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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
MARCH 31, 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 jurisdiction (I.R.S. Employer
of incorporation or Identification)
organization)
2301 NATIONSBANK PLAZA
901 MAIN STREET
DALLAS, TEXAS 75202
(Address of principal executive offices, including zip code)
(214) 761-3100
(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.
<TABLE>
<CAPTION>
Class Outstanding at May 11, 1998
----- ---------------------------
<S> <C>
COMMON STOCK, $0.0001 PAR VALUE 17,973,268 SHARES
</TABLE>
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AMERICAN PHYSICIAN PARTNERS, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
FORM 10-Q ITEM PAGE
- -------------- ----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets as of March 31, 1998 (Unaudited) and December 31, 1997.......... 1
Consolidated Statements of Income (Unaudited) for the three months
ended March 31, 1998 and 1997............................................................... 2
Consolidated Statements of Cash Flows (Unaudited) for the three months
ended March 31, 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 ................................. 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................... 9
Item 2. Changes in Securities....................................................................... 9
Item 3. Defaults Upon Securities.................................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders......................................... 9
Item 5. Other Information .......................................................................... 9
Item 6. Exhibits and Reports on Form 8-K............................................................ 9
SIGNATURES.................................................................................................... 10
</TABLE>
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ---------
(UNAUDITED)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ............................. $ 6,933 $ 4,572
Accounts receivable, net of allowances ................ 29,314 21,398
Due from affiliated practices ......................... 282 3,651
Other current assets .................................. 2,888 2,651
--------- ---------
Total current assets ............................... 39,417 32,272
PROPERTY AND EQUIPMENT, net of accumulated depreciation .. 30,200 22,395
INVESTMENTS IN JOINT VENTURES ............................ 4,418 3,725
INTANGIBLE ASSETS, net ................................... 29,772 --
DEFERRED FINANCING COSTS ................................. 2,296 2,395
OTHER ASSETS ............................................. 1,109 1,979
--------- ---------
Total assets ....................................... $ 107,212 $ 62,766
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses ................. $ 9,254 $ 12,689
Accrued physician retention ........................... 5,470 4,330
Accrued salaries and benefits ......................... 2,146 1,514
Due to joint ventures ................................. 1,280 639
Current portion of long-term debt ..................... 821 858
Current portion of capital lease obligations .......... 3,287 1,791
Deferred income taxes ................................. 4,447 6,124
Other current liabilities ............................. 1,457 651
--------- ---------
Total current liabilities .......................... 28,162 28,596
DEFERRED INCOME TAXES .................................... 1,694 3,872
LONG-TERM DEBT, net of current portion ................... 82,365 51,734
CAPITAL LEASE OBLIGATIONS, net of current portion ........ 4,004 1,482
OTHER LIABILITIES ........................................ 501 297
--------- ---------
Total liabilities .................................. 116,725 85,981
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES .......... 768 820
STOCKHOLDERS' DEFICIT:
Common stock .......................................... 2 2
Additional paid-in capital ............................ (7,780) (18,460)
Accumulated deficit ................................... (2,504) (5,577)
--------- ---------
Total stockholders' deficit ........................ (10,282) (24,035)
--------- ---------
Total liabilities and stockholders' deficit ........ $ 107,212 $ 62,766
========= =========
</TABLE>
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
1998 1997
------------ ------------
(UNAUDITED)
REVENUES:
<S> <C> <C>
Physician groups revenue, net ............ $ 47,008 $ --
Less: amounts retained by physician groups (17,292) --
------------ ------------
Service fee revenue ................. 29,716 --
COSTS AND EXPENSES:
Salaries and benefits .................... 9,368 --
Practice supplies ........................ 2,186 --
Practice rent and lease expense .......... 2,360 --
Other practice expenses .................. 5,343 --
Corporate general and administrative ..... 2,010 844
Depreciation and amortization ............ 2,472 4
------------ ------------
Total costs and expenses ............ 23,739 848
------------ ------------
OPERATING INCOME (LOSS) .................... 5,977 (848)
OTHER EXPENSES:
Interest expense, net .................... 1,400 32
------------ ------------
Total other expenses ................ 1,400 32
------------ ------------
INCOME (LOSS) BEFORE TAXES, MINORITY
INTERESTS IN CONSOLIDATED SUBSIDIARIES
AND EQUITY IN EARNINGS OF INVESTMENTS ...... 4,577 (880)
EQUITY IN EARNINGS OF INVESTMENTS .......... 651 --
MINORITY INTERESTS IN INCOME OF
CONSOLIDATED SUBSIDIARIES .................. (106) --
------------ ------------
INCOME (LOSS) BEFORE TAXES ................. 5,122 (880)
INCOME TAX EXPENSE ......................... (2,049) --
------------ ------------
NET INCOME (LOSS) .......................... $ 3,073 $ (880)
============ ============
NET INCOME (LOSS) PER COMMON SHARE
Basic .................................... $ 0.17 $ (0.44)
Diluted .................................. $ 0.16 $ (0.44)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic .................................... 18,054,221 2,000,000
Diluted .................................. 18,840,770 2,000,000
</TABLE>
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
1998 1997
-------- --------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) ....................................... $ 3,073 $ (880)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities --
Minority interests ................................... 106 --
Depreciation and amortization ........................ 2,472 4
Equity in earnings of investments .................... (651) --
Changes in assets and liabilities- net of acquisitions
Accounts receivable, net ......................... (2,269) --
Other receivables and other current assets ....... 2,138 (584)
Other noncurrent assets .......................... 302 (3)
Accounts payable and accrued expenses ............ (6,603) 720
Accrued salaries and benefits .................... 297 --
Due to joint ventures ............................ 484 --
Other liabilities ................................ 1,010 --
-------- --------
Net cash provided by (used in)
operating activities .......................... 359 (743)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ..................... (1,797) (91)
Cash paid for acquisitions .............................. (26,054) --
Contributions to joint ventures ......................... (130) --
Distributions from joint ventures ....................... 88 --
-------- --------
Net cash used in investing activities ......... (27,893) (91)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt ................ 30,800 --
Payments on long-term debt .............................. (206) --
Payments on capital leases .............................. (699) --
-------- --------
Net cash provided by financing activities ..... 29,895 --
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ....................................... 2,361 (834)
CASH AND CASH EQUIVALENTS, beginning of period ............. 4,572 2,491
-------- --------
CASH AND CASH EQUIVALENTS, end of period ................... $ 6,933 $ 1,657
======== ========
</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.
Service Fee Revenue
Service fee revenue represents physician groups revenue less amounts
retained by physician groups. The amounts retained by physician groups
represents 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 fixed fee
structure should result in the Company receiving substantially the same amount
of service fee as it would have received under its negotiated percentage fee
structure. The service fees received by the Company under either fee structure
provide the Company with a net profits 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.
Service fee revenue in the first quarter of 1998 consists of the following
(in thousands):
<TABLE>
<S> <C>
Professional component $ 7,722
Technical component 21,994
--------
$ 29,716
========
</TABLE>
4
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2. ACQUISITIONS AND PRACTICE AFFILIATIONS
In January 1998, the Company announced its affiliation with Community
Radiology Associates, Inc., a ten-physician radiology practice based in
Rockville, Maryland. The Company also announced the acquisition of Community
Radiology Associates' seven imaging centers and the acquisition of four
independent imaging centers in the Greater Bay Area of Northern California. The
total consideration for these transactions was approximately $41,133,000
consisting of issuance of (or the obligation to issue) 1,019,018 shares of the
Company's common stock, cash and assumed debt. These transactions will be
accounted for under the purchase method.
3. EARNINGS PER SHARE
Net income (loss) per share (basic and diluted) were calculated using the
weighted average number of common shares outstanding during the period plus the
net additional number of shares which would be issuable upon the exercise of
stock options, assuming the Company used the proceeds received to purchase
additional shares at market value. 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.
4. SUBSEQUENT EVENTS
In April 1998, the Company announced its affiliation with Radiology
Imaging Associates, Inc., an eight-physician radiology practice based in Fort
Pierce, Florida. The total consideration for this transaction was approximately
$11,800,000 consisting of the issuance of 433,662 shares of the Company's common
stock, cash and assumed debt. This transaction will be accounted for under the
purchase method.
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 physician practice management services to radiology
practices. The Company's focus is on the development, consolidation and
management of integrated radiology and imaging center networks. As of May 12,
1998, APPM provided management services to nine Affiliated Practices consisting
of 241 physicians practicing at 47 hospitals and 70 owned, operated or managed
diagnostic imaging centers ("ICs") in California, Florida, Kansas, Maryland, New
York and Texas. 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 March 31, 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, 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
first-quarter 1997 results are not meaningful.
Service Fee Revenue
The Company generated service fee revenue of $29,716 for the three months
ended March 31, 1998. There was no service fee revenue generated during the same
period ended March 31, 1997.
Salaries and Benefits
Salaries and benefits for the three months ended March 31, 1998, were
$9,368. Salaries and benefits include certain costs of non-physician clinical
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 31.5% for the three months ended March 31, 1998.
Practice Supplies
Practice supplies expenses for the three months ended March 31, 1998, were
$2,186. Practice supplies expenses 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 expenses to total service fee
revenue was 7.4% for the three months ended March 31, 1998.
Practice Rent and Lease Expense
Practice rent and lease expenses for the three months ended March 31,
1998, were $2,360. 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 7.9% for the
three months ended March 31, 1998.
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Other Practice Expenses
Other practice expenses for the three months ended March 31, 1998, were
$5,343. 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 18.0% for the three
months ended March 31, 1998.
Corporate General and Administrative
Corporate general and administrative expenses for the three months ended
March 31, 1998, were $2,010 compared to $844 for the three months ended March
31, 1997 representing an increase of $1,166 or 138.2%. The percentage of
corporate general and administrative expenses to total service fee revenue was
6.8% for the three months ended March 31, 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 March
31, 1998, were $2,472 compared to $4 for the three months ended March 31, 1997
representing an increase of $2,468. The percentage of depreciation and
amortization expenses to total service fee revenue was 8.3% for the three months
ended March 31, 1998. Depreciation and amortization expenses increased from the
1997 amount due to the Reorganizations and the subsequent acquisitions completed
in the first quarter of 1998.
Interest Expense
Interest expense for the three months ended March 31, 1998, was $1,400
compared to $32 for the three months ended March 31, 1997 representing an
increase of $1,368. The percentage of interest expense to total service fee
revenue was 4.7% for the three months ended March 31, 1998. Interest expense
increased due the cost of borrowings under the Company's $115 million credit
facility (the "Credit Facility") entered into on November 26, 1997, the
assumption of certain indebtedness of the Founding Affiliated Practices in
connection with the Reorganizations and certain capital lease obligations.
Income Taxes
Income taxes were provided on the taxable income of the Company for
federal and state reporting purposes using the applicable effective rates. The
Company did not recognize any income tax benefit for the operating losses
incurred in prior periods. The Company will recognize these benefits in future
periods.
Net Income
As a result of the foregoing factors, the Company generated a net income of
$3,073 for the three months ended March 31, 1998, or diluted income per share of
$0.16 on 18,841,000 shares outstanding, compared to a net loss of $880 for the
three months ended March 31, 1997, or diluted loss per share of $(0.44) on
2,000,000 shares outstanding.
Three Months Ended March 31, 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 first-quarter 1997
results are not meaningful.
Liquidity and Capital Resources
Net cash from operations for the three months ended March 31, 1998, was
$359. Net cash from operations includes a use of cash in the amount of $3,400
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. The
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Company also experienced an increase in its accounts receivable due to the time
required to obtain new Medicare provider numbers for several of the Founding
Affiliated Practices. The Company was successful in obtaining the required
provider numbers in the latter half of the first quarter.
Net cash used in investing activities for the three months ended March 31,
1998, was $27,893. During the three months ended March 31,1998, the Company
expended $26,054 in consideration for acquisitions. These expenditures were
funded primarily from borrowings under the Company's Credit Facility.
Net cash flows from financing activities for the three months ended March
31, 1998, were $29,895. Borrowings during the three months ended March 31,
1998, under the Credit Facility were $30,800 and were used to finance the
Company's ongoing development activities, the acquisition of equipment and for
working capital purposes.
Under the terms of the Credit Facility dated November 26, 1997, 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 $115.0 million or 2.75 times the consolidated EBITDA of the Company
giving pro forma effect to acquisitions made with such borrowings. At March 31,
1998, the Company was eligible to borrow up to $115.0 million under the Credit
Facility, and the Company had outstanding borrowings of $80.4 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 1.0% to 1.75% dependent
on certain financial ratios or (ii) the prime rate plus an applicable margin
which can vary from 0% to 0.75%. 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
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.
On May 12, 1998, the Company announced that it received a firm commitment
from its existing group of lenders to increase its Credit Facility to $160
million from the current $115 million. Closing is conditioned upon execution of
an amended credit agreement, which is anticipated before the end of May 1998. As
a result, the Company has 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.
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
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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.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to one suit relating to services provided by a
Founding Affiliated Practice. There can be no assurances that additional claims
will not be asserted against the Company in the future. The Company became
subject to certain 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 will not have a
material adverse effect on the business, financial condition or results of
operations of the Company.
There can be no assurance that the Company will not subsequently be named
as a defendant in additional lawsuits. 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 the
Company is subsequently added as a party in any of these lawsuits, or 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
Form 8-K, dated April 13, 1998, American Physician Partners, Inc. (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 (the "Act").
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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: May 15, 1998 /s/ GREGORY L. SOLOMON
----------------------
Gregory L. Solomon
President, Chief Executive
Officer, and Director (Principal
Executive Officer)
Date: May 15, 1998 /s/ SAMI S. ABBASI
------------------
Sami S. Abbasi
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
Date: May 15, 1998 /s/ DAVID W. YOUNG
------------------
David W. Young
Controller
(Principal Accounting Officer)
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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 **
<PAGE> 14
EXHIBIT
NUMBER DESCRIPTION
------- -----------
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 *
<PAGE> 15
EXHIBIT
NUMBER DESCRIPTION
------- -----------
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.**
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.***
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
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. *
11.1 Statement re: computation of per share earnings *
27 Financial Data Schedule *
</TABLE>
- --------------
* File 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.
<PAGE> 1
================================================================================
ASSET PURCHASE AGREEMENT
dated as of
January 1, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.
(a Delaware corporation),
COMMUNITY IMAGING PARTNERS, INC.
(a Delaware corporation),
and
COMMUNITY RADIOLOGY ASSOCIATES, INC.
(a Maryland professional corporation),
DRS. KORSOWER AND PION RADIOLOGY, P.A.
(a Maryland professional association)
and
Larry Joseph Bernstein, M.D., Dilip S. Arwindekar, M.D.,
Nicholas Harry Malakis, M.D.,
James M. McCabe, M.D., Sidney J. Pion, M.D., Maya Eve Reiser, M.D.,
Paul S. Schaefer, M.D., William D. Wehunt, M.D. and Alan Abood Cohen, M.D.
(all individuals residing in Maryland)
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Rules of Interpretation . . . . . . . . . . . . . . . 4
ARTICLE II PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . 5
Section 2.1 Purchased Assets . . . . . . . . . . . . . . . . . . . 5
Section 2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . 7
Section 2.3 Subsequent Actions . . . . . . . . . . . . . . . . . . 7
ARTICLE III ASSUMED LIABILITIES . . . . . . . . . . . . . . . . . 8
Section 3.1 Assumed Liabilities . . . . . . . . . . . . . . . . . 8
ARTICLE IV PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . 8
Section 4.1 Purchase Price . . . . . . . . . . . . . . . . . . . . 8
Section 4.2 Closing and Effective Time . . . . . . . . . . . . . . 11
Section 4.3 Closing Deliveries . . . . . . . . . . . . . . . . . . 12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER AND
PRINCIPAL STOCKHOLDERS. . . . . . . . . . . . . . . . . 12
Section 5.1 Organization and Good Standing; Qualification . . . . 12
Section 5.2 Authorization and Validity . . . . . . . . . . . . . . 12
Section 5.3 Title to Purchased Assets. . . . . . . . . . . . . . . 13
Section 5.4 Condition of Tangible Assets . . . . . . . . . . . . . 13
Section 5.5 Consents and Approvals . . . . . . . . . . . . . . . . 13
Section 5.6 Governmental Authorization . . . . . . . . . . . . . . 13
Section 5.7 Continuity of Business Enterprise . . . . . . . . . . 13
Section 5.8 Subsidiaries and Investments . . . . . . . . . . . . . 13
Section 5.9 Absence of Conflicting Agreements or Required Consents 13
Section 5.10 Seller Financial Statements . . . . . . . . . . . . . 14
Section 5.11 No Undisclosed Liabilities . . . . . . . . . . . . . . 14
Section 5.12 Litigation and Claims . . . . . . . . . . . . . . . . 14
Section 5.13 No Violation of Law . . . . . . . . . . . . . . . . . 15
Section 5.14 Contracts and Commitments . . . . . . . . . . . . . . 15
Section 5.15 No Brokers . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.16 No Other Agreements to Sell the Assets of the Business 16
Section 5.17 Employee Matters . . . . . . . . . . . . . . . . . . . 16
Section 5.18 Labor Relations . . . . . . . . . . . . . . . . . . . 16
Section 5.19 Employee Benefit Plans . . . . . . . . . . . . . . . . 17
Section 5.20 Lease Agreements . . . . . . . . . . . . . . . . . . . 18
Section 5.21 Real and Personal Property . . . . . . . . . . . . . . 19
Section 5.22 Environmental Matters . . . . . . . . . . . . . . . . 19
Section 5.23 Filing Reports . . . . . . . . . . . . . . . . . . . . 20
Section 5.24 Insurance Policies . . . . . . . . . . . . . . . . . . 20
Section 5.25 Accounts Receivable; Payors . . . . . . . . . . . . . 21
Section 5.26 Accounts Payable; Suppliers . . . . . . . . . . . . . 21
Section 5.27 Inventory . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
Section 5.28 Licenses, Authorization and Provider Programs . . . . 22
Section 5.29 Inspections and Investigations . . . . . . . . . . . . 23
Section 5.30 Proprietary Rights and Information . . . . . . . . . . 23
Section 5.31 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.32 Related Party Arrangements . . . . . . . . . . . . . . 25
Section 5.33 Banking Relations . . . . . . . . . . . . . . . . . . 25
Section 5.34 Fraud and Abuse and Self Referral . . . . . . . . . . 25
Section 5.35 Restrictions on Business Activities . . . . . . . . . 25
Section 5.36 Agreements in Full Force and Effect . . . . . . . . . 25
Section 5.37 Statements True and Correct . . . . . . . . . . . . . 26
Section 5.38 Schedules . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.39 Finders' Fees . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER AND APPM . . . 26
Section 6.1 Organization and Good Standing; Qualification . . . . 26
Section 6.2 Authorization and Validity. . . . . . . . . . . . . . 26
Section 6.3 Governmental Authorization . . . . . . . . . . . . . . 26
Section 6.4 Capitalization . . . . . . . . . . . . . . . . . . . . 27
Section 6.5 Absence of Conflicting Agreements or Required Consents 27
Section 6.6 Statements True and Correct . . . . . . . . . . . . . 27
Section 6.7 Schedules . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.8 Finders' Fees . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VII Intentionally Omitted . . . . . . . . . . . . . . . . 27
ARTICLE VIII Intentionally Omitted . . . . . . . . . . . . . . . . . 27
ARTICLE IX Intentionally Omitted . . . . . . . . . . . . . . . . 27
ARTICLE X Intentionally Omitted . . . . . . . . . . . . . . . . 27
ARTICLE XI CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . 28
Section 11.1 Deliveries of Seller . . . . . . . . . . . . . . . . . 28
Section 11.2 Deliveries of APPM . . . . . . . . . . . . . . . . . . 29
ARTICLE XII Intentionally Omitted . . . . . . . . . . . . . . . . 29
ARTICLE XIII POST CLOSING MATTERS . . . . . . . . . . . . . . . . . 29
Section 13.1 Further Instruments of Transfer . . . . . . . . . . . 29
Section 13.2 Certain Prorations . . . . . . . . . . . . . . . . . . 29
Section 13.3 Certain Expenses. . . . . . . . . . . . . . . . . . . 30
Section 13.4 Certain Employee Benefits . . . . . . . . . . . . . . 30
Section 13.5 Buyer's Compliance with Section 4.1 . . . . . . . . . 30
Section 13.6 Lock-up . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XIV REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 30
Section 14.1 Indemnification by Seller. . . . . . . . . . . . . . . 30
Section 14.2 Indemnification by APPM and Buyer . . . . . . . . . . 31
Section 14.3 Conditions of Indemnification . . . . . . . . . . . . 31
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
Section 14.4 Remedies Not Exclusive . . . . . . . . . . . . . . . . 33
Section 14.7 Costs, Expenses and Legal Fees . . . . . . . . . . . . 34
Section 14.8 Tax Benefits; Insurance Proceeds . . . . . . . . . . . 34
ARTICLE XV Intentionally Omitted . . . . . . . . . . . . . . . . 35
ARTICLE XVI NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . 35
Section 16.1 Non-Disclosure Covenant . . . . . . . . . . . . . . . 35
Section 16.2 Damages . . . . . . . . . . . . . . . . . . . . . . . 35
Section 16.3 Survival . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XVII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 35
Section 17.1 Amendment; Waivers . . . . . . . . . . . . . . . . . . 35
Section 17.2 Assignment . . . . . . . . . . . . . . . . . . . . . . 35
Section 17.3 Parties in Interest; No Third Party Beneficiaries . . 35
Section 17.4 Entire Agreement . . . . . . . . . . . . . . . . . . . 36
Section 17.5 Severability . . . . . . . . . . . . . . . . . . . . . 36
Section 17.6 Survival of Representations, Warranties and Covenants 36
Section 17.7 Governing Law . . . . . . . . . . . . . . . . . . . . 36
Section 17.8 Captions . . . . . . . . . . . . . . . . . . . . . . . 36
Section 17.9 Gender and Number . . . . . . . . . . . . . . . . . . 36
Section 17.10 Reference to Agreement . . . . . . . . . . . . . . . . 36
Section 17.11 Confidentiality; Publicity and Disclosures . . . . . . 36
Section 17.12 Notice . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 17.13 No Waiver; Remedies . . . . . . . . . . . . . . . . . 37
Section 17.14 Counterparts . . . . . . . . . . . . . . . . . . . . . 37
Section 17.15 Defined Terms . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
(iii)
<PAGE> 5
SCHEDULES
Schedule 2.1(a) Real Property/Leasehold Improvements
Schedule 2.1(b) Personal Property
Schedule 2.1(c) Inventory
Schedule 2.1(d)(i) Intellectual Property
Schedule 2.1(d)(iii) Governmental Licenses and Permits
Schedule 2.1(d)(vi) Prepaids
Schedule 2.1(d)(viii) Interest in Other Entities, Joint Ventures
Schedule 2.1(d)(ix) Warranties, Guarantees and Covenants
Schedule 2.1(e) Purchased Contracts
Schedule 2.2 Excluded Assets
Schedule 3.1 Assumed Liabilities
Schedule 4.1 Allocation of Purchase Price
Schedule 5.3(a) Encumbrances
Schedule 5.3(b) Permitted Encumbrances
Schedule 5.4 Condition of Tangible Assets
Schedule 5.5 Consents and Approvals
Schedule 5.6 Governmental Authorizations
Schedule 5.7 Sale, Distribution or Spin-Off of Assets
Schedule 5.8 Subsidiaries and Investments
Schedule 5.9 Conflicting Agreements or Required Consents
Schedule 5.10 Seller Financial Statements
Schedule 5.11 Undisclosed Liabilities
Schedule 5.12 Litigation and Claims
Schedule 5.14 Contracts and Commitments
Schedule 5.17(a) Employment Contracts
Schedule 5.17(b) Employees Earning Over $50,000
Schedule 5.17(c) Severance Arrangements
Schedule 5.18(a) Employees Terminating Employment
Schedule 5.18(b) Unfair Labor Practice Complaints
Schedule 5.18(c) Discrimination Charges, Investigations,
Proceedings or Complaints; Governmental Audits
Schedule 5.18(d) Inquiries, Investigations or Monitoring of
Professional Personnel
Schedule 5.19(a) Employee Benefit Plans
Schedule 5.19(c) Audits, Investigations, etc., of Employee Benefit
Plans
Schedule 5.19(e) Pending or Threatened Claims Against Employee
Benefit Plans
Schedule 5.19(g) Funding Status
Schedule 5.19(l) Other Compensation Arrangements
Schedule 5.20 Lease Agreements
Schedule 5.22(b) Asbestos
Schedule 5.22(d) Environmental Audits
Schedule 5.24 Insurance Policies
Schedule 5.25(a) Accounts Receivable Aging
Schedule 5.25(b) Certain Payors
Schedule 5.26(a) Accounts Payable
Schedule 5.26(b) Certain Providers/Suppliers
Schedule 5.28(a) Licenses; Permits; Authorizations; Provider
Agreements
Schedule 5.28(b) Cost Reports
(iv)
<PAGE> 6
Schedule 5.29 Inspections and Investigations
Schedule 5.30(a) Proprietary Rights and Information
Schedule 5.30(b) Proprietary Rights and Information - Technology
Agreements
Schedule 5.30(c) Proprietary Rights and Information - Required
Consents
Schedule 5.31(b) Taxes - Disputes
Schedule 5.31(c) Notices and Threats of Tax Deficiency or
Delinquency
Schedule 5.32 Related Party Arrangements
Schedule 5.33 Banking Relations
Schedule 5.35 Restrictions on Business Activities
Schedule 5.39 Finders' Fees
Schedule 6.3 Governmental Authorization
Schedule 6.5 Conflicting Agreements; Required Consents
Schedule 13.2(a) Prorated Items
(v)
<PAGE> 7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of January 1,
1998, is by and among AMERICAN PHYSICIAN PARTNERS, INC., a Delaware corporation
("APPM"), Community Imaging Partners, Inc., a Delaware corporation and a
wholly-owned subsidiary of APPM ("Buyer"), and Community Radiology Associates,
Inc., a Maryland professional corporation ("CRA") and Drs. Korsower and Pion
Radiology, P.A., a Maryland professional association ("KPR") and, together with
CRA (the "Seller"), and Larry Joseph Bernstein, M.D., Dilip S. Arwindekar,
M.D., Nicholas Harry Malakis, M.D., James M. McCabe, M.D., Sidney J. Pion,
M.D., Maya Eve Reiser, M.D., Paul S. Schaefer, M.D., William D. Wehunt, M.D.
and Alan Abood Cohen, M.D. (collectively, the "Principal Stockholders").
RECITALS
A. CRA and KPR own and operate (i) a professional medical practice
specializing in radiology and (ii) seven diagnostic imaging centers
(collectively, the "Business").
B. The Principal Stockholders own all of the issued and outstanding
capital stock of both CRA and KPR.
C. 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.
D. Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer certain of the assets and other rights related to the Business (which
assets and rights are defined in Section 2.1 as the "Purchased Assets"), and to
assume certain liabilities of Seller relating thereto, as set forth herein, on
the terms and conditions in this Agreement.
E. The Principal Stockholders acknowledge that they have received
adequate consideration for entering into this Agreement and performing their
obligations under this Agreement, and that they will be benefitted by the
transactions contemplated by this Agreement. The Principal Stockholders
acknowledge that APPM and Buyer have relied on the Principal Stockholders'
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.
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"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" or "to the knowledge of" and similar phrases shall mean
(i) in the case of a natural person, the particular fact was known, or not
known, as the context requires, to such person after diligent investigation and
inquiry by such person, and (ii) in the case of an entity, the particular fact
was known, or not known, as the context requires, to any Principal Stockholder,
director or executive officer of such entity after diligent investigation and
inquiry by the executive officers of such entity.
"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 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).
"CRA" shall have the meaning set forth in the preamble to this
Agreement.
"Damages" shall have the meaning set forth in Section 14.1.
"Effective Time" shall have the meaning set forth in Section 4.2.
"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(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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"Excluded Assets" shall have the meaning set forth in Section 2.2.
"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.
"KPR" shall have the meaning set forth in the preamble to this
Agreement.
"Lease Assignments" shall have the meaning set forth in Section 11.1(k).
"Lease Agreements" shall have the meaning set forth in Section 5.20.
"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: (i)
the MWTA; (ii) the U.S. Public Vessel Medical Waste Anti-Dumping Act of 1988,
33 USCA Section 2501 et seq.; (iii) the Marine Protection, Research, and
Sanctuaries Act of 1972, 33 USCA Section 1401 et seq.; (iv) The Occupational
Safety and Health Act, 29 USCA Section 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
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.
Section 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.
"Other Agreements" shall have the meaning set forth in Section 11.1(b).
"Payors" shall mean any and all third-party payors including, but not
limited to, Medicare and Medicaid Programs (as defined in Section 5.28),
insurance companies, health maintenance organizations, preferred provider
organizations, independent practice associations, hospitals, hospital systems,
integrated
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delivery systems, CHAMPUS, and any and all other private or governmental entity
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.
"Physician Employee" shall mean each radiologist employed by Seller.
"Purchased Assets" shall have the meaning set forth in Section 2.1.
"Principal Stockholders" shall have the meaning set forth in the
preamble to this Agreement.
"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 Reviewed 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.
"Seller Subsidiary" shall have the meaning set forth in Section 5.8.
"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.
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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, real, personal or mixed,
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) Real Property and Leasehold Improvements. All real
property including, without limitation, the real property more particularly
described in Schedule 2.1(a) attached hereto (collectively, the "Real Estate"),
and all buildings, improvements, other constructions, construction-in-progress
and fixtures (collectively, the "Improvements") now or hereafter located on the
Real Estate or owned by Seller and located on the real property subject to the
Lease Agreements (as defined in Section 5.20 hereof) (the Real Estate and
Improvements are hereinafter collectively referred to as the "Real Property"),
which includes, without limitation, all real property used in connection with
the Business together with, as they relate to the Real Property, all right,
title and interest of Seller in all options, easements, servitudes,
rights-of-way and other rights associated therewith;
(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, fixtures, machinery, vehicles, 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 date hereof (the "Inventory"). A list
of Inventory is attached as Schedule 2.1(c);
(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 (the "Intellectual
Property"), including, without limitation, the items identified in Schedule
2.1(d)(i) attached 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, and relating to any renovation or construction
on the Real Property, or the Leased Real Estate (collectively, the
"Governmental Licenses and Permits"), which
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Governmental Licenses and Permits are listed in Schedule 2.1(d)(iii) attached
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 (i) each Seller's relinquishment of all of its right, title and
interest in, to and under such Governmental Licenses and Permits as of the date
hereof to the fullest extent necessary or appropriate to enable Buyer to
acquire such Governmental Licenses and Permits; and (ii) the issuance or grant
to Buyer by the appropriate third party, federal, state, or local governmental
authority of all right, title and interest in, to and under such Governmental
Licenses and Permits as of the date hereof reasonably equivalent to that
relinquished by the Seller, including, but not limited to, the right,
authority, and approval for Buyer to provide long-term care services from and
after the date hereof in a reasonably equivalent manner as Seller prior to the
date hereof;
(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;
(v) All deposits (the "Deposits") held by Seller in
connection with future services to be rendered by Seller, delivered under the
LEASES (as defined below);
(vi) Those advance payments, prepayments, prepaid
expenses, deposits and the like (the "Prepaids") which are existing as of the
date hereof, including real property taxes and assessments and utility deposits
and payments (subject to the prorations provided for in this Agreement), which
were made by Seller solely with respect to its operation of the Business (the
"Purchased Prepaids"), the current categories and amounts of which are set
forth in Schedule 2.1(d)(vi);
(vii) Seller's goodwill associated with the Purchased
Assets;
(viii) All interests in joint ventures, partnerships,
corporations and limited liability companies, other than the 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 exhibit shall not cause same to be among the Purchased
Assets), including, without limitation, the interests identified in Schedule
2.1(d)(viii) attached 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);
(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 are
not terminable or cancelable upon 60 days' notice;
(f) Books and Records. Seller hereby delivers to Buyer, and
Buyer hereby takes possession of, all operating data and records pertaining to
the assets, properties, business, operations, accounts, financial condition,
customers or suppliers of the Business, including all of Seller's books,
records,
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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 operate the Business from and after the date hereof, including, without
limitation, the following:
(i) subject to federal and state law, patient and
medical records and all other medical and financial information regarding
patients of the Business (which shall be subject to the confidentiality
provisions set forth in this Agreement) (provided, however, notwithstanding
anything to the contrary herein, KPR shall retain beneficial ownership of the
patient charts and medical records);
(ii) patient lists;
(iii) employment and personnel records relating to the
Seller employees who are hired by Buyer;
(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 Real Property, the Personal Property, the Purchased Contracts and the
Lease Agreements, all title information (including but not limited to all title
insurance policies, commitments, acts of sale, covenants, conditions,
restrictions, leases, licenses, occupancy agreements, easements, servitudes,
and other items of record), all environmental studies, reports and information,
all property use and operational material, plans and specifications, contracts,
site plans, plats, surveys, zoning material, correspondence, and governmental
material (i.e., licenses, permits, notices, and other matters with respect to
governmental authorities), information and notices;
(g) Accounts Receivable. Accounts receivable of Seller as of
December 31, 1997 (provided, however, that notwithstanding anything to the
contrary herein, Seller shall not sell to Buyer any of Seller's Medicare or
Medicaid accounts receivable as of December 31, 1997 (the "Medicare
Receivables"), but Seller shall irrevocably retain Buyer to collect on Seller's
behalf such Medicare Receivables, and which, immediately following the
collection of such Medicare Receivables, as such collection may occur from time
to time, Seller shall deliver to Buyer the proceeds of such Medicare Receivable
collections); 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 (collectively, the "Excluded Assets"). The Excluded
Assets shall not be transferred by Seller to Buyer.
Section 2.3 Subsequent Actions. If, at any time after the Effective
Time, APPM or Buyer shall consider or be advised that any deeds, 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 APPM or 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 Seller, execute and deliver all such
deeds, bills of sale, assignments and assurances and to 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.
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ARTICLE III
ASSUMED LIABILITIES
Section 3.1 Assumed Liabilities. Buyer hereby assumes 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, 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, 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 shareholders,
directors, officers, partners, agents or employees whether prior or subsequent
to the date hereof, 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 date hereof; (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 or arising prior to the date hereof 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 shareholders, directors, officers, partners,
agents or employees prior to the date hereof; (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 date hereof; (f) except as set forth
on Schedule 3.1, trade payables which arise prior to the date hereof; (g)
claims by any third-party payor (including Medicare or Medicaid) or patient
with respect to any matter or billing occurring prior to the date hereof; and
(h) any other liability or obligation of Seller. All employment tax
liabilities of Seller shall remain Seller's responsibility for collection,
remittance and tax filing purposes for the period through the date hereof.
Seller shall supply confirmation that all past and current employment taxes
through the date hereof have been remitted to the appropriate agencies in a
timely manner.
ARTICLE IV
PURCHASE PRICE
Section 4.1 Purchase Price.
(a) First Installment of Purchase Price. In consideration for
the sale, transfer, assignment, conveyance and delivery of the Purchased Assets
from Seller to Buyer, Buyer hereby delivers the following ("Closing
Consideration"):
(i) ____________________ Dollars ($_______) by wire
transfer of immediately available funds to one or
more accounts designated in writing by Seller;
(ii) __________ shares of common stock, par value $.0001
per share, of APPM (each share of such class being
referred to herein as a share of "APPM Stock")
having an aggregate value equal to $____________.
The number
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of shares of APPM Stock delivered to Seller on the
date hereof is referred to herein as the "Closing
Stock." The number of shares of APPM Stock that
constitute the Closing Stock has been determined
based on the average closing sale price of the APPM
Stock for the twenty (20) trading days prior to the
Closing Date; and
(iii) The assumption by Buyer of the Assumed Liabilities.
(b) Additional Installments of Purchase Price. After the date
hereof, as additional installments of the consideration for the sale, transfer,
assignment, conveyance and delivery of the Purchased Assets from Seller to
Buyer, Buyer (or APPM) shall deliver to Seller shares of APPM Stock as follows:
(i) __________ shares of APPM Stock representing an
aggregate value equal to $__________ (such shares
being referred to herein as the "Six Month Stock").
Buyer or APPM shall deliver the certificates
representing the Six Month Stock on the six-month
anniversary of the date hereof. The aggregate
number of shares of APPM Stock that will constitute
the Six Month Stock has been determined based on
the average closing sale price of the APPM Stock
for the twenty (20) trading days prior to the
Closing Date; and
(ii) ___________ shares of APPM Stock representing an
aggregate value equal to $__________ (such shares
being referred to herein as the "Anniversary
Stock"). Buyer or APPM shall deliver the
certificates representing the Anniversary Stock on
the one-year anniversary of the date hereof. The
aggregate number of shares of APPM Stock that will
constitute the Anniversary Stock has been
determined based on the average closing sale price
of the APPM Stock for the twenty (20) trading days
prior to the Closing Date.
Whole shares shall be delivered in lieu of any fractional shares that otherwise
would have been delivered pursuant to this Section 4.1(b). In addition to the
terms and conditions set forth herein, the APPM Stock shall be subject to the
terms and conditions of a lock-up agreement between APPM and CRA of even date.
(c) Holdback of the APPM Stock. Simultaneously with APPM's
delivery to Seller of each certificate representing the Closing Stock, Seller
hereby deposits each such certificate with APPM, which shall hold such shares
as security for the satisfaction of indemnification obligations of Seller and
the Principal Stockholders pursuant to Article XIV hereof. Immediately after
Seller's receipt of the certificates representing the Six Month Stock on the
six-month anniversary of the date hereof, Seller shall deposit each such
certificate with APPM, which shall hold such shares as security for the
satisfaction of indemnification obligations of Seller and the Principal
Stockholders pursuant to Article XIV hereof. Immediately after Seller's
receipt of the certificates representing the Anniversary Stock on the one-year
anniversary of the date hereof, Seller shall deposit each such certificate with
APPM, which shall hold such shares as security for the satisfaction of
indemnification obligations of Seller and the Principal Stockholders pursuant
to Article XIV hereof. Simultaneously with each such deposit of APPM Shares
(whether on the date hereof, the six-month anniversary of the date hereof or
the one-year anniversary of the date hereof), Seller shall deliver to APPM an
executed stock power (in form and substance satisfactory to APPM), authorizing
APPM to deliver such certificates to APPM's Transfer Agent for cancellation (in
whole or in part) if any of the shares or APPM Stock are retained by APPM
pursuant to the terms of this Section 4.1(c) in satisfaction of any
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indemnification obligation of any Seller or Principal Stockholder pursuant to
Article XIV hereof. APPM shall hold, for the benefit of Seller and Buyer, the
certificates representing the Closing Stock, the Six Month Stock and the
Anniversary Stock, and shall retain or disburse such certificates only in
accordance with the terms of this Section 4.1(c).
At any time prior to the one-year anniversary of the Closing Date, Buyer
or APPM may deliver a Claim Notice (as defined in Article XIV) to Seller, to
the effect that Buyer or APPM believes that any Seller or Principal Stockholder
has or may have liability to Buyer or APPM pursuant to Article XIV hereof and
specifying in reasonable detail the basis for such belief. If, by the one-year
anniversary of the date hereof, neither Buyer nor APPM has delivered any Claim
Notices, then APPM shall deliver the certificates representing the Closing
Stock to Seller. If, however, Buyer or APPM has delivered one or more Claim
Notices prior to the one-year anniversary of the date hereof, then (i) APPM
shall not disburse any shares of the Closing Stock, but instead shall retain
the certificates representing such shares of APPM Stock and (ii) APPM
thereafter shall disburse such retained shares of APPM Stock only upon the
delivery to APPM of (x) a written agreement signed by APPM, Buyer and Seller,
which agreement shall expressly provide the number of shares of the Closing
Stock to be delivered to Seller (if any) and/or retained by APPM (if any); or
(y) a final arbitration decision or a final judgment that determines Seller's
and Buyer's rights with respect to the Closing Stock.
At any time prior to the eighteen-month anniversary of the Closing Date,
Buyer or APPM may deliver a Claim Notice (as defined in Article XIV) to Seller,
to the effect that Buyer or APPM believes that any Seller or Principal
Stockholder has or may have liability to Buyer or APPM pursuant to Article XIV
hereof and specifying in reasonable detail the basis for such belief. If, by
the eighteen-month anniversary of the date hereof, neither Buyer nor APPM has
delivered any Claim Notices, then APPM shall deliver the certificates
representing the Six Month Stock to Seller. If, however, Buyer or APPM has
delivered one or more Claim Notices prior to the eighteen-month anniversary of
the date hereof, then (i) APPM shall not disburse any shares of the Six Month
Stock, but instead shall retain the certificates representing such shares of
APPM Stock and (ii) APPM thereafter shall disburse such retained shares of APPM
Stock only upon the delivery to APPM of (x) a written agreement signed by APPM,
Buyer and Seller, which agreement shall expressly provide the number of shares
of the Six Month Stock to be delivered to Seller (if any) and/or retained by
APPM (if any); or (y) a final arbitration decision or a final judgment that
determines Seller's and Buyer's rights with respect to the Six Month Stock.
At any time prior to the two-year anniversary of the Closing Date, Buyer
or APPM may deliver a Claim Notice (as defined in Article XIV) to Seller, to
the effect that Buyer or APPM believes that any Seller or Principal Stockholder
has or may have liability to Buyer or APPM pursuant to Article XIV hereof and
specifying in reasonable detail the basis for such belief. If, by the two-year
anniversary of the date hereof, neither Buyer nor APPM has delivered any Claim
Notices, then APPM shall deliver the certificates representing the Anniversary
Stock to Seller. If, however, Buyer or APPM has delivered one or more Claim
Notices prior to the two-year anniversary of the date hereof, then (i) APPM
shall not disburse any shares of the Anniversary Stock, but instead shall
retain the certificates representing such shares of APPM Stock and (ii) APPM
thereafter shall disburse such retained shares of APPM Stock only upon the
delivery to APPM of (x) a written agreement signed by APPM, Buyer and Seller,
which agreement shall expressly provide the number of shares of the Anniversary
Stock to be delivered to Seller (if any) and/or retained by APPM (if any); or
(y) a final arbitration decision or a final judgment that determines Seller's
and Buyer's rights with respect to the Anniversary Stock.
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Disbursement by APPM to Seller pursuant to this Section 4.1(c) of
certificates representing shares of APPM Stock shall not affect or release any
Seller or Principal Stockholder from liability for indemnification obligations
pursuant to Article XIV hereof.
The exercise by Buyer or APPM, in good faith, of Buyer's or APPM's right
to deliver one or more Claim Notices and to withhold disbursement of
certificates representing shares of APPM Stock shall not constitute an event of
default under, or breach of Buyer's or APPM's obligations to, Seller or any
Principal Stockholder under this Agreement, any Other Agreement (as defined
below) or any related agreement between the parties hereto. Buyer's and APPM's
right to deliver one or more Claim Notices and APPM's right to withhold
disbursement of deposited certificates representing shares of APPM Stock shall
be in addition to, shall not be in lieu of, and shall not limit any other
remedy available under this Agreement, under any Other Agreement or any related
agreement between the parties hereto, under law or otherwise.
Any shares of the Closing Stock, the Six Month Stock or the Anniversary
Stock retained by APPM in satisfaction of any indemnification obligation of any
Seller or Principal Stockholder under Article XIV hereof shall, for such
purposes, be deemed to have a value per share equal to the lesser of (i) the
average closing sale price of the APPM Stock for the twenty trading days prior
to the date hereof and (ii) the closing sale price on the last trading day
immediately prior to the date on which such shares are determined (whether by
agreement, arbitration award or final judgment) to be retainable by APPM in
satisfaction of an indemnification obligation of any Seller or Principal
Stockholder.
(d) Ownership of Escrowed Shares; Voting Rights. Each Seller
shall have all indicia of ownership of the shares of APPM Stock registered in
such Seller's name on the records of APPM's transfer agent and held by APPM
pursuant to Section 4.1(c) while such shares are so held and prior to a
determination pursuant to Section 4.1(c) that any shares of APPM Stock
deposited with APPM are to be retained by APPM, including without limitation
the rights to vote such shares and receive distributions thereon and the
obligations to pay all taxes, assessments, and charges with respect thereto
(but subject to the terms of any agreement pursuant to which Seller's rights to
dispose of such shares is limited and subject to all applicable laws relating
to sales of securities); provided, however, that any distribution, on or with
respect to such shares and any other shares or securities into which such
shares may be changed or for which they may be exchanged pursuant to corporate
action of APPM affecting holders of APPM Stock generally shall be delivered to
and held by APPM pursuant to Section 4.1(c), shall be deemed shares so held
hereunder and shall be subject to the provisions of Section 4.1(c).
(e) Allocation of Purchase Price. The Purchase Price shall be
allocated by Buyer and Seller in accordance with Schedule 4.1(e) hereto.
Section 4.2 Closing and Effective Time. The closing of the
transactions contemplated under this Agreement shall take place at the offices
of Siskind, Grady, Rosen & Hoover, Baltimore, Maryland at 10:00 a.m. local time
on January 23, 1998 (the "Closing Date"), or 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 January 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.
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Section 4.3 Closing Deliveries.
(a) Seller. Simultaneously with the execution and delivery of
this Agreement, Seller hereby executes and delivers to Buyer: (i) a Bill of
Sale substantially in the form attached as Exhibit A hereto ("Bill of Sale");
and (ii) the documents required to be delivered pursuant to Section 11.1
hereof.
(b) Buyer. Simultaneously with the execution and delivery of
this Agreement, Buyer hereby delivers to Seller: (i) the cash portion of the
Current Consideration; (ii) certificate(s) for the Closing Stock; and (iii) the
documents required to be delivered pursuant to Section 11.2 hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPAL STOCKHOLDERS
As an inducement to APPM and to Buyer to enter into this Agreement,
Seller and each Principal Stockholder jointly and severally (subject to the
terms and conditions hereof) represent and warrant to APPM and to Buyer as of
the date hereof.
Section 5.1 Organization and Good Standing; Qualification. CRA 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 and as now contemplated, to execute and
deliver this Agreement and to consummate the transactions contemplated by this
Agreement. KPR is a professional association duly organized, validly existing
and in good standing under the laws of its state of incorporation, with all
requisite association power and authority to own, operate and lease its assets
and properties and to carry on its business as currently conducted and as now
contemplated, to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement. Seller and each Seller Subsidiary
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 Seller and each Seller Subsidiary.
The Principal Stockholders own all of the issued and outstanding capital stock
of both CRA and KPR.
Each Principal Stockholder has full requisite power, authority and
capacity to execute, deliver and perform this Agreement. No Principal
Stockholder is aware of any defect (or facts that might be deemed to constitute
such a defect) in any other Principal Stockholder's power, authority or
capacity that could impair the enforceability of this Agreement and the
applicable Other Agreements against any other Principal Stockholder. The
Agreement has been duly executed and delivered by each Principal Stockholder
and constitutes the legal, valid and binding obligations of each Principal
Stockholder, enforceable against them in accordance with its terms.
Section 5.2 Authorization and Validity. Seller has all requisite
corporate 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, subject to
approval of this Agreement by the Principal Stockholders, 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 respective corporate powers and have been duly authorized by all
necessary action on the part of Seller's Boards of Directors. 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,
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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 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, the tangible Personal Property and any other tangible Purchased
Assets are in operating condition and are sufficient for the operation of the
Business as presently conducted and are in conformity in all material respects
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, no consent, approval or authorization of, notice to, or declaration,
filing or registration with, any governmental entity or any other Person 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 set forth in
Schedule 5.6, and other than consents, filings or notifications required to be
made or obtained by Buyer or APPM, 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 to
the best knowledge of 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, 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 (2) years preceding the date of this Agreement.
Section 5.8 Subsidiaries and Investments. Except as set forth in
Schedule 5.8, 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.
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 5.6 and Schedule
5.9 hereto, does not require the consent of any governmental or regulatory body
or authority or any other third party; (ii) will not conflict with or result in
a violation of any provision of Seller's articles or certificate of
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incorporation or bylaws; (iii) to the best knowledge of Seller, will not
conflict with, result in a violation of, or constitute a default under any law,
rule, ordinance, 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
to or bound; (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, to which Seller is a party or by
which Seller or any of its properties are subject to or bound; and (v) will not
create any Encumbrance or restriction upon any of the Purchased Assets.
Section 5.10 Seller Financial Statements. Attached hereto as Schedule
5.10 are (i) the reviewed consolidated balance sheet of Seller as of April 30,
1996, and the related statements of income, Principal Stockholders' equity and
statements of cash flows of Seller and Seller Subsidiaries for the year ended
April 30, 1996 (collectively, the "Seller Reviewed Financial Statements"); and
(ii) the unaudited consolidated balance sheet of Seller and Seller Subsidiaries
as of December 31, 1997 (the "Seller Current Balance Sheet") and the related
statements of income, Principal Stockholders' equity and statements of cash
flows of Seller and Seller Subsidiaries for the eight (8) month period then
ended (collectively, the "Seller Current Financial Statements"). Seller
Reviewed Financial Statements and Seller Current Financial Statements are
sometimes collectively referred to herein as the "Seller Financial Statements."
Seller Reviewed 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 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 and Seller
Subsidiaries 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 audit adjustments (the effect of which will not individually or in the
aggregate 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 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
affecting, or to the knowledge of Seller threatened against, or affecting
Seller, any Seller Subsidiary, any Principal Stockholder, the Physician
Employees or any other licensed professional or other individual affiliated
with Seller affecting or that could affect the operations, business condition,
(financial or otherwise), or results of operations or the prospects of Seller
which (i) if successful, may, individually or in the aggregate, have a Material
Adverse Effect on Seller or (ii) could adversely affect the ability of Seller
or any Seller Subsidiary to effect the transactions contemplated hereby, and
there is no basis for any such action or any state of facts or occurrence of
any event which might give rise to the foregoing. There are no unsatisfied
judgments against Seller or any Seller Subsidiary or any licensed professional
or other individual affiliated with Seller or any Seller Subsidiary relating to
services provided by or on behalf of Seller or any Seller Subsidiary or any
consent decrees to which any of the foregoing is subject. Except as set forth
in Schedule 5.12, each of the matters, if any, set forth in Schedule 5.12 is
fully covered by policies of insurance of Seller or any Seller Subsidiary as in
effect on the date hereof.
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Section 5.13 No Violation of Law. Neither Seller nor any Seller
Subsidiary has been, nor shall be as of the date hereof (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 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 APPM 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, and any government entity, Payor, 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, 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 Seller (or any Physician Employee 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 to which aggregate future payments by Seller
are 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, all such contracts, agreements or other instruments
are in full force and effect, there has been no threatened cancellation
thereof, there are no outstanding disputes thereunder, each is with unrelated
third parties and was entered into on an arms-length basis in the ordinary
course of business and, assuming the receipt of the appropriate consents, each
constituting an Assumed Contract will continue to be binding in accordance with
their terms after consummation of the transaction contemplated herein. 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 and insurance policies) which could either singularly or
in the aggregate 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. For
each of the Assumed Liabilities, in every instance where consent is necessary,
Seller obtained and delivered to Buyer in writing, effective as of the date
hereof, such consents as are necessary to effect a valid and binding transfer
or assignment so as to enable Buyer to enjoy all of the rights now enjoyed by
Seller under such contracts. 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 notice of any plan or intention of any other party to exercise any
right to cancel or terminate such contract, agreement or instrument, and Seller
is not aware of any fact(s) that would justify the exercise of such a right;
and (ii) Seller does not currently contemplate, or have reason to believe any
other Person currently contemplates, any amendment or change to any such
contract, agreement or instrument.
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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
Person 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(a), 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 (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 December 31, 1997, Seller employed a
collective total of 115 full-time and part-time employees. Schedule 5.17(b)
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 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.
(c) Severance Arrangements. Except as set forth on Schedule
5.17(c), upon termination of employment of any employee or Physician 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.
(a) Except as set forth on Schedule 5.18(a), to the knowledge
of Seller, 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) Except as set forth in Schedule 5.18(b), there is no
unfair labor practice, charge or complaint or any other employment-related
matter against or involving Seller pending or threatened before the National
Labor Relations Board or any federal, state or local agency, authority or
court.
(c) Except as set forth in Schedule 5.18(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 threatened before the Equal
Employment Opportunity Commission or any federal, state or local agency,
authority or court against Seller. There have been no governmental
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audits of the equal employment opportunity practices of Seller and no basis for
any such audit exists which, if conducted would result in a Material Adverse
Effect on Seller.
(d) Except as set forth in Schedule 5.18(d), there are no
inquiries, investigations or monitoring activities of any licensed, registered,
or certified professional personnel employed or retained by, credentialed or
privileged, or otherwise affiliated with 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(a) contains a complete and
accurate list 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
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, 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. In addition, Seller has provided
or made available to Buyer a written description of all existing practices
engaged in by Seller that constitute Employee Benefit Plans. Except as set
forth in Schedule 5.19(a), 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 such entity to make further
contributions or payments in connection therewith following such termination.
Except as set forth in Schedule 5.19(a), 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 to
Seller.
(c) Examinations. Except as set forth in Schedule 5.19(c),
Seller has not received any 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 could
result, directly or indirectly, (including through any obligation of
indemnification or contribution), in any taxes, penalties or other liability to
Seller, APPM or any of their respective Affiliates.
(e) Claims and Litigation. Except as set forth in Schedule
5.19(e), no pending or 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. 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
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knowledge of Seller and each Principal Stockholder, has been continually
qualified under the applicable section of the Code since the effective date of
such Employee Benefit Plan. No proceedings exist or 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(g),
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"). Except as set forth in Schedule 5.19(g), with respect to
each Employee Benefit Plan subject to Title IV of ERISA, the assets of each
such plan are at least equal in value to the present value of accrued benefits
determined on an ongoing basis as of the date hereof. With respect to each
Employee Benefit Plan described in Section 501(c)(9) of the Code, the assets of
each such plan are at least equal in value to the present value of accrued
benefits, based upon the most recent actuarial valuation as of a date no more
than ninety (90) days prior to the date hereof. Schedule 5.19(g) contains a
complete and accurate statement of all actuarial assumptions applied to
determine the present value of accrued benefits under all Employee Benefit
Plans subject to actuarial assumptions.
(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) Multiemployer Plans. Neither Seller nor any member of a
Controlled Group is or ever has been obligated to contribute to a multiemployer
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 exist that would 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. 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(l), neither Seller nor any Principal Stockholder or Physician
Employee of Seller is 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.
Section 5.20 Lease Agreements. Schedule 5.20 contains a true, accurate
and complete list of all the lease agreements and license agreements to which
Seller or any Seller Subsidiary is a party and pursuant to which Seller or any
Seller Subsidiary 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. Each Lease Agreement is valid, effective and in
full force in accordance with its terms, and there is not under any such lease
(i) any existing or claimed material default by Seller or any Seller Subsidiary
(as applicable) or event of material default or event which with notice or
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lapse of time, or both, would constitute a material default by Seller or any
Seller Subsidiary (as applicable) and, individually or in the aggregate, result
in a Material Adverse Effect on Seller; or (ii) any existing material default
by any other party under any of the Lease Agreements or, to the knowledge of
Seller, any event of material default or event which with notice or lapse of
time, or both, would constitute a material default by any such party. To the
knowledge of Seller, neither Seller nor any Principal Stockholder has received
notice of any pending or threatened reassessment of any property covered by the
Lease Agreements. Seller or a Seller Subsidiary (as applicable) has obtained
the consent of each landlord or lessor whose consent is required to the
assignment of the Lease Agreements and has delivered to Buyer in writing such
consents as are necessary to effect a valid and binding transfer or assignment
of Seller's or any Seller Subsidiary's rights thereunder. Seller has a good,
clear, valid and enforceable 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.
Section 5.21 Real and Personal Property.
(i) Except as set forth in Schedule 2.1(a), neither
Seller nor any Seller Subsidiary owns any interest (other than the Lease
Agreements) in real property.
(ii) Except as set forth in Schedule 5.3(b), Seller and
any Seller Subsidiary (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). 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 and any Seller Subsidiary.
Section 5.22 Environmental Matters.
(a) Neither Seller nor any Seller Subsidiary has, 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 notice of any penalty, lien or assessment, and 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) Neither Seller nor any Seller Subsidiary has 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
subsection (e) below) that would give rise to any Environmental Liabilities (as
defined in subsection (e) below) for Seller under any applicable Environmental
Law that had, or could likely have, a Material Adverse Effect on Seller.
Neither Seller nor any Seller Subsidiary has engaged in any activity or failed
to undertake any activity which action or failure to act has given, or could
likely give, rise to any Environmental Liabilities or enforcement action by any
federal, state or local regulatory agency or authority, or has resulted,
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or could likely result, in any fine or penalty imposed pursuant to any
Environmental Law. Schedule 5.22(b) discloses any known presence of asbestos
in or on Seller's or any Seller Subsidiary's owned or leased premises. There
is no friable asbestos in or on Seller's or any Seller Subsidiary's owned or
leased premises.
(c) No soil or water in or under any assets currently or
formerly held for use or sale by Seller or any Seller Subsidiary 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 or any
Seller Subsidiary where such contamination had, or could likely have, a
Material Adverse Effect on Seller.
(d) Schedule 5.22(d) contains a list of all environmental
audits and other similar reports which have been prepared by, for or concerning
Seller or any Seller Subsidiary 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, any Seller Subsidiary or any of their
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
or any Seller Subsidiary, whether contingent or fixed, which (i) have
arisen, or could likely 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 lists and briefly
describes Seller's policies of insurance to which Seller or any Affiliate is a
party or under which Seller or any Affiliate, officer or director thereof 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 or any of its Affiliates
(the "Insurance Policies"). Except as set forth in Schedule 5.24, all of the
Insurance Policies (i) are, to the best knowledge of Seller and the Principal
Stockholders, issued by insurers that are financially sound and reputable; and
(ii) are valid, outstanding and
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enforceable policies, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies and all premiums with respect thereto are
currently paid. All Insurance Policies currently maintained by Seller or any
Affiliate thereof ("Current Policies") taken together (i) provide adequate
insurance coverage for the assets, properties and operations of Seller and its
Affiliates for all risks normally insured against by a Person carrying on a
substantially similar business or businesses as Seller and its Affiliates; (ii)
are sufficient for compliance with legal and contractual requirements to which
Seller or any of its Affiliates is a party or by which any of them may be
bound; and (iii) shall be maintained in force (including the payment of all
premiums and compliance with their terms without interruption up to and
including the date hereof. True, complete and correct copies of all Insurance
Policies have been provided to APPM. Except as set forth in Schedule 5.24,
neither Seller nor any of its Affiliates nor any officer or director thereof
has received any notice or other communication from any issuer of any Current
Policy cancelling such policy, materially increasing any deductibles or
retained amounts thereunder, or materially increasing the annual or other
premiums payable thereunder and, to the knowledge of Seller and the Principal
Stockholders, 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 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 or any
Affiliate thereof during the immediately preceding three-year period. Except
as set forth in Schedule 5.24, 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 customary for such a physician
practicing the same type of medicine in the same geographic area.
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 December 15, 1997, 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).
(b) Schedule 5.25(b) 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 5% of the revenues of Seller in the fiscal year ended December 31, 1997,
or which is reasonably expected to account for more than 5% of the revenues of
Seller for the fiscal year ended December 31, 1998. Except as set forth in
Schedule 5.25(b), Seller has satisfactory relations with such Payors and 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 December 15, 1997, and (ii)
list of each individual indebtedness of $2,500 or more, setting forth the payee
and the amount of indebtedness.
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(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 (including, without limitation all non-Physician Employee
providers of care to patients) which accounted for a dollar volume of purchases
paid for by Seller in excess of $2,500 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 $2,500 for the fiscal year ended
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, and all such items on hand
at the Effective Time will 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 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 none of such
purchase commitments are at prices in excess of prevailing market prices at the
time of such purchase commitment.
Section 5.28 Licenses, Authorization and Provider Programs.
(a) Except as listed in Schedule 5.28(a), Seller, and each
Physician Employee and other 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 certified for
participation under Titles XVIII and XIX of the Social Security Act (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 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 recommended 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 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 knowledge of Seller, 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 hereof, neither Seller nor any Physician Employee (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.
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(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, or any Physician Employee, nor the right of any licensed professional
or other individual affiliated with 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, no Physician
Employee, licensed professional or other individual affiliated with the
business has, during the past three (3) years prior to the Effective Time, had
their 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) 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 Seller or any of its Affiliates; (ii) all
patents and applications therefor and inventories and discoveries that may be
patentable currently owned, in whole or in part, or used by Seller or any of
its Affiliates; (iii) all licenses, royalties, and assignments thereof to which
Seller or any of its Affiliates are a party; (iv) all copyrights (for published
and unpublished works) currently owned in whole or part, or used by Seller or
any of its Affiliates; and (v) other similar agreements relating to the
foregoing to which Seller or any of its affiliates 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 or, to Seller's knowledge, 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. 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
neither Seller nor any Principal Stockholder is aware of any valid basis for
any such claim. To the best knowledge of Seller, 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 them.
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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 and reports required to be filed by the United States or any state or
any political subdivision thereof or any foreign jurisdiction. All such Tax
Returns or reports 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), (i) Seller has paid all taxes, penalties,
assessments and interest that have become due with respect to any Tax Returns
that it has filed and has properly accrued on its books and records in
accordance with generally accepted accounting principles 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), Seller has not received any
notice that any tax deficiency or delinquency has been asserted against Seller,
and to the best knowledge of Seller, 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 be asserted
by any taxing authority. Since January 1, 1993, there has been no taxing
authority audit and there is no taxing authority audit of Seller pending, or to
the actual knowledge of Seller, threatened against Seller or any Seller
Subsidiary (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 or any Seller Subsidiary 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 timely paid to the respective
governmental agencies.
(f) Foreign Person. Neither Seller nor any Principal
Stockholder 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.
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(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 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 except that CRA
is an "S" corporation.
(m) Personal Holding Companies. Seller is not and 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 sets forth a
description of any interest held, directly or indirectly, by any officer,
director or other Affiliate 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. Except as set forth in Schedule 5.32, none
of the Assumed Liabilities includes any obligation of any kind or designation
to any Affiliate of Seller or the Principal Stockholders.
Section 5.33 Banking Relations. Set forth in Schedule 5.33 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
Seller Subsidiary has engaged and, to the knowledge of Seller, neither Seller's
officers and directors nor the Physician Employees or other 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. Sections 1320a
7, 7a or 7b or 42 U.S.C. Section 1395nn (subject to the exceptions or safe
harbor provisions set forth in such legislation), or the regulations
promulgated thereunder or pursuant to 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, there is no material agreement, judgment,
injunction, order or decree binding upon Seller, any Seller Subsidiary or
officer, director or key employee (including, but not limited to, Physician
Employees) of Seller or Seller Subsidiary, which has or reasonably could be
expected to have the effect of prohibiting or materially impairing any current
or future business practice of Seller or any Seller Subsidiary, any acquisition
of property by Seller, any Seller Subsidiary or the conduct of business by
Seller or any Seller Subsidiary.
Section 5.36 Agreements in Full Force and Effect. Except as expressly
set forth in Seller's Schedules to this Agreement, 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. There is no
pending or, to the knowledge of Seller, 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
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happening or occurrence of any other event) would constitute a default
thereunder by Seller or any other party thereto. No contract with a health
care provider has been terminated in the last twelve (12) months.
Section 5.37 Statements True and Correct. No representation or
warranty made herein by Seller or any Principal Stockholder, nor any statement,
certificate, exhibit or instrument to be furnished by Seller or any Principal
Stockholder 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 to state a material fact necessary to make the statements
contained herein and therein not misleading.
Section 5.38 Schedules. All Schedules required by Article V hereof and
attached hereto are true, correct and complete in all material respects as of
the date of this Agreement.
Section 5.39 Finders' Fees. Except as set forth in Schedule 5.39, no
investment banker, broker, finder or other intermediary has been retained by or
is authorized to act on behalf of any of the Principal Stockholders or Seller
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 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 Principal
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 and APPM's respective corporate powers and
have been duly authorized by all necessary action on the part of Buyer's and
APPM's Boards 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 to which
Buyer and APPM is a party constitute, or upon execution will constitute, valid
and binding agreements of Buyer and 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 6.3 Governmental Authorization. Except as expressly set forth
in Schedule 6.3, and other than consents, filings or notifications required to
be made or obtained by Buyer and APPM, the
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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, to the best knowledge of
Buyer and APPM, requires no action by or in respect of, or filing with, any
governmental body, agency, official or authority.
Section 6.4 Capitalization. The authorized capital stock of APPM
consists of 50,000,000 shares of APPM Common Stock, of which approximately
17,300,000 shares are issued and outstanding and 10,000,000 shares of APPM
Preferred Stock, none of which are outstanding. Each outstanding share of APPM
Common Stock which is being purchased by Seller hereunder has been legally and
validly issued and is fully paid and nonassessable, and based in part upon the
representations of Seller in this Agreement will be issued pursuant to a valid
exemption from registration under (i) the Securities Act and (ii) all
applicable state securities laws.
Section 6.5 Absence of Conflicting Agreements or Required Consents.
To the best knowledge of Buyer and APPM, 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) except as set forth in Schedule 6.3 and Schedule 6.5 hereto, does
not require the consent of any governmental or regulatory body or authority or
any other third party; (ii) will not conflict with any provision of Buyer's or
APPM's certificate of incorporation or bylaws; (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 Buyer or APPM is a party or by which Buyer or APPM or
their or its properties are subject to or bound; and (iv) except as set forth
in Schedule 6.5, 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
respective properties are bound.
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 or a Principal
Stockholder pursuant to this Agreement, contains or will contain as of the
Effective Time any untrue statement of material fact or omits or will omit to
state a material fact necessary to make the statements contained herein and
therein not misleading.
Section 6.7 Schedules. All Schedules required by Article IV hereof
and attached hereto are true, correct and complete in all material respects as
of the date of this Agreement.
Section 6.8 Finders' 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.
ARTICLE VII
Intentionally Omitted
ARTICLE VIII
Intentionally Omitted
ARTICLE IX
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 the Boards of Directors of Seller
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements, each certified by the Secretary of such
corporation as being true and correct copies of the originals thereof subject
to no modifications or amendments;
(b) a copy of resolutions of the Boards of Directors of Seller
authorizing the execution, delivery and performance of the Service Agreement
(as defined below) and Employment Agreements (as defined below) (collectively,
the "Other Agreements") each certified by the Secretary of Seller as being true
and correct copies of the originals thereof subject to no modifications or
amendments;
(c) Intentionally Omitted;
(d) Intentionally Omitted;
(e) a certificate of the Secretary of Seller certifying as to
the incumbency of the directors and officers of such corporation and as to the
signatures of such directors and officers who have executed documents delivered
on behalf of that corporation;
(f) a certificate, dated within ten (10) days prior to the
date hereof, of the Secretary of State of Maryland 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;
(g) certificates, dated within ten (10) days prior to the date
hereof, of the Secretaries of State of the states in which Seller is qualified
to do business, to the effect that each such corporation is qualified to do
business and, if applicable, is in good standing as a foreign corporation in
each of such states;
(h) all authorizations, consents, approvals, permits and
licenses referenced in Section 5.28;
(i) the executed Service Agreement entered into by and among
Buyer, APPM and Seller as of the date hereof (the "Service Agreement");
(j) Intentionally Omitted;
(k) an assignment to Buyer of (i) each lease for real or
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"); (iii) all Purchased Contracts; and (iv) all
contracts described in Schedule 5.14 which cannot be assigned to Buyer ("Payor
Contract Assignments");
(l) the executed employment agreements by and between KPR and
each of the Principal Stockholders (the "Employment Agreements"); and
(m) the executed legal opinion by counsel to Seller dated of
even date.
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Section 11.2 Deliveries of APPM. APPM hereby delivers to Seller the
following:
(a) a copy of resolutions of the Board of Directors of APPM
authorizing the execution, delivery and performance of this Agreement, and all
related documents and agreements, certified by APPM's Secretary as being true
and correct copies of the originals thereof subject to no modifications or
amendments;
(b) the Closing Consideration accordance with Article IV
hereof;
(c) Intentionally Omitted;
(d) Intentionally Omitted;
(e) a certificate of the Secretary of Buyer certifying as to
the incumbency of the officers of Buyer who have executed documents on behalf
of Buyer;
(f) a certificate, dated within ten (10) days prior to the
date hereof, of the Secretary of State of Delaware establishing that Buyer 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 date hereof, of the Secretaries of State of the states
in which Buyer is qualified to do business, to the effect that Buyer is
qualified to do business and, if applicable, is in good standing as a foreign
corporation in such state;
(h) the executed Other Agreements; and
(i) the executed Lease Assignments, Non-Payor Contract
Assignments, Purchased Contracts and Payor Contract Assignments.
ARTICLE XII
Intentionally Omitted
ARTICLE XIII
POST CLOSING MATTERS
Section 13.1 Further Instruments of Transfer. Following the date
hereof, at the request of Buyer and at Buyer's sole cost and expense, the
Principal Stockholders and Seller 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.
Section 13.2 Certain Prorations.
(a) The items set forth on Schedule 13.2(a) shall be prorated
or adjusted between the parties hereto as of the Effective Time.
(b) On the date hereof, 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 13.2. If final figures have not
been calculated on any of the adjustments, prorations or reimbursements as of
the date hereof, then the parties hereto shall close this transaction using
estimated adjustments, prorations and
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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 date hereof, if possible, and no later than six (6) months
following the date hereof.
Section 13.3 Certain Expenses.
(a) Seller shall be responsible for the following expenses:
(i) obtaining, filing and recording any and all releases, satisfactions, deeds,
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(b) 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 13.4 Certain Employee Benefits. Except as provided by law,
Buyer agrees that it will maintain the existing level of employee benefits
currently provided to the employees of Seller (other than the Principal
Stockholders) through March 31, 1998.
Section 13.5 Buyer's Compliance with Section 4.1. Buyer shall comply
with the terms and conditions of Section 4.1 hereof with respect to the future
delivery of the Six Month Stock and the Anniversary Stock.
Section 13.6 Lock-up. Prior to the second anniversary of the Closing
Date, CRA shall not (a) directly or indirectly sell, offer, pledge,
hypothecate, assign, sell short or long, subject to an option, distribute to
CRA's stockholders or creditors, transfer or otherwise dispose of, or (b) agree
to do any of the foregoing, in either case with respect to any shares of the
Closing Stock, the Six Month Stock or the Anniversary Stock, without the prior
written consent of APPM. CRA acknowledges that the certificates representing
the Closing Stock, the Six-Month Stock and the Anniversary Stock will bear a
legend describing the restrictions set forth in this Section. CRA acknowledges
that remedies at law may be inadequate to protect against breach of this
Section and CRA hereby in advance agrees to the granting of injunctive relief
in APPM's favor against a breach of this Section, without proof of actual
damages.
ARTICLE XIV
REMEDIES
Section 14.1 Indemnification by Seller. Subject to the terms and
conditions of this Article XIV, CRA, KPR and each Principal Stockholder,
jointly and severally, shall indemnify, defend and hold APPM and Buyer and
their respective directors, officers, members, managers, employees, agents,
attorneys and Affiliates (collectively, the "Buyer Indemnitees") 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 Buyer
Indemnitees arising out of or resulting from:
(a) a breach of any representation or warranty (without giving
effect to any Material Adverse Effect qualifier contained as part of any such
representation or warranty) or covenant of Seller contained herein or in any
Schedule or certificate delivered hereunder;
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(b) any violation (or alleged violation) by Seller and/or any
of its past or present directors, officers, partners, shareholders, employees
(including, without limitation, any Physician Employee), 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 date hereof, 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 date hereof;
(c) any liability under the Securities Act, the Exchange Act
or any other federal or state "blue sky" or securities law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact relating to Seller or any Principal
Stockholder, and provided to APPM or its counsel by Seller, specifically for
inclusion in any preliminary prospectus, registration statement or prospectus
forming a part thereof, or any amendment thereof or supplement thereto),
arising out of or based upon any omission or alleged omission to state therein
a material fact relating to Seller required to be stated therein or necessary
to make the statements therein not misleading; and
(d) all Unassumed Liabilities.
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 respective agents, attorneys and
Affiliates (collectively, the "Seller Indemnities") harmless from and against
all Damages asserted against or incurred by such Seller Indemnities arising out
of or resulting from:
(a) a breach by APPM or Buyer of any representation or
warranty (without giving effect to any Material Adverse Effect qualifier
contained as part of any such 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.
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.
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(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 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 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.
(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
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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 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) Notwithstanding any provision herein to the contrary, the
obligation of APPM or Buyer, on the one hand, or Seller or any Principal
Stockholder, on the other hand, to provide indemnification for breach of any
representation or warranty as provided in Section 14.1(a) or Section 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 $10,000.00, and then such Indemnifying Party shall indemnify
the Indemnified Party to the full amount of such Damages.
(g) Notwithstanding any provision herein to the contrary, the
Principal Stockholders shall not have any liability to Buyer or APPM under this
Agreement after the Principal Stockholders have, collectively, paid to Buyer or
APPM pursuant to this Article XIV indemnification payments in an aggregate
amount (together with the applicable value (as determined pursuant to Section
14(c)) of any APPM Shares retained by APPM pursuant to Section 4.1(c)), equal
to $_______________.
Section 14.4 Remedies Not Exclusive.
(a) The Buyer Indemnitees' rights to be indemnified, defended
and held harmless by Seller and the Principal Stockholders shall be the Buyer
Indemnitees' exclusive remedy against Seller and the Principal Stockholders for
matters arising out of this Agreement; provided, however, that the limitation
set forth in this sentence shall not limit any Buyer Indemnitee's remedies
against Seller and the Principal
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Stockholders for matters arising out of this Agreement that constitute fraud or
intentional misrepresentation by any Seller or Principal Stockholder, failure
of any Seller or Principal Stockholder to deliver to Buyer or APPM good, valid
and marketable title to the Purchased Assets, or failure of any Seller or
Principal Stockholder to pay any taxes or any penalties, assessments or
interest relating thereto. This Section shall not limit APPM's right to
injunctive relief against a breach by any Seller or Principal Stockholder of
any covenant set forth in this Agreement.
(b) The Seller Indemnitees' rights to be indemnified, defended
and held harmless by Buyer and APPM shall be the Seller Indemnitees' exclusive
remedy against Buyer and APPM for matters arising out of this Agreement;
provided, however, that the limitation set forth in this sentence shall not
limit any Seller Indemnitee's remedies against Buyer or APPM for matters
arising out of this Agreement that constitute fraud or intentional
misrepresentation by Buyer or APPM. This Section shall not limit Seller's
right to injunctive relief against a breach by APPM or Buyer of any covenant
set forth in this Agreement.
(c) Except as set forth in Sections 14.4(a) or 14.4(b) above,
the remedies provided in this Agreement shall not be exclusive of any other
rights or remedies available to one party against the other, either at law or
in equity.
Section 14.5 No Effect on Liability. None of (i) the consummation of
the transactions contemplated by this Agreement or the Other Agreements, (ii)
the delay or omission of any party to exercise any of its rights under this
Agreement or any Other Agreement or (iii) any investigation or disclosure that
any party makes, any notice that any party gives, or any knowledge that any
party obtains as a result thereof, or otherwise, shall (A) affect the liability
of the parties to one another for breaches of this Agreement, any Other
Agreement or any related agreement between the parties hereto, or (B) prevent
any party from relying on the representations or warranties contained in this
Agreement, any Other Agreement or any related agreement between the parties
hereto.
Section 14.6 Commencing Actions. Any action against any party hereto
that is not commenced on or before the second anniversary of the Closing Date
shall be deemed waived, and no person shall have any remedy against any party
therefor; provided, however, that actions by Buyer or APPM against any Seller
or Principal Stockholder may be commenced at any time with respect to actions
(i) that constitute fraud or intentional misrepresentation by any Seller or
Principal Stockholder; (ii) that result from the failure of any Seller or
Principal Stockholder to pay any taxes or any penalties, assessments or
interest thereon; (iii) that result from the failure of any Seller or Principal
Stockholder to deliver to Buyer or APPM good, valid and marketable title to the
Purchased Assets; or (iv) that result from any breach of Section 5.22 or
Section 5.13 or any misrepresentation relating to the representations and
warranties set forth therein.
Section 14.7 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 14.8 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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ARTICLE XV
Intentionally Omitted
ARTICLE XVI
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 16.1 Non-Disclosure Covenant. Seller recognizes and
acknowledges that it has in the past, currently has, and in the future may
possibly have, access to certain Confidential Information of APPM that is
valuable, special and unique assets of APPM's businesses. Seller shall not
disclose such Confidential Information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally through
no fault of Seller; (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), Seller shall, if possible, give
prior written notice thereof to APPM and provide APPM with the opportunity to
contest such disclosure; or (iii) the disclosing party reasonably believes that
such disclosure is required by applicable law in connection with the defense of
a lawsuit against the disclosing party. In the event of a breach or threatened
breach by Seller of the provisions of this Section, APPM shall be entitled to
an injunction restraining the other party, as the case may be, from disclosing,
in whole or in part, such Confidential Information. Nothing herein shall be
construed as prohibiting APPM from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
Section 16.2 Damages. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which they would have
no other adequate remedy, Seller agrees that, in the event of a breach by it of
the foregoing covenant, the covenant may be enforced against it by injunctions
and restraining orders.
Section 16.3 Survival. The obligations of Seller under this Article
XVI shall survive the consummation of the transactions as described in this
Agreement.
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 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.
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Section 17.4 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 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, covenants and undertakings contained herein
shall survive the consummation of the transactions described herein and all
statements contained in any certificate, exhibit or other instrument delivered
by or on behalf of Seller, any Principal Stockholder, APPM or Buyer pursuant to
this Agreement shall be deemed to have been representations and warranties by
such Seller, such Principal Stockholder, APPM or Buyer.
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; provided that the foregoing shall not
prohibit any disclosure (a) 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 National Association of Securities Dealers, (b) to
attorneys, accountants, investment bankers or other agents of the parties
assisting the parties in connection with the transactions contemplated by this
Agreement and (c) by APPM in connection with conducting an examination of the
operations and assets of Seller; provided that APPM shall reasonably promptly
provide notice of any release.
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 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
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(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 APPM and Buyer: American Physician Partners, Inc.
901 Main Street, Suite 2301
Dallas, Texas 75202
Fax No.: (214) 761-3150
Attn: Gregory L. Solomon, President
Paul M. Jolas, Esq, General
Counsel and Senior Vice President
with a copy to: Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Fax No.: (214) 200-0365
Attn: Kenneth K. Bezozo, Esq.
If to Seller
or any Principal
Stockholder: Drs. Korsower and Pion Radiology, P.A.
4110 Aspen Hill Road
Rockville, Maryland 20853
Fax No.: (301) 460-5967
Attn: Sidney J. Pion, M.D.
with a copy to : Siskind, Grady, Rosen & Hoover, P.A.
Two East Fayette Street, Suite 600
Baltimore, Maryland 21202
Attn: Arvin E. Rosen, 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. Except as set forth in Section 14.4(a) or Section
14.4(b) above, 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.
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 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.
* * * * *
37
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
APPM:
AMERICAN PHYSICIAN PARTNERS, INC.
By: /s/ GREGORY L. SOLOMON
-----------------------------------
Gregory L. Solomon, President
BUYER:
COMMUNITY IMAGING PARTNERS, INC.
By: /s/ GREGORY L. SOLOMON
-----------------------------------
Gregory L. Solomon, President
SELLER:
COMMUNITY RADIOLOGY ASSOCIATES, INC.
By: /s/ SIDNEY J. PION, M.D.
-----------------------------------
Sidney J. Pion, M.D., President
DRS. KORSOWER AND PION RADIOLOGY, P.A.
By: /s/ SIDNEY J. PION, M.D.
-----------------------------------
Sidney J. Pion, M.D., President
<PAGE> 46
/s/ LARRY JOSEPH BERNSTEIN, M.D.
-------------------------------------------
Larry Joseph Bernstein, M.D.
/s/ DILIP S. ARWINDEKAR, M.D.
-------------------------------------------
Dilip S. Arwindekar, M.D.
/s/ NICHOLAS HARRY MALAKIS, M.D.
-------------------------------------------
Nicholas Harry Malakis, M.D.
/s/ JAMES M. McCABE, M.D.
-------------------------------------------
James M. McCabe, M.D.
/s/ SIDNEY J. PION, M.D.
-------------------------------------------
Sidney J. Pion, M.D.
/s/ MAYA EVE REISER, M.D.
-------------------------------------------
Maya Eve Reiser, M.D.
/s/ PAUL S. SCHAEFER, M.D.
-------------------------------------------
Paul S. Schaefer, M.D.
/s/ WILLIAM D. WEHUNT. M.D.
-------------------------------------------
William D. Wehunt, M.D.
/s/ ALAN ABOOD COHEN, M.D.
-------------------------------------------
Alan Abood Cohen, M.D.
<PAGE> 1
================================================================================
ASSET PURCHASE AGREEMENT
dated as of
January 12, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.
(a Delaware corporation),
VALLEY IMAGING PARTNERS, INC.
(a California corporation),
QUESTAR IMAGING, INC.
(a Florida corporation)
and
QUESTAR IMAGING VR, INC.
(a California corporation)
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Rules of Interpretation . . . . . . . . . . . . . . . . 4
ARTICLE II PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . 5
Section 2.1 Purchased Assets . . . . . . . . . . . . . . . . . . . . 5
Section 2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . 7
Section 2.3 Subsequent Actions . . . . . . . . . . . . . . . . . . . 7
ARTICLE III ASSUMED LIABILITIES . . . . . . . . . . . . . . . . . . 7
Section 3.1 Assumed Liabilities . . . . . . . . . . . . . . . . . . 7
ARTICLE IV PURCHASE PRICE AND CLOSING . . . . . . . . . . . . . . . 8
Section 4.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.2 Closing and Effective Time . . . . . . . . . . . . . . . 8
Section 4.3 Closing Deliveries. . . . . . . . . . . . . . . . . . . 9
Section 4.4 Certain Prorations. . . . . . . . . . . . . . . . . . . 9
Section 4.5 Inventory . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.6 Closing Expenses. . . . . . . . . . . . . . . . . . . . 9
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER AND
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . 9
Section 5.1 Organization and Good Standing; Qualification . . . . . 9
Section 5.2 Authorization and Validity . . . . . . . . . . . . . . . 10
Section 5.3 Title to Purchased Assets . . . . . . . . . . . . . . . 10
Section 5.4 Condition of Tangible Assets . . . . . . . . . . . . . . 10
Section 5.5 Consents and Approvals . . . . . . . . . . . . . . . . . 10
Section 5.6 Governmental Authorization . . . . . . . . . . . . . . . 10
Section 5.7 Continuity of Business Enterprise . . . . . . . . . . . 10
Section 5.8 Subsidiaries and Investments . . . . . . . . . . . . . . 11
Section 5.9 Absence of Conflicting Agreements or Required
Consents . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.10 Seller Financial Statements . . . . . . . . . . . . . . 11
Section 5.11 No Undisclosed Liabilities . . . . . . . . . . . . . . . 11
Section 5.12 Litigation and Claims . . . . . . . . . . . . . . . . . 11
Section 5.13 No Violation of Law . . . . . . . . . . . . . . . . . . 11
Section 5.14 Contracts and Commitments . . . . . . . . . . . . . . . 12
Section 5.15 No Brokers . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.16 No Other Agreements to Sell the Assets of the
Seller's Business . . . . . . . . . . . . . . . . . . . 13
Section 5.17 Employee Matters . . . . . . . . . . . . . . . . . . . . 13
Section 5.18 Labor Relations . . . . . . . . . . . . . . . . . . . . 13
Section 5.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . 13
Section 5.20 Lease Agreements . . . . . . . . . . . . . . . . . . . . 15
Section 5.21 Real and Personal Property . . . . . . . . . . . . . . . 15
Section 5.22 Environmental Matters . . . . . . . . . . . . . . . . . 16
Section 5.23 Filing Reports . . . . . . . . . . . . . . . . . . . . . 17
Section 5.24 Insurance Policies . . . . . . . . . . . . . . . . . . . 17
Section 5.25 Accounts Receivable; Payors . . . . . . . . . . . . . . 17
Section 5.26 Accounts Payable; Suppliers . . . . . . . . . . . . . . 17
Section 5.27 Inventory . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.28 Licenses, Authorization and Provider Programs . . . . . 18
Section 5.29 Inspections and Investigations . . . . . . . . . . . . . 18
Section 5.30 Proprietary Rights and Information . . . . . . . . . . . 19
Section 5.31 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.32 Related Party Arrangements . . . . . . . . . . . . . . . 20
Section 5.33 Banking Relations . . . . . . . . . . . . . . . . . . . 20
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 5.34 Fraud and Abuse and Self Referral . . . . . . . . . . . 20
Section 5.35 Restrictions on Business Activities . . . . . . . . . . 20
Section 5.36 Agreements in Full Force and Effect . . . . . . . . . . 21
Section 5.37 Statements True and Correct . . . . . . . . . . . . . . 21
Section 5.38 Schedules . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.39 Finders' Fees . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER AND APP . . . . 21
Section 6.1 Organization and Good Standing; Qualification . . . . . 21
Section 6.2 Authorization and Validity . . . . . . . . . . . . . . . 21
Section 6.3 Governmental Authorization . . . . . . . . . . . . . . . 22
Section 6.4 Intentionally omitted . . . . . . . . . . . . . . . . . 22
Section 6.5 Absence of Conflicting Agreements or Required
Consents . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.6 Statements True and Correct . . . . . . . . . . . . . . 22
Section 6.7 Schedules . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.8 Finder's Fees . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VII PRE-CLOSING COVENANTS OF SELLER . . . . . . . . . . . . 22
ARTICLE VIII PRE-CLOSING COVENANTS OF APP AND BUYER . . . . . . . . . 22
ARTICLE IX CONDITIONS PRECEDENT OF APP AND BUYER . . . . . . . . . 22
ARTICLE X CONDITIONS PRECEDENT OF SELLER . . . . . . . . . . . . . 23
ARTICLE XI CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . 23
Section 11.1 Deliveries of Seller . . . . . . . . . . . . . . . . . . 23
Section 11.2 Deliveries of APP . . . . . . . . . . . . . . . . . . . 23
ARTICLE XII CERTAIN ADDITIONAL AGREEMENTS OF THE PARTIES . . . . . . 24
ARTICLE XIII POST CLOSING MATTERS . . . . . . . . . . . . . . . . . . 24
ARTICLE XIV REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 14.1 Indemnification by Seller and the Principal
Stockholders . . . . . . . . . . . . . . . . . . . . . . 24
Section 14.2 Indemnification by APP and Buyer . . . . . . . . . . . . 25
Section 14.3 Conditions of Indemnification . . . . . . . . . . . . . 25
Section 14.4 Remedies Exclusive . . . . . . . . . . . . . . . . . . . 27
Section 14.5 Costs, Expenses and Legal Fees . . . . . . . . . . . . . 27
Section 14.6 Tax Benefits; Insurance Proceeds . . . . . . . . . . . . 27
ARTICLE XV TERMINATION . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XVI NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . 27
Section 16.1 Non-Disclosure Covenant . . . . . . . . . . . . . . . . 27
Section 16.2 Damages . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 16.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XVII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 28
Section 17.1 Amendment; Waivers . . . . . . . . . . . . . . . . . . . 28
Section 17.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . 28
Section 17.3 Parties in Interest; No Third Party Beneficiaries . . . 28
Section 17.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . 28
Section 17.5 Severability . . . . . . . . . . . . . . . . . . . . . . 28
Section 17.6 Survival of Representations, Warranties and
Covenants . . . . . . . . . . . . . . . . . . . . . . . 28
Section 17.7 Governing Law . . . . . . . . . . . . . . . . . . . . . 29
Section 17.8 Captions . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 17.9 Gender and Number . . . . . . . . . . . . . . . . . . . 29
Section 17.10 Reference to Agreement . . . . . . . . . . . . . . . . . 29
Section 17.11 Confidentiality; Publicity and Disclosures . . . . . . . 29
Section 17.12 Notice . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 17.13 No Waiver; Remedies . . . . . . . . . . . . . . . . . . 30
Section 17.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.15 Defined Terms . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
ii
<PAGE> 4
EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Bill of Sale. . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B - Non-Compete Agreement . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
iii
<PAGE> 5
SCHEDULES
Schedule 2.1(a) Real Estate
Schedule 2.1(b) Personal Property
Schedule 2.1(c) Inventory
Schedule 2.1(d)(i) Intellectual Property
Schedule 2.1(d)(iii) Governmental Licenses and Permits
Schedule 2.1(d)(vi) Purchased Prepaids
Schedule 2.1(d)(viii) Joint Ventures and Partnerships
Schedule 2.1(d)(ix) Warranties, Guarantees and Covenants
Schedule 2.1(e) Purchased Contracts
Schedule 2.2 Excluded Assets
Schedule 3.1 Assumed Liabilities
Schedule 4.1(b) Allocation of Purchase Price
Schedule 4.4(a) Certain Prorations
Schedule 5.3(a) Claims, Liabilities, Liens and Pledges
Schedule 5.3(b) Permitted Encumbrances
Schedule 5.4 Condition of Tangible Assets
Schedule 5.5 Consents and Approvals
Schedule 5.6 Governmental Authorizations
Schedule 5.7 Continuity of Business Enterprise
Schedule 5.8 Subsidiaries and Investments
Schedule 5.9 Absence of Conflicting Agreements or Required
Consents
Schedule 5.10 Seller Financial Statements
Schedule 5.11 No Undisclosed Liabilities
Schedule 5.12 Litigation and Claims
Schedule 5.14 Contracts and Commitments
Schedule 5.17 Employee Contracts
Schedule 5.17(c) Severance Arrangements
Schedule 5.18 Labor Relations
Schedule 5.18(a) Plans to Terminate Employment
Schedule 5.18(c) Charges, Investigations and Administrative
Proceedings
Schedule 5.18(d) Inquiries, Investigations and Monitoring
Activities
Schedule 5.19 Employee Benefit Plans
Schedule 5.19(a) Employee Benefit Plans
Schedule 5.19(c) Examinations
Schedule 5.19(e) Claims and Litigation
Schedule 5.19(g) Funding Status
Schedule 5.20 Lease Agreements
Schedule 5.22(b) Asbestos
Schedule 5.22(d) Environmental Audits
Schedule 5.24 Insurance Policies
Schedule 5.25(a) Accounts Receivable Listing
Schedule 5.25(b) Payors
Schedule 5.28(a) Licenses, Authorizations and Provider Programs
Schedule 5.28(b) Cost Reports
Schedule 5.29 Inspections and Investigations
Schedule 5.30(a) Proprietary Rights
Schedule 5.30(b) Proprietary Rights
Schedule 5.30(c) Proprietary Rights
Schedule 5.31(b) Payment of Taxes
Schedule 5.31(c) Pending Deficiencies, Delinquencies, Assessments
or Audits
Schedule 5.32 Related Party Arrangements
Schedule 5.33 Banking Relations
Schedule 5.35 Restrictions of Business Activities
iv
<PAGE> 6
<TABLE>
<S> <C>
Schedule 5.39 Finders' Fees
Schedule 6.3 Governmental Authorizations
Schedule 6.5 Absence of Conflicting Agreements or Required
Consents
</TABLE>
v
<PAGE> 7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of January
12, 1998, is by and among AMERICAN PHYSICIAN PARTNERS, INC., a Delaware
corporation ("APP"), Valley Imaging Partners, Inc., a California corporation
and a wholly-owned subsidiary of APP ("Buyer") and Questar Imaging, Inc., a
Florida corporation ("Parent") and Questar Imaging VR, Inc., a California
corporation ("Seller").
RECITALS
A. Seller owns and operates diagnostic imaging centers (the
"Business").
B. Buyer is a wholly-owned subsidiary of APP. APP 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 to purchase from Seller, and Seller desires to sell
to Buyer certain of the assets and other rights related to the Seller's
business, including the diagnostic imaging centers known as VRI Openscan, Inc.
and Mountain View MRI (the "Centers") (which assets and rights are defined in
Section 2.1 as the "Purchased Assets"), and to assume certain liabilities of
Seller relating thereto, as set forth herein, on the terms and conditions 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.
"Assumed Liabilities" shall have the meaning set forth in Section 3.1.
"APP" shall have the meaning set forth in the preamble to this
Agreement.
"Best knowledge" or "to the knowledge of" and similar phrases shall mean
(i) in the case of a natural person, the particular fact was known, or not
known, as the context requires, to such person after diligent investigation and
inquiry by such person, and (ii) in the case of an entity, the particular fact
was known, or not known, as the context requires, to any Stockholder, director
or executive officer of such entity after diligent investigation and inquiry by
the executive officers of such entity.
"Business" shall have the meaning set forth in the Recitals.
"Buyer" shall have the meaning set forth in the preamble to this
Agreement.
"Centers" shall have the meaning set forth in the Recitals.
"Claim Notice" shall have the meaning set forth in Section 14.3(a).
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<PAGE> 8
"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.
"Consideration" shall have the meaning set forth in Section 4.1(a).
"Controlled Group" shall have the meaning set forth in Section 5.19(g).
"Damages" shall have the meaning set forth in Section 14.1.
"Deposits" shall have the meaning set forth in Section 2.1(d)(v).
"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.
"Hospital" shall have the meaning set forth in Section 4.1(a)(ii).
"Improvements" shall have the meaning set forth in Section 2.1(a).
"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.
"Intangible Assets" shall have the meaning set forth in Section 2.1(d).
"Inventory" shall have the meaning set forth in Section 2.1(a).
"IRS" shall mean the Internal Revenue Service.
2
<PAGE> 9
"Lease Assignments" shall have the meaning set forth in Section 11.1(k).
"Lease Agreements" shall have the meaning set forth in Section 5.20.
"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 Sections 2501 et seq., (iii) the Marine
Protection, Research, and Sanctuaries Act of 1972, 33 USCA Sections 1401 et
seq., (iv) The Occupational Safety and Health Act, 29 USCA Sections 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.
Sections 6992, et seq.
"Other Agreement" shall have the meaning set forth in Section 9.9.
"Parent" shall mean Questar Imaging, Inc., a Florida corporation.
"Payors" shall mean any and all third-party payors including, but not
limited to, Medicare and Medicaid Programs (as defined in Section 5.26(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 entity 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.
"Personal Property" shall have the meaning set forth in Section 2.1(b).
"Prepaids" shall have the meaning set forth in Section 2.1(d)(vi).
"Purchased Assets" shall have the meaning set forth in Section 2.1.
"Purchased Contracts" shall have the meaning set forth in Section
2.1(a).
"Purchased Prepaids" shall have the meaning set forth in Section
2.1(d)(vi).
"Principal Stockholders" shall mean Paul M. Stanley, Thomas R. Newkirk,
and Joseph J. Klauer.
"Real Estate" shall have the meaning set forth in Section 2.1(a).
"Real Property" shall have the meaning set forth in Section 2.1(a).
"Regulated Activity" shall have the meaning set forth in Section
5.22(e).
3
<PAGE> 10
"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 Audited 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.
"Seller Subsidiaries" shall have the meaning set forth in Section 5.8.
"Stockholders" shall mean the stockholders of Seller.
"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).
"Unassumed Liabilities" shall have the meaning set forth in Section 3.1.
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 of Section number of this Agreement.
4
<PAGE> 11
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.1 Purchased Assets. On the Closing Date, Seller shall,
sell, assign, transfer, convey and deliver to Buyer, and Buyer shall acquire,
all right, title and interest of Seller in and to the following assets, rights
and interests used in the operation of the Seller's assets at the Centers, of
every kind and description, wherever located, whether tangible or intangible,
real, personal or mixed, 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) Real Property and Leasehold Improvements. All real
property including, without limitation, the real property more particularly
described in Schedule 2.1(a) attached hereto (collectively, the "Real Estate"),
and all buildings, improvements, other constructions, construction-in-progress
and fixtures (collectively, the "Improvements") now or hereafter located on the
Real Estate or owned by Seller and located on the real property subject to the
Lease Agreements (as defined in Section 5.20 hereof) (the Real Estate and
Improvements are hereinafter collectively referred to as the "Real Property"),
which includes, without limitation, all real property used in connection with
the Business together with, as they relate to the Real Property, all right,
title and interest of Seller in all options, easements, servitudes,
rights-of-way and other rights associated therewith;
(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 is inventoried in the ordinary course of business), including, without
limitation, all furniture, fixtures, machinery, vehicles, 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 is attached as Schedule 2.1(c);
(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 (the "Intellectual
Property"), including, without limitation, the items identified in Schedule
2.1(d)(i) attached hereto;
(ii) All telephone numbers used in connection with the
Business at the Centers;
(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, and relating to any renovation or construction
on the Real Property, or the Leased Real Estate (collectively, the
"Governmental Licenses and Permits"), which Governmental Licenses and Permits
are listed in Schedule 2.1(d)(iii) attached 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 (i) each
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 (ii) the issuance or grant to Buyer by
the appropriate third party, 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,
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and approval for Buyer to provide services of the Business from and after the
Closing Date in a reasonably equivalent manner as 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;
(v) All deposits (the "Deposits") held by Seller in
connection with future services to be rendered by Seller or delivered under the
Leases (as defined below);
(vi) Those advance payments, prepayments, prepaid
expenses, deposits and the like (the "Prepaids") which are existing as of the
Closing Date, including real property taxes and assessments and utility
deposits and payments (subject to the prorations provided for in this
Agreement), which were made by Seller solely with respect to its operation of
the Business (the "Purchased Prepaids"), the current categories and amounts of
which are set forth in Schedule 2.1(d)(vi);
(vii) Seller's goodwill associated with the Purchased
Assets;
(viii) All interests in joint ventures, partnerships,
corporations and limited liability companies, other than the marketable and
investment securities identified in Schedule 2.2 as Excluded Assets (provided
that the failure of Seller to list publicly-traded securities in such exhibit
shall not cause same to be among the Purchased Assets), including, without
limitation, the interests identified in Schedule 2.1(d)(ix) attached hereto;
and
(ix) to the extent assignable, all warranties,
guarantees and covenants not to compete with respect to the Centers including,
without limitation, the arrangements identified in Schedule 2.1(d)(ix);
(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 Centers
(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 Centers 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 $5,000.00 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 operating data and
records pertaining to the assets, properties, business, operations, accounts,
financial condition, customers or suppliers of the Centers, including all of
Seller's books, records, papers, computer tapes, disks or data and instruments
related to the Centers or the Purchased Assets or which are required or
necessary in order for Buyer to operate the Centers from and after the Closing
Date, including, without limitation, the following:
(i) patient and medical records and all other medical
and financial information regarding patients of the Centers;
(ii) patient lists;
(iii) employment and personnel records relating to
Retained Employees (as defined in Section 12.2 hereof);
(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 Real Property, the Personal Property and the Lease Agreements, all title
information (including but not limited to all title
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insurance policies, commitments, acts of sale, covenants, conditions,
restrictions, leases, licenses, occupancy agreements, easements, servitudes,
and other items of record), all environmental studies, reports and information,
all property use and operational material, plans and specifications, contracts,
site plans, plats, surveys, zoning material, correspondence, and governmental
material (i.e., licenses, permits, notices, and other matters with respect to
governmental authorities), information and notices.
(g) Accounts Receivable. Accounts receivable existing as of
or arising on or subsequent to the Closing Date arising from the Centers; and
(h) Residual Assets. All other assets of Seller related to
the operation of the Business at the Centers 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 (collectively, the "Excluded Assets"). The Excluded
Assets shall not be transferred by Seller to Buyer.
Section 2.3 Subsequent Actions. If, at any time after the Closing
Date, APP or Buyer shall consider or be advised that any deeds, 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 APP or 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 Seller be authorized to execute and
deliver all such deeds, bills of sale, assignments and assurances and to 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.
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 Centers as set forth on
Schedule 3.1 hereto (the "Assumed Liabilities"). Other than the Assumed
Liabilities, Buyer shall not assume, nor shall APP, Buyer or any of their
respective Affiliates 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
Centers), 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 APP,
Buyer nor any of their respective Affiliates shall have any liability or
obligation with respect to or arising out of: (a) acts or omissions of Seller
or any of its Affiliates whether prior or subsequent to the Closing Date,
whether or not in the ordinary course of business; (b) liabilities or
obligations relating to or secured by any portion of or act of either the
Purchased Assets or the Centers 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 Centers or any claim, whether or not
asserted and whether or not liquidated or contingent, with respect to the
Centers arising from acts or the failure to take any action by Seller or any of
its Affiliates prior to the Closing Date; (e) liabilities for any income or
other tax, whether disputed or not, attributable to Seller and/or the Centers
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 third party payor (including Medicare or Medi-Cal) or patient with respect
to any matter or billing occurring prior to the Closing; and (h) any other
liability or obligation of Seller. 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. The 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
(a) Purchase Price. The aggregate purchase price (the
"Purchase Price") for the sale, transfer, assignment collectively, conveyance
and delivery of the Purchased Assets from Seller to Buyer shall consist of all
of the following (the "Consideration"):
(i) Four Million Eight Hundred Thousand Dollars
($4,800,000) by cashier's check or wire transfer of immediately available funds
to one or more accounts designated by Seller, and to be paid by Buyer to Seller
at the Closing;
(ii) One Hundred Fifty Thousand Dollars ($150,000) by
cashier's check or wire transfer of immediately available funds to one or more
accounts designated by Seller, and to be paid by Buyer to Seller upon
assignment by Seller to APP or Buyer of an executed contract to provide
magnetic resonance imaging services to Alexian Brothers Hospital (the
"Hospital"), in substantially similar terms as the one provided to APP at the
time of the expression of interest letter dated October 21, 1997. In the event
such contract or agreement is not assigned to APP or Buyer on or before April
1, 1998, the agreement set forth in Exhibit C attached hereto shall apply;
(iii) One Hundred Fifty Thousand Dollars ($150,000) by
cashier's check or wire transfer of immediately available funds to one or more
accounts designated by Seller, and to be paid by Buyer to Seller upon
assignment by Seller to APP or Buyer a certificate of occupancy from the
required regulatory agency for the magnetic resonance imaging facility at the
Hospital. In the event such contract or agreement is not assigned to APP or
Buyer on or before April 1, 1998, the agreement set forth in Exhibit C attached
hereto shall apply;
(iv) One Hundred Thousand Dollars ($100,000) by
cashier's check or wire transfer of immediately available funds to one or more
accounts designated by Seller, and to be paid by Buyer to Seller to the extent
Seller, with APP's assistance, is successful in securing a contractual
agreement with San Jose Medical Group, Inc. to provide outpatient MRI services
on or before December 31, 1998, provided that there is a successful assignment
to APP of all Seller's contractual rights under the aforementioned agreement.
The contract's terms and conditions must be acceptable to APP;
(v) Fifty Thousand Dollars ($50,000) finders fee by
cashier's check or wire transfer of immediately available funds to one or more
accounts designated by Seller, and to be paid by Buyer to Seller in the event
that APP, with Seller's assistance, is successful in executing a service
agreement on or before December 31, 1998 with Radiology Associates of Tampa,
P.A. (located in Tampa, FL);
(vi) Fifty Thousand Dollars ($50,000) finders fee by
cashier's check or wire transfer of immediately available funds to one or more
accounts designated by Seller, and to be paid by Buyer to Seller in the event
that APP, with Seller's assistance, is successful in executing a service
agreement on or before December 31, 1998 with Rocky Mountain Radiologist, P.C.
(located in Denver, CO): and
(vii) The assumption by Buyer of the Assumed Liabilities.
(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 American Physician Partners, Inc., Dallas, Texas at 10:00
a.m. local time on January 12, 1998, or 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 January 1, 1998 (the "Effective Time"). The obligations and proceeds
from the operations of the Centers shall be deemed to be the property of Buyer
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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 A
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 due and payable at Closing; (ii) the
documents required to be delivered pursuant to Section 11.2 hereof; and (iii)
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, deeds, 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) Seller shall pay all prepayment penalties and all other
costs of any kind whatsoever associated with the payment of the mortgages on
the properties referenced in Schedule 2.1(a).
(c) 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.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPAL STOCKHOLDERS
As an inducement to APP and to Buyer to enter into this Agreement,
Seller and each Principal Stockholder represents and warrants to APP and to
Buyer as of the Closing Date as follows:
Section 5.1 Organization and Good Standing; Qualification. Seller 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
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its business as currently conducted and as now contemplated, to execute and
deliver this Agreement and to consummate the transactions contemplated by this
Agreement. Seller 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 Seller.
Section 5.2 Authorization and Validity. Seller has all requisite
corporate 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 respective corporate powers and have been duly authorized by
all necessary action on the part of Seller's Board of Directors. 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 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 of
any kind affecting the Purchased Assets (collectively, the "Encumbrances").
(b) Seller shall immediately prior to the Closing have 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 shall, at the time of the Closing have 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 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, the tangible Personal Property and any other tangible Purchased
Assets are in reasonable operating condition and are sufficient for the
operation of the Centers as presently conducted and are in conformity in all
material respects 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, 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 Seller in connection with its
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
Section 5.6 Governmental Authorization. Except as expressly set forth
in Schedule 5.6, and other than consents, filings or notifications required to
be made or obtained by Buyer or APP, 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, 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 (2) two years preceding the date of this Agreement.
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Section 5.8 Subsidiaries and Investments. Except as set forth in
Schedule 5.8, 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.
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 5.6 and Schedule
5.9 hereto, does not require the consent of any governmental or regulatory body
or authority or any other third party; (ii) will not conflict with or result in
a violation of any provision of Seller's articles or certificate of
incorporation or bylaws, (iii) will not conflict with, result in a violation
of, or constitute a default under any law, rule, ordinance, 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 to or bound; (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, to which Seller is a party or by which Seller or any of its properties
are subject to or bound; 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 unaudited consolidated balance sheet of Seller as of December
31, 1996 and the related statements of income, stockholders' equity and
statements of cash flows of Seller for the year ended December 31, 1996
(collectively, the "Seller Unaudited Financial Statements") and (ii) the
unaudited consolidated balance sheet of Seller as of November 30, 1997 (the
"Seller Current Balance Sheet") and the related statements of income,
stockholders' equity and statements of cash flows of Seller for the eleven (11)
month period then ended (collectively, the "Seller Current Financial
Statements"). Seller Unaudited Financial Statements and Seller Current
Financial Statements are sometimes collectively referred to herein as the
"Seller Financial Statements". Seller Unaudited 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 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 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
affecting, or to the knowledge of Seller threatened against, or affecting
Seller, any Stockholder, or any other licensed professional or other individual
affiliated with Seller affecting or that could affect the operations, business
condition, (financial or otherwise), or results of operations or the prospects
of Seller, the Business or the Centers which (i) if successful, may,
individually or in the aggregate, have a Material Adverse Effect on Seller, the
Business or the Centers or (ii) could adversely affect the ability of Seller to
effect the transactions contemplated hereby, and there is no basis for any such
action or any state of facts or occurrence of any event which might give rise
to the foregoing. There are no unsatisfied judgments against Seller or any
licensed professional or other individual affiliated with Seller relating to
services provided on behalf of Seller or any consent decrees to which any of
the foregoing is subject. Except as set forth in Schedule 5.12, each of the
matters, if any, set forth in Schedule 5.12 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
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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 APP 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, 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, aggregate future payments in excess of $5,000 in any fiscal
year or $10,000 in the aggregate, (iii) all agreements for capital improvements
or acquisitions involving an amount of $5,000 in any fiscal year or $10,000 in
the aggregate, (iv) all agreements containing a covenant limiting the freedom
of Seller (or any provider employee 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 to which aggregate future payments by Seller in
excess of $5,000 in any fiscal year or $10,000 in the aggregate and that are
not cancelable by providing notice of sixty (60) days or less. Except as noted
in Schedule 5.24, all such contracts, agreements or other instruments are in
full force and effect, there has been no threatened cancellation thereof, there
are no outstanding disputes thereunder, each is with unrelated third parties
and was entered into on an arms-length basis in the ordinary course of business
and, assuming the receipt of the appropriate consents, each constituting an
Assumed Contract will continue to be binding in accordance with their terms
after consummation of the transaction contemplated herein; except as noted in
Schedule 5.24, there are no contracts, agreements or other instruments to which
Seller is a party or is bound (other than physician employment contracts and
insurance policies) which could either singularly or in the aggregate 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. For each of the Assumed
Liabilities, in every instance where consent is necessary, Seller shall, on or
before the Closing Date, obtain and deliver to Buyer in writing, effective as
of the Closing Date, such consents as are necessary to effect a valid and
binding transfer or assignment so as to enable Buyer to enjoy all of the rights
now enjoyed by Seller under such contracts. Said consent shall be in a form
acceptable to Buyer and shall contain an acknowledgment by the consenting party
that Seller has fully complied with and is not in default under any provision
of the particular contract or agreement. 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 notice of any plan or intention of any other party to exercise any
right to cancel or terminate such contract, agreement or instrument, and Seller
is not aware of any fact(s) that would justify the exercise of such a right;
and (ii) Seller does not currently contemplate, or have reason to believe any
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.
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Section 5.16 No Other Agreements to Sell the Assets of the Seller's
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 Centers 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, 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 (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 December 15, 1997, Seller employed a
collective total of one (1) full-time employee. Schedule 5.17 lists each
employee of, or consultant to, Seller who received combined salary, benefits
and bonuses for 1996 in excess of $25,000 or who is expected to receive
combined salary, benefits and bonuses in 1997 in excess of $25,000. Seller is
not delinquent in payment 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.
(c) Severance Arrangements. Except as set forth on Schedule
5.17(c), 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:
(a) Except as set forth on Schedule 5.18(a), to the knowledge
of Seller, 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 Centers pursuant hereto;
(b) There is no unfair labor practice, charge or complaint or
any other employment-related matter against or involving Seller pending or
threatened before the National Labor Relations Board or any federal, state or
local agency, authority or court;
(c) Except as set forth in Schedule 5.18(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 threatened before the Equal
Employment Opportunity Commission or any federal, state or local agency or
court against Seller. There have been no governmental audits of the equal
employment opportunity practices of Seller and no basis for any such audit
exists which, if conducted would result in a Material Adverse Effect on Seller;
(d) Except as set forth in Schedule 5.18(d), there are no
inquiries, investigations or monitoring activities of any licensed, registered,
or certified professional personnel employed or retained by, credentialed or
privileged, or otherwise affiliated with 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 contains a complete and
accurate list 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
plan documents (as they may have been amended to the date
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hereof), determination letters, pending determination letter applications,
trust instruments, insurance contracts or policies related to an Employee
Benefit Plan, administrative services contracts, annual reports, 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. In addition,
Seller has provided or made available to Buyer a written description of all
existing practices engaged in by Seller that constitute Employee Benefit Plans.
Except as set forth in Schedule 5.19(a) 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 such entity
to make further contributions or payments in connection therewith following
such termination. Except as set forth in Schedule 5.19(a), 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(c),
Seller has not received any 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 could
result, directly or indirectly, (including through any obligation of
indemnification or contribution), in any taxes, penalties or other liability to
APP or any of its Affiliates.
(e) Claims and Litigation. Except as set forth in Schedule
5.19(e), no pending or 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. 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 each Stockholder, has been
continually qualified under the applicable Section of the Code since the
effective date of such Employee Benefit Plan. No proceedings exist or 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(g),
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"). Except as set forth in Schedule 5.19(g), with respect to
each Employee Benefit Plan subject to Title IV of ERISA, the assets of each
such plan are at least equal in value to the present value of accrued benefits
determined on an ongoing basis as of the date hereof. With respect to each
Employee Benefit Plan described in Section 501(c)(9) of the Code, the assets of
each such plan are at least equal in value to the present value of accrued
benefits, based upon the most recent actuarial valuation as of a date no more
than ninety (90) days prior to the date hereof. Schedule 5.19(g) contains a
complete and accurate statement of all actuarial assumptions applied to
determine the present value of accrued benefits under all Employee Benefit
Plans subject to actuarial assumptions.
(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.
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(i) Multiemployer Plans. Neither Seller nor any member of a
Controlled Group is or ever has been obligated to contribute to a multiemployer
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 exist that would result
in the imposition of liability against APP, 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. 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(i), neither Seller nor any Stockholder or physician employee of
Seller is 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.
Section 5.20 Lease Agreements. Schedule 5.20 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 the Centers 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. Each Lease
Agreement is valid, effective and in full force in accordance with its terms,
and there is not under any such lease (i) any existing or claimed material
default by Seller or event of material default or event which with notice or
lapse of time, or both, would constitute a material default by Seller and,
individually or in the aggregate, may reasonably result in a Material Adverse
Effect on the Centers, or (ii) any existing material default by any other party
under any of the Lease Agreements or, to the knowledge of Seller, any event of
material default or event which with notice or lapse of time, or both, would
constitute a material default by any such party. There is no pending or
threatened reassessment of any property covered by the Lease Agreements.
Seller has obtained the consent of each landlord or lessor whose consent is
required to the assignment of the Lease Agreements and has delivered to Buyer
in writing such consents as are necessary to effect a valid and binding
transfer or assignment of Seller's rights thereunder. Seller has a good,
clear, valid and enforceable 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.
Section 5.21 Real and Personal Property.
(i) Except as set forth in Schedule 2.1(a), Seller
does not own interest (other than the Lease Agreements) in real property.
(ii) Except as set forth in Schedule 5.3, 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). 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.
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Section 5.22 Environmental Matters.
(a) Neither Seller nor any Seller Subsidiary has, 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 notice of any penalty, lien or assessment, and 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
(f) below) by Seller.
(b) Neither Seller nor any Seller Subsidiary has 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)
that would give rise to any Environmental Liabilities (as defined in subsection
(e) below) for Seller under any applicable Environmental Law that had, or could
likely have, a Material Adverse Effect on Seller. Neither Seller nor any
Seller Subsidiary has engaged in any activity or failed to undertake any
activity which action or failure to act has given, or could likely give, rise
to any Environmental Liabilities or enforcement action by any federal, state or
local regulatory agency or authority, or has resulted, or could likely result,
in any fine or penalty imposed pursuant to any Environmental Law. Schedule
5.22(b) discloses any known presence of asbestos in or on Seller's or any
Seller Subsidiary's owned or leased premises. There is no friable asbestos in
or on Seller's or any Seller Subsidiary's owned or leased premises.
(c) No soil or water in or under any assets currently or
formerly held for use or sale by Seller or any Seller Subsidiary 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 or any
Seller Subsidiary where such contamination had, or could likely have, a
Material Adverse Effect on Seller.
(d) Schedule 5.22(d) contains a list of all environmental
audits and other similar reports which have been prepared by, for or concerning
Seller or any Seller Subsidiary 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, any Seller Subsidiary 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
or any Seller Subsidiary, whether contingent or fixed, which (i) have
arisen, or could likely 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.
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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 lists and briefly
describes Seller's policies of insurance to which Seller or any Affiliate is a
party or under which Seller or any Affiliate, officer or director thereof 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 or any of its Affiliates
(the "Insurance Policies"). Except as set forth in Schedule 5.24, all of the
Insurance Policies are issued by insurers that are financially sound and
reputable, and are valid, outstanding and enforceable policies, except as may
be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies and all
premiums with respect thereto are currently paid. All Insurance Policies
currently maintained by Seller or any Affiliate thereof ("Current Policies")
taken together, (i) provide adequate insurance coverage for the assets,
properties and operations of Seller and its Affiliates for all risks normally
insured against by a Person carrying on a substantially similar business or
businesses as Seller and its Affiliates, (ii) are sufficient for compliance
with legal and contractual requirements to which Seller or any of its
Affiliates is a party or by which any of them may be bound, and (iii) 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 Insurance Policies have been provided to
APP. Except as set forth in Schedule 5.24, neither Seller nor any of its
Affiliates nor any officer or director thereof has received any notice or other
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 knowledge of Seller and Stockholders, 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 have been given and all 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 or any
Affiliate thereof 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 November 30, 1997, 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). Notwithstanding the foregoing, nothing shall
be construed hereunder as a guarantee by Seller of the collectibility of the
accounts receivable.
(b) Schedule 5.25(b) 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 5% of the revenues of Seller in the fiscal year ended December 31, 1996,
or which is reasonably expected to account for more than 5% of the revenues of
Seller for the fiscal year to end December 31, 1997. Except as set forth in
Schedule 5.25(b), Seller has satisfactory relations with such Payors and 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. Intentionally omitted.
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, and all such items on hand
at the Effective Time will 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
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ordinary course of Seller's business and conform to generally accepted
standards in the industry of which Seller is a part. 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 none of such purchase
commitments are at prices in excess of prevailing market prices at the time of
such purchase commitment.
Section 5.28 Licenses, Authorization and Provider Programs.
(a) Except as listed in Schedule 5.28(a), Seller, the Centers, and each
other licensed employee or independent contractor of Seller, other than any
physicians providing professional medical services at the Centers, (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 the Business and (ii) is certified for participation under
Titles XVIII and XIX of the Social Security Act (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 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 APP. 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 recommended 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 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 knowledge
of Seller, there has been no decision not to renew any existing agreement with
any provider or Payor relating to the Centers as presently being conducted by
it. Except as set forth in Schedule 5.28(a) or Schedule 5.12 hereof, neither
Seller nor either Center (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), neither Seller
nor the Centers have been required, or 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, the Centers, nor the right of any licensed professional or other
individual affiliated with 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, no licensed
professional or other individual affiliated with the Centers has, during the
past three (3) years prior to the Effective Time, had their 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) 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 Seller or any of its affiliates, (ii) all
patents and applications therefor and inventories and discoveries that may be
patentable currently owned, in whole or in part, or used by Seller or any of
its affiliates, (iii) all licenses, royalties, and assignments thereof to which
Seller or any of its Affiliates are a party (iv) all copyrights (for published
and unpublished works) currently owned in whole or part, or used by Seller or
any of its Affiliates and (v) other similar agreements relating to the
foregoing to which Seller or any of its affiliates 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 APP. There
are no outstanding and, to Seller's knowledge, any 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 APP upon consummation
of the transactions contemplated hereby and the Proprietary Rights are freely
transferable. 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
neither Seller nor any Stockholder is aware of any valid basis for any such
claim. To the best knowledge of Seller, 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 them.
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 and reports required to be filed by the United States or any state or
any political subdivision thereof or any foreign jurisdiction. All such Tax
Returns or reports 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), (i) Seller has paid all taxes, penalties,
assessments and interest that have become due with respect to any Tax Returns
that it has filed and has properly accrued on its books and records in
accordance with generally accepted accounting principles 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), Seller has not received any
notice that any tax deficiency or delinquency has been asserted against Seller
or to the best knowledge of Seller, 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 be asserted
by any taxing authority. There is no taxing authority audit of Seller pending,
or to the actual knowledge of Seller, threatened within the last five (5)
years, 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 or any Seller Subsidiary which have resulted from any failure
to pay (or alleged failure to pay) taxes.
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(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 Stockholder 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, APP, Buyer or any Affiliate of APP,
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 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 been a
personal holding company within the meaning of Section 542 of the Code.
Section 5.32 Related Party Arrangements. Schedule 5.32 sets forth a
description of any interest held, directly or indirectly, by any officer,
director or other Affiliate of Seller in any property, real or personal or
mixed, tangible or intangible, used in or pertaining to the Centers and any
arrangement or agreement with any such person concerning the provision of goods
or services or other matters pertaining to the Centers. There is no
commitments to, and no income reflected in Seller Financial Statements that has
been derived from an Affiliate, and following the Closing shall not have any
obligation of any kind or designation to any such Affiliate.
Section 5.33 Banking Relations. Intentionally omitted.
Section 5.34 Fraud and Abuse and Self Referral. Seller has not engaged
and, to the knowledge of Seller, neither Seller's officers and directors nor
other 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.
Sections 1320a 7, 7a or 7b or 42 U.S.C. Section 1395nn or (subject to the
exceptions or safe harbor provisions set forth in such legislation), or the
regulations promulgated thereunder or pursuant to 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, there is no material agreement, judgment,
injunction, order or decree binding upon Seller, or officer, director or key
employee of Seller, which has or reasonably could be expected to have the
effect of prohibiting or materially impairing any current or future business
practice of Seller, any acquisition of property by Seller, or the conduct of
business by Seller or any Seller Subsidiary.
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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, 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. There is no
pending or, to the knowledge of Seller, 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 default
thereunder by Seller or any other party thereto. Seller has not received any
termination notice regarding a contract with a health care provider in the last
twelve (12) months.
Section 5.37 Statements True and Correct. No representation or
warranty made herein by Seller or any Stockholder, nor any statement,
certificate, exhibit or instrument to be furnished by Seller or any Stockholder
to APP 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 to
state a material fact necessary to make the statements contained herein and
therein not misleading.
Section 5.38 Schedules. All Schedules required by Article V hereof and
attached hereto are true, correct and complete in all material respects as of
the date of this Agreement.
Section 5.39 Finders' Fees. Except as set forth in Schedule 5.39, no
investment banker, broker, finder or other intermediary has been retained by or
is authorized to act on behalf of any of the Stockholders or Seller 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 APP
Buyer and APP each represents and warrants to Seller as follows:
Section 6.1 Organization and Good Standing; Qualification. Each of
Buyer and APP is a corporation duly organized, validly existing and in good
standing under the laws of the state of California and Delaware, respectively,
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 APP 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 APP. Copies
of the certificate of incorporation and all amendments thereto of Buyer and APP
and the bylaws of Buyer and APP, as amended, and copies of the corporate
minutes of Buyer and APP 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 APP (and all
committees thereof) regarding this transaction.
Section 6.2 Authorization and Validity. Each of Buyer and APP 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 APP of this Agreement and the agreements provided for
herein, and the consummation by Buyer and APP of the transactions contemplated
hereby and thereby are within Buyer and APP's respective corporate powers and
have been duly authorized by all necessary action on the part of Buyer and
APP's Board of Directors. This Agreement has been duly executed by Buyer and
APP. This Agreement and all other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby to which
Buyer and APP is a party constitute, or upon execution will constitute, valid
and binding agreements of Buyer and APP, 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.
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Section 6.3 Governmental Authorization. Except as expressly set forth
in Schedule 6.3, and other than consents, filings or notifications required to
be made or obtained by Buyer and APP, the execution, delivery and performance
by Buyer and APP of this Agreement and the agreements provided for herein, and
the consummation of the transactions contemplated hereby and thereby by Buyer
and APP, to the best knowledge of Buyer and APP, requires no action by or in
respect of, or filing with, any governmental body, agency, official or
authority.
Section 6.4 Intentionally omitted.
Section 6.5 Absence of Conflicting Agreements or Required Consents.
To the best knowledge of Buyer and APP, the execution, delivery and performance
of this Agreement by Buyer and/or APP 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 6.3 and Schedule 6.5 hereto, does not require
the consent of any governmental or regulatory body or authority or any other
third party; (ii) will not conflict with any provision of Buyer's or APP's
certificate of incorporation or bylaws; (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 Buyer or APP is a party or by which Buyer or APP or
their or its properties are subject to or bound; and (iv) except as set forth
in Schedule 6.5, 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 APP is a party or by which APP or any of its respective
properties are bound.
Section 6.6 Statements True and Correct. No representation or
warranty made herein by Buyer or APP, nor any statement, certificate or
instrument to be furnished by Buyer or APP to Seller or a Stockholder pursuant
to this Agreement, contains or will contain as of the Effective Time any untrue
statement of material fact or omits or will omit to state a material fact
necessary to make the statements contained herein and therein not misleading.
Section 6.7 Schedules. All Schedules required by Article VI hereof
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 APP who is entitled to any fee or commission upon consummation of the
transactions contemplated by this Agreement or referred to herein.
ARTICLE VII
PRE-CLOSING COVENANTS OF SELLER
Intentionally Omitted.
ARTICLE VIII
PRE-CLOSING COVENANTS OF APP AND BUYER
Intentionally Omitted.
ARTICLE IX
CONDITIONS PRECEDENT OF APP AND BUYER
Intentionally Omitted.
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ARTICLE X
CONDITIONS PRECEDENT OF SELLER
Intentionally Omitted.
ARTICLE XI
CLOSING DELIVERIES
Section 11.1 Deliveries of Seller. At or prior to the Closing Date,
Seller shall deliver to Buyer the following, all of which shall be in a form
satisfactory to Buyer and APP:
(a) a copy of resolutions of the Board of Directors of Seller
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements and consummation of the Acquisition, each
certified by the Secretary of such corporation as being true and correct copies
of the originals thereof subject to no modifications or amendments;
(b) a copy of resolutions of the Board of Directors of Seller
authorizing the execution, delivery and performance of the Non-Compete
Agreement among Buyer and APP on the one hand and Seller and the Principal
Stockholders on the other hand, in a form satisfactory to APP in its sole and
absolute discretion, each certified by the Secretary of Seller as being true
and correct copies of the originals thereof subject to no modifications or
amendments;
(c) intentionally omitted;
(d) intentionally omitted;
(e) a certificate of the Secretary of Seller certifying as to
the incumbency of the directors and officers of such corporation and as to the
signatures of such directors and officers who have executed documents delivered
at the Closing on behalf of that corporation;
(f) a certificate, dated within ten (10) days prior to the
Closing Date, of the Secretary of State of California, as applicable, 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 California, as applicable;
(g) certificates, dated within ten (10) days prior to the
Closing Date, of the Secretaries of State of the states in which Seller is
qualified to do business, to the effect that each such corporation is qualified
to do business and, if applicable, is in good standing as a foreign corporation
in each of such states;
(h) all authorizations, consents, approvals, permits and
licenses referenced in Section 5.28;
(i) the executed Non-Compete Agreement in substantially the
form attached hereto as Exhibit B;
(j) Intentionally omitted;
(k) an assignment to Buyer of (i) each lease for real or
personal property described on Schedule 5.20 (the "Lease Assignments") and (ii)
all contracts described on Schedule 5.14 which can be assigned to Buyer ("Non-
Payor Contract Assignments"); and
(l) such other instrument or instruments of transfer prepared
by Buyer as shall be necessary or appropriate, as Buyer or its counsel shall
reasonably request, to carry out and effect the purpose and intent of this
Agreement.
Section 11.2 Deliveries of APP. At or prior to the Closing Date, APP
shall deliver to Seller the following, all of which shall be in a form
satisfactory to Seller:
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(a) a copy of resolutions of the Board of Directors of APP
authorizing the execution, delivery and performance of this Agreement, and all
related documents and agreements, certified by APP's Secretary as being true
and correct copies of the originals thereof subject to no modifications or
amendments;
(b) the Consideration in accordance with Article IV hereof;
(c) intentionally omitted;
(d) intentionally omitted;
(e) a certificate of the Secretary of Buyer certifying as to
the incumbency of the officers of Buyer who have executed documents delivered
at the Closing on behalf of;
(f) a certificate, dated within ten (10) days prior to the
Closing Date, of the Secretary of State of Delaware establishing that APP and
Buyer, respectively, are in existence, have paid all franchise or similar
taxes, if any, and, if applicable, otherwise are in good standing to transact
business in the state of Delaware and California, respectively; and
(g) certificates (or photocopies thereof), dated within ten
(10) days prior to the Closing Date, of the Secretaries of State of the states
in which Buyer and APP are qualified to do business, to the effect that Buyer
and APP are qualified to do business and, if applicable, are in good standing
as foreign corporations in such state.
ARTICLE XII
CERTAIN ADDITIONAL AGREEMENTS OF THE PARTIES
Intentionally omitted.
ARTICLE XIII
POST CLOSING MATTERS
Section 13.1 Further Instruments of Transfer. Following the Closing,
at the request of Buyer and at Buyer's sole cost and expense, the Principal
Stockholders and/or Seller 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.
ARTICLE XIV
REMEDIES
Section 14.1 Indemnification by Seller and the Principal Stockholders.
Subject to the terms and conditions of this Article XIV, Parent and the
Principal Stockholders jointly and severally agree to indemnify, defend and
hold APP 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 indemnities arising out of or
resulting from:
(a) a breach of any representation, warranty or covenant (without giving
effect to any Material Adverse Effect qualifier contained as part of any such
representation or warranty) of Seller contained herein or in any Schedule or
certificate delivered hereunder;
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(b) any violation (or alleged violation) by Seller and/or any of
its past or present directors, officers, partners, shareholders, 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
(c) any liability under the Securities Act, the Exchange Act or
any other federal or state "blue sky" or securities law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact relating to Seller (including its
subsidiaries) and provided to APP or its counsel by Seller, specifically for
inclusion in any preliminary prospectus, registration statement or prospectus
forming a part thereof, or any amendment thereof or supplement thereto),
arising out of or based upon any omission or alleged omission to state therein
a material fact relating to Seller (including its Subsidiaries) required to be
stated therein or necessary to make the statements therein not misleading.
APP and Buyer hereby agree to seek indemnification hereunder in the
following priority: (1) Parent and (2) Principal Stockholders.
Section 14.2 Indemnification by APP and Buyer. Subject to the terms
and conditions of this Article XIV, APP and Buyer jointly and severally hereby
agree to indemnify, defend and hold Seller and its respective agents, attorneys
and Affiliates harmless from and against all Damages asserted against or
incurred by such indemnities arising out of or resulting from a breach by APP
or Buyer of any representation, warranty or covenant (without giving effect to
any Material Adverse Effect qualifier contained as part of any such
representation or warranty) of APP or Buyer contained herein or in any schedule
or certificate delivered hereunder.
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 the 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.
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 shall deem necessary or appropriate to protect its
interests or those of the Indemnifying Party and not prejudicial to the
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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 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.
(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 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.
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(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) Notwithstanding any provision herein to the contrary, the
obligation of APP or Buyer on the one hand, or Seller or the Principal
Stockholders, on the other hand, to provide indemnification for breach of any
representation or warranty 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 APP or Buyer, on the one hand, or
Seller or the Principal Stockholders, on the other hand, as a result of such a
breach or breaches exceeds $15,000.
Section 14.4 Remedies Exclusive. The remedies provided in this
Agreement are the exclusive rights or remedies available to one party against
the other, either at law or in equity except in the case of 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.
ARTICLE XV
TERMINATION
Intentionally Omitted.
ARTICLE XVI
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 16.1 Non-Disclosure Covenant. Seller and each Principal
Stockholder recognize and acknowledge that it has in the past, currently has,
and in the future may possibly have, access to certain Confidential Information
of APP that is valuable, special and unique assets of APP's businesses. APP
and Buyer acknowledge that they had in the past, currently have, and in the
future may possibly have, access to certain Confidential Information of Seller
that is valuable, special and unique assets of Seller's business. Seller, and
Principal Stockholder and APP agree that they will not disclose such
Confidential Information to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except (a) to authorized
representatives of APP and (b) to counsel and other advisers to APP provided
that such advisers (other than counsel) agree to the confidentiality provisions
of this Section 16.1, unless (i) such information becomes available to or known
by the public generally through no fault of Seller or APP, 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) Seller or APP, as the case may be, shall, if possible, give
prior written notice thereof to Seller and APP and provide Seller and APP 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
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is the sole and exclusive owner of such Confidential Information as a result of
the Acquisition or otherwise. In the event of a breach or threatened breach by
Seller or APP of the provisions of this Section, APP and Seller shall be
entitled to an injunction restraining the other party, as the case may be, from
disclosing, in whole or in part, such Confidential Information. Nothing herein
shall be construed as prohibiting APP and Seller from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages.
Section 16.2 Damages. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which they would have
no other adequate remedy, APP and Seller agree that, in the event of a breach
by any of them of the foregoing covenant, the covenant may be enforced against
them by injunctions and restraining orders.
Section 16.3 Survival. The obligations of the parties under this
Article XVI shall survive the termination of this Agreement.
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 APP to a
wholly owned subsidiary of APP; provided that any such assignment shall not
relieve APP 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 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. 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 with respect to the Parent for a period of two (2) years, and with
respect to the Principal Stockholders for a period of one (1) year from the
Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of Seller, any Stockholder, APP or Buyer
pursuant to this Agreement shall be deemed to have been representations and
warranties by such Seller, such Principal Stockholder, APP or Buyer and,
notwithstanding any provision in this Agreement to the contrary, the
representations and warranties contained herein shall survive the Closing for
the periods of time set forth in this Section 17.6.
28
<PAGE> 35
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 CALIFORNIA.
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; provided that the foregoing shall not
prohibit any disclosure (a) by press release, filing or otherwise that APP has
determined in its good faith judgment to be required by federal securities laws
or the rules of the National Association of Securities Dealers, (b) to
attorneys, accountants, investment bankers or other agents of the parties
assisting the parties in connection with the transactions contemplated by this
Agreement and (c) by APP in connection with conducting an examination of the
operations and assets of Seller; provided that APP shall reasonably promptly
provide notice of any release. In the event that the transactions contemplated
hereby are not consummated for any reason whatsoever, the parties hereto agree
not to disclose or use any Confidential Information they may have concerning
the affairs of the other parties, except for information that is required by
law to be disclosed; provided that should the transactions contemplated hereby
not be consummated, nothing contained in this Section shall be construed to
prohibit the parties hereto from operating businesses in competition with each
other.
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 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 APP and Buyer: American Physician Partners, Inc.
901 Main Street
2301 NationsBank Plaza
Dallas, Texas 75202
Fax No.: (214) 761-3150
Attn: Gregory L. Solomon, President
Paul M. Jolas, Esq., General
Counsel and Sr. V.P.
with a copy to: McDermott, Will & Emery
1301 Dove Street, Suite 500
Newport Beach, California 92660-2444
Fax No. (714) 851-9348
Attn: Jonathan F. Atzen, Esq.
29
<PAGE> 36
If to Seller
or any Stockholder: Questar Imaging VR, Inc.
15438 N. Florida Avenue, Suite 200
Tampa, Florida 33613
Attn: Paul M. Stanley
with a copy to Marshall Burack, Esq.
Akerman, Centerfitt & Eidson
1 Southeast Third Avenue, 20th Floor
Miami, FL 33131
Phone: (305) 374-5600
Fax: (305) 374-5095
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.
[SIGNATURE PAGE FOLLOWS]
30
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
APP:
AMERICAN PHYSICIAN PARTNERS, INC.
By: /s/ GREGORY L. SOLOMON
------------------------------------
Gregory L. Solomon, President
Buyer:
VALLEY IMAGING PARTNERS, INC.
By: /s/ GREGORY L. SOLOMON
-----------------------------------
Gregory L. Solomon, President
Seller:
QUESTAR IMAGING VR, INC.
By: /s/ PAUL M. STANLEY
------------------------------------
Its: President
---------------------------------
Parent:
QUESTAR IMAGING, INC.
By: /s/ PAUL M. STANLEY
------------------------------------
Its: President
-----------------------------------
31
<PAGE> 1
================================================================================
ASSET PURCHASE AGREEMENT
dated as of
January 23, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.
(a Delaware corporation),
VALLEY IMAGING PARTNERS, INC.
(a California corporation),
PAL IMAGING CORP.
(a California corporation)
and
THE PRINCIPAL STOCKHOLDERS
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Rules of Interpretation . . . . . . . . . . . . . . . . . 5
ARTICLE II Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.1 Purchased Assets . . . . . . . . . . . . . . . . . . . . . 5
Section 2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . 7
Section 2.3 Subsequent Actions . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.1 Assumed Liabilities . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV Purchase Price and Closing . . . . . . . . . . . . . . . . . . . 8
Section 4.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.2 Closing and Effective Time . . . . . . . . . . . . . . . . 8
Section 4.3 Closing Deliveries . . . . . . . . . . . . . . . . . . . . 9
Section 4.4 Certain Prorations . . . . . . . . . . . . . . . . . . . . 9
Section 4.5 Inventory . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.6 Closing Expenses . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V Representations and Warranties of Seller and Stockholders . . . 9
Section 5.1 Organization and Good Standing; Qualification . . . . . . 9
Section 5.2 Authorization and Validity . . . . . . . . . . . . . . . . 10
Section 5.3 Title to Purchased Assets . . . . . . . . . . . . . . . . 10
Section 5.4 Condition of Tangible Assets . . . . . . . . . . . . . . . 10
Section 5.5 Consents and Approvals . . . . . . . . . . . . . . . . . . 10
Section 5.6 Governmental Authorization . . . . . . . . . . . . . . . . 10
Section 5.7 Continuity of Business Enterprise . . . . . . . . . . . . 10
Section 5.8 Subsidiaries and Investments . . . . . . . . . . . . . . . 10
Section 5.9 Absence of Conflicting Agreements or Required Consents . . 11
Section 5.10 Seller Financial Statements . . . . . . . . . . . . . . . 11
Section 5.11 No Undisclosed Liabilities . . . . . . . . . . . . . . . . 11
Section 5.12 Litigation and Claims . . . . . . . . . . . . . . . . . . 11
Section 5.13 No Violation of Law . . . . . . . . . . . . . . . . . . . 12
Section 5.14 Contracts and Commitments . . . . . . . . . . . . . . . . 12
Section 5.15 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.16 No Other Agreements to Sell the Assets of the
Seller's Business . . . . . . . . . . . . . . . . . . . . 13
Section 5.17 Employee Matters . . . . . . . . . . . . . . . . . . . . . 13
Section 5.18 Labor Relations . . . . . . . . . . . . . . . . . . . . . 13
Section 5.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . 14
Section 5.20 Lease Agreements . . . . . . . . . . . . . . . . . . . . . 15
Section 5.21 Real and Personal Property . . . . . . . . . . . . . . . . 15
Section 5.22 Environmental Matters . . . . . . . . . . . . . . . . . . 16
Section 5.23 Filing Reports . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.24 Insurance Policies . . . . . . . . . . . . . . . . . . . . 17
Section 5.25 Accounts Receivable; Payors . . . . . . . . . . . . . . . 17
Section 5.26 Accounts Payable; Suppliers . . . . . . . . . . . . . . . 18
Section 5.27 Inventory . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.28 Licenses, Authorization and Provider Programs . . . . . . 18
Section 5.29 Inspections and Investigations . . . . . . . . . . . . . . 19
Section 5.30 Proprietary Rights and Information . . . . . . . . . . . . 19
Section 5.31 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.32 Related Party Arrangements . . . . . . . . . . . . . . . . 21
Section 5.33 Banking Relations . . . . . . . . . . . . . . . . . . . . 21
Section 5.34 Fraud and Abuse and Self Referral . . . . . . . . . . . . 21
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
Section 5.35 Restrictions on Business Activities . . . . . . . . . . . 21
Section 5.36 Agreements in Full Force and Effect . . . . . . . . . . . 21
Section 5.37 Statements True and Correct . . . . . . . . . . . . . . . 21
Section 5.38 Schedules . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI Representations and Warranties of Buyer and APP . . . . . . . . 22
Section 6.1 Organization and Good Standing; Qualification . . . . . . 22
Section 6.2 Authorization and Validity . . . . . . . . . . . . . . . 22
Section 6.3 Governmental Authorization . . . . . . . . . . . . . . . . 22
Section 6.4 Capitalization . . . . . . . . . . . . . . . . . . . . . 22
Section 6.5 Absence of Conflicting Agreements or Required Consents . . 22
Section 6.6 Statements True and Correct . . . . . . . . . . . . . . . 23
Section 6.7 Schedules . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.8 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII Pre-Closing Covenants of Seller [Intentionally Omitted] . . . . 23
ARTICLE VIII Pre-Closing Covenants of APP and Buyer [Intentionally Omitted] . 23
ARTICLE IX Conditions Precedent of APP and Buyer [Intentionally Omitted] . 23
ARTICLE X Conditions Precedent of Seller [Intentionally Omitted] . . . . . 23
ARTICLE XI Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . 23
Section 11.1 Deliveries of Seller . . . . . . . . . . . . . . . . . . . 23
Section 11.2 Deliveries of APP . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XII Certain Additional Agreements of the Parties
[Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XIII Post Closing Matters . . . . . . . . . . . . . . . . . . . . . . 25
Section 13.1 Further Instruments of Transfer . . . . . . . . . . . . . 25
ARTICLE XIV Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 14.1 Indemnification by Seller and the Principal
Stockholders . . . . . . . . . . . . . . . . . . . . . . . 25
Section 14.2 Indemnification by APP and Buyer . . . . . . . . . . . . . 25
Section 14.3 Conditions of Indemnification . . . . . . . . . . . . . . 25
Section 14.4 Remedies Exclusive . . . . . . . . . . . . . . . . . . . . 27
Section 14.5 Costs, Expenses and Legal Fees . . . . . . . . . . . . . . 27
Section 14.6 Tax Benefits; Insurance Proceeds . . . . . . . . . . . . 27
ARTICLE XV Termination [Intentionally Omitted] . . . . . . . . . . . . . . 28
ARTICLE XVI Nondisclosure of Confidential Information . . . . . . . . . . . 28
Section 16.1 Non-Disclosure Covenant . . . . . . . . . . . . . . . . . 28
Section 16.2 Damages . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 16.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XVII Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 17.1 Amendment; Waivers . . . . . . . . . . . . . . . . . . . . 28
Section 17.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 17.3 Parties in Interest; No Third Party Beneficiaries . . . . 29
Section 17.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 29
Section 17.5 Severability . . . . . . . . . . . . . . . . . . . . . . . 29
Section 17.6 Survival of Representations, Warranties and Covenants . . 29
Section 17.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . 29
Section 17.8 Captions . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 17.9 Gender and Number . . . . . . . . . . . . . . . . . . . . 29
Section 17.10 Reference to Agreement . . . . . . . . . . . . . . . . . . 29
Section 17.11 Confidentiality; Publicity and Disclosures . . . . . . . . 29
Section 17.12 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.13 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . 30
Section 17.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.15 Defined Terms . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
ii
<PAGE> 4
SCHEDULES
Schedule 3.1 Organization and Good Standing; Qualification
Schedule 3.3 Governmental Authorization
Schedule 3.5 Transactions in Capital Stock
Schedule 3.6 Continuity of Business Enterprise
Schedule 3.7 Subsidiaries and Investments
Schedule 3.8 Absence of Conflicting Agreements or Required Consents
Schedule 3.9 Seller Financial Statements
Schedule 3.10 Absence of Changes
Schedule 3.11 No Undisclosed Liabilities
Schedule 3.12 Litigation and Claims
Schedule 3.14 Lease Agreements
Schedule 3.15 Real and Personal Property
Schedule 3.15(a) Real and Personal Property
Schedule 3.15(b) Real and Personal Property
Schedule 3.16 Indebtedness for Borrowed Money
Schedule 3.17 Contracts and Commitments
Schedule 3.18 Employee Matters
Schedule 3.19 Labor Relations
Schedule 3.20 Employee Benefit Plans
Schedule 3.20(a) Employee Benefit Plans
Schedule 3.20(c) Employee Benefit Plans
Schedule 3.20(e) Employee Benefit Plans
Schedule 3.20(g) Employee Benefit Plans
Schedule 3.20(l) Employee Benefit Plans
Schedule 3.21 Environmental Matters
Schedule 3.21(b) Environmental Matters
Schedule 3.21(d) Environmental Matters
Schedule 3.23 Insurance Policies
Schedule 3.24 Accounts Receivable Payors
Schedule 3.24(a) Accounts Receivable Payors
Schedule 3.24(b) Accounts Receivable Payors
Schedule 3.25 Accounts Payable Suppliers
Schedule 3.25(a) Accounts Payable Suppliers
Schedule 3.25(b) Accounts Payable Suppliers
Schedule 3.27 Licenses, Authorization and Provider Programs
Schedule 3.27(a) Licenses, Authorization and Provider Programs
Schedule 3.27(b) Licenses, Authorization and Provider Programs
Schedule 3.28 Inspections and Investigations
Schedule 3.29 Proprietary Rights and Information
Schedule 3.29(a) Proprietary Rights and Information
Schedule 3.29(b) Proprietary Rights and Information
Schedule 3.29(c) Proprietary Rights and Information
Schedule 3.30 Taxes
Schedule 3.30(b) Taxes (Seller)
Schedule 3.30(c) Taxes (Seller)
Schedule 3.31 Related Party Arrangements
Schedule 3.33 Banking Relations
Schedule 3.34 Investments in Competitors
Schedule 3.40 Finders' Fees (Seller)
Schedule 4.3 Personal Holding Companies; Control of Related
Businesses
Schedule 4.4 Transfers of Stock
Schedule 4.8 Finder's Fee (Stockholder)
iii
<PAGE> 5
Schedule 4.9 Ownership of Interested Persons; Affiliations
Schedule 4.10 Investments in Competitors
Schedule 5.1 Organization and Good Standing; Qualification
Schedule 5.3 Governmental Authorization
Schedule 5.5 Subsidiaries and Investments
Schedule 5.6 Absence of Conflicting Agreements or Required Consents
Schedule 5.7 APP Financial Statements
Schedule 5.8 Absence of Changes
Schedule 5.9 No Undisclosed Liabilities
Schedule 5.10 Litigation and Claims
Schedule 5.12 Employee Matters
Schedule 5.13 Taxes
Schedule 5.14 Related Party Arrangements
Schedule 6.1 Organization and Good Standing; Qualification
Schedule 14.2 Preservation of Tax and Accounting Treatment
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of January
23, 1998, is by and among AMERICAN PHYSICIAN PARTNERS, INC., a Delaware
corporation ("APP"), Valley Imaging Partners, Inc., a California corporation
and a wholly-owned subsidiary of APP ("Buyer"), and PAL Imaging Corp., a
California corporation ("Seller") and the Principal Stockholders.
RECITALS
A. Seller owns and operates two diagnostic imaging centers; one
located at 451 Sherman Avenue, Suite 110, Palo Alto, California, and one
located at 35 Baywood Avenue, San Mateo, California (the "Centers").
B. APP 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 to purchase from Seller, and Seller desires to sell
to Buyer, certain of the assets and other rights related to Seller's business,
and to assume certain liabilities of Seller relating thereto, as set forth
herein, on the terms and conditions 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.
"APP" shall have the meaning set forth in the preamble to this
Agreement.
"Appraised Value" shall have the meaning set forth in Section 12.1.
"Assumed Liabilities" shall have the meaning set forth in Section 3.1.
"Best knowledge" or "to the knowledge of" and similar phrases shall mean
(i) in the case of a natural person, the particular fact was known, or not
known, as the context requires, to such person after diligent investigation and
inquiry by such person, and (ii) in the case of an entity, the particular fact
was known, or not known, as the context requires, to any Stockholder, director
or executive officer of such entity after diligent investigation and inquiry by
the executive officers of such entity.
"Bill of Sale" shall have the meaning set forth in Section 4.3(a).
"Buyer" shall have the meaning set forth in the preamble to this
Agreement.
"Centers" shall have the meaning set froth in the preamble to this
Agreement.
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<PAGE> 7
"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).
7 "Current Policies" shall have the meaning set forth in Section 5.24.
"Damages" shall have the meaning set forth in Section 14.1.
"Deposits" shall have the meaning set forth in Section 2.1(d)(v).
"Effective Time" shall have the meaning set forth in Section 4.2.
"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).
"Environmental Liabilities" 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.
"Government Licenses and Permits" shall have the meaning set forth in
Section 2.1(d)(iii).
"Government Programs" shall have the meaning set forth in Section
5.28(a).
"Hazardous Substances" shall have the meaning set forth in Section
5.22(e).
"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).
2
<PAGE> 8
"Insurance Policies" shall have the meaning set forth in Section 5.24.
"Intangible Assets" shall have the meaning set forth in Section 2.1(d).
"Intellectual Property" shall have the meaning set forth in Section 2.1.
"Inventory" shall have the meaning set forth in Section 2.1(c).
"IRS" shall mean the Internal Revenue Service.
"Lease Assignments" shall have the meaning set forth in Section 11.1(k).
"Lease Agreements" shall have the meaning set forth in Section 5.20.
"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 Sections 2501 et seq., (iii) the Marine
Protection, Research, and Sanctuaries Act of 1972, 33 USCA Sections 1401 et
seq., (iv) The Occupational Safety and Health Act, 29 USCA Sections 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.
"Medicare and Medicaid Programs" shall have the meaning set forth in
Section 5.28(a).
"MWTA" shall mean the Medical Waste Tracking Act of 1988, 42 U.S.C.
Sections 6992, et seq.
"Non-Payor Contract Assignments" shall have the meaning set forth in
Section 11.1(k).
"Other Agreement" shall have the meaning set forth in Section 9.9.
"Payor Contract Assignments" shall have the meaning set forth in Section
11.1(k).
"Payors" shall mean any and all third-party payors 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, CHAMPUS, and any and all other private or governmental entity
rendering payment to Seller for professional medical or technical services.
"PBGC" shall have the meaning set forth in Section 5.19(j).
"Person" shall mean any natural person, corporation, partnership, joint
venture, limited liability company, association, group, organization or other
entity.
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"Personal Property" shall have the meaning set forth in Section 2.1(b).
"Prepaids" shall have the meaning set forth in Section 2.1(d)(vi).
"Principal Stockholders" shall mean Norman Meyers and Barbara L. Meyers.
"Private Programs" shall have the meaning set forth in Section 5.28(a).
"Property Rights" shall have the meaning set forth in Section 5.30(a).
"Purchased Assets" shall have the meaning set forth in Section 2.1.
"Purchased Contracts" shall have the meaning set forth in Section
2.1(e).
"Purchase Price" shall have the meaning set forth in Section 4.1(a).
"Purchased Prepaids" shall have the meaning set forth in Section
2.1(d)(vi).
"Real Estate" shall have the meaning set forth in Section 2.1(a).
"Real Property" shall have the meaning set forth in Section 2.1(a).
"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 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.
"Seller Subsidiaries" shall have the meaning set forth in Section 5.8.
"Stockholders" shall mean the stockholders of Seller.
"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).
"Title Policy" shall have the meaning set forth in Section 12.1.
"Title Seller" shall have the meaning set forth in Seller 12.1.
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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 of Section number of this Agreement.
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.1 Purchased Assets. On the Closing Date, Seller shall,
sell, assign, transfer, convey and deliver to Buyer, and Buyer shall acquire,
all right, title and interest of Seller in and to, the following assets, rights
and interests used in the operation of the Seller's assets at the Centers, of
every kind and description, wherever located, whether tangible or intangible,
real, personal or mixed, excluding the Excluded Assets, including, without
limitation, the following assets, rights and interests (collectively, the
"Purchased Assets"):
(a) Real Property and Leasehold Improvements. All real
property including, without limitation, the real property more particularly
described in Schedule 2.1(a) (collectively, the "Real Estate"), and all
buildings, improvements, other constructions, construction-in-progress and
fixtures (collectively, the "Improvements") now or hereafter located on the
Real Estate or owned by Seller and located on the real property subject to the
Lease Agreements (the Real Estate and Improvements are hereinafter collectively
referred to as the "Real Property"), which includes, without limitation, all
real property used in connection with the Business together with, as they
relate to the Real Property, all right, title and interest of Seller in all
options, easements, servitudes, rights-of-way and other rights associated
therewith;
(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 is inventoried in the ordinary course of business), including, without
limitation, all furniture, fixtures, machinery, vehicles, owned or licensed
computer systems, and equipment, including, without limitation, the Personal
Property listed in Schedule 2.1(b) attached 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 is attached as Schedule 2.1(c);
(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 (the "Intellectual
Property"), including, without limitation, the items identified in Schedule
2.1(d)(i) attached hereto;
(ii) All telephone numbers;
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(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, and relating to any renovation or construction
on the Real Property, or the Leased Real Estate (collectively, the
"Governmental Licenses and Permits"), which Governmental Licenses and Permits
are listed in Schedule 2.1(d)(iii) attached 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 (i)
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 (ii) the issuance or grant to Buyer by
the appropriate third party, 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
Seller, including, but not limited to, the right, authority, and approval for
Buyer to provide services at the Centers from and after the Closing Date in a
reasonably equivalent manner as 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;
(v) All deposits (the "Deposits") held by Seller in
connection with future services to be rendered by Seller, delivered under the
Leases;
(vi) Those advance payments, prepayments, prepaid expenses,
deposits and the like (collectively, the "Prepaids") which are existing as of
the Closing Date, including real property taxes and assessments and utility
deposits and payments (subject to the prorations provided for in this Agreement
in Section 4.4), which were made by Seller solely with respect to its operation
of the Business (collectively, the "Purchased Prepaids"), the current
categories and amounts of which are set forth in Schedule 2.1(d)(vi) attached
hereto;
(vii) Seller's goodwill associated with the Purchased Assets;
(viii) All interests in joint ventures, partnerships,
corporations and limited liability companies, other than the marketable and
investment securities identified in Schedule 2.2 attached hereto as Excluded
Assets (provided that the failure of Seller to list publicly-traded securities
in such exhibit shall not cause same to be among the Purchased Assets),
including, without limitation, the interests identified in Schedule
2.1(d)(viii) attached hereto; and
(ix) to the extent assignable, all warranties, guarantees and
covenants not to compete with respect to the Centers including, without
limitation, the arrangements identified in Schedule 2.1(d)(ix).
(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 Centers
(collectively, the "Purchased Contracts"). Schedule 2.1(e) attached 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 Centers 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 $5,000.00, 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 operating data and records
pertaining to the assets, properties, business, operations, accounts, financial
condition, customers or suppliers of the Centers, including all of Seller's
books, records, papers, computer tapes, disks or data and instruments related
to the Centers or the Purchased Assets or which are required or necessary in
order for Buyer to operate the Centers from and after the Closing Date,
including, without limitation, the following:
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(i) patient and medical records and all other medical
and financial information regarding patients of the Centers;
(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
(v) all material, documents, and information relating
to the Real Property, the Personal Property and the Lease Agreements, all title
information (including but not limited to all title insurance policies,
commitments, acts of sale, covenants, conditions, restrictions, leases,
licenses, occupancy agreements, easements, servitudes, and other items of
record), all environmental studies, reports and information, all property use
and operational material, plans and specifications, contracts, site plans,
plats, surveys, zoning material, correspondence, and governmental material
(i.e., licenses, permits, notices, and other matters with respect to
governmental authorities), information and notices.
Upon consent of Buyer, Seller shall be entitled to retain copies of such
books and records. Seller shall be responsible for all charges and expenses
relating to such copies.
(g) Accounts Receivable. Accounts receivable existing as of or
arising on or subsequent to the Closing Date arising from the Centers; and
(h) Residual Assets. All other assets of Seller related to and
reasonably necessary for the Centers' operation other than the Excluded Assets.
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 attached hereto (collectively, the "Excluded
Assets"). The Excluded Assets shall not be transferred by Seller to Buyer.
Section 2.3 Subsequent Actions. If, during a reasonable time
following the Closing Date, APP or Buyer shall consider or be advised that any
deeds, 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 APP or 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 Seller, be authorized
to execute and deliver all such deeds, bills of sale, assignments and
assurances and to 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.
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 Centers as set forth on
Schedule 3.1 attached hereto (collectively, the "Assumed Liabilities"). Other
than the Assumed Liabilities, Buyer shall not assume, nor shall APP, 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 Centers), or claims for such liability or
obligation, whether accrued, matured or unmatured, liquidated or unliquidated,
fixed or contingent, known or unknown (collectively, the "Unassumed
Liabilities"). Specifically, and without limiting the generality of the
foregoing, other than the Assumed Liabilities, neither APP, Buyer nor any of
their respective affiliates or subsidiaries shall have any liability or
obligation with respect to or
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arising out of: (a) acts or omissions of Seller, its partners, agents or
employees whether prior to or subsequent to the Closing Date, whether or not in
the ordinary course of business; (b) liabilities or obligations relating to or
secured by any portion of or act of either the Purchased Assets or the Centers
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
Centers or any claim, whether or not asserted and whether or not liquidated or
contingent, with respect to the Centers 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 Centers 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 third party payor
(including Medicare or Medi-Cal) or patient with respect to any matter or
billing occurring prior to the Closing; and (h) any other liability or
obligation of Seller. Notwithstanding the foregoing, Buyer shall be
responsible for all refunds required by Payors in the event such refund relates
to the accounts receivable purchased by Buyer; provided, Seller shall remain
responsible for all other refunds which relate to revenue collected prior to
the Closing. All employment tax liabilities of Seller shall remain 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
(a) 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 following:
(i) Three Million Five Hundred Thousand Dollars
($3,500,000.00) by cashier's check or wire transfer of immediately available
funds to one or more accounts designated by Seller, and to be paid by Buyer to
Seller at the Closing; and
(ii) The assumption by Buyer of the Assumed Liabilities.
(b) Allocation of Purchase Price. The Purchase Price shall be
allocated by Buyer and Seller in accordance with Schedule 4.1(b) attached
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 American Physician Partners, Inc., Dallas, Texas at 10:00
a.m. local time on January 23, 1998, or 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 the day of the Closing (the "Effective Time"). The obligations and
proceeds from the operations of the Centers 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.
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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 A
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 at the Centers 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; (ii) the documents required to be
delivered pursuant to Section 11.2 hereof; and (iii) 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) attached hereto
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.
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, deeds, UCC
termination statements and similar documents required in order to cause title
to the Purchased Assets to be free, clear and unencumbered; and (ii) all sales,
use, transfer and other taxes, if any, required by or imposed as a result of
the transactions contemplated hereby.
(b) Seller shall pay all prepayment penalties and all other
costs of any kind whatsoever associated with the payment of the mortgages on
the properties referenced in Schedule 2.1(a).
(c) 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.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDERS
As an inducement to APP and to Buyer to enter into this Agreement,
Seller and each Principal Stockholder represents and warrants to APP and to
Buyer as of the Closing Date as follows:
Section 5.1 Organization and Good Standing; Qualification. Seller 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 and as now contemplated, to execute and
deliver this Agreement and to consummate the transactions contemplated by this
Agreement. Seller is not qualified to do business in any foreign jurisdiction.
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Section 5.2 Authorization and Validity. Seller has all requisite
corporate 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, [subject to
approval of this Agreement by the Stockholders,] 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
respective corporate powers and have been duly authorized by all necessary
action on the part of Seller's Board of Directors. 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) attached 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 shall immediately prior to the Closing have 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) attached hereto (the "Permitted Encumbrances"), and, subject
to the Permitted Encumbrances, Seller shall, at the time of the Closing have
full power and right to sell, assign and deliver the Purchased Assets in
accordance with the terms of this Agreement. The delivery to the 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 attached hereto, the tangible Personal Property and any other
tangible Purchased Assets are in reasonable operating condition and are
sufficient for the operation of the Centers as presently conducted and are in
conformity in all material respects 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 attached hereto, 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 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 attached hereto, and other than consents, filings or
notifications required to be made or obtained by Buyer or APP, 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 attached hereto, 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 (2) two years preceding the date of this Agreement.
Section 5.8 Subsidiaries and Investments. Except as set forth in
Schedule 5.8 attached 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").
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Section 5.9 Absence of Conflicting Agreements or Required Consents.
Subject to approval of this Agreement by the Stockholders 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 5.6 and Schedule 5.9
attached hereto, does not require the consent of any governmental or regulatory
body or authority or any other third party; (ii) will not conflict with or
result in a violation of any provision of Seller's articles or certificate of
incorporation or bylaws, (iii) will not conflict with, result in a violation
of, or constitute a default under any law, rule, ordinance, 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 to or bound; (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, to which Seller is a party or by which Seller or any of its properties
are subject to or bound; 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 unaudited consolidated balance sheet of Seller as of December
31, 1996 and the related statements of income, stockholders' equity and
statements of cash flows of Seller and its Subsidiaries for the year ended
December 31, 1996 (collectively, the "Seller Annual Financial Statements") and
(ii) the unaudited consolidated balance sheet of Seller and its subsidiaries as
of December 31, 1997 (the "Seller Current Balance Sheet") and the related
statements of income, stockholders' equity and statements of cash flows of
Seller and the Subsidiaries for the eleven (11) month period then ended
(collectively, the "Seller Current Financial Statements"). Seller Financial
Statements and Seller Current Financial Statements are sometimes collectively
referred to herein as the "Seller Financial Statements". Seller 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
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 and its subsidiaries 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 audit adjustments (the
effect of which will not individually or in the aggregate 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 attached 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
attached hereto, there are no claims, lawsuits, actions, arbitrations,
administrative or other proceedings, governmental investigations or inquiries
pending, or affecting, or to the knowledge of Seller threatened against, or
affecting Seller, any Seller Subsidiary, any Stockholder, or any other licensed
professional or other individual affiliated with Seller affecting or that could
affect the operations, business condition, (financial or otherwise), or results
of operations or the prospects of Seller which (i) if successful, may,
individually or in the aggregate, have a Material Adverse Effect on Seller or
(ii) could adversely affect the ability of Seller or any Seller Subsidiary to
effect the transactions contemplated hereby, and there is no basis for any such
action or any state of facts or occurrence of any event which might give rise
to the foregoing. There are no unsatisfied judgments against Seller or any
Seller Subsidiary or any licensed professional or other individual affiliated
with Seller or any Seller Subsidiary relating to services provided on behalf of
Seller or any Seller Subsidiary or any consent decrees to which any of the
foregoing is subject. Except as set forth in Schedule 5.12, each of the
matters, if any, set forth in Schedule 5.12 is fully covered by policies of
insurance of Seller or any Seller Subsidiary as in effect on the date hereof.
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Section 5.13 No Violation of Law. Neither Seller nor any Seller
Subsidiary 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 Seller.
Section 5.14 Contracts and Commitments.
(a) Schedule 5.14 attached hereto contains a true, accurate
and complete list, and Seller has delivered to APP 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, 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, aggregate future payments in excess of $5,000 in any
fiscal year or $10,000 in the aggregate, (iii) all agreements for capital
improvements or acquisitions involving an amount of $5,000 in any fiscal year
or $10,000 in the aggregate, (iv) all agreements containing a covenant limiting
the freedom of Seller (or any provider employee 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 to which aggregate future payments by Seller
in excess of $5,000 in any fiscal year or $10,000 in the aggregate and that are
not cancelable by providing notice of sixty (60) days or less. Except as noted
in Schedule 5.24, all such contracts, agreements or other instruments are in
full force and effect, there has been no threatened cancellation thereof, there
are no outstanding disputes thereunder, each is with unrelated third parties
and was entered into on an arms-length basis in the ordinary course of business
and, assuming the receipt of the appropriate consents, each constituting an
Purchased Contract will continue to be binding in accordance with their terms
after consummation of the transaction contemplated herein; except as noted in
Schedule 5.24, there are no contracts, agreements or other instruments to which
Seller is a party or is bound (other than physician employment contracts and
insurance policies) which could either singularly or in the aggregate 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. For each of the Assumed
Liabilities, in every instance where consent is necessary, Seller shall, on or
before the Closing Date, obtain and deliver to Buyer in writing, effective as
of the Closing Date, such consents as are necessary to effect a valid and
binding transfer or assignment so as to enable Buyer to enjoy all of the rights
now enjoyed by Seller under such contracts. Said consent shall be in a form
acceptable to Buyer and shall contain an acknowledgment by the consenting party
that Seller has fully complied with and is not in default under any provision
of the particular contract or agreement. 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 notice of any plan or intention of any other party to exercise any
right to cancel or terminate such contract, agreement or instrument, and Seller
is not aware of any fact(s) that would justify the exercise of such a right;
and (ii) Seller does not currently contemplate, or have reason to believe any
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.
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Section 5.16 No Other Agreements to Sell the Assets of the Seller's
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 Centers 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 attached 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
(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 December 15, 1997, Seller employed a
collective total of one (1) part-time and two (2) full-time employees.
Schedule 5.17 lists each employee of, or consultant to, Seller who received
combined salary, benefits and bonuses for 1996 in excess of $25,000 or who is
expected to receive combined salary, benefits and bonuses in 1997 in excess of
$25,000. Seller is not delinquent in payment 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.
(c) Severance Arrangements. Except as set forth on Schedule
5.17(c) attached hereto, 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 attached hereto:
(a) To the knowledge of Seller, 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 Centers pursuant hereto;
(b) There is no unfair labor practice, charge or complaint or
any other employment-related matter against or involving Seller pending or
threatened before the National Labor Relations Board or any 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 threatened before the Equal Employment Opportunity Commission or any
federal, state or local agency or court against Seller. There have been no
governmental audits of the equal employment opportunity practices of Seller and
no basis for any such audit exists which, if conducted would result in a
Material Adverse Effect on Seller; and
(d) There are no inquiries, investigations or monitoring
activities of any licensed, registered, or certified professional personnel
employed or retained by, credentialed or privileged, or otherwise affiliated
with Seller pending or threatened by any state professional board or agency
charged with regulating the professional activities of health care
practitioners.
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Section 5.19 Employee Benefit Plans.
(a) Identification. Schedule 5.19(a) attached hereto contains
a complete and accurate list 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 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, 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. In addition,
Seller has provided or made available to Buyer a written description of all
existing practices engaged in by Seller that constitute Employee Benefit Plans.
Except as set forth in Schedule 5.19(a) 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 such entity
to make further contributions or payments in connection therewith following
such termination. Except as set forth in Schedule 5.19(a), 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(c)
attached hereto, Seller has not received any 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 could
result, directly or indirectly, (including through any obligation of
indemnification or contribution), in any taxes, penalties or other liability to
APP or any of its Affiliates.
(e) Claims and Litigation. Except as set forth in Schedule
5.19(e) attached hereto, no pending or 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. 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 each Stockholder, has been
continually qualified under the applicable Section of the Code since the
effective date of such Employee Benefit Plan. No proceedings exist or 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(g)
attached hereto, 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"). Except as set forth in Schedule 5.19(g),
with respect to each Employee Benefit Plan subject to Title IV of ERISA, the
assets of each such plan are at least equal in value to the present value of
accrued benefits determined on an ongoing basis as of the date hereof. With
respect to each Employee Benefit Plan described in Section 501(c)(9) of the
Code, the assets of each such plan are at least equal in value to the present
value of accrued benefits, based upon the most recent actuarial valuation as of
a date no more than ninety (90) days prior to the date hereof. Schedule
5.19(g) contains a complete and accurate statement of all actuarial assumptions
applied to determine the present value of accrued benefits under all Employee
Benefit Plans subject to actuarial assumptions.
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(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) Multiemployer Plans. Neither Seller nor any member of a
Controlled Group is or ever has been obligated to contribute to a multiemployer
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 exist that would result
in the imposition of liability against APP, 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. 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(e), neither Seller nor any Stockholder or physician employee of
Seller is 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.
Section 5.20 Lease Agreements. Schedule 5.20 attached hereto, contains
a true, accurate and complete list of all the lease agreements and license
agreements to which Seller or any Seller Subsidiary is a party and pursuant to
which Seller or any Seller Subsidiary leases (whether as lessor or lessee) or
licenses (whether as licensor or licensee) any real or personal property
related to the operation of the Centers 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. Each Lease Agreement
is valid, effective and in full force in accordance with its terms, and there
is not under any such lease (i) any existing or claimed material default by
Seller [or any Seller Subsidiary (as applicable)] or event of material default
or event which with notice or lapse of time, or both, would constitute a
material default by Seller or any Seller Subsidiary (as applicable) and,
individually or in the aggregate, may reasonably result in a Material Adverse
Effect on the Centers, or (ii) any existing material default by any other party
under any of the Lease Agreements or, to the knowledge of Seller, any event of
material default or event which with notice or lapse of time, or both, would
constitute a material default by any such party. There is no pending or
threatened reassessment of any property covered by the Lease Agreements.
Seller or any Seller Subsidiary has obtained the consent of each landlord or
lessor whose consent is required to the assignment of the Lease Agreements and
has delivered to Buyer in writing such consents as are necessary to effect a
valid and binding transfer or assignment of Seller's or any Seller Subsidiary's
rights thereunder. Seller has a good, clear, valid and enforceable 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.
Section 5.21 Real and Personal Property.
(i) Except as set forth in Schedule 2.1(a), neither
Seller nor any Seller Subsidiary owns any interest (other than the Lease
Agreements) in real property.
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(ii) Except as set forth in Schedule 5.3(b), Seller and
any Seller Subsidiary (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). 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 and any Seller Subsidiary.
Section 5.22 Environmental Matters.
(a) Neither Seller nor any Seller Subsidiary has, 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 notice of any penalty, lien or assessment, and 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
(f) below) by Seller.
(b) Neither Seller nor any Seller Subsidiary has 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)
that would give rise to any Environmental Liabilities (as defined in subsection
(e) below) for Seller under any applicable Environmental Law that had, or could
likely have, a Material Adverse Effect on Seller. Neither Seller nor any
Seller Subsidiary has engaged in any activity or failed to undertake any
activity which action or failure to act has given, or could likely give, rise
to any Environmental Liabilities or enforcement action by any federal, state or
local regulatory agency or authority, or has resulted, or could likely result,
in any fine or penalty imposed pursuant to any Environmental Law. Schedule
5.22(b) attached hereto discloses any known presence of asbestos in or on
Seller's or any Seller Subsidiary's owned or leased premises. There is no
friable asbestos in or on Seller's or any Seller Subsidiary's owned or leased
premises.
(c) No soil or water in or under any assets currently or
formerly held for use or sale by Seller or any Seller Subsidiary 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 or any
Seller Subsidiary where such contamination had, or could likely have, a
Material Adverse Effect on Seller.
(d) Schedule 5.22(d) attached hereto, contains a list of all
environmental audits and other similar reports which have been prepared by, for
or concerning Seller or any Seller Subsidiary 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, any Seller Subsidiary 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
or any Seller Subsidiary, whether contingent or fixed, which (i) have
arisen, or could likely arise, under Environmental Laws
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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 attached hereto lists
and briefly describes Seller's policies of insurance to which Seller or any
Affiliate is a party or under which Seller or any Affiliate, officer or
director thereof 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
or any of its Affiliates (the "Insurance Policies"). Except as set forth in
Schedule 5.24, all of the Insurance Policies are issued by insurers that are
financially sound and reputable, and are valid, outstanding and enforceable
policies, except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or the availability of
equitable remedies and all premiums with respect thereto are currently paid.
All Insurance Policies currently maintained by Seller or any Affiliate thereof
("Current Policies") taken together, (i) provide adequate insurance coverage
for the assets, properties and operations of Seller and its Affiliates for all
risks normally insured against by a Person carrying on a substantially similar
business or businesses as Seller and its Affiliates, (ii) are sufficient for
compliance with legal and contractual requirements to which Seller or any of
its Affiliates is a party or by which any of them may be bound, and (iii) 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 Insurance Policies have been provided
to APP. Except as set forth in Schedule 5.24, neither Seller nor any of its
Affiliates nor any officer or director thereof has received any notice or other
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 knowledge of Seller and the Stockholders, 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 have been given and all 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 or any
Affiliate thereof during the immediately preceding three-year period.
Section 5.25 Accounts Receivable; Payors.
(a) Schedule 5.25(a) attached hereto is a list and aging of
all accounts receivable of Seller as of December 15, 1997, 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 in this Section 5.25 shall
be construed as a guarantee of collectibility of the accounts receivable.
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(b) Schedule 5.25(b) attached 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 5% of the revenues of Seller in the fiscal year ended
December 31, 1996, or which is reasonably expected to account for more than 5%
of the revenues of Seller for the fiscal year to end December 31, 1997. Except
as set forth in Schedule 5.25(b), Seller has satisfactory relations with such
Payors and 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) attached hereto is a
true and complete (i) list of the accounts payable of Seller as of December 15,
1997, and (ii) list of each individual indebtedness of $2,500 or more, setting
forth the payee and the amount of indebtedness.
(b) Schedule 5.26(b) attached hereto 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 (including, without
limitation all non-Physician Employee providers of care to patients) which
accounted for a dollar volume of purchases paid for by Seller in excess of
$2,500 for the fiscal year ended December 31, 1996, or which is reasonably
expected to account for a dollar volume of purchases paid for by Seller in
excess of $2,500 for the fiscal year to end December 31, 1997.
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, and all such items on hand
at the Effective Time will consist 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
value of the inventories reflected on Seller Current Balance Sheet contained in
Seller Financial Statements. Purchase commitments of Seller for inventory are
not materially in excess of normal requirements, and none of such purchase
commitments are at prices in excess of prevailing market prices at the time of
such purchase commitment.
Section 5.28 Licenses, Authorization and Provider Programs.
(a) Except as listed in Schedule 5.28(a) attached hereto,
Seller, and each other 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 certified for
participation under Titles XVIII and XIX of the Social Security Act (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 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 3.27(a), true, complete and
correct copies of which have been provided to APP. 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 recommended 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 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 knowledge of Seller, there has been no decision not to renew any
existing agreement with any provider or Payor relating to the Centers as
presently being conducted by it. Except as set forth in Schedule 5.28(a) or
Schedule 5.12 hereof, neither Seller nor either Center (i) has had his/her/its
professional license, Drug Enforcement Agency number, Medicare/Medicaid
provider status or staff privileges at any hospital or
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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) attached hereto,
Seller is not required, or 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 the right of any licensed professional or other individual
affiliated with 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 attached hereto, to the best
knowledge of Seller no licensed professional or other individual affiliated
with the Centers has, during the past three (3) years prior to the Closing had
their 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) attached 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 Seller or any of its
affiliates, (ii) all patents and applications therefor and inventories and
discoveries that may be patentable currently owned, in whole or in part, or
used by Seller or any of its affiliates, (iii) all licenses, royalties, and
assignments thereof to which Seller or any of its Affiliates are a party (iv)
all copyrights (for published and unpublished works) currently owned in whole
or part, or used by Seller or any of its Affiliates and (v) other similar
agreements relating to the foregoing to which Seller or any of its affiliates
is a party (including expiration date if applicable) (collectively, the
"Proprietary Rights").
(b) Schedule 5.30(b) attached hereto 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
APP. There are no outstanding and, to Seller's knowledge, any 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) attached hereto, no
consent of any person will be required for the use thereof by Buyer or APP upon
consummation of the transactions contemplated hereby and the Proprietary Rights
are freely transferable. 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 neither Seller nor any Stockholder is aware of any valid
basis for any such claim. To the best knowledge of Seller, 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 them.
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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 and reports required to be filed by the United States or any state or
any political subdivision thereof or any foreign jurisdiction. All such Tax
Returns or reports 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) attached 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 and has properly accrued on its books and
records in accordance with generally accepted accounting principles 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) attached hereto, Seller has
not received any notice that any tax deficiency or delinquency has been
asserted against Seller or to the best knowledge of Seller, 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 be asserted by any taxing authority. There is no taxing authority
audit of Seller pending, or to the actual knowledge of Seller, threatened
within the last five (5) years, 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 or any Seller Subsidiary 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 Stockholder 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, APP, Buyer or any Affiliate of APP,
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 made an election to be taxed as
an "S" corporation under Section 1362(a) of the Code.
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(m) Personal Holding Companies. Seller is not or has been a
personal holding company within the meaning of Section 542 of the Code.
Section 5.32 Related Party Arrangements. Schedule 5.32 attached hereto
sets forth a description of any interest held, directly or indirectly, by any
officer, director or other Affiliate of Seller in any property, real or
personal or mixed, tangible or intangible, used in or pertaining to the Centers
and any arrangement or agreement with any such person concerning the provision
of goods or services or other matters pertaining to the Centers. There are no
commitments to, and no income reflected in Seller Financial Statements that has
been derived from an Affiliate, and following the Closing 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 attached
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
Seller Subsidiary has engaged and, to the knowledge of Seller, neither Seller's
officers and directors nor other 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. Sections 1320a 7, 7a or 7b or 42 U.S.C. Section
1395nn or (subject to the exceptions or safe harbor provisions set forth in
such legislation), or the regulations promulgated thereunder or pursuant to
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, there is no material agreement, judgment,
injunction, order or decree binding upon Seller, any Seller Subsidiary or
officer, director or key employee of Seller or Seller Subsidiary, which has or
reasonably could be expected to have the effect of prohibiting or materially
impairing any current or future business practice of Seller or any Seller
Subsidiary, any acquisition of property by Seller, any Seller Subsidiary or the
conduct of business by Seller or any Seller Subsidiary.
Section 5.36 Agreements in Full Force and Effect. Except as expressly
set forth in Seller's Schedules to this Agreement, 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. There is no
pending or, to the knowledge of Seller, 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 default
thereunder by Seller or any other party thereto. Seller has not received any
termination notice regarding a contract with a health care provider in the last
twelve (12) months.
Section 5.37 Statements True and Correct. No representation or
warranty made herein by Seller or any Stockholder, nor any statement,
certificate, exhibit or instrument to be furnished by Seller or any Stockholder
to APP or Buyer pursuant to this Agreement, contains or will contain as of the
Closing any untrue statement of material fact or omits or will omit to state a
material fact necessary to make the statements contained herein and therein not
misleading.
Section 5.38 Schedules. All Schedules required by Article V hereof and
attached hereto are true, correct and complete in all material respects as of
the date of this Agreement.
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Section 5.39 Finders' Fees. Except as set forth in Schedule 5.39
attached hereto, no investment banker, broker, finder or other intermediary has
been retained by or is authorized to act on behalf of any of the Stockholders
or Seller 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 APP
Buyer and APP each represents and warrants to Seller as follows:
Section 6.1 Organization and Good Standing; Qualification. Each of
Buyer and APP is a corporation duly organized, validly existing and in good
standing under the laws of the state of California and Delaware, respectively,
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 APP 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 APP. Copies
of the certificate of incorporation and all amendments thereto of Buyer and APP
and the bylaws of Buyer and APP, as amended, and copies of the corporate
minutes of Buyer and APP 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 APP (and all
committees thereof) regarding this transaction.
Section 6.2 Authorization and Validity. Each of Buyer and APP 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 APP of this Agreement and the agreements provided for
herein, and the consummation by Buyer and APP of the transactions contemplated
hereby and thereby are within Buyer and APP's respective corporate powers and
have been duly authorized by all necessary action on the part of Buyer and
APP's Board of Directors. This Agreement has been duly executed by Buyer and
APP. This Agreement and all other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby to which
Buyer and APP is a party constitute, or upon execution will constitute, valid
and binding agreements of Buyer and APP, 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 Governmental Authorization. Except as expressly set forth
in Schedule 6.3 attached hereto, and other than consents, filings or
notifications required to be made or obtained by Buyer and APP, the execution,
delivery and performance by Buyer and APP of this Agreement and the agreements
provided for herein, and the consummation of the transactions contemplated
hereby and thereby by Buyer and APP, to the best knowledge of Buyer and APP,
requires no action by or in respect of, or filing with, any governmental body,
agency, official or authority.
Section 6.4 Capitalization. The authorized capital stock of APP
consists of 50,000,000 shares of APP Common Stock, of which [18,000,000] shares
are issued and outstanding and 10,000,000 shares of APP Preferred Stock, none
of which are outstanding.
Section 6.5 Absence of Conflicting Agreements or Required Consents.
To the best knowledge of Buyer and APP, the execution, delivery and performance
of this Agreement by Buyer and/or APP 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 6.3 and Schedule 6.5 attached hereto, does not
require the consent of any governmental or regulatory body or authority or any
other third party; (ii) will not conflict with any provision of Buyer's or
APP's certificate of incorporation or bylaws; (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 Buyer or APP is a party or by which Buyer or APP or
their or its properties are subject to or bound; and (iv) except as set forth
in Schedule 6.5, will not
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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
APP is a party or by which APP or any of its respective properties are bound.
Section 6.6 Statements True and Correct. No representation or
warranty made herein by Buyer or APP, nor any statement, certificate or
instrument to be furnished by Buyer or APP to Seller or a Stockholder pursuant
to this Agreement, contains or will contain as of the Effective Time any untrue
statement of material fact or omits or will omit to state a material fact
necessary to make the statements contained herein and therein not misleading.
Section 6.7 Schedules. All Schedules required by Article VI hereof
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 APP who is entitled to any fee or commission upon consummation of the
transactions contemplated by this Agreement or referred to herein.
ARTICLE VII
PRE-CLOSING COVENANTS OF APP AND BUYER
[Intentionally Omitted]
ARTICLE VIII
CONDITIONS PRECEDENT OF APP AND BUYER
[Intentionally Omitted]
ARTICLE IX
CONDITIONS PRECEDENT OF SELLER
[Intentionally Omitted]
ARTICLE X
CLOSING DELIVERIES
Section 10.1 Deliveries of Seller. At or prior to the Closing Date,
Seller shall deliver to Buyer the following, all of which shall be in a form
satisfactory to Buyer and APP:
(a) a copy of resolutions of the Board of Directors of Seller
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements and consummation of the Acquisition, each
certified by the Secretary of such Corporation as being true and correct copies
of the originals thereof subject to no modifications or amendments;
(b) a copy of resolutions of the Board of Directors of Seller
authorizing the execution, delivery and performance of the Non-Compete
Agreement each certified by the Secretary of Seller as being true and correct
copies of the originals thereof subject to no modifications or amendments;
(c) intentionally omitted;
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(d) intentionally omitted;
(e) a certificate of the Secretary of Seller certifying as to
the incumbency of the directors and officers of Seller and as to the signatures
of such directors and officers who have executed documents delivered at the
Closing on behalf of Seller;
(f) a certificate, dated within ten (10) days prior to the
Closing Date, of the Secretary of State of California 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 California;
(g) certificates, dated within ten (10) days prior to the
Closing Date, of the Secretaries of State of the states in which Seller is
qualified to do business, to the effect that each such corporation is qualified
to do business and, if applicable, is in good standing as a foreign corporation
in each of such states;
(h) all authorizations, consents, approvals, permits and
licenses referenced in Section 5.28;
(i) the executed Non-Compete Agreement in substantially the
form attached hereto as Exhibit B and executed employment letter for Barbara L.
Meyer in substantially the form attached hereto as Exhibit C.
(j) a non-foreign affidavit, as such affidavit is referred to
in Section 1445(b)(2) of the Code, of each Seller, signed under a penalty of
perjury and dated as of the Closing Date, to the effect that Seller is a United
States citizen resident (and thus not a foreign person) and providing Seller's
United States taxpayer identification number;
(k) an assignment to Buyer of (i) each lease for real or
personal property described on Schedule 5.20 (the "Lease Assignments") and (ii)
all contracts described on Schedule 5.14 which can be assigned to Buyer ("Non-
Payor Contract Assignments"); and
(l) such other instrument or instruments of transfer prepared
by Buyer as shall be necessary or appropriate, as Buyer or its counsel shall
reasonably request, to carry out and effect the purpose and intent of this
Agreement.
Section 10.2 Deliveries of APP. At or prior to the Closing Date, APP
shall deliver to Seller the following, all of which shall be in a form
satisfactory to Seller:
(a) a copy of resolutions of the Board of Directors of APP
authorizing the execution, delivery and performance of this Agreement, and all
related documents and agreements, certified by APP's Secretary as being true
and correct copies of the originals thereof subject to no modifications or
amendments;
(b) the Purchase Price in accordance with Article IV hereof;
(c) intentionally omitted;
(d) intentionally omitted;
(e) a certificate of the Secretary of Buyer certifying as to
the incumbency of the officers of Buyer 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 APP and
Buyer, respectively, are in existence, have paid all franchise or similar
taxes, if any, and, if applicable, otherwise are in good standing to transact
business in the state of Delaware and California, respectively; and
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(g) certificates (or photocopies thereof), dated within ten
(10) days prior to the Closing Date, of the Secretaries of State of the states
in which Buyer and APP are qualified to do business, to the effect that Buyer
and APP are qualified to do business and, if applicable, are in good standing
as foreign corporations in such state.
ARTICLE XI
CERTAIN ADDITIONAL AGREEMENTS OF THE PARTIES
Intentionally omitted.
ARTICLE XII
POST CLOSING MATTERS
Section 12.1 Further Instruments of Transfer. Following the Closing,
at the request of Buyer and at Buyer's sole cost and expense, the Stockholders
and Seller 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.
ARTICLE XIII
REMEDIES
Section 13.1 Indemnification by Seller and the Principal Stockholders.
Subject to the terms and conditions of this Article XIV, Seller and the
Principal Stockholders jointly and severally agree to indemnify, defend and
hold APP 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 indemnities arising out of or
resulting from:
(a) a breach of any representation or warranty (without giving
effect to any Material Adverse Effect qualifier contained as part of any such
representation or warranty) of Seller contained herein or in any Schedule or
certificate delivered hereunder; and
(b) any violation (or alleged violation) by Seller and/or any
of its past or present directors, officers, partners, shareholders, 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.
Section 13.2 Indemnification by APP and Buyer. Subject to the terms
and conditions of this Article XIV, APP and Buyer jointly and severally hereby
agree to indemnify, defend and hold Seller and its respective agents, attorneys
and Affiliates harmless from and against all Damages asserted against or
incurred by such indemnities arising out of or resulting from (a) a breach by
APP or Buyer of any representation or warranty (without giving effect to any
Material Adverse Effect qualifier contained as part of any such representation
or warranty) of APP or Buyer contained herein or in any schedule or certificate
delivered hereunder.
Section 13.3 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 the 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
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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 14.3 attached hereto, 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.
Damages awarded shall be reduced by the costs incurred as a result of such
delays.
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 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 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.
(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
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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 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) Notwithstanding any provision herein to the contrary, the
obligation of APP or Buyer on the one hand, or Seller or the Principal
Stockholders, on the other hand, to provide indemnification for breach of any
representation or warranty 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 APP or Buyer, on the one hand, or
Seller or the Principal Stockholders, on the other hand, as a result of such a
breach or breaches exceeds $10,000.
Section 13.4 Remedies Exclusive. The remedies provided in this
Agreement shall be the exclusive rights or remedies available to one party
against the other, either at law or in equity except in the case of fraud.
Section 13.5 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 13.6 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
27
<PAGE> 33
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.
ARTICLE XIV
TERMINATION
[Intentionally Omitted]
ARTICLE XV
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 15.1 Non-Disclosure Covenant. Seller recognizes and
acknowledges that it has in the past, currently has, and in the future may
possibly have, access to certain Confidential Information of APP that is
valuable, special and unique assets of APP's businesses. APP and Buyer
acknowledge that they had in the past, currently have, and in the future may
possibly have, access to certain Confidential Information of Seller that is
valuable, special and unique assets of Seller's business. Seller and APP agree
that they will not disclose such Confidential Information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of APP and (b) to counsel and other
advisers to APP provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 16.1, unless (i) such information
becomes available to or known by the public generally through no fault of
Seller or APP, 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) Seller or APP, as the
case may be, shall, if possible, give prior written notice thereof to Seller
and APP and provide Seller and APP 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 Acquisition or otherwise. In the
event of a breach or threatened breach by Seller or APP of the provisions of
this Section, APP and Seller shall be entitled to an injunction restraining the
other party, as the case may be, from disclosing, in whole or in part, such
Confidential Information. Nothing herein shall be construed as prohibiting APP
and Seller from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
Section 15.2 Damages. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, and because of the
immediate and irreparable damage that would be caused for which they would have
no other adequate remedy, APP and Seller agree that, in the event of a breach
by any of them of the foregoing covenant, the covenant may be enforced against
them by injunctions and restraining orders.
Section 15.3 Survival. The obligations of the parties under this
Article XVI shall survive the termination of this Agreement.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 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 16.2 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 APP to a
wholly owned subsidiary of APP; provided that any such assignment shall not
relieve APP of its obligations hereunder.
28
<PAGE> 34
Section 16.3 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 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 16.4 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 16.5 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 16.6 Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants contained herein shall survive
the Closing and all statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of Seller, any Stockholder, APP or Buyer
pursuant to this Agreement shall be deemed to have been representations and
warranties by such Seller, such Stockholder, APP or Buyer and, notwithstanding
any provision in this Agreement to the contrary, the representations and
warranties contained herein shall survive the Closing.
Section 16.7 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 CALIFORNIA.
Section 16.8 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 16.9 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 16.10 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 16.11 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 provided that the foregoing shall not
prohibit any disclosure (a) by press release, filing or otherwise that APP has
determined in its good faith judgment to be required by federal securities laws
or the rules of the National Association of Securities Dealers, (b) to
attorneys, accountants, investment bankers or other agents of the parties
assisting the parties in connection with the transactions contemplated by this
Agreement and (c) by APP in connection with conducting an examination of the
operations and assets of Seller; provided that APP shall reasonably promptly
provide notice of any release. In the event that the transactions contemplated
hereby are not consummated for any reason whatsoever, the parties hereto agree
not to disclose or use any Confidential Information they may have concerning
the affairs of the other parties, except for information that is required by
law to be disclosed; provided that should the transactions contemplated hereby
not be consummated, nothing contained in this Section shall be construed to
prohibit the parties hereto from operating businesses in competition with each
other.
29
<PAGE> 35
Section 16.12 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 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 APP and Buyer: American Physician Partners, Inc.
901 Main Street
2301 NationsBank Plaza
Dallas, Texas 75202
Fax No.: (214) 761-3150
Attn: Gregory L. Solomon, President
Paul M. Jolas, Esq., General
Counsel and Sr. V.P.
with a copy to: McDermott, Will & Emery
1301 Dove Street, Suite 500
Newport Beach, California 92660-2444
Fax No.: (714) 851-9348
Attn: Jonathan F. Atzen, Esq.
If to Seller
or any Stockholder: Norman Meyers
1604 Mariani Drive
Sunnyvale, CA 94087
Fax No. (408) 617-0520
Section 16.13 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 16.14 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 16.15 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.
30
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the date first written above.
APP:
AMERICAN PHYSICIAN PARTNERS, INC.
By: /s/ GREGORY L. SOLOMON
-------------------------------------
Gregory L. Solomon, President
Buyer:
VALLEY IMAGING PARTNERS, INC.
By: /s/ GREGORY L. SOLOMON
-------------------------------------
Gregory L. Solomon
Seller:
PAL IMAGING CORP.
By: /s/ NORMAN MEYERS
------------------------------------
Its: President
------------------------------------
Principal Stockholders:
/s/ NORMAN MEYERS
-----------------------------------------
Norman Meyers
/s/ BARBARA L. MEYERS
-----------------------------------------
Barbara L. Meyers
<PAGE> 1
================================================================================
SERVICE AGREEMENT
Dated as of the 1st day of January, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.,
COMMUNITY IMAGING PARTNERS, INC.,
COMMUNITY RADIOLOGY ASSOCIATES, INC.
and
DRS. KORSOWER AND PION RADIOLOGY, P.A.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - Relationship of the Parties . . . . . . . . . . . . . . . . . 8
Section 2.1 Independent Contractors . . . . . . . . . . . . . . . 8
Section 2.2 Practice of Medicine . . . . . . . . . . . . . . . . 8
Section 2.3 No Payment or Other Compensation for Referrals . . . 8
Section 2.4 Group's Internal Matters . . . . . . . . . . . . . . 8
ARTICLE III - Services to be Provided by Administrator . . . . . . . . . . 9
Section 3.1 General . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.2 General Administrative Services . . . . . . . . . . . 9
Section 3.3 Facilities . . . . . . . . . . . . . . . . . . . . . 13
Section 3.4 Acquisition and Assistance . . . . . . . . . . . . . 14
Section 3.5 Financial Planning and Budgeting . . . . . . . . . . 15
Section 3.6 Personnel . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.7 Provider and Payor Relationships . . . . . . . . . . 16
Section 3.8 Inventory and Supplies . . . . . . . . . . . . . . . 17
Section 3.9 Advertising and Public Relations . . . . . . . . . . 17
Section 3.10 Quality Assurance . . . . . . . . . . . . . . . . . . 17
Section 3.11 Other Consulting and Advisory Services . . . . . . . 17
Section 3.12 Events Excusing Performance . . . . . . . . . . . . . 17
ARTICLE IV - Obligations of the Group . . . . . . . . . . . . . . . . . . . 18
Section 4.1 Employment of Physician Employees and
Physician Extender Employees . . . . . . . . . . . . . 18
Section 4.2 Professional Services . . . . . . . . . . . . . . . . 18
Section 4.3 Medical Practice . . . . . . . . . . . . . . . . . . 19
Section 4.4 Group's Internal Matters . . . . . . . . . . . . . . 19
Section 4.5 Name . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.6 Compliance with Laws . . . . . . . . . . . . . . . . 19
Section 4.7 Ancillary Services . . . . . . . . . . . . . . . . . 20
Section 4.8 Premises and Personal Property . . . . . . . . . . . 21
Section 4.9 Practice Employee Benefit Plans . . . . . . . . . . . 21
Section 4.10 Events Excusing Performance . . . . . . . . . . . . . 21
ARTICLE V - Joint Planning Board . . . . . . . . . . . . . . . . . . . . . 21
Section 5.1 Formation and Operation of the Joint Planning Board . 21
Section 5.2 Duties and Responsibilities of the Joint
Planning Board . . . . . . . . . . . . . . . . . . . . 22
Section 5.3 Acts of the Joint Planning Board . . . . . . . . . . 23
Section 5.4 Joint Planning Board Meetings . . . . . . . . . . . . 24
</TABLE>
<PAGE> 3
<TABLE>
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ARTICLE VI - Restrictive Covenants . . . . . . . . . . . . . . . . . . . . 25
Section 6.1 Restrictive Covenants of the Group . . . . . . . . . 25
Section 6.2 Restrictive Covenants . . . . . . . . . . . . . . . . 28
Section 6.3 Enforcement of Restrictive Covenants and Other
Provisions . . . . . . . . . . . . . . . . . . . . . 29
Section 6.4 Remedies . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.5 Condition Precedent to Release of Obligations . . . . 30
Section 6.6 Survival of Certain Covenants . . . . . . . . . . . . 30
Section 6.7 Definition . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VII - Financial and Security Arrangements . . . . . . . . . . . . . 31
Section 7.1 Service Fee . . . . . . . . . . . . . . . . . . . . . 31
Section 7.2 Payments . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.3 Advances . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.4 Security Agreement . . . . . . . . . . . . . . . . . 32
Section 7.5 Adjustment of Fees . . . . . . . . . . . . . . . . . 32
Section 7.6 Priority of Payments . . . . . . . . . . . . . . . . 32
ARTICLE VIII - Records . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.1 Records . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE IX - Insurance and Indemnification . . . . . . . . . . . . . . . . 34
Section 9.1 Insurance to be Maintained by the Group . . . . . . . 34
Section 9.2 Insurance to be Maintained by Administrator . . . . . 34
Section 9.3 Continuing Liability Insurance Coverage . . . . . . . 34
Section 9.4 Additional Insureds . . . . . . . . . . . . . . . . . 35
Section 9.5 Indemnification . . . . . . . . . . . . . . . . . . . 35
ARTICLE X - Term and Termination . . . . . . . . . . . . . . . . . . . . . 36
Section 10.1 Term of Agreement . . . . . . . . . . . . . . . . . . 36
Section 10.2 Extended Term . . . . . . . . . . . . . . . . . . . . 36
Section 10.3 Termination by the Group . . . . . . . . . . . . . . 36
Section 10.4 Termination by Administrator . . . . . . . . . . . . 37
Section 10.5 Effective Date of Termination . . . . . . . . . . . . 38
Section 10.6 Purchase of Assets . . . . . . . . . . . . . . . . . 38
Section 10.7 Terms of Purchase . . . . . . . . . . . . . . . . . . 40
Section 10.8 Exception to Purchase . . . . . . . . . . . . . . . . 40
Section 10.9 Effect Upon Termination . . . . . . . . . . . . . . . 41
ARTICLE XI - Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . 41
Section 11.1 Informal Dispute Resolution . . . . . . . . . . . . . 41
ARTICLE XII - General Provisions . . . . . . . . . . . . . . . . . . . . . 42
Section 12.1 Assignment . . . . . . . . . . . . . . . . . . . . . 42
Section 12.2 Amendments . . . . . . . . . . . . . . . . . . . . . 42
Section 12.3 Waiver of Provisions . . . . . . . . . . . . . . . . 42
</TABLE>
<PAGE> 4
<TABLE>
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Section 12.4 Additional Documents . . . . . . . . . . . . . . . . 42
Section 12.5 Attorneys' Fees . . . . . . . . . . . . . . . . . . . 42
Section 12.6 Contract Modifications for Prospective Legal Events . 42
Section 12.7 Parties In Interest; No Third Party Beneficiaries . . 43
Section 12.8 Entire Agreement . . . . . . . . . . . . . . . . . . 43
Section 12.9 Severability . . . . . . . . . . . . . . . . . . . . 43
Section 12.10 Governing Law . . . . . . . . . . . . . . . . . . . . 43
Section 12.11 No Waiver; Remedies Cumulative . . . . . . . . . . . 43
Section 12.12 Communications . . . . . . . . . . . . . . . . . . . 43
Section 12.13 Captions . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.14 Gender and Number . . . . . . . . . . . . . . . . . . 44
Section 12.15 Reference to Agreement . . . . . . . . . . . . . . . 44
Section 12.16 Notice . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.17 [Intentionally omitted] . . . . . . . . . . . . . . . 45
Section 12.18 Counterparts . . . . . . . . . . . . . . . . . . . . 45
Section 12.19 Defined Terms . . . . . . . . . . . . . . . . . . . . 45
Section 12.20 Parent Obligations. . . . . . . . . . . . . . . . . . 45
</TABLE>
<PAGE> 5
LIST OF EXHIBITS
Exhibit Description
- ------- -----------
1.1 Allocation of Practice Expenses
3.3(a) Premises
7.1 Services Fee
7.4 Security Agreement
<PAGE> 6
SERVICE AGREEMENT
This Service Agreement (this "Agreement"), dated effective as of January
1, 1998, is entered into by and among American Physician Partners, Inc., a
Delaware corporation ("Parent"), Community Imaging Partners, Inc., a Delaware
corporation ("Administrator"), and Community Radiology Associates, Inc. a
Maryland professional corporation and Drs. Korsower and Pion Radiology , P.A.,
a Maryland professional association (collectively, the "Group").
R E C I T A L S:
A. The Group owns and operates a radiology medical practice in
Maryland and provides professional and technical radiology services to the
general public through individual physicians who are licensed to practice
medicine in the State of Maryland and who are employed or otherwise retained by
the Group.
B. Administrator is in the business of owning certain assets of
medical practices and providing management, administrative, and other non-
medical radiological support services to radiological and radiation oncology
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:
1
<PAGE> 7
"Acquisition" shall mean the acquisition described in the Acquisition
Agreement.
"Acquisition Agreement" shall mean the Asset Purchase Agreement dated
January 1, 1998, by and among Parent and the Group.
"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 as 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: (A) any legal, accounting or other
professional expenses incurred by Administrator, Parent or any of their
Affiliates including those in connection with the Acquisition, (B) 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 (C) all taxes of Administrator, Parent or any
Affiliate not incurred for the benefit 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).
"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.
"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.
"APPI 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.
2
<PAGE> 8
"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 or requires 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 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.
3
<PAGE> 9
"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.
"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, $.0001 par value per
share, of Parent.
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"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 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), on an accrual basis and without markup, 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.
"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 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 [solely - to be determined by APPM] for the Professional
Operations; (ii) direct costs of all employees of Administrator engaged to
provide services to improve performance of the Professional Operations; (iii)
leases for assets utilized for the benefit of the Professional Operations; (iv)
personal and property taxes assessed against Administrator's assets utilized
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<PAGE> 11
[solely - to be determined by APPM] 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; (ix) any depreciation of assets to the extent used in connection
with the Professional Operations; and (x) other 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.
"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.
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"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 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;
(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; (ix) any depreciation of
assets to the extent used in connection with the Technical Operations; and (x)
other 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.
"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.
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"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
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. Administrator and the Group agree that the
Group shall retain the exclusive authority to direct the medical, professional,
and ethical aspects of its medical practice. Administrator shall neither
exercise control or direction over the medical methods, procedures or decisions
nor interfere with the physician-patient relationships of the Group, which
shall be maintained strictly between the physicians of the Group, Physician
Employees and/or Physician Extender Employees and their patients.
Section 2.2 Practice of Medicine. The parties hereto acknowledge that
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 that 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
parties hereby agree that 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 or any of its
Affiliates to any of the Group's patients in any facility controlled, managed
or operated by Administrator.
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 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.
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<PAGE> 14
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 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. Except as
provided in Exhibit 3.2(a), 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.
(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:
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<PAGE> 15
(A) to 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;
(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;
(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 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 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.
(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
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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 shall comply with all
applicable Managed Care Contracts and all applicable laws, rules and
regulations.
(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 account of Administrator and to use
such cash for purposes as Administrator deems appropriate, subject to and
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 contractual
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.
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(f) Obligations of Administrator. Administrator shall supply to the
Group all ordinary, necessary or appropriate services for the efficient
operation of the Practice, including without limitation, 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 Returns in excess of $2,500 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 shall be included in Excluded Practice Expenses unless
such audit discloses a material discrepancy, equal to or greater than ten
percent (10%) of the residual amount to which the Group is entitled following
application of the priority of payment set forth in Section 7.6 below in which
case the cost shall be an Administrator Expense.
(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 patient medical
records and 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 in the state of
Maryland (unless the Group shall consent to the transfer of such records to
another state, which consent shall not be unreasonably withheld) 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.
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.
(ii) The Practice's Business and Financial 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 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.
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(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
request and with reasonable advance notice, to obtain access (within not more
than 30 days following 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 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"). 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
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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 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
and shall not eliminate or diminish Administrator's obligations hereunder.
(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 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 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, and
any decision to make such affiliation or acquisition shall be subject to prior
approval of Administrator, which decision of the Administrator shall be
provided to the Group in a reasonable and timely manner following 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 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
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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,
the Group may seek from Administrator, and 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 Board of Directors of Parent or a committee
designated by such Board of Directors. For purposes of developing the initial
annual operating budget, the Joint Planning Board shall take into account the
categories of expenses determined by Administrator and 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 purposes of developing the annual
capital budget, the Joint Planning Board will include budgeted 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.
(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 either $50,000 individually or an
aggregate amount equivalent to $2,500 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 $100,000 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.
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(c) 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.
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. 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. If the Group is dissatisfied with the services of any such
personnel who provide services primarily for the Practice at the Premises, the
Group shall consult with Administrator, and Administrator shall in good faith
determine whether the performance of that employee could be brought to
acceptable levels through counsel and assistance, or whether such employee
should be considered for termination. If Administrator determines to retain
such employee and the Group is still dissatisfied with the services provided by
such employee after a reasonable period of time, Administrator shall either
relocate such employee or otherwise cease to utilize such employee in providing
services to the Practice hereunder. Administrator shall maintain established
working relationships wherever possible and Administrator shall make every
effort consistent with sound business practices to honor the specific requests
of the Group with regard to the assignment of Administrator's employees.
Section 3.7 Provider and Payor Relationships. 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 the Joint Planning Board,
be the 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
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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.]
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. In consultation with
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, laws and regulations.
Section 3.10 Quality Assurance. Subject to Article II, Administrator
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 or other events
over which Administrator has
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no control, Administrator shall not be liable to the Group for failure to
perform any of the services required hereunder 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.
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, 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 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; provided, however, that the preceding language shall not limit the
Group's obligation to participate in or comply with any programs established by
Administrator or Parent for purposes of ensuring that the Group complies with
applicable law. The Group shall employ Physician Employees and Physician
Extender Employees as is necessary to provide efficient medical care to
patients of the Practice.
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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 Administrator, 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 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 Group's facilities and at such outpatient
surgery centers, acute care hospitals and other facilities as the Group may
deem appropriate from time to time. 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 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
for review 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. Administrator agrees that the 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 Schedule 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, and shall use its
[reasonable] efforts 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 Practice's business. Without limiting the generality of the
foregoing, the Group shall comply and shall cause each Physician Employee,
Physician Extender
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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 not, and 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;
(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.
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 Administrator.
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Section 4.8 Premises and Personal Property. The Group shall use its
[reasonable] 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.
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 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
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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 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 collaborate with
Administrator on all annual capital and operating budgets prepared by
Administrator, as set forth in Section 3.5(b) and after the annual capital and
operating budgets have been approved as provided in Section 3.5(b), 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 of the services
performed by or for 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.
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(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.
(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 and such act of the Joint Planning Board includes the
approval by both of the members designated by Administrator, 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. Except as provided in the prior sentence, the Group and
Administrator hereby agree to be bound by the act of the Joint Planning Board
if such act was approved by the members holding at least a majority of the
voting power of the Joint Planning Board. No action of the Joint Planning
Board shall be effective unless 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 of the Joint Planning Board, present in person, by
telephone, or by proxy and the quorum must remain for the duration of the
meeting.
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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.
(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.
(iii) 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.
(iv) 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.
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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 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 APPI Group anywhere within 15
miles of any location at which any member of the APPI 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 APPI 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 APPI Group; (iii) directly
or indirectly solicit, or induce any party to solicit, any contractors of any
member of the APPI 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 APPI 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.
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(d) Administration's Obligations Regarding Proprietary Interest.
(i) Acknowledgement of Proprietary Interest. Administrator,
Parent or 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, 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 Administrator,
Parent or their Affiliates and their counsel, committing themselves to maintain
the Group's
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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, 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 Interest.
(i) Acknowledgement of Proprietary Interest. 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
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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 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 APPI 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 APPI
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,
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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.
Except as otherwise approved by the Joint Planning Board, each Group Physician
Stockholder or Full-time Physician Employee shall agree that 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
Administrator; 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, the
obligation of the Group to enforce Restrictive Covenants shall be limited to
enforcement of 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 or any other provision of the
Stockholder Employment Agreements 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
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recovered thereby. In the event the Purchase Assets are acquired by the Group
pursuant to Article X, the obligation of the Group to enforce Restrictive
Covenants shall be limited to enforcement of 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
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 Administrator in its sole and absolute discretion)
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 pursuant to
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
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Section 6.1(d),(e),(f) and (g) 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 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.
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.
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
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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 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 contractual 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 proviso in the preceding sentence);
(b) payment of the accrued Service Fee for the prior month;
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(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
Records
Section 8.1 Records. All records relating in any way to the operation
of the Practice (other than Group Records) shall, subject to the obligations of
the Practice to maintain patient medical records pursuant to Section 3.2(g), at
all times be the property of Administrator as set forth in Section 3.2(g).
During the term of this Agreement, and for a reasonable time thereafter, the
Group or its agents shall have reasonable access during normal business hours
to the Group's and Administrator's personnel and financial records relating to
the Practice, including, but not limited to, records of collections, expenses
and disbursements as kept by Administrator in performing Administrator's
obligations under this Agreement, and the Group may copy any or all such
records.
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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 jointly by Administrator and the Group with minimum legal
limits or such higher limits as shall be required under the 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
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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 cost, if any, associated therewith shall be a Practice Expense.
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), 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,
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 (other than in connection with
the activities of the Joint Planning Board), 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), 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,
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 (other than in connection with the
activities of the Joint Planning Board), 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.
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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 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.
36
<PAGE> 42
(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 11.6 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 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 or any
Physician Employee (1) fails 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)
engages in any conduct or is formally accused of conduct for which the Group's
ability or license, or a 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) is notified in writing of any
adverse action by any state or federal department or agency that has the effect
of either excluding that 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)
is otherwise disciplined by any licensing, regulatory or professional entity or
institution, the result of any of which event does or is reasonably expected to
materially adversely affect the Practice, 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
37
<PAGE> 43
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 11.6 hereof to cure such
violation.
(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 to respond to a reasonable proposal to extend the
term of such contract or (iv) voluntary closing of facilities by Administrator.
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 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,
38
<PAGE> 44
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.
(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
10.3(c), 10.4(b) or 10.4(c) and (ii) at any time in the event of a termination
pursuant to Section 10.4(a).
39
<PAGE> 45
(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 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.
40
<PAGE> 46
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
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, 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.
41
<PAGE> 47
ARTICLE XII
General Provisions
Section 12.1 Assignment.
Administrator shall have the right to assign its rights hereunder to
Parent or any direct or indirect 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 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.
42
<PAGE> 48
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 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.
43
<PAGE> 49
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.
901 Main Street
Suite 2301
Dallas, Texas 75202
Fax: (214) 761-3150
Attn: Gregory L. Solomon
with a copy to: Haynes and Boone, L.L.P.
3100 NationsBank Plaza
901 Main Street
Dallas, Texas 75202
Attn: Kenneth K. Bezozo, Esq.
If to the Group: Community Radiology Associates, Inc.
4110 Aspen Hill Road, Suite 200
Rockville, Maryland 20853
Fax No.: (301) 460-5967
Attn: Sidney J. Pion, M.D.
with a copy to: Siskind, Grady, Rosen & Hoover
Jefferson Building
Two East Fayette Street
Baltimore, Maryland 21202
Fax No.: (410) 332-0269
Attn: Arvin Rosen, Esq.
44
<PAGE> 50
Section 12.17 [Intentionally Omitted]
Section 12.18 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 12.19 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 12.20 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.
45
<PAGE> 51
IN WITNESS WHEREOF, the parties hereto have executed this Service
Agreement as of the date first written above.
Group:
COMMUNITY RADIOLOGY ASSOCIATES, INC.
By: /s/ SIDNEY J. PION, M.D.
----------------------------------------
Sidney J. Pion, M.D., President
DRS. KORSOWER AND PION RADIOLOGY, P.A.
By: /s/ SIDNEY J. PION, M.D.
----------------------------------------
Sidney J. Pion, M.D., President
Administrator:
COMMUNITY IMAGING PARTNERS, INC.
By: /s/ GREGORY L. SOLOMON
--------------------------------------
Gregory L. Solomon, President
Parent:
AMERICAN PHYSICIAN PARTNERS, INC.
By: /s/ GREGORY L. SOLOMON
----------------------------------------
Gregory L. Solomon, President
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
March, 31
-------------------
1998 1997
------- -------
BASIC
<S> <C> <C>
Net income (loss) $ 3,073 $ (880)
Weighted average shares outstanding 18,054 2,000
Per share earnings (loss) $ 0.17 $ (0.44)
======= =======
DILUTED
Net income (loss) $ 3,073 $ (880)
Weighted average shares outstanding 18,054 2,000
Weighted average common stock equivalents 787 0
------- -------
Total shares outstanding 18,841 2,000
Per share earnings (loss) $ 0.16 $ (0.44)
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,933
<SECURITIES> 0
<RECEIVABLES> 29,314
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 39,417
<PP&E> 30,200
<DEPRECIATION> 0
<TOTAL-ASSETS> 107,212
<CURRENT-LIABILITIES> 28,162
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> (10,284)
<TOTAL-LIABILITY-AND-EQUITY> 107,212
<SALES> 29,716
<TOTAL-REVENUES> 29,716
<CGS> 0
<TOTAL-COSTS> 23,739
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,400
<INCOME-PRETAX> 5,122
<INCOME-TAX> 2,049
<INCOME-CONTINUING> 3,073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,073
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.16
</TABLE>
