of
the product of (i) the number of rentable square feet in the Premises
multiplied by (ii) $3.00. Such allowance shall be due and payable 30 days
after Tenant's delivery to Landlord of the paid invoices evidencing such
expense. In the event the moving expenses do not exceed the moving allowance,
Tenant may use such excess moving allowance to pay for the costs of
constructing the Work (as defined in Exhibit D hereof).
b. Lobby Improvements. Landlord shall re-paint and re-carpet the
elevator lobby on the 36th floor of the Building with matching paint and
carpet which Tenant selects with respect to the Premises, provided that
Landlord determines, in its sole discretion, that such paint and carpet
selected by Tenant is appropriate for a class A office building multi-tenant
elevator lobby.
c. Refurbishment Allowance. Provided there is then no uncured Event of
Default, upon the expiration of the seventh year of the Term of the Lease,
Landlord shall provide Tenant with a refurbishment allowance (the
"Refurbishment Allowance") in an amount equal to the product of $5.00
multiplied by the number of rentable square feet of area then in the
Premises, to improve and refurbish the Premises pursuant to plans and
specifications approved by Landlord and Tenant and such refurbishment work to
be performed by contractors approved by Landlord and Tenant. The
Refurbishment Allowance shall not be disbursed to Tenant in cash, but shall
be paid by Landlord if, as, and when such costs are actually incurred.
EXCEPT AS EXPRESLLY SET FORTH TO THE CONTRARY IN THIS LEASE, LANDLORD AND
TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE
SUITABLE FOR TENANT'S INTENDED COMMERCIAL PURPOSE, AND TENANT'S OBLIGATION
TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES
OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT,
WITHOUT ABATEMENT, SETOFF, DEDUCTION, NOTWITHSTANDING ANY BREACH BY
LANDLORD OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR
IMPLIED.
<PAGE> 21
DATED as of the date first above written.
<TABLE>
<CAPTION>
LANDLORD: TENANT:
- -------- ------
<S> <C>
THE EQUITABLE-NISSEI DALLAS COMPANY, FIBREBOARD CORPORATION,
a joint venture a Delaware corporation
By: The Equitable Life Assurance By:_________________________
Society of the United States, Name:_______________________
a New York corporation, Title:______________________
its Managing Venturer
By:___________________________
Name:_________________________
Title:________________________
</TABLE>
<PAGE> 1
EXHIBIT 10.43
SUBLEASE AGREEMENT
This Agreement of Sublease ("Sublease"), made as of the 13th day of July, 1998,
by and between FIBREBOARD CORPORATION, a Delaware Corporation, One Owens
Corning Parkway, Toledo, Ohio (hereinafter referred to as "Sublessor") and
AMERICAN PHYSICIAN PARTNERS, INC., a Delaware corporation, 2301 NationsBank
Plaza, 901 Main Street, Dallas, Texas 75202-3721 (hereinafter referred to as
"Sublessee").
W I T N E S S E T H:
WHEREAS, The Equitable - Nissei Dallas Company, a joint venture, as Lessor
("Lessor") and Fibreboard Corporation, as Lessee, entered into that certain
lease (the "Lease") dated June 10, 1996 regarding 2200 Ross Avenue, Suite 3600,
Dallas, Texas (the "Premises");
WHEREAS, the Lease is attached hereto as Exhibit A hereof and is hereinafter
referred to as the "Dominant Lease"; and
WHEREAS, the Lessor and the Lessee entered into that certain First Amendment of
Lease dated April 17, 1997, pursuant to which Lessee leased from Lessor an
additional 5,321 square feet of rentable area at 2200 Ross Avenue, Suite 3600,
Dallas, Texas, and, as a result, the "Subleased Premises," as defined and used
herein, includes the additional 5,321 square feet so that the "Subleased
Premises" consists of approximately 25,812 square feet of rentable area located
on the 36th Floor of 2200 Ross Avenue; and
WHEREAS, Sublessor is desirous of subletting to Sublessee the Subleased
Premises;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual promises
hereinafter made and other good and valuable consideration, the parties agree
as follows:
1. SUBLEASE OF SUBLEASED PREMISES. Sublessor, in consideration of the
sub-rents to be paid and the agreements to be performed by Sublessee,
and subject to and upon all of the terms and conditions hereof, does
hereby sublease to Sublessee, and Sublessee hereby Subleases from
Sublessor, the Subleased Premises. Sublessee shall use the Subleased
Premises only as is permitted in Section 9 of the Dominant Lease.
2. TERM. The term of this Sublease ("Term") shall be for a period of one
hundred fifty-seven (157) months commencing on August 1, 1998 (the
"Commencement Date") and ending August 31, 2011 ("Expiration Date").
3. NET RENT. Sublessee shall pay to Sublessor monthly rent in advance, on
the first day of each month during the Term, in accordance with the
Rent Schedule attached hereto as Exhibit B. Rent under this Sublease
shall be paid without deduction or set-off, except to the extent
allowed "Lessee" in the Dominant Lease, in which event there shall be
a dollar-for-dollar reduction in the amount of rent payable hereunder
during any period of the Term when rent is not payable by Sublessor
thereunder. Prior to the Commencement Date, Sublessor shall permit
Sublessee without payment of rent to have access (with keys) and to
occupy for the purpose of inspecting the Subleased Premises and, at
Sublessee's expense and risk, the Subleased Premises (i) to begin work
on cabling and other computer-related
<PAGE> 2
installation; (ii) to move certain personalty of Sublessee's into the
Subleased Premises; and (ii) for storage use and fixturing prior to
the Commencement Date. Should the Commencement Date occur on other
than the 1st day of a calendar month or should the Expiration Date
occur on any day except the last day of a calendar month, the monthly
rent for that month shall be prorated based on the number of days
Sublessee actually occupies the Subleased premises. Upon Commencement
Date, Sublessee shall have the right to fully occupy the entire
Subleased Premises consisting of 25,812 rentable square feet;
provided, however, Sublessee intends, and shall have the right, to
advertise for and subsublease the approximately 5,300 square foot
portion of the Subleased Premises which has its own separate entrances
and exits (the "5,300 feet"). Any rentals received by Sublessee from
the 5,300 Feet from any subsubtenant shall belong solely to Sublessee,
notwithstanding anything to the contrary contained in this Sublease or
the Dominant Lease.
4. ADDITIONAL RENTAL.
A) Sublessee shall also pay to Sublessor monthly as additional
rental the amount of electrical costs charged to Sublessor
pursuant to Section 4.C. of the Dominant Lease.
B) Sublessee shall also pay to Sublessor monthly as additional
rent all operating expense escalations charged to Sublessor
pursuant to Exhibit C of the Dominant Lease.
C) Notwithstanding anything contained in this Sublease or in the
Dominant Lease to the contrary, Sublessee shall not be
responsible for the payment of any additional rentals to the
Sublessor for the period of September 1, 1998 through November
30, 1999.
5. SECURITY DEPOSIT. On the date of execution of this Sublease by
Sublessee, there shall be due and payable by Sublessee to Sublessor a
Security Deposit in an amount equal to $79,587.00 to be held by
Sublessor for the performance by Sublessee of Sublessee's covenants
and obligations under this Sublease and Dominant Lease. Upon the
confirmed occurrence of any event of default by Sublessee, Sublessor
may, from time to time, without notice or prejudice to any other
remedy, use said Security Deposit to the extent necessary to make good
any arrears of rent or any other damage, injury, expense or liability
caused to Sublessor by such default or misuse. Any remaining balance
of Security Deposit shall be returned to Sublessee at the end of the
first four (4) years of the Term if there is then no default
hereunder, and otherwise upon satisfactory compliance with the terms
herein, inspection and acceptance by Sublessor of the vacated
Subleased Premises.
6. INCORPORATION AND OBSERVANCE OF DOMINANT LEASE. Sublessee accepts,
assumes and agrees to perform and be bound by all the terms, covenants
and conditions of the Dominant Lease which obligate the "Lessee"
thereunder unless this Sublease expressly provides for terms,
covenants or conditions which conflict with those of the "Lessee"
under the Dominant Lease; all terms of the Dominant Lease being
-2-
<PAGE> 3
incorporated herein by reference as though fully set forth herein.
Sublessor agrees to exert reasonable efforts to obtain the performance
of all the covenants of the "Lessor" pursuant to the provisions of
said Dominant Lease. In the event of conflict between the terms of
this Sublease and those of the Dominant Lease, as between the
Sublessor and Sublessee, the terms of this Sublease Agreement shall
control.
7. INSURANCE. Sublessee agrees to keep the Subleased Premises insured
with a reputable insurance company pursuant to a Tenants Comprehensive
General Liability Insurance policy with a minimum limit of $1,000,000
and All Risk Property policy insuring the contents contained within
the Premises. Such policies shall name Sublessor and Lessor as their
interests may appear, as additional insureds under the policies and
Sublessee shall provide Sublessor with a certificate evidencing such
insurance. The policies shall contain an agreement by the insurer
that such policies cannot be canceled or materially changed without at
least thirty (30) day's prior written notice to Sublessor.
8. DEFAULT. In addition to any default incorporated herein pursuant to
Paragraph 6 above, Sublessee shall be in default under this Sublease
if (a) Sublessee shall fail to pay, except as otherwise expressly
provided herein, when due any monthly rent payment within the time and
subject to the conditions applicable to Sublessor under the Dominant
Lease; or (b) Sublessee shall fail to perform any of its other
obligations under this Sublease after the same should have been
performed in accordance with the terms hereof within the time and
subject to the conditions applicable to Sublessor under the Dominant
Lease.
9. REMEDIES. If Sublessee shall be in default hereunder after having
been given notice of the existence of such default but with Sublessee
not having cured such default within thirty (30) days after receipt of
such notice, in addition to any other remedies that may be available
to Sublessor at law or in equity, Sublessor shall have the right to
immediately terminate this Sublease by written notice thereof to
Sublessee. In such event, Sublessee shall immediately quit and
surrender the Subleased Premises upon the date set forth in such
notice.
10. INDEMNITY. Sublessee shall indemnify and hold harmless Sublessor and
Sublessor's affiliates, and their respective directors, officers,
shareholders, employees, representatives and agents, from and against
any and all damages, losses, costs, claims, liabilities and expense
(including, without limitation, reasonable attorney's fees and
disbursements) incurred in connection with or otherwise arising from
(a) the occupancy and use of the Subleased Premises by Sublessee; and
(b) the breach or default by Sublessee of any of its obligations or
duties hereunder.
11. CONDITION OF SUBLEASED PREMISES AND ALTERATIONS. Sublessor Shall
deliver the Subleased Premises to Sublessee clean and free of debris
on the Commencement Date. Sublessor has no duty to construct or
improve the Subleased Premises and the Sublease Premises shall be
taken by Sublessee "As Is".
-3-
<PAGE> 4
12. SURRENDER OF SUBLEASED PREMISES. Subject to the requirements of
Section 6 above, at the termination of this Sublease, by lapse of time
or otherwise, Sublessee shall deliver up the Subleased Premises to
Sublessor in as good condition as existed on the date of possession by
Sublessee, ordinary wear and tear only excepted. Upon such
termination of this Sublease, Sublessor shall have the right to
re-enter and resume possession of the Subleased Premises.
13. ALTERATIONS TO SUBLEASED PREMISES. The Sublessee may, with the prior
written consent of the Sublessor and the Lessor, which consent shall
not be unreasonably withheld by the Sublessor and subject to the terms
of the Dominant Lease, at any time and from time to time during the
Term of this Sublease, make such changes and alterations, structural
or otherwise, to the Subleased Premises as the Sublessee shall deem
necessary or desirable in its sole discretion in connection with the
operation of Sublessee's business; provided that:
A) No change or alteration shall materially weaken, either
temporarily or permanently, the structure of the Subleased
Premises or, when completed, be of such character as to:
i) affect adversely the value of the Subleased Premises
in a material manner;
ii) reduce the cubic content of the Building; or
iii) reduce the general utility of the Subleased Premises.
B) Full sets of plans and specifications for any such changes and
alterations shall be supplied to the Sublessor and the Lessor.
C) Any interior or exterior structural alterations to the
Subleased Premises which are performed, or caused to be
performed, by the Sublessee shall become at once a part of the
realty and belong to Lessor. Lessor under the Dominant Lease
may, however, at its discretion, require that any such
alterations be removed upon surrender of the Subleased
Premises by the Sublessee, without expense to Sublessor or to
Lessor, and that the Subleased Premises be restored to its
condition, as it existed prior to such alteration at
Sublessee's sole cost and expense. Sublessee shall own and
retain title to all other leasehold improvements, moveable
furniture, trade fixtures, furnishings and equipment,
including those presently existing in the Subleased Premises
(collectively, the "Personalty"), providing Sublessee is not
in default under the terms of the Agreements. Sublessee shall
be responsible for all personal property taxes with respect to
the Personalty from and after the effective date of this
Sublease, with such taxes prorated for the 1998 tax year.
D) Any such alteration or change must be completed in a
professional and workmanlike manner, and must be completed in
full compliance with all applicable laws, regulations and
building codes.
14. HOLDOVER. If this Sublease is terminated for any reason and Sublessee
fails or refuses to vacate the Subleased Premises within five (5) days
of such termination, Sublessor, in
-4-
<PAGE> 5
addition to any other remedies available to it, shall be entitled to
receive 135% of the rental due during the period in which Sublessee
remains on the Subleased Premises in violation of this provision.
There are no renewal options granted to Sublessee hereunder or under
the Dominant Lease.
15. BROKERS. Only Fischer & Company was instrumental in arranging this
Sublease, and Sublessee indemnifies and holds harmless Sublessor and
Lessor from any claim for commission by any other broker, and
Sublessor is solely responsible for any commission due to Fischer &
Company as a result of this Sublease.
16. NOTICES. All notices required or permitted to be given hereunder
shall be given in writing and, if not delivered by hand, shall be
deposited, either registered or certified, in the United States mail,
postage prepaid, and addressed to Sublessor or Sublessee, as the case
may be, at its above address.
17. HAZARDOUS MATERIALS. SUBLESSEE SHALL NOT CONDUCT ANY ACTIVITIES ON OR
ABOUT THE SUBLEASED PREMISES WHICH RESULT IN THE GENERATION, STORAGE
OR RELEASE OF ANY TOXIC, HAZARDOUS OR SIMILAR SUBSTANCES (AS SUCH
TERMS MAY BE DEFINED FROM TIME TO TIME BY ANY FEDERAL, STATE OR LOCAL
LAW, RULE OR REGULATION). SUBLESSEE SPECIFICALLY AGREES TO INDEMNIFY,
DEFEND AND HOLD SUBLESSOR AND LESSOR HARMLESS FROM AND AGAINST ANY AND
ALL CLAIMS, DAMAGES, LIABILITIES AND LOSES ARISING AS A RESULT OF
SUBLESSEE'S BREACH OF THE FOREGOING PROHIBITION.
18. ASSIGNMENT. Sublessee shall not assign this Sublease nor sublet all
or any part of the Subleased Premises without the prior written
consent of Sublessor, which consent shall not be unreasonably
withheld; provided that, Sublessee may sublet subject to the terms,
covenants and conditions of this Sublease all or any part of the 5,300
feet, provided Sublessee remains obligated to Sublessor for the rental
and other obligations of Sublessee hereunder respecting the 5,300
Feet. With respect to any proposed subletting, Sublessee shall notify
Sublessor in writing at least forty-five (45) days prior to the
proposed commencement date of the new tenant's occupancy, and identify
the tenant, the nature of the tenant's business and the proposed use
of the new tenant's space. Sublessor shall approve or disapprove of
the proposed subletting in writing within fifteen (15) days after
receipt of Sublessee's notice. However, Sublessor shall have the
right, at any time, to assign this Sublease to any other party without
the consent of Sublessee.
19. LESSOR'S CONSENT. Sublessor and Sublessee each acknowledge and agree
that this Sublease is subject to the Sublessor obtaining the prior
written consent of Lessor in accordance with the terms of the Dominant
Lease. Such written consent shall be accompanied by the Lessor's
acknowledgment that there are no defaults by or offsets against
Sublessor under the Dominant Lease. In the event that such consent is
not obtained within thirty (30) days following the date hereof, but in
any event prior to the Commencement Date, this Sublease shall
terminate and neither party shall have any liability to the other
hereunder.
-5-
<PAGE> 6
20. SUBLESSOR'S OBLIGATIONS. Sublessor agrees during the Term to:
A) Promptly provide Sublessee any notice or other communications
respecting the Dominant Lease received by Sublessor from
Landlord or any mortgagee of Landlord.
B) Cooperate with and assist Sublessee to perform Sublessee's
obligations under the Dominant Lease in any endeavor, such as
in the event of condemnation or casualty proceeds, wherein
Sublessor's participation is necessary in Sublessor's name
either under the Dominant Lease or by law.
21. SUBLESSOR'S REPRESENTATIONS. Sublessor represents that:
A) Sublessor will pay any amounts to be paid to Landlord under
subparagraph 10.a. of the Dominant Lease.
B) Sublessor will indemnify Sublessee for damages resulting from
Sublessor's default under the Dominant Lease through no fault
of Sublessee, including but not limited to, Sublessor's acts
or omissions of the type specified in subparagraph 11.c. of
the Dominant Lease.
C) This Sublease does not violate the terms of any mortgage
encumbering the Premises, those of any agreement between
Sublessor and any mortgagee of Landlord, nor those of any
other agreement with any other creditor of Sublessor's holding
a lien against or a security interest in the Premises.
D) All payments due and owing under the Dominant Lease have been
made, and Sublessor is not in default thereunder.
E) It will provide Sublessee by the Commencement Date an estoppel
letter from Lessor, specifying the address for monthly rent
due hereunder, approving this Sublease, and acknowledging that
so long as Sublessee is not in default hereunder, a default
under the Dominant Lease by Sublessor will not result in the
termination of Sublessee's tenancy so long as Sublessee
attorns to Lessor under the terms hereof.
F) The Subleased Premises comply with the Americans With
Disabilities Act.
22. SUBLESSEE'S RIGHT TO TERMINATE. Sublessee shall have the same rights
to terminate this Sublease as Sublessor would have under the Dominant
Lease for Landlord's acts or omissions as are specified in the
Dominant Lease or as otherwise provided to Sublessor by Law.
-6-
<PAGE> 7
23. REFURBISHMENT AND CONSTRUCTION ALLOWANCE. On the seventh (7th)
anniversary of the Commencement Date of the Dominant Lease, Sublessor
shall pay to Sublessee a lump sum of $102,455.00 in cash as an
allowance to refurbish the Subleased Premises, as such sum becomes
available to Sublessor under the Dominant Lease and any amendments
thereto. In addition, from and after the Commencement Date of this
Sublease, Sublessor shall make available the sum of $53,210 to
Sublease as a construction allowance to be disbursed to Sublessee from
time to time during the Term of this Sublease (if not utilized within
the first six months after the Commencement Date by Sublessee) for
Sublessee's improvements to the Subleased Premises.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
the day and year first above written.
SUBLESSOR: FIBREBOARD CORPORATION
By:
------------------------------------------
Title:
---------------------------------------
Date:
----------------------------------------
SUBLESSEE: AMERICAN PHYSICIAN PARTNERS, INC.
By:
------------------------------------------
Title:
---------------------------------------
Date:
----------------------------------------
LESSOR: The EQUITABLE-NISSEI DALLAS COMPANY, a
joint venture
By:
------------------------------------------
Title:
---------------------------------------
Date:
----------------------------------------
-8-
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BASIC
Net income (loss) 3,408 (1,444) 9,872 (3,143)
Weighted average shares outstanding 18,908 2,000 18,572 2,000
Net income (loss) per share $ 0.18 $ (0.72) $ 0.53 $ (1.57)
DILUTED
Net income (loss) 3,408 (1,444) 9,872 (3,143)
Weighted average shares outstanding 18,908 2,000 18,572 2,000
Weighted average common stock equivalents 448 0 647 0
-------- -------- -------- --------
Total shares outstanding 19,356 2,000 19,219 2,000
Net income (loss) per share $ 0.18 $ (0.72) $ 0.51 $ (1.57)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,990
<SECURITIES> 0
<RECEIVABLES> 112,300
<ALLOWANCES> 78,707
<INVENTORY> 0
<CURRENT-ASSETS> 42,856
<PP&E> 107,432
<DEPRECIATION> 71,966
<TOTAL-ASSETS> 146,267
<CURRENT-LIABILITIES> 24,517
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 3,384
<TOTAL-LIABILITY-AND-EQUITY> 146,267
<SALES> 0
<TOTAL-REVENUES> 98,327
<CGS> 0
<TOTAL-COSTS> 79,056
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,142
<INCOME-PRETAX> 16,080
<INCOME-TAX> 6,208
<INCOME-CONTINUING> 3,408
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,872
<EPS-PRIMARY> $0.53
<EPS-DILUTED> $0.51
</TABLE>
