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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
JUNE 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM
----------------------------------------------------
COMMISSION FILE NO. 0-23311
AMERICAN PHYSICIAN PARTNERS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2648089
(State or other (I.R.S. Employer
jurisdiction of Identification)
incorporation or
organization)
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.
Class Outstanding at August 11, 1998
----- ------------------------------
COMMON STOCK, $0.0001 PAR VALUE 18,365,064 SHARES
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AMERICAN PHYSICIAN PARTNERS, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
FORM 10-Q ITEM PAGE
- -------------- ----
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998 (Unaudited) and December 31, 1997........... 1
Consolidated Statements of Income (Unaudited) for the three months and six months
ended June 30, 1998 and 1997................................................................ 2
Consolidated Statements of Cash Flows (Unaudited) for the three months and six months
ended June 30, 1998 and 1997................................................................ 3
Notes to Consolidated Financial Statements.................................................. 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...... 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................. 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................... 11
Item 2. Changes in Securities....................................................................... 11
Item 3. Defaults Upon Securities.................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders......................................... 11
Item 5. Other Information .......................................................................... 12
Item 6. Exhibits and Reports on Form 8-K............................................................ 12
SIGNATURES.................................................................................................... 12
</TABLE>
2
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
--------- ---------
(UNAUDITED)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents .................................... $ 3,125 $ 4,572
Accounts receivable, net of allowances ....................... 31,101 21,398
Due from affiliated practices ................................ 255 3,651
Other current assets ......................................... 1,588 2,351
--------- ---------
Total current assets ...................................... 36,069 31,972
PROPERTY AND EQUIPMENT, net ..................................... 31,584 22,837
INVESTMENTS IN JOINT VENTURES ................................... 4,387 3,725
INTANGIBLE ASSETS, net .......................................... 45,899 1,790
DEFERRED FINANCING COSTS ........................................ 4,215 2,395
OTHER ASSETS .................................................... 97 47
--------- ---------
Total assets .............................................. $ 122,251 $ 62,766
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses ........................ $ 9,046 $ 12,689
Accrued physician retention .................................. 6,310 4,330
Accrued salaries and benefits ................................ 2,550 1,514
Due to joint ventures ........................................ 1,051 639
Current portion of long-term debt ............................ 840 858
Current portion of capital lease obligations ................. 2,674 1,791
Deferred income taxes ........................................ 910 6,124
Other current liabilities .................................... 1,218 651
--------- ---------
Total current liabilities ................................. 24,599 28,596
DEFERRED INCOME TAXES ........................................... 3,871 3,872
LONG-TERM DEBT, net of current portion .......................... 91,531 51,734
CAPITAL LEASE OBLIGATIONS, net of current portion ............... 3,759 1,482
OTHER LIABILITIES ............................................... 251 297
--------- ---------
Total liabilities ......................................... 124,011 85,981
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES ................. 720 820
STOCKHOLDERS' DEFICIT:
Common stock ................................................. 2 2
Additional paid-in capital ................................... (3,369) (18,460)
Retained earnings (deficit) .................................. 887 (5,577)
--------- ---------
Total stockholders' deficit ............................... (2,480) (24,035)
--------- ---------
Total liabilities and stockholders' deficit ............... $ 122,251 $ 62,766
========= =========
</TABLE>
1
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AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Physician groups revenue, net ................ $ 51,131 $ -- $ 98,139 $ --
Less: amounts retained by physician groups ... (17,575) -- (34,867) --
-------- -------- -------- --------
Service fee revenue ..................... 33,556 -- 63,272 --
COSTS AND EXPENSES:
Salaries and benefits ........................ 10,342 -- 19,709 --
Practice supplies ............................ 1,971 -- 4,157 --
Practice rent and lease expenses ............. 3,167 -- 5,527 --
Other practice expenses ...................... 6,061 -- 11,404 --
Corporate general and administrative ......... 2,429 771 4,440 1,615
Depreciation and amortization ................ 2,907 8 5,379 12
-------- -------- -------- --------
Total costs and expenses ................ 26,877 779 50,616 1,627
-------- -------- -------- --------
OPERATING INCOME (LOSS) ........................ 6,679 (779) 12,656 (1,627)
OTHER EXPENSES:
Interest expense, net ........................ 1,688 40 3,088 72
-------- -------- -------- --------
Total other expenses .................... 1,688 40 3,088 72
-------- -------- -------- --------
INCOME (LOSS) BEFORE TAXES, MINORITY
INTERESTS IN CONSOLIDATED SUBSIDIARIES
AND EQUITY IN EARNINGS OF INVESTMENTS .......... 4,991 (819) 9,568 (1,699)
EQUITY IN EARNINGS OF INVESTMENTS .............. 596 -- 1,247 --
MINORITY INTERESTS IN INCOME OF
CONSOLIDATED SUBSIDIARIES ...................... (117) -- (223) --
-------- -------- -------- --------
INCOME (LOSS) BEFORE TAXES ..................... 5,470 (819) 10,592 (1,699)
INCOME TAX EXPENSE ............................. (2,079) -- (4,128) --
-------- -------- -------- --------
NET INCOME (LOSS) .............................. $ 3,391 $ (819) $ 6,464 $ (1,699)
======== ======== ======== ========
NET INCOME (LOSS) PER COMMON SHARE
Basic ........................................ $ 0.18 $ (0.41) $ 0.35 $ (0.85)
Diluted ...................................... $ 0.17 $ (0.41) $ 0.34 $ (0.85)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic ........................................ 18,744 2,000 18,401 2,000
Diluted ............................................... 19,449 2,000 19,148 2,000
</TABLE>
2
<PAGE> 5
AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1998 1997 1998 1997
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ........................................... $ 3,391 $ (819) $ 6,464 $ (1,699)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities --
Minority interests ....................................... 117 -- 223 --
Depreciation and amortization ............................ 2,907 8 5,379 12
Equity in earnings of investments ........................ (596) -- (1,247) --
Changes in assets and liabilities- net of acquisitions
Accounts receivable, net ............................. 1,274 -- (995) --
Other current assets ................................. (187) 461 1,950 (123)
Other noncurrent assets .............................. 211 (2,054) 513 (2,057)
Accounts payable and accrued expenses ................ (4,920) 888 (11,523) 1,608
Accrued salaries and benefits ........................ 136 -- 433 --
Due to joint ventures ................................ (247) -- 237 --
Other liabilities .................................... 3,181 -- 4,192 --
-------- -------- -------- --------
Net cash provided by (used in)
operating activities .............................. 5,267 (1,516) 5,626 (2,259)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ......................... (2,914) (31) (4,711) (122)
Cash paid for acquisitions .................................. (12,927) -- (38,981) --
Contributions to joint ventures ............................. (497) -- (627) --
Distributions from joint ventures ........................... 974 -- 1,062 --
-------- -------- -------- --------
Net cash used in investing activities ............. (15,364) (31) (43,257) (122)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt .................... 15,285 -- 46,085 --
Payments on long-term debt .................................. (8,720) -- (8,926) --
Payments on capital leases .................................. (291) -- (990) --
Proceeds from the exercise of options ....................... 15 -- 15 --
-------- -------- -------- --------
Net cash provided by financing activities ......... 6,289 -- 36,184 --
-------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ........................................... (3,808) (1,547) (1,447) (2,381)
CASH AND CASH EQUIVALENTS, beginning of period ................. 6,933 1,657 4,572 2,491
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS, end of period ....................... $ 3,125 $ 110 $ 3,125 $ 110
======== ======== ======== ========
</TABLE>
3
<PAGE> 6
AMERICAN PHYSICIAN PARTNERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated unaudited financial statements have been
prepared by American Physician Partners, Inc. (the "Company" or "APPM") pursuant
to the rules and regulations of the Securities and Exchange Commission, and
reflect all adjustments (all of which are of a normal recurring nature) which,
in the opinion of management, are necessary for a fair statement of the results
of the interim periods presented. These financial statements do not include all
disclosures associated with the annual financial statements and, accordingly,
should be read in conjunction with the attached Management's Discussion and
Analysis of Financial Condition and Results of Operations and the consolidated
financial statements and footnotes for the year ended December 31, 1997,
included in APPM's Form 10-K filed with the Securities and Exchange Commission
on March 31, 1998.
1. BASIS OF PRESENTATION
The consolidated financial statements have been prepared on the accrual
basis of accounting and include the accounts of the Company and its wholly-owned
subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation.
The Company does not consolidate the operating results and accounts of the
physician practices with which it affiliates (the "Affiliated Practices"). For
display purposes, the Company has presented physician groups revenue and amounts
retained by physician groups in the accompanying consolidated statements of
income to arrive at the Company's service fee revenue.
Reclassification
Certain prior year amounts have been reclassified to conform to current
year presentation. These reclassifications have no effect on the previously
reported net loss, stockholders' deficit, or cash flows.
Service Fee Revenue
Service fee revenue represents physician groups revenue less amounts
retained by physician groups. The amounts retained by physician groups represent
amounts paid to the physicians pursuant to the service agreements between the
Company and the Affiliated Practices. Under the service agreements, the Company
provides each physician group with the facilities and equipment used in its
medical practice, assumes responsibility for the management of the operations of
the practice, and employs substantially all of the non-physician personnel
utilized by the group.
The Company's service fee revenues are dependent upon the operating
results of the Affiliated Practices. Where state law allows, service fees due
under the service agreements are derived from two distinct revenue streams: (1)
a negotiated percentage (typically 20% to 30%) of the adjusted professional
revenues as defined in the service agreement; and (2) 100% of the adjusted
technical revenues as defined in the service agreements. In states where the law
requires a flat fee structure, the Company has negotiated a base service fee,
which is equal to the fair market value of the services provided under the
service agreement and which is renegotiated each year to equal the fair market
value of the services provided under the service agreement. The service fees
received by the Company under either fee structure provide the Company with a
net profit or equivalent interest in the Affiliated Practices and, as a result,
the Company displays the revenues, net of amounts retained by physicians, and
expenses of the Affiliated Practices. Adjusted professional revenues and
adjusted technical revenues are determined by deducting certain contractually
agreed-upon expenses (non-physician salaries and benefits, rent, depreciation,
insurance, interest and other physician costs) from physician groups revenue.
4
<PAGE> 7
Service fee revenue in the second quarter and year-to-date 1998 consists
of the following (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30,1998 Ended June 30, 1998
------------------ -------------------
<S> <C> <C>
Professional component $ 9,372 $ 17,094
Technical component 24,184 46,178
-------- ------
$ 33,556 $ 63,272
======== ========
</TABLE>
2. ACQUISITIONS AND PRACTICE AFFILIATIONS
In April 1998, the Company announced its affiliation with Radiology
Imaging Associates, a ten-physician radiology practice based in Fort Pierce,
Florida. The Company also announced the acquisition of Radiology Imaging
Associates' imaging center and the acquisition of an independent imaging center
in the Hudson Valley Area of Southern New York. In June 1998, the Company
completed the acquisition of an independent imaging center in the Bay Area of
California. The total consideration for these transactions was approximately
$15,150,000 consisting of the issuance of 433,662 shares of the Company's common
stock, cash and assumed debt. These transactions were accounted for under the
purchase method.
3. EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128
("SFAS 128"), "Earnings per Share," effective December 15, 1997. SFAS 128
requires that the calculation of basic earnings per share be calculated by
dividing net income by the weighted average number of shares of common stock
outstanding during the period and diluted earnings per common share be
calculated using the weighted average number of shares of common stock and
common stock equivalents. As required, the Company reported earnings per share
in accordance with SFAS 128.
4. SUBSEQUENT EVENTS
In July 1998, the Company completed its acquisition of two imaging centers
in the Greater Bay Area of California. In August 1998, the Company completed its
acquisition of an imaging center in San Antonio, Texas. The total consideration
for these transactions was approximately $9,775,000. These transactions will be
accounted for under the purchase method.
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 July 29,
1998, APPM provided management services to nine Affiliated Practices consisting
of 243 physicians practicing at 47 hospitals and 72 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 June 30, 1998
The Company conducted no significant operations before its initial public
offering ("IPO") in November 1997 when the Company acquired the tangible and
intangible non-medical assets and certain liabilities of, and entered into
service agreements with seven radiology practices (the "Founding Affiliated
Practices"). The acquisitions that occurred simultaneously with the IPO are
referred to herein as the "Reorganizations". As a result, the Company's
comparative second-quarter and year-to-date 1997 results are not meaningful.
Service Fee Revenue
The Company generated service fee revenue of $33,556 for the three months
ended June 30, 1998. There was no service fee revenue generated during the same
period ended June 30, 1997.
Salaries and Benefits
Salaries and benefits for the three months ended June 30, 1998, were
$10,342. Salaries and benefits include certain costs of non-physician clinical
and administrative employee expenses paid by the Company pursuant to the terms
of the service agreements. The percentage of salaries and benefits to total
service fee revenue was 30.8% for the three months ended June 30, 1998.
Practice Supplies
Practice supplies for the three months ended June 30, 1998, were $1,971.
Practice supplies include costs of film, contrast and other related supplies
paid by the Company pursuant to the terms of the service agreements. The
percentage of practice supplies to total service fee revenue was 5.9% for the
three months ended June 30, 1998.
Practice Rent and Lease Expenses
Practice rent and lease expenses for the three months ended June 30, 1998,
were $3,167. Practice rent and lease expenses include costs of the facilities
used to provide the medical and administrative services and lease costs for
equipment used in the performance of certain medical and administrative
procedures. The percentage of practice rent and lease expenses to total service
fee revenue was 9.4% for the three months ended June 30, 1998.
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<PAGE> 9
Other Practice Expenses
Other practice expenses for the three months ended June 30, 1998, were
$6,061. 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 18.1% for the three
months ended June 30, 1998.
Corporate General and Administrative
Corporate general and administrative expenses for the three months ended
June 30, 1998, were $2,429 compared to $771 for the three months ended June 30,
1997 representing an increase of $1,658 or 215.1%. The percentage of corporate
general and administrative expenses to total service fee revenue was 7.2% for
the three months ended June 30, 1998. Corporate general and administrative
expenses increased due to the continued building of the Company's infrastructure
prior to and following its IPO.
Depreciation and Amortization
Depreciation and amortization expenses for the three months ended June 30,
1998, were $2,907 compared to $8 for the three months ended June 30, 1997,
representing an increase of $2,899. The percentage of depreciation and
amortization expenses to total service fee revenue was 8.7% for the three months
ended June 30, 1998. Depreciation and amortization expenses increased from the
1997 amount due to the Reorganizations and the subsequent acquisitions completed
in the first and second quarters of 1998.
Interest Expense
Interest expense for the three months ended June 30, 1998, was $1,688
compared to $40 for the three months ended June 30, 1997, representing an
increase of $1,648. The percentage of interest expense to total service fee
revenue was 5.0% for the three months ended June 30, 1998. Interest expense
increased due the cost of borrowings under the Company's $160 million credit
facility (the "Credit Facility") entered into on November 26, 1997 (as amended
on May 19, 1998), the assumption of certain indebtedness and capital lease
obligations of the Founding Affiliated Practices in connection with the
Reorganizations.
Income Tax Expense
Income taxes were provided on the taxable income of the Company for
federal and state reporting purposes using the applicable effective rates.
Net Income
As a result of the foregoing factors, the Company generated a net income
of $3,391 for the three months ended June 30, 1998, or diluted income per share
of $0.17 on 19,449,000 shares outstanding, compared to a net loss of $819 for
the three months ended June 30, 1997, or diluted loss per share of $(0.41) on
2,000,000 shares outstanding.
Three Months Ended June 30, 1997
Prior to November 26, 1997, the Company had no revenue while incurring
corporate overhead expenses associated with building its management
infrastructure. As a result, the Company's comparative second-quarter 1997
results are not meaningful.
7
<PAGE> 10
Six Months Ended June 30, 1998
The Company conducted no significant operations before its initial public
offering ("IPO") in November 1997 when the Company acquired the tangible and
intangible non-medical assets and certain liabilities, 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
second-quarter and year-to-date 1997 results are not meaningful.
Service Fee Revenue
The Company generated service fee revenue of $63,272 for the six months
ended June 30, 1998. There was no service fee revenue generated during the same
period ended June 30, 1997.
Salaries and Benefits
Salaries and benefits for the six months ended June 30, 1998, were
$19,709. Salaries and benefits include certain costs of non-physician clinical
and administrative employee expenses paid by the Company pursuant to the terms
of the service agreements. The percentage of salaries and benefits to total
service fee revenue was 31.1% for the six months ended June 30, 1998.
Practice Supplies
Practice supplies for the six months ended June 30, 1998, were $4,157.
Practice supplies include costs of film, contrast and other related supplies
paid by the Company pursuant to the terms of the service agreements. The
percentage of practice supplies to total service fee revenue was 6.6% for the
six months ended June 30, 1998.
Practice Rent and Lease Expenses
Practice rent and lease expenses for the six months ended June 30, 1998,
were $5,527. Practice rent and lease expenses include costs of the facilities
used to provide the medical services and lease costs for equipment used in the
performance of certain medical procedures. The percentage of practice rent and
lease expenses to total service fee revenue was 8.7% for the six months ended
June 30, 1998.
Other Practice Expenses
Other practice expenses for the six months ended June 30, 1998, were
$11,404. 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 six
months ended June 30, 1998.
Corporate General and Administrative
Corporate general and administrative expenses for the six months ended
June 30, 1998, were $4,440 compared to $1,615 for the six months ended June 30,
1997 representing an increase of $2,825 or 174.9%. The percentage of corporate
general and administrative expenses to total service fee revenue was 7.0% for
the six months ended June 30, 1998. Corporate general and administrative
expenses increased due to the continued building of the Company's infrastructure
prior to and following its IPO.
Depreciation and Amortization
Depreciation and amortization expenses for the six months ended June 30,
1998, were $5,379 compared to $12 for the six months ended June 30, 1997,
representing an increase of $5,367. The percentage of depreciation and
amortization expenses to total service fee revenue was 8.5% for the six months
ended June 30, 1998. Depreciation and amortization expenses increased from the
1997 amount due to the Reorganizations and the subsequent acquisitions completed
in the first and second quarters of 1998.
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<PAGE> 11
Interest Expense
Interest expense for the six months ended June 30, 1998, was $3,088
compared to $72 for the six months ended June 30, 1997, representing an increase
of $3,016. The percentage of interest expense to total service fee revenue was
4.9% for the six months ended June 30, 1998. Interest expense increased due the
cost of borrowings under the Company's $160 million credit facility (the "Credit
Facility") entered into on November 26, 1997 (as amended on May 19, 1998), the
assumption of certain indebtedness and capital lease obligations of the Founding
Affiliated Practices in connection with the Reorganizations.
Income Tax Expense
Income taxes were provided on the taxable income of the Company for
federal and state reporting purposes using the applicable effective rates.
Net Income
As a result of the foregoing factors, the Company generated a net income of
$6,464 for the six months ended June 30, 1998, or diluted income per share of
$0.34 on 19,148,000 shares outstanding, compared to a net loss of $1,699 for the
six months ended June 30, 1997, or diluted loss per share of $(0.85) on
2,000,000 shares outstanding.
Six Months Ended June 30, 1997
Prior to November 26, 1997, the Company had no revenue while incurring
corporate overhead expenses associated with building its management
infrastructure. As a result, the Company's comparative year-to-date 1997 results
are not meaningful. Liquidity and Capital Resources
Net cash from operations for the six months ended June 30, 1998, was
$5,626. Net cash from operations includes a use of cash in the amount of $5,400
for deferred income taxes as a result of the conversion of the Founding
Affiliated Practices from cash basis to accrual basis. The Company files a
consolidated annual return on the accrual basis.
Net cash used in investing activities for the six months ended June 30,
1998, was $43,257. During the six months ended June 30,1998, the Company
expended $38,981 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 six months ended June 30,
1998, were $36,184. Net borrowings during the six months ended June 30, 1998,
under the Credit Facility, were $39,400 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 (as amended
May 19, 1998), the Company may borrow, repay and reborrow amounts during the
first three years of the Credit Facility. Amounts outstanding under the Credit
Facility at the end of three years are required to be repaid in quarterly
installments of varying amounts commencing September 30, 2000. The Credit
Facility expires and all loans thereunder mature on the sixth anniversary of the
closing date of the Credit Facility. Borrowings under the Credit Facility at any
time may not exceed the lesser of $160.0 million or 3.00 times the consolidated
EBITDA of the Company, giving pro forma effect to acquisitions made with such
borrowings. At June 30, 1998, the Company was eligible to borrow up to $160.0
million under the Credit Facility, and the Company had outstanding borrowings of
$89.0 million under the Credit Facility. At the Company's option, the interest
rate is (i) an adjusted LIBOR rate plus an applicable margin which can vary from
1.5% to 2.5% dependent on certain financial ratios or (ii) the prime rate plus
an applicable margin which can vary from 0.5% to 1.50%. In each case the
applicable margin varies based on financial ratios maintained by the Company.
The Credit Facility includes certain restrictive covenants including
prohibitions on the payment of dividends and the maintenance of certain
financial ratios (including minimum debt-service 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
9
<PAGE> 12
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 June 8, 1998, the Company announced that it completed the expansion of
its Credit Facility to $160 million from the current $115 million. As a result,
the Company elected not to pursue the previously announced private offering of
Notes.
The Company anticipates that funds generated from operations, cash and
cash equivalents, and funds available under the Credit Facility will be
sufficient to meet the Company's working capital requirements and debt
obligations and to finance any necessary capital expenditures at least through
the end of 1998. Expansion of the Company's business through acquisitions may
require additional funds, which, to the extent not provided by
internally-generated sources, cash, and the Credit Facility, would require the
Company to seek additional debt or equity financing.
Year 2000 Compliance
The Company is dependent upon its computer systems to bill patients for
services rendered by the Affiliated Practices and to accumulate and report the
related revenues and expenses of Affiliated Practices. The Company's various
patient accounting systems are not currently capable of processing year 2000
transactions; however, the vendors are currently addressing the modifications
that are required to make the systems operational for the year 2000. The Company
does not believe the costs to make their patient accounting systems and other
ancillary computer systems operational for the year 2000 will be material and
such costs will be funded through operations or working capital advances under
the Credit Facility.
Forward-Looking Statements
This report contains or may contain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 including
statements of the Company's and management's expectations, intentions, plans and
beliefs, including those contained in or implied by "Management's Discussion and
Analysis of Financial Condition and Results of Operations." These
forward-looking statements, as defined in Section 21E of the Securities Exchange
Act of 1934, are dependent on certain events, risks and uncertainties that may
be outside of the Company's control. These forward-looking statements may
include statements of management's plans and objectives for the Company's future
operations and statements of future economic performance; the Company's capital
budget and future capital requirements, and the Company's meeting its future
capital needs; and the assumptions described in this report underlying such
forward-looking statements. Actual results and developments could differ
materially from those expressed in or implied by such statements due to a number
of factors, including, without limitation, those described in the context of
such forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's cash equivalents and its Credit Facility.
10
<PAGE> 13
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time the Company is subject to certain legal proceedings and
claims which arise in the normal course of its business. Pending matters include
claims against the Company relating to professional services provided by a
Founding Affiliated Practice or relating to agreements between a Founding
Affiliated Practice and third parties. There can be no assurances that
additional claims will not be asserted against the Company in the future. The
Company became subject to certain of the pending claims as the result of
successor liability in connection with the acquisition of the Founding
Affiliated Practices; however, the Company believes that the ultimate resolution
of such claims net of applicable indemnification and available insurance will
not have a material adverse effect on the business, financial condition or
results of operations of the Company.
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
The annual meeting of shareholders of the Company was held on Wednesday,
May 20, 1998. At this meeting, the following matters were voted upon by the
Company's shareholders:
(A) ELECTION OF DIRECTORS
Less T. Chafen, M.D., John W. Colloton, Lawrence R. Muroff, M.D., John
Pappajohn, Derace L. Schaffer, M.D., Michael L. Sherman, M.D. and Gregory L.
Solomon were elected to serve as directors of the Company until the annual
meeting of stockholders held in 1999. The vote was as follows:
<TABLE>
<CAPTION>
Votes Cast Votes Cast
Name In Favor Against or Withheld
---- --------- -------------------
<S> <C> <C>
Less T. Chafen, M.D. 11,246,833 133,160
John W. Colloton 11,200,891 179,102
Lawrence R. Muroff, M.D. 11,241,433 138,560
John Pappajohn 11,246,833 133,160
Derace L. Schaffer, M.D. 11,246,833 133,160
Michael L. Sherman, M.D. 11,245,833 134,160
Gregory L. Solomon 11,189,602 190,391
(B) SELECTION OF AUDITORS
</TABLE>
The shareholders of the Company ratified the appointment of Arthur
Andersen LLP as the Company's independent auditors for the fiscal year ended
December 31, 1998, by the following vote:
<TABLE>
Votes Cast In Favor Votes Cast Against Abstentions
------------------- ------------------ -----------
<S> <C> <C>
11,219,186 112,815 47,992
</TABLE>
11
<PAGE> 14
ITEM 5. OTHER INFORMATION
On May 20, 1998, the Company announced that Mark L. Wagar was named
President and Chief Executive Officer to succeed Gregory Solomon. On July 2 ,
1998 the Company appointed Mark L. Wagar as a Director and Chairman of the Board
of the Company to succeed Lawrence R. Muroff, M.D., who has served as Chairman
and a Director of the Company since its inception.
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").
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: August 14, 1998 /s/ MARK L. WAGAR
-----------------
Mark L. Wagar
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1998 /s/ SAMI S. ABBASI
------------------
Sami S. Abbasi
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 14, 1998 /s/ DAVID W. YOUNG
------------------
David W. Young
Controller and Treasurer
(Principal Accounting Officer)
12
<PAGE> 15
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 **
13
<PAGE> 16
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 ****
14
<PAGE> 17
2.45 Asset Purchase Agreement, dated as of April 1, 1998, by and among
American Physician Partners, Inc., Treasure Coast Imaging Partners,
Inc. and Radiology Imaging Associates, Basilico, Gallagher and Raffa,
M.D., P.A. and Robert F. Basilico, M.D., Edward Gallagher, M.D., R.J.
Raffa, M.D., Joseph T. Charles, M.D., Alex N. Vennos, M.D., and Robin
J. Connolly, M.D.*
2.46 Asset Purchase Agreement, dated as of April 1, 1998, by and among
American Physician Partners, Inc., Treasure Coast Imaging Partners,
Inc. and St. Lucie Imaging and Breast Center, Inc. and Robert F.
Basilico, M.D., Edward Gallagher, M.D., R.J. Raffa, M.D., Joseph T.
Charles, M.D., Alex N. Vennos, M.D., and Robin J. Connolly, M.D.*
2.47 Asset Purchase Agreement, dated as of April 28, 1998, by and among
American Physician Partners, Inc., Valley Imaging Partners, Inc., LXL,
Ltd. and the Partners of LXL, Ltd.*
2.48 Asset Purchase Agreement, dated as of June 1, 1998, by and among
American Physician Partners, Inc., Mid Rockland Imaging Partners, Inc.,
Empire State Imaging Partners, Inc., RF Management Corp. and Modern
Medical Modalities Corporation*
2.49 Asset Purchase Agreement, dated as of June 23, 1998, by and among
American Physician Partners, Inc., Valley Imaging Partners, Inc.,
Brewster Imaging Center, Inc. and Each Principal Stockholder*
2.50 Asset Purchase Agreement, dated as of June 29, 1998, by and among
American Physician Partners, Inc., Valley Imaging Partners, Inc. and
Bryan M. Shieman, M.D., a sole proprietorship d/b/a El Camino Center
for Osteoporosis and/or ECOO II*
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.**
15
<PAGE> 18
10.20 Consulting Agreement between American Physician Partners, Inc. and
Michael L. Sherman, M.D.***
10.21 Office Building Lease Agreement between Dallas Main Center Limited
Partnership and American Physician Partners, Inc.***
10.22 First Amendment to Office Building Lease Agreement between Dallas Main
Center Limited Partnership and American Physician Partners, Inc.***
10.23 Credit Agreement by and among American Physician Partners, Inc., GE
Capital Corporation and the other credit parties signatory thereto.***
10.24 Consulting Agreement between American Physician Partners, Inc. and
Lawrence R. Muroff, M.D.***
10.25 Side Letter dated November 12, 1997 by and between American Physician
Partners, Inc. and Lawrence Muroff, M.D.***
10.26 Side Letter dated November 12, 1997 by and between American Physician
Partners, Inc. and Mark Martin.***
10.27 Side Letter dated November 12, 1997 by and between American Physician
Partners, Inc. and Sami Abbasi.***
10.28 Side Letter dated November 12, 1997 by and between American Physician
Partners, Inc. and Gregory L. Solomon.***
10.29 First Amendment to Consulting Agreement between American Physician
Partners, Inc. and Lawrence R. Muroff, M.D.***
10.30 Side Letter dated November 12, 1997 by and between American Physician
Partners, Inc. and Michael Sherman, M.D.***
10.31 Side Letter dated November 12, 1997 by and between American Physician
Partners, Inc. and Paul M. Jolas.***
10.32 Side Letter dated November 12, 1997 by and between American Physician
Partners, Inc. and Derace Schaffer, M.D.***
10.33 Side Letter dated November 12, 1997 by and between American Physician
Partners, Inc. and John Pappajohn.***
10.34 Side Letter dated November 12, 1997 by and between American Physician
Partners, Inc. and Mary Pappajohn.***
10.35 Side Letter dated November 12, 1997 by and between American Physician
Partners, Inc. and Thebes Ltd.***
10.36 Side Letter dated November 12, 1997 by and between American Physician
Partners, Inc. and Halkis Ltd.***
10.37 Service Agreement dated January 1, 1998, by and among American
Physician Partners, Inc., Community Imaging Partners, Inc., Community
Radiology Associates, Inc. and Drs. Korsower and Pion Radiology,
P.A.****
10.38 Service Agreement dated April 1, 1998, by and among American Physician
Partners, Inc., Treasure Coast Imaging Partners, Inc. and Radiology
Imaging Associates - Basilico, Gallagher & Raffa, M.D., P.A. *
10.39 First Amendment to Credit Agreement and Consent dated May 19, 1998, by
and among American Physician Partners, Inc., General Electric Capital
Corporation and the other credit parties signatory thereto*
10.40 Employment Agreement between American Physician Partners, Inc. and Mark
L. Wagar*
11.1 Statement re: computation of per share earnings*
27 Financial Data Schedule*
- --------------
* Filed herewith.
** Incorporated by reference to the corresponding Exhibit number to the
Registrant's Registration Statement No. 333-31611 on Form S-4.
*** Incorporated by reference to the corresponding Exhibit number to the
Registrant's Registration Statement No. 333-30205 on Form S-1.
**** Incorporated by reference to the corresponding Exhibit number to the
Registrant's Form 10-Q filed on May 15, 1998
16
<PAGE> 1
================================================================================
ASSET PURCHASE AGREEMENT
dated as of
April 1, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.
(a Delaware corporation),
TREASURE COAST IMAGING PARTNERS, INC.
(a Delaware corporation),
and
RADIOLOGY IMAGING ASSOCIATES,
BASILICO, GALLAGHER AND RAFFA, M.D., P.A.
(a Florida professional corporation),
and
ROBERT F. BASILICO, M.D., EDWARD GALLAGHER, M.D., R.J. RAFFA, M.D.,
JOSEPH T. CHARLES, M.D., ALEX N. VENNOS, M.D., and ROBIN J. CONNOLLY, M.D.
(all individuals residing in Florida)
================================================================================
<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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.3 Subsequent Actions . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III ASSUMED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.2 Closing and Effective Time . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.3 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.4 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER AND
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.1 Organization and Good Standing; Qualification . . . . . . . . . . . . 7
Section 5.2 Authorization and Validity . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.3 Title to Purchased Assets . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.4 Condition of Tangible Assets . . . . . . . . . . . . . . . . . . . . . 8
Section 5.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.6 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.7 Continuity of Business Enterprise . . . . . . . . . . . . . . . . . . 8
Section 5.8 Subsidiaries and Investments . . . . . . . . . . . . . . . . . . . . . 8
Section 5.9 Absence of Conflicting Agreements or Required Consents . . . . . . . . 8
Section 5.10 Seller Financial Statements . . . . . . . . . . . . . . . . . . . . . 9
Section 5.11 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.12 Litigation and Claims . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.13 No Violation of Law . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.14 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.15 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.16 No Other Agreements to Sell the Assets of the Business . . . . . . . . 11
Section 5.17 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.18 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.20 Lease Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.21 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.23 Filing Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.24 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.25 Accounts Receivable; Payors . . . . . . . . . . . . . . . . . . . . . 16
Section 5.26 Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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Section 5.27 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.28 Licenses, Authorization and Provider Programs . . . . . . . . . . . . 16
Section 5.29 Inspections and Investigations . . . . . . . . . . . . . . . . . . . . 17
Section 5.30 Proprietary Rights and Information . . . . . . . . . . . . . . . . . . 18
Section 5.31 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.32 Related Party Arrangements . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.33 Banking Relations . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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 . . . . . . . . . . . . . . . . . 20
Section 5.37 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . 20
Section 5.38 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.39 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER AND APPM . . . . . . . . . . . . . . . . . . . 21
Section 6.1 Organization and Good Standing; Qualification . . . . . . . . . . . . 21
Section 6.2 Authorization and Validity . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.3 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.5 Absence of Conflicting Agreements or Required Consents . . . . . . . . 21
Section 6.6 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . 22
Section 6.7 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.8 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VII INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VIII INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IX INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE X INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XI CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.1 Deliveries of Seller . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.2 Deliveries of APPM . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XII INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XIII POST CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 13.1 Further Instruments of Transfer . . . . . . . . . . . . . . . . . . . 24
Section 13.2 Certain Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 13.3 Certain Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 13.4 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 13.5 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 13.6 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XIV REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 14.1 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . 25
Section 14.2 Indemnification by APPM and Buyer . . . . . . . . . . . . . . . . . . 25
Section 14.3 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . 26
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Section 14.4 Remedies Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 14.5 Costs, Expenses and Legal Fees . . . . . . . . . . . . . . . . . . . . 28
Section 14.6 Tax Benefits; Insurance Proceeds . . . . . . . . . . . . . . . . . . . 28
Section 14.7 Commencing Actions . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XV INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XVI NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 28
Section 16.1 Non-Disclosure Covenant . . . . . . . . . . . . . . . . . . . . . . . 28
Section 16.2 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 16.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XVII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 17.1 Amendment; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 17.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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, Covenants
and Indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.8 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.9 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.10 Reference to Agreement . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.11 Confidentiality; Publicity and Disclosures . . . . . . . . . . . . . . 30
Section 17.12 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.13 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 17.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 17.15 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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SCHEDULES
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Schedule 2.1(a) Leasehold Improvements
Schedule 2.1(b) Personal Property
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 5.12 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(b) Certain Providers/Suppliers
Schedule 5.28(a) Licenses; Permits; Authorizations; Provider Agreements
Schedule 5.28(b) Cost Reports
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
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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
</TABLE>
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<PAGE> 7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of April 1,
1998, is by and among AMERICAN PHYSICIAN PARTNERS, INC., a Delaware corporation
("APPM"), Treasure Coast Imaging Partners, Inc., a Delaware corporation and a
wholly-owned subsidiary of APPM ("Buyer"), and Radiology Imaging Associates,
Basilico, Gallagher and Raffa, M.D., P.A., a Florida professional corporation
(referred to herein as "RIA" and the "Seller"), and Robert F. Basilico, M.D.,
Edward Gallagher, M.D., R.J. Raffa, M.D., Joseph T. Charles, M.D., Alex N.
Vennos, M.D., and Robin J. Connolly, M.D. (collectively, the "Principal
Stockholders").
RECITALS
A. The Seller owns and operates a professional medical practice
specializing in radiology (the "Business").
B. The Principal Stockholders own all of the issued and
outstanding capital stock and membership interests of RIA.
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"),
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.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
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"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).
"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.
"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).
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"Indemnifying Party" shall have the meaning set forth in Section
14.3(a).
"Indemnity Notice" shall have the meaning set forth in Section
14.3(d).
"Insurance Policies" shall have the meaning set forth in Section 5.24.
"IRS" shall mean the Internal Revenue Service.
"Lease Assignments" shall have the meaning set forth in Section
11.1(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 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.
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<PAGE> 10
"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).
"RIA" shall have the meaning set forth in the preamble to this
Agreement.
"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 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.
Unless otherwise indicated, reference herein to an Article number
(e.g., Article IV) or a Section number (e.g., Section 6.2) shall be construed
to be a reference to the designated Article number or Section number of this
Agreement.
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ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 1.3 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"):
(1) Intentionally Omitted;
(2) 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;
(3) Intentionally Omitted;
(4) Intangible Assets. All of the following intangible
property (collectively, the "Intangible Assets"):
(1) Intentionally Omitted;
(2) Intentionally Omitted;
(3) Intentionally Omitted;
(4) Intentionally Omitted;
(5) Intentionally Omitted;
(6) Intentionally Omitted;
(7) Seller's goodwill associated with the
Purchased Assets;
(8) Intentionally Omitted;
(9) to the extent assignable, all warranties and
guarantees with respect to the Purchased Assets;
(5) Intentionally Omitted;
(6) Intentionally Omitted;
(7) Accounts Receivable. Accounts receivable of Seller
arising on or before the Closing Date (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,
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immediately following the collection of such Medicare Receivables, as such
collection may occur from time to time, Seller shall immediately deliver to
Buyer the proceeds of such Medicare Receivable collections); and
(8) Intentionally Omitted.
Section 1.4 Excluded Assets. The "Purchased Assets" shall
exclude all assets, rights and interests not described in Section 2.1 above,
including, but not limited to, the teleradiology equipment located at the
Principal Stockholders' residences (collectively, the "Excluded Assets"). The
Excluded Assets shall not be transferred by Seller to Buyer.
Section 1.5 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.
ARTICLE III
ASSUMED LIABILITIES
Section 1.6 Assumed Liabilities. Buyer shall assume no
liabilities whatsoever of Seller.
ARTICLE IV
PURCHASE PRICE
Section 1.7 Purchase Price.
(1) Purchase Price. Subject to the terms and conditions
herein, in consideration for the sale, transfer, assignment, conveyance and
delivery of the Purchased Assets from Seller to Buyer, Buyer hereby delivers
the following ("Purchase Price"):
(i) Six Hundred Twenty-Three Thousand One Hundred
Eighty-Four and 00/100 Dollars ($623,184.00)
by wire transfer of immediately available
funds to one or more accounts designated in
writing by Seller.
(ii) Intentionally Omitted.
(iii) Intentionally Omitted.
(2) Allocation of Purchase Price. The Purchase Price
shall be allocated by Buyer and Seller in accordance with Schedule 4.1(b)
hereto.
Section 1.8 Closing and Effective Time. The closing of the
transactions contemplated under this Agreement shall take place at the offices
of APPM, Dallas, Texas at 10:00 a.m. local time on April 2, 1998 (the "Closing
Date").
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 April 1, 1998 (the "Effective Time"). The obligations
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and proceeds from the operations of the Business shall be deemed to be the
property of Buyer from and after the Effective Time, and Buyer and Seller shall
take any and all actions reasonably necessary to carry out the intent of this
Section 4.2.
Section 1.9 Closing Deliveries.
(1) 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.
(2) Buyer. Simultaneously with the execution and
delivery of this Agreement, Buyer hereby delivers to Seller: (i) the cash
portion of the Purchase Price; and (ii) the documents required to be delivered
pursuant to Section 11.2 hereof.
Section 1.10 Intentionally Omitted.
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 1.11 Organization and Good Standing; Qualification. RIA
is a professional 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 and each Seller Subsidiary
do not transact business outside the State of Florida and accordingly are not
qualified to do business as a foreign corporation in any other jurisdiction.
The Principal Stockholders own all of the issued and outstanding capital stock
and membership interests of RIA.
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 1.12 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, except as enforceability may be
limited by
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bankruptcy or other laws affecting the enforcement of creditors' rights
generally, or by general equity principles, or by public policy.
Section 1.13 Title to Purchased Assets.
(1) Schedule 5.3(a) hereto sets forth a true, correct and
complete list of the Purchased Assets;
(2) Seller has good, clear, record and marketable title
to, all of the Purchased Assets, free and clear 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"); and
(3) 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.
Section 1.14 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 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 1.15 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 1.16 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
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority.
Section 1.17 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 1.18 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 1.19 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;
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(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
Purchased Assets.
Section 1.20 Seller Financial Statements. Attached hereto as
Schedule 5.10 are (i) the consolidated balance sheet of Seller as of December
31, 1997, and the related statements of income, Principal Stockholders' equity
and statements of cash flows of Seller and Seller Subsidiaries for the year
ended December 31, 1997 (collectively, the "Seller Financial Statements"); and
(ii) the unaudited consolidated balance sheet of Seller and Seller Subsidiaries
as of February 28, 1998 (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 two (2) month period ended
February 28, 1998, (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 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 1.21 Intentionally Omitted.
Section 1.22 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.
Section 1.23 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.
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Section 1.24 Contracts and Commitments.
(1) 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.
(2) 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 1.25 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 1.26 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.
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Section 1.27 Employee Matters.
(1) 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.
(2) Employees. As of February 28, 1998, Seller employed
a collective total of eight (8) 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.
(3) 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 1.28 Labor Relations.
(1) 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.
(2) 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.
(3) 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 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.
(4) 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.
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Section 1.29 Employee Benefit Plans.
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) 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 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.
(7) 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
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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.
(8) 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.
(9) 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.
(10) 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.
(11) 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.
(12) 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 1.30 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 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. There is no 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 1.31 Intentionally Omitted.
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Section 1.32 Environmental Matters.
(1) 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.
(2) 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, 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.
(3) 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.
(4) 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.
(5) 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.
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"Regulated Activity" shall mean any generation, treatment,
storage, recycling, transportation, disposal or release of any
Hazardous Substances.
Section 1.33 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 1.34 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 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 1.35 Accounts Receivable; Payors.
(1) Attached hereto as Schedule 5.25(a) is a list and
aging of all accounts receivable of Seller as of February 28, 1998, which list
is complete, true and accurate in all material respects. All such accounts
receivable arose in the ordinary course of business and have not been
previously written off as bad debts and, are, to the extent still uncollected,
collectible in the ordinary course of business, net of contractual allowances,
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).
(2) 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
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for more than 5% of the revenues of Seller in the fiscal year ended February
28, 1998, 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 1.36 Suppliers.
(1) Intentionally Omitted.
(2) 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 1.37 Intentionally Omitted.
Section 1.38 Licenses, Authorization and Provider Programs.
(1) 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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(2) 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 1.39 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 1.40 Proprietary Rights and Information.
(1) 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").
(2) 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.
(3) 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.
Section 1.41 Taxes.
(1) 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
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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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) 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.
(7) 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.
(8) 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.
(9) Collapsible Corporation. Seller has not at any time
consented to have the provisions of Section 341(f)(2) of the Code apply to it.
(10) Boycotts. Seller has not at any time participated in
or cooperated with any international boycott as defined in Section 999 of the
Code.
(11) 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.
(12) S Corporation. Seller has not made an election to be
taxed as an "S" corporation under Section 1362(a) of the Code.
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(13) Personal Holding Companies. Seller is not and has
not been a personal holding company within the meaning of Section 542 of the
Code.
Section 1.42 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 1.43 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 1.44 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 1.45 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 1.46 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. No contract with a health
care provider has been terminated in the last twelve (12) months.
Section 1.47 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 1.48 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 1.49 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 1.50 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 1.51 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 1.52 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 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 1.53 Capitalization. The authorized capital stock of APPM
consists of 50,000,000 shares of APPM Common Stock, of which approximately
17,540,000 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.
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Section 1.54 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 1.55 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 1.56 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 1.57 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
ARTICLE XI
CLOSING DELIVERIES
Section 1.58 Deliveries of Seller. Seller hereby delivers to
Buyer the following:
(1) 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;
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(2) 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;
(3) Intentionally Omitted;
(4) Intentionally Omitted;
(5) 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;
(6) a certificate, dated within ten (10) days prior to
the date hereof, of the Secretary of State of Florida 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
Florida;
(7) Intentionally Omitted;
(8) all authorizations, consents, approvals, permits and
licenses referenced in Section 5.28;
(9) the executed Service Agreement entered into by and
among Buyer, APPM and Seller as of the date hereof (the "Service Agreement");
(10) Intentionally Omitted;
(11) 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");
(12) the executed employment agreements by and between RIA
and each of the Principal Stockholders (the "Employment Agreements"); and
(13) the executed legal opinion by counsel to Seller dated of even date.
Section 1.59 Deliveries of APPM. APPM hereby delivers to Seller
the following:
(1) 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;
(2) the Purchase Price accordance with Article IV hereof;
(3) Intentionally Omitted;
(4) Intentionally Omitted;
(5) 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;
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(6) 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;
(7) 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;
(8) the executed Other Agreements; and
(9) the executed Lease Assignments, Non-Payor Contract
Assignments, Purchased Contracts and Payor Contract Assignments.
ARTICLE XII
INTENTIONALLY OMITTED
ARTICLE XIII
POST CLOSING MATTERS
Section 1.60 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 1.61 Certain Prorations.
(1) The items set forth on Schedule 13.2(a) shall be
prorated or adjusted between the parties hereto as of the Effective Time.
(2) 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 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 1.62 Certain Expenses.
(1) 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.
(2) 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.
(3) Intentionally Omitted.
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Section 1.63 Intentionally Omitted.
Section 1.64 Intentionally Omitted.
Section 1.65 Intentionally Omitted.
ARTICLE XIV
REMEDIES
Section 1.66 Indemnification by Seller. Subject to the terms and
conditions of this Article XIV, RIA 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:
(1) 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;
(2) 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;
(3) 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
any Seller Subsidiary) 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
(4) all Unassumed Liabilities.
Section 1.67 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:
(1) 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
(2) all Assumed Liabilities.
24
<PAGE> 31
Section 1.68 Conditions of Indemnification. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(1) 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.
(2) 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.
25
<PAGE> 32
(3) 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.
(4) 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.
(5) 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.
(6) 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
26
<PAGE> 33
$5,000.00, and then such Indemnifying Party shall indemnify the Indemnified
Party to the full amount of such Damages.
Section 1.69 Remedies Not Exclusive.
(1) 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 1.70 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 1.71 Tax Benefits; Insurance Proceeds. The total amount
of any indemnity payments owed by one party to another party to this Agreement
shall be reduced by any correlative tax benefit received by the party to be
indemnified or the net proceeds received by the party to be indemnified with
respect to recovery from third parties or insurance proceeds, and such
correlative insurance benefit shall be net of the insurance premium, if any,
that becomes due as a result of such claim.
Section 1.72 Commencing Actions. Any action against any party
hereto that is not commenced on or before the third 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
5.13 or Section 5.22 or any misrepresentation relating to the representations
and warranties set forth therein.
ARTICLE XV
INTENTIONALLY OMITTED
ARTICLE XVI
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 1.73 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.
27
<PAGE> 34
Section 1.74 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 1.75 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 1.76 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 1.77 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 1.78 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 1.79 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 1.80 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 1.81 Survival of Representations, Warranties, Covenants
and Indemnifications. The representations, warranties, covenants,
indemnifications, 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 and, notwithstanding any provision in
this Agreement to the contrary, the representations and warranties contained
herein shall survive the Closing.
Section 1.82 Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN
28
<PAGE> 35
ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING CONFLICTS OF
LAWS) OF THE STATE OF TEXAS.
Section 1.83 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 1.84 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 1.85 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 1.86 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. Notwithstanding the foregoing, APPM and Buyer
shall have the right to issue a press release announcing the Closing of the
transactions covered by this Agreement following the Closing.
Section 1.87 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 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.
29
<PAGE> 36
If to Seller or any
Principal Stockholder: Radiology Imaging Associates,
Basilico, Gallagher and Raffa, M.D.,
P.A. 2306 Nebraska Avenue
Fort Pierce, Florida 34950
Attn: Robert F. Basilico, M.D.
with a copy to : Rogers, Bowers, Dempsey and Paladino
Flagler Center Tower
505 S. Flagler Drive,
Suite 1330
West Palm Beach, Florida 33401
Attn: Robert O. Rogers, Esq.
Section 1.88 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 1.89 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 1.90 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.
* * * * *
30
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
APPM:
AMERICAN PHYSICIAN PARTNERS, INC.
By:
-----------------------------------
Gregory L. Solomon, President
BUYER:
TREASURE COAST IMAGING PARTNERS, INC.
By:
-----------------------------------
Gregory L. Solomon, President
SELLER:
RADIOLOGY IMAGING ASSOCIATES, BASILICO,
GALLAGHER AND RAFFA, M.D., P.A.
By:
-----------------------------------
Robert F. Basilico, M.D., President
31
<PAGE> 38
-----------------------------------
Robert F. Basilico, M.D.
-----------------------------------
Edward Gallagher, M.D.
-----------------------------------
R.J. Raffa, M.D.
-----------------------------------
Joseph T. Charles, M.D.
-----------------------------------
Alex N. Vennos, M.D.
-----------------------------------
Robin J. Connolly, M.D.
32
<PAGE> 1
===============================================================================
ASSET PURCHASE AGREEMENT
dated as of
April 1, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.
(a Delaware corporation),
TREASURE COAST IMAGING PARTNERS, INC.
(a Delaware corporation),
and
ST. LUCIE IMAGING AND BREAST CENTER, INC.
(a Florida corporation),
and
ROBERT F. BASILICO, M.D., EDWARD GALLAGHER, M.D., R.J. RAFFA, M.D.,
JOSEPH T. CHARLES, M.D., ALEX N. VENNOS, M.D., and ROBIN J. CONNOLLY, M.D.
(all individuals residing in Florida)
===============================================================================
i
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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..............................................8
Section 4.1 Purchase Price............................8
Section 4.2 Closing and Effective Time................9
Section 4.3 Closing Deliveries........................9
Section 4.4 Delivery of Closing Stock To Principal
Stockholders..............................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........11
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 Intentionally Omitted....................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...............................13
Section 5.16 No Other Agreements to Sell the Assets of
the 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.........................16
Section 5.21 Real and Personal Property...............16
Section 5.22 Environmental Matters....................16
Section 5.23 Filing Reports...........................18
Section 5.24 Insurance Policies.......................18
Section 5.25 Accounts Receivable; Payors..............18
Section 5.26 Suppliers................................19
</TABLE>
ii
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<TABLE>
<S> <C> <C> <C>
Section 5.27 Intentionally Omitted....................19
Section 5.28 Licenses, Authorization and Provider
Programs.................................19
Section 5.29 Inspections and Investigations...........20
Section 5.30 Proprietary Rights and Information.......20
Section 5.31 Taxes....................................21
Section 5.32 Related Party Arrangements...............22
Section 5.33 Banking Relations........................22
Section 5.34 Fraud and Abuse and Self Referral........22
Section 5.35 Restrictions on Business Activities......22
Section 5.36 Agreements in Full Force and Effect......22
Section 5.37 Statements True and Correct..............23
Section 5.38 Schedules................................23
Section 5.39 Finders' Fees............................23
Section 5.40 Investment Decision......................23
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER AND APPM...........23
Section 6.1 Organization and Good Standing;
Qualification............................23
Section 6.2 Authorization and Validity...............23
Section 6.3 Governmental Authorization...............24
Section 6.4 Capitalization...........................24
Section 6.5 Absence of Conflicting Agreements or
Required Consents........................24
Section 6.6 Statements True and Correct..............24
Section 6.7 Schedules................................24
Section 6.8 Finders' Fees............................24
ARTICLE VII INTENTIONALLY OMITTED......................................25
ARTICLE VIII INTENTIONALLY OMITTED......................................25
ARTICLE IX INTENTIONALLY OMITTED......................................25
ARTICLE X INTENTIONALLY OMITTED......................................25
ARTICLE XI CLOSING DELIVERIES.........................................25
Section 11.1 Deliveries of Seller.....................25
Section 11.2 Deliveries of APPM.......................26
ARTICLE XII INTENTIONALLY OMITTED......................................26
ARTICLE XIII POST CLOSING MATTERS.......................................27
Section 13.1 Further Instruments of Transfer..........27
Section 13.2 Certain Prorations.......................27
Section 13.3 Certain Expenses.........................27
Section 13.4 Letter of Issuance.......................27
Section 13.5 Intentionally Omitted....................27
Section 13.6 Lock-up..................................27
ARTICLE XIV REMEDIES...................................................28
Section 14.1 Indemnification by Seller................28
Section 14.2 Indemnification by APPM and Buyer........29
</TABLE>
iii
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<TABLE>
<S> <C> <C> <C>
Section 14.3 Conditions of Indemnification............29
Section 14.4 Remedies Not Exclusive...................31
Section 14.5 Costs, Expenses and Legal Fees...........31
Section 14.6 Tax Benefits; Insurance Proceeds.........31
Section 14.7 Commencing Actions.......................31
ARTICLE XV INTENTIONALLY OMITTED......................................31
ARTICLE XVI NONDISCLOSURE OF CONFIDENTIAL INFORMATION..................32
Section 16.1 Non-Disclosure Covenant..................32
Section 16.2 Damages..................................32
Section 16.3 Survival.................................32
ARTICLE XVII MISCELLANEOUS..............................................32
Section 17.1 Amendment; Waivers.......................32
Section 17.2 Assignment...............................32
Section 17.3 Parties in Interest; No Third Party
Beneficiaries............................32
Section 17.4 Entire Agreement.........................32
Section 17.5 Severability.............................33
Section 17.6 Survival of Representations, Warranties,
Covenants, Indemnifications and Lock-Up..33
Section 17.7 Governing Law............................33
Section 17.8 Captions.................................33
Section 17.9 Gender and Number........................33
Section 17.10 Reference to Agreement...................33
Section 17.11 Confidentiality; Publicity and
Disclosures..............................33
Section 17.12 Notice...................................33
Section 17.13 No Waiver; Remedies......................34
Section 17.14 Counterparts.............................34
Section 17.15 Defined Terms............................34
</TABLE>
iv
<PAGE> 5
SCHEDULES
<TABLE>
<S> <C>
Schedule 2.1(a) Leasehold Improvements
Schedule 2.1(b) Personal Property
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 5.12 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(b) Certain Providers/Suppliers
Schedule 5.28(a) Licenses; Permits; Authorizations; Provider
Agreements
Schedule 5.28(b) Cost Reports
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
</TABLE>
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<TABLE>
<S> <C>
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
</TABLE>
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<PAGE> 7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of April 1,
1998, is by and among AMERICAN PHYSICIAN PARTNERS, INC., a Delaware corporation
("APPM"), Treasure Coast Imaging Partners, Inc., a Delaware corporation and a
wholly-owned subsidiary of APPM ("Buyer"), and St. Lucie Imaging and Breast
Center, Inc., a Florida corporation (referred to herein as "SLIBC" and the
"Seller"), and Robert F. Basilico, M.D., Edward Gallagher, M.D., R.J. Raffa,
M.D., Joseph T. Charles, M.D., Alex N. Vennos, M.D., and Robin J. Connolly,
M.D. (collectively, the "Principal Stockholders").
RECITALS
A. The Seller owns and operates (i) a professional medical practice
specializing in radiology and (ii) one (1) diagnostic imaging center
(collectively, the "Business").
B. The Principal Stockholders own all of the issued and outstanding
capital stock and membership interests of SLIBC.
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.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
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"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).
"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.
"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).
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"Indemnity Notice" shall have the meaning set forth in Section 14.3(d).
"Insurance Policies" shall have the meaning set forth in Section 5.24.
"IRS" shall mean the Internal Revenue Service.
"Lease Assignments" shall have the meaning set forth in Section 11.1(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 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.
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"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 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.
"SLIBC" shall have the meaning set forth in the preamble to this
Agreement.
"Tax Returns" shall include all federal, state, local or foreign income,
excise, corporate, franchise, property, sales, use, payroll, withholding,
provider, environmental, duties, value added and other tax returns (including
information returns).
"Third Party Claim" shall have the meaning set forth in Section 14.3(a).
Section 1.2 Rules of Interpretation. The definitions set forth in
Section 1.1 shall be equally applicable to both the singular and the plural
forms of the terms therein defined and shall cover both genders.
Unless otherwise indicated "herein," "hereby," "hereunder," "hereof,"
"hereinabove," "hereinafter" and other equivalent words refer to this Agreement
and not solely to the particular Article, Section or subdivision hereof in
which such word is used.
This Agreement occasionally omits the modifying words "all" and "any"
and the articles "the" and "an," but the fact that a modifier or an article is
absent from one statement and appears in another is not intended to affect the
interpretation of either statement.
Unless otherwise indicated, reference herein to an Article number (e.g.,
Article IV) or a Section number (e.g., Section 6.2) shall be construed to be a
reference to the designated Article number or Section number of this Agreement.
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ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 1.3 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"):
(1) Leasehold Improvements. All leasehold improvements, other
constructions, construction-in-progress and fixtures (collectively, the
"Improvements") owned by Seller and located on the real property subject to the
Lease Agreements (as defined in Section 5.20 hereof);
(2) 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;
(3) Intentionally Omitted;
(4) Intangible Assets. All intangible property (collectively,
the "Intangible Assets") of every kind and nature, including, without
limitation, the following:
(1) All patents, trademarks, trade names, corporate
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;
(2) All telephone numbers;
(3) All licenses, permits, certificates, franchises,
registrations, authorizations, filings, consents, accreditations, approvals and
other indicia of authority relating to the operation of the Business as
presently conducted by Seller (collectively, the "Governmental Licenses and
Permits"), which Governmental Licenses and Permits are listed in Schedule
2.1(d)(iii) 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;
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(4) 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;
(5) All deposits (the "Deposits") held by Seller in
connection with future services to be rendered by Seller, delivered under the
Leases (as defined below);
(6) 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);
(7) Seller's goodwill associated with the Purchased
Assets;
(8) 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
(9) 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);
(5) 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;
(6) 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, 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:
(1) 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);
(2) patient lists;
(3) employment and personnel records relating to the
Seller employees who are hired by Buyer;
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(4) 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
(5) all material, documents, and information relating
to 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.
(7) Accounts Receivable. Accounts receivable of Seller
arising on or before the Closing Date (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 immediately deliver to Buyer the proceeds of such
Medicare Receivable collections); and
(8) Residual Assets. All other assets of Seller other than
the Excluded Assets (as such term is defined in Section 2.2 below).
Section 1.4 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 1.5 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.
ARTICLE III
ASSUMED LIABILITIES
Section 1.6 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 members,
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;
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(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 1.7 Purchase Price.
(1) Purchase Price. Subject to the terms and conditions
herein, in consideration for the sale, transfer, assignment, conveyance and
delivery of the Purchased Assets from Seller to Buyer, Buyer hereby delivers
the following ("Purchase Price"):
(i) Five Million Nine Hundred Seventy-One Thousand Five
Hundred Twenty-Six and 60/100 Dollars
($5,971,526.60) by wire transfer of immediately
available funds to one or more accounts designated
in writing by Seller;
(ii) 433,662 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 $4,396,470.40.
The number 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.
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 Seller of even
date.
(2) Allocation of Purchase Price. The Purchase Price shall be
allocated by Buyer and Seller in accordance with Schedule 4.1(b) hereto.
Section 1.8 Closing and Effective Time. The closing of the
transactions contemplated under this Agreement shall take place at the offices
of APPM, Dallas, Texas at 10:00 a.m. local time on April 2, 1998 (the "Closing
Date").
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The transfer of the Purchased Assets by Seller to Buyer and Buyer's
assumption of the Assumed Liabilities shall be deemed effective as of 12:01
a.m. on April 1, 1998 (the "Effective Time"). The obligations and proceeds
from the operations of the Business shall be deemed to be the property of Buyer
from and after the Effective Time, and Buyer and Seller shall take any and all
actions reasonably necessary to carry out the intent of this Section 4.2.
Section 1.9 Closing Deliveries.
(1) 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.
(2) Buyer. Simultaneously with the execution and delivery of
this Agreement, Buyer hereby delivers to Seller: (i) the cash portion of the
Purchase Price; and (ii) the documents required to be delivered pursuant to
Section 11.2 hereof.
Buyer also shall deliver certificate(s) for the Closing Stock as
described in Section 13.4.
Section 1.10 Delivery of Closing Stock To Principal Stockholders. As
soon as practicable after the Closing (but in any event prior to the delivery
of the Closing Stock), Seller shall liquidate pursuant to Florida law and
distribute to the Principal Stockholders the Purchase Price. Therefore, Seller
has requested that the Closing Stock be issued directly to the Principal
Stockholders as described in Section 13.4 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 1.11 Organization and Good Standing; Qualification. SLIBC 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 and each Seller Subsidiary do not transact business outside
the State of Florida and accordingly are not qualified to do business as a
foreign corporation in any other jurisdiction. The Principal Stockholders own
all of the issued and outstanding capital stock and membership interests of
SLIBC.
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 1.12 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
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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, 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 1.13 Title to Purchased Assets.
(1) 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").
(2) 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 1.14 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 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 1.15 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 1.16 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
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority.
Section 1.17 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 1.18 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").
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Section 1.19 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 Purchased Assets.
Section 1.20 Seller Financial Statements. Attached hereto as Schedule
5.10 are (i) the consolidated balance sheet of Seller as of December 31, 1997,
and the related statements of income, Principal Stockholders' equity and
statements of cash flows of Seller and Seller Subsidiaries for the year ended
December 31, 1997 (collectively, the "Seller Financial Statements"); and (ii)
the unaudited consolidated balance sheet of Seller and Seller Subsidiaries as
of February 28, 1998 (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 two (2) month period ended
February 28, 1998, (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 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 1.21 Intentionally Omitted.
Section 1.22 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 1.23 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 1.24 Contracts and Commitments.
(1) 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.
(2) 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 1.25 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 1.26 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 1.27 Employee Matters.
(1) 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.
(2) Employees. As of February 28, 1998, Seller employed a
collective total of twenty-one (21) 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.
(3) 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 1.28 Labor Relations.
(1) 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.
(2) 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.
(3) 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 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.
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(4) 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 1.29 Employee Benefit Plans.
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) 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 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.
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(7) 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.
(8) 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.
(9) 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.
(10) 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.
(11) 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.
(12) 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 1.30 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
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. There is
no 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
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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 1.31 Real and Personal Property.
(1) 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.
(2) 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 (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 1.32 Environmental Matters.
(1) 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.
(2) 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, 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.
(3) 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.
(4) 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
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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.
(5) 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 1.33 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 1.34 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 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
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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 1.35 Accounts Receivable; Payors.
(1) Attached hereto as Schedule 5.25(a) is a list and aging of
all accounts receivable of Seller as of February 28, 1998, which list is
complete, true and accurate in all material respects. All such accounts
receivable arose in the ordinary course of business and have not been
previously written off as bad debts and, are, to the extent still uncollected,
collectible in the ordinary course of business, net of contractual allowances,
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).
(2) 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 February 28, 1998,
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 1.36 Suppliers.
(1) Intentionally Omitted.
(2) 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 1.37 Intentionally Omitted.
Section 1.38 Licenses, Authorization and Provider Programs.
(1) 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
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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.
(2) 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 1.39 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 1.40 Proprietary Rights and Information.
(1) 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").
(2) 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
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<PAGE> 26
to Buyer or APPM. There are no outstanding or, to Seller's knowledge,
threatened disputes or disagreements with respect to any such agreement.
(3) 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.
Section 1.41 Taxes.
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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.
(6) 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.
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(7) 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.
(8) 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.
(9) Collapsible Corporation. Seller has not at any time
consented to have the provisions of Section 341(f)(2) of the Code apply to it.
(10) Boycotts. Seller has not at any time participated in or
cooperated with any international boycott as defined in Section 999 of the
Code.
(11) 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.
(12) S Corporation. Seller has made an election to be taxed as
an "S" corporation under Section 1362(a) of the Code.
(13) Personal Holding Companies. Seller is not and has not
been a personal holding company within the meaning of Section 542 of the Code.
Section 1.42 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 1.43 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 1.44 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 1.45 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.
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Section 1.46 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. No contract with a health
care provider has been terminated in the last twelve (12) months.
Section 1.47 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 1.48 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 1.49 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.
Section 1.50 Investment Decision. Seller is entering into this
Agreement at the direction of, and based on the prior written approval of, the
Principal Stockholders. The Principal Stockholders have taken or have caused
Seller to take all actions necessary or appropriate to effectuate the
dissolution of Seller on, or as soon as practicable after, the date hereof (but
in any event prior to the issuance of the Closing Stock). The determination
(i) to accept the Closing Stock as a portion of the consideration to be
delivered by Buyer for the transactions contemplated herein, (ii) to dissolve
Seller, (iii) to have the Closing Stock issued directly to the Principal
Stockholders, and (iv) to accept such Closing Stock to be held as restricted
securities as described in those certain Investment Representation Letters of
even date, have been made by the Principal Stockholders.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER AND APPM
Buyer and APPM each represents and warrants to Seller as follows:
Section 1.51 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
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and accurately reflect all material proceedings of the Principal Stockholders
and directors of Buyer and APPM (and all committees thereof) regarding this
transaction.
Section 1.52 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 1.53 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 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 1.54 Capitalization. The authorized capital stock of APPM
consists of 50,000,000 shares of APPM Common Stock, of which approximately
17,540,000 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 1.55 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 1.56 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.
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Section 1.57 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 1.58 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
ARTICLE XI
CLOSING DELIVERIES
Section 1.59 Deliveries of Seller. Seller hereby delivers to Buyer the
following:
(1) 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;
(2) 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;
(3) Intentionally Omitted;
(4) Intentionally Omitted;
(5) 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;
(6) a certificate, dated within ten (10) days prior to the
date hereof, of the Secretary of State of Florida 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
Florida;
(7) 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;
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(8) all authorizations, consents, approvals, permits and
licenses referenced in Section 5.28;
(9) the executed Service Agreement entered into by and among
Buyer, APPM and Seller as of the date hereof (the "Service Agreement");
(10) Intentionally Omitted;
(11) 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");
(12) the executed employment agreements by and between SLIBC
and each of the Principal Stockholders (the "Employment Agreements");
(13) the executed legal opinion by counsel to Seller dated of
even date; and
(14) the executed Investment Representation Letter
Section 1.60 Deliveries of APPM. APPM hereby delivers to Seller the
following:
(1) 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;
(2) the Purchase Price accordance with Article IV hereof;
(3) Intentionally Omitted;
(4) Intentionally Omitted;
(5) 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;
(6) 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;
(7) 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;
(8) the executed Other Agreements; and
(9) the executed Lease Assignments, Non-Payor Contract
Assignments, Purchased Contracts and Payor Contract Assignments.
ARTICLE XII
INTENTIONALLY OMITTED
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ARTICLE XIII
POST CLOSING MATTERS
Section 1.61 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 1.62 Certain Prorations.
(1) The items set forth on Schedule 13.2(a) shall be prorated
or adjusted between the parties hereto as of the Effective Time.
(2) 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 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 1.63 Certain Expenses.
(1) 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.
(2) 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.
(3) Seller shall pay all prepayment penalties and all other
costs of any kind whatsoever associated with the payment of the mortgages and
leases on the properties referenced on Schedules 2.1 and 3.1.
Section 1.64 Letter of Issuance. Within three (3) days following the
Closing Date, APPM will submit a letter to its transfer agent requesting that
the transfer agent issue to the Principal Stockholders the Closing Stock as
described in Section 4.4..
Section 1.65 Intentionally Omitted.
Section 1.66 Lock-up. Prior to the second anniversary of the Closing
Date, the Principal Stockholders shall not (a) directly or indirectly sell,
offer, pledge, hypothecate, assign, sell short or long, subject to an option,
distribute, 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
without the prior written consent of APPM. If at any time prior to the two-
year anniversary of the Closing Date, Buyer or APPM delivers a Claim Note (as
defined in Article XIV) to any Principal Stockholder to the effect that Buyer
or APPM believes that any Principal Stockholder has or may have liability to
Buyer or APPM pursuant to Article XIV hereof, then Buyer and/or APPM shall have
the sole and absolute right to not release shares of the Closing Stock from a
lock-up described in this section. Notwithstanding the preceding, the
restrictions contained in this Section 13.6, the prior sentence shall no longer
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apply (i) as to twenty-five percent (25%) of the APPM Common Stock received by
the Principal Stockholders following expiration of a one-year period following
the Effective Date, (ii) as to an additional twenty-five percent (25%) of the
APPM Common Stock received by the Principal Stockholders following expiration
of an eighteen-month period following the Effective Date, and (iii) as to the
remaining fifty percent (50%) of the APPM Common Stock received by the
Principal Stockholders following expiration of a twenty-four month period
following the Effective Date. In addition, the release by APPM of the lock-up
restrictions described in this section shall not effect or release any
Principal Stockholder from liability for indemnification obligations pursuant
to Article XIV hereof. The Principal Stockholders acknowledge that the
certificates representing the Closing Stock will bear a legend describing the
restrictions set forth in this Section. The Principal Stockholders acknowledge
that remedies at law may be inadequate to protect against breach of this
Section and the Principal Stockholders hereby in advance agree 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 1.67 Indemnification by Seller. Subject to the terms and
conditions of this Article XIV, SLIBC 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:
(1) 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;
(2) 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;
(3) 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 any
Seller Subsidiary) 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
(4) all Unassumed Liabilities.
Section 1.68 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:
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(1) 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
(2) all Assumed Liabilities.
Section 1.69 Conditions of Indemnification. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(1) 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.
(2) 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
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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.
(3) 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.
(4) 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.
(5) 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.
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(6) 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 $5,000.00, and then such Indemnifying Party shall indemnify
the Indemnified Party to the full amount of such Damages.
Section 1.70 Remedies Not Exclusive.
(1) 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 1.71 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 1.72 Tax Benefits; Insurance Proceeds. The total amount of any
indemnity payments owed by one party to another party to this Agreement shall
be reduced by any correlative tax benefit received by the party to be
indemnified or the net proceeds received by the party to be indemnified with
respect to recovery from third parties or insurance proceeds, and such
correlative insurance benefit shall be net of the insurance premium, if any,
that becomes due as a result of such claim.
Section 1.73 Commencing Actions. Any action against any party hereto
that is not commenced on or before the third 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 5.13 or
Section 5.22 or any misrepresentation relating to the representations and
warranties set forth therein.
ARTICLE XV
INTENTIONALLY OMITTED
ARTICLE XVI
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
Section 1.74 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
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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 1.75 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 1.76 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 1.77 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 1.78 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 1.79 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 1.80 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 1.81 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 1.82 Survival of Representations, Warranties, Covenants,
Indemnifications and Lock-Up. The representations, warranties, covenants,
indemnifications, lock-up 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
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Principal Stockholder, APPM or Buyer and, notwithstanding any provision in this
Agreement to the contrary, the representations and warranties contained herein
shall survive the Closing.
Section 1.83 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 TEXAS.
Section 1.84 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 1.85 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 1.86 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 1.87 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. Notwithstanding the foregoing, APPM and Buyer
shall have the right to issue a press release announcing the Closing of the
transactions covered by this Agreement following the Closing.
Section 1.88 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 APPM and Buyer: American Physician Partners, Inc.
901 Main Street, Suite 2301
Dallas, Texas 75202
Attn: Gregory L. Solomon, President
Paul M. Jolas, Esq, General
Counsel and Senior Vice
President
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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: St. Lucie Imaging and Breast Center, Inc.
2306 Nebraska Avenue
Fort Pierce, Florida 34950
Attn: Robert F. Basilico, M.D.
with a copy to: Rogers, Bowers, Dempsey and Paladino
Flagler Center Tower
505 S. Flagler Drive, Suite 1330
West Palm Beach, Florida 33401
Attn: Robert O. Rogers, Esq.
Section 1.89 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 1.90 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 1.91 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.
* * * * *
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<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
APPM:
AMERICAN PHYSICIAN PARTNERS, INC.
By:
-------------------------------
Gregory L. Solomon, President
BUYER:
TREASURE COAST IMAGING PARTNERS, INC.
By:
-------------------------------
Gregory L. Solomon, President
SELLER:
ST. LUCIE IMAGING AND BREAST CENTER, INC.
By:
-------------------------------
Robert F. Basilico, M.D., President
34
<PAGE> 41
Robert F. Basilico, M.D.
-------------------------------
Edward Gallagher, M.D.
-------------------------------
R.J. Raffa, M.D.
-------------------------------
Joseph T. Charles, M.D.
-------------------------------
Alex N. Vennos, M.D.
-------------------------------
Robin J. Connolly, M.D.
35
<PAGE> 1
================================================================================
ASSET PURCHASE AGREEMENT
dated as of
April 28, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.
(a Delaware corporation),
VALLEY IMAGING PARTNERS, INC.
(a California corporation),
LXL, LTD.
(a California partnership)
and
the Partners of LXL, LTD.
================================================================================
<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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section_2.1 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section_2.2 Subsequent Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III ASSUMED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section_3.1 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV PURCHASE PRICE AND CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section_4.1 Purchase Price and Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 5
Section_4.2 Closing and Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section_4.3 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section_4.4 Certain Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section_4.5 Closing Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER AND PARTNERS . . . . . . . . . . . . . . . . . . . . 6
Section_5.1 Organization and Good Standing; Qualification . . . . . . . . . . . . . . . . . . . . . . . . 6
Section_5.2 Authorization and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section_5.3 Title to Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section_5.4 Condition of Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section_5.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section_5.6 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section_5.7 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section_5.8 Continuity of Business Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section_5.9 Subsidiaries and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section_5.10 Absence of Conflicting Agreements or Required Consents . . . . . . . . . . . . . . . . . . . 7
Section_5.11 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section_5.12 Litigation and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section_5.13 No Violation of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section_5.14 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section_5.15 No Other Agreements to Sell the Assets of the Seller's Business . . . . . . . . . . . . . . . 8
Section_5.16 Lease Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section_5.17 Real and Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section_5.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section_5.19 Filing Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section_5.20 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Section_5.21 Accounts Receivable; Payors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Section_5.22 Accounts Payable; Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Section_5.23 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Section_5.24 Licenses, Authorization and Provider Programs . . . . . . . . . . . . . . . . . . . . . . . 110
Section_5.25 Inspections and Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Section_5.26 Proprietary Rights and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Section_5.27 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Section_5.28 Banking Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Section_5.29 Fraud and Abuse and Self Referral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Section_5.30 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Section_5.31 Agreements in Full Force and Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Section_5.32 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
</TABLE>
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<TABLE>
<S> <C> <C>
Section_5.33 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Section_5.34 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER AND APP . . . . . . . . . . . . . . . . . . . . . . 142
Section_6.1 Organization and Good Standing; Qualification . . . . . . . . . . . . . . . . . . . . . . . 142
Section_6.2 Authorization and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Section_6.3 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Section_6.4 Intentionally omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Section_6.5 Absence of Conflicting Agreements or Required Consents . . . . . . . . . . . . . . . . . . 143
Section_6.6 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Section_6.7 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Section_6.8 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
ARTICLE VII PRE-CLOSING COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
ARTICLE VIII PRE-CLOSING COVENANTS OF APP AND BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . 154
ARTICLE IX CONDITIONS PRECEDENT OF APP AND BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE X CONDITIONS PRECEDENT OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
ARTICLE XI CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
Section_11.1 Deliveries of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
Section_11.2 Deliveries of APP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
ARTICLE XII CERTAIN ADDITIONAL AGREEMENTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . 175
ARTICLE XIII POST CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Section_13.1 Further Instruments of Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
ARTICLE XIV REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Section_14.1 Indemnification by Seller and the Partners . . . . . . . . . . . . . . . . . . . . . . . . 175
Section_14.2 Indemnification by APP and Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Section_14.3 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
Section_14.4 Remedies Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section_14.5 Costs, Expenses and Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section_14.6 Tax Benefits; Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE XV TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE XVI NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section_16.1 Non-Disclosure Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section_16.2 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section_16.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE XVII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section_17.1 Amendment; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section_17.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section_17.3 Parties in Interest; No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . 19
Section_17.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section_17.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section_17.6 Survival of Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . 19
Section_17.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section_17.8 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
Section_17.9 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
Section_17.10 Reference to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
Section_17.11 Confidentiality; Publicity and Disclosures . . . . . . . . . . . . . . . . . . . . . . . . 220
Section_17.12 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
Section_17.13 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
Section_17.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
Section_17.15 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
</TABLE>
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<PAGE> 4
SCHEDULES
<TABLE>
<CAPTION>
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Schedule 2.1(a) Personal Property
Schedule 3.1 Assumed Liabilities
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 Contracts and Commitments
Schedule 5.8 Continuity of Business Enterprise
Schedule 5.9 Subsidiaries and Investments
Schedule 5.10 Absence of Conflicting Agreements or Required Consents
Schedule 5.11 No Undisclosed Liabilities
Schedule 5.12 Litigation and Claims
Schedule 5.14 Contracts and Commitments
Schedule 5.16 Lease Agreements
Schedule 5.18(b) Environmental Matters
Schedule 5.18(d) Environmental Audits
Schedule 5.20 Insurance Policies
Schedule 5.27(b) Payment of Taxes
Schedule 5.27(c) No Pending Deficiencies, Delinquencies, Assessments or Audits
Schedule 5.30 Restrictions on Business Activities
Schedule 5.34 Finders' Fees
Schedule 6.3 Governmental Authorizations
Schedule 6.5 Absence of Conflicting Agreements or Required Consents
</TABLE>
<PAGE> 5
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of April
28, 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 (collectively, "Buyer") and LXL, LTD., a
California partnership ("LXL"), and the Partners (collectively, "Seller").
RECITALS
A. Seller owns certain assets and equipment in connection with
the operation of 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 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.
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.
"Claim Notice" shall have the meaning set forth in Section 14.3(a).
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<PAGE> 6
"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.
"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).
"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
5.18(e).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"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 5.20.
"IRS" shall mean the Internal Revenue Service.
"Lease Assignments" shall have the meaning set forth in Section
11.1(c).
"Lease Agreements" shall have the meaning set forth in Section 5.15.
"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.
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<PAGE> 7
"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.
"Merger Agreement" shall mean that certain Agreement and Plan of
Reorganization and Merger dated June 27, 1997, as amended, by and between APP,
Buyer and the Stockholders.
"MWTA" shall mean the Medical Waste Tracking Act of 1988, 42 U.S.C.
Sections 6992, et seq.
"Partners" shall mean the individuals listed on Exhibit A attached
hereto who are all of the partners of Seller.
"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.
"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).
"Purchased Assets" shall have the meaning set forth in Section 2.1.
"Regulated Activity" shall have the meaning set forth in Section
5.18(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.
"Stockholders" shall mean all of the stockholders of Valley Radiology
Medical Group, Inc.
"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.
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<PAGE> 8
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 Business excluding the Excluded
Assets (as such term is defined in Section 2.2 below), including the following
assets, rights and interests (collectively, the "Purchased Assets"):
(a) Personal Property. All tangible personal property
(collectively, the "Personal Property") listed in Schedule 2.1(a) hereto;
(b) Insurance Benefits. All benefits, proceeds or any
other amounts payable, if any, 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;
(c) Warranty Rights. To the extent assignable, all
warranties, guarantees and covenants not to compete, if any, with respect to
the Purchased Assets.
(d) 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 Purchased Assets.
Section 2.2 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, 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 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 Business), or claims for such
liability or obligation, whether accrued, matured
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<PAGE> 9
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 the Purchased Assets 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 or any claim, whether or not
asserted and whether or not liquidated or contingent, 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 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.
ARTICLE IV
PURCHASE PRICE AND CLOSING
Section 4.1 Purchase Price and Allocation of Purchase Price.
(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 be Five Hundred Eighty One
Thousand Seven Hundred Dollars ($581,700) payable by cashier's check or wire
transfer of immediately available funds to one or more accounts designated by
Seller and paid by Buyer to Seller at the Closing.
(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 February __, 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 February __, 1998 (the "Effective Time"). The Purchased Assets shall
be deemed to be the property of Buyer from and after the Effective Time, and
Buyer and Seller shall take any and all actions reasonably necessary to carry
out the intent of this Section 4.2.
Section 4.3 Closing Deliveries.
(c) 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.
(d) Buyer. At the Closing, Buyer shall deliver to
Seller: (i) the Purchase Price; (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.
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<PAGE> 10
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 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) 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 PARTNERS
As an inducement to APP and to Buyer to enter into this Agreement, LXL
and each Partner represent and warrant to APP and to Buyer as of the Closing
Date as follows:
Section 5.1 Organization and Good Standing; Qualification. LXL
is a partnership duly organized and validly existing under the laws of the
State of California with all requisite 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.
Section 5.2 Authorization and Validity. Seller has all requisite
power to enter into this Agreement and all other agreements entered into in
connection with the transactions contemplated hereby and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Seller of this Agreement and the agreements contemplated herein, and the
consummation by Seller of the transactions contemplated hereby and thereby are
within Seller's respective powers and have been duly authorized by all
necessary action on the part of the Partners. This Agreement has been duly
executed by LXL and the Partners, 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
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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.
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 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 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 Contracts and Commitments. Except as set forth in
Schedule 5.7, LXL has no contracts or agreements with respect to the Purchased
Assets.
Section 5.8 Continuity of Business Enterprise. Except as set
forth in Schedule 5.8, there has not been any sale, distribution or spin-off of
significant assets of LXL other than in the ordinary course of business within
the (2) two years preceding the date of this Agreement.
Section 5.9 Subsidiaries and Investments. Except as set forth in
Schedule 5.9, LXL 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 5.10 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 5.10 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 LXL's partnership agreement,
(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
5.10, 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
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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 5.11 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 LXL.
Section 5.13 No Violation of Law. LXL has not been, nor shall be
as of the Closing Date (by virtue of any action, omission to act, contract to
which it is a party or any occurrence or state of facts whatsoever), in
violation of any applicable local, state or federal law, ordinance, regulation,
order, injunction or decree, or any other requirement of any governmental body,
agency, authority or court binding on it, or relating to its properties, assets
or business or its advertising, sales or pricing practices, except for
violations which reasonably, individually or in the aggregate, would not have a
Material Adverse Effect on LXL.
Section 5.14 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 5.15 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.
Section 5.16 Lease Agreements. Schedule 5.16 contains a true,
accurate and complete list of all the lease agreements and license agreements
to which LXL is a party and pursuant to which LXL leases (whether as lessor or
lessee) or licenses (whether as licensor or licensee) any real or personal
property (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 Business,
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 will, prior to Closing, deliver 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 5.17 Real and Personal Property. Intentionally omitted.
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Section 5.18 Environmental Matters.
(a) LXL has not, within the five (5) years preceding the
date hereof, through the Effective Time, received from any federal, state or
local governmental body, agency, authority or entity, or any other Person, any
written notice, demand, citation, summons, complaint or order or any 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 LXL of
any Environmental Law (as defined in subsection (e) below) (ii) alleged failure
by LXL 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 LXL.
(b) LXL has not used, transported, disposed of or
arranged for the disposal of (as those terms are defined in and construed under
the Comprehensive Environmental Response, Compensation and Liability Act) any
Hazardous Substance (as defined herein) that would give rise to any
Environmental Liabilities (as defined in subsection (e) below) for LXL under
any applicable Environmental Law that had, or could likely have, a Material
Adverse Effect on LXL. LXL has not 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 5.18(b) discloses any known presence of asbestos
in or on LXL's owned or leased premises.
(c) No soil or water in or under any assets currently or
formerly held for use or sale by LXL has been contaminated by any Hazardous
Substance while such assets or premises were owned, leased, operated or
managed, directly or indirectly by LXL where such contamination had or, could
likely have, a Material Adverse Effect on LXL.
(d) Schedule 5.18(d) contains a list of all environmental
audits and other similar reports which have been prepared by, for or concerning
LXL 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
LXL, any LXL or any of its predecessors, true and complete copies of which have
been provided to Buyer.
(e) For the purposes of this Section 5.18, 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 5.19 Filing Reports. All returns, reports, plans and
filings of any kind or nature necessary to be filed by LXL with any
governmental agency or authority have been properly completed and
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timely filed in compliance with all applicable requirements, except where
failure to so file would not have a Material Adverse Effect on LXL.
Section 5.20 Insurance Policies. Schedule 5.20 lists and briefly
describes LXL's policies of insurance to which LXL is a party or under which
LXL or any officer, Partner 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 LXL (the "Insurance Policies"). Except as set
forth in Schedule 5.20, 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 LXL ("Current
Policies") taken together, (i) provide adequate insurance coverage for the
assets, properties and operations of LXL for all risks normally insured against
by a Person carrying on a substantially similar business or businesses as LXL,
(ii) are sufficient for compliance with legal and contractual requirements to
which LXL 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 5.20, neither LXL nor any of its
Partners, officers or directors 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 LXL and its Partners, no such cancellation or increase of
deductibles, retainages or premiums is threatened. Except as set forth in
Schedule 5.20, 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 5.20, since January 1, 1993, LXL has
not filed a written application for any professional liability insurance
coverage which has been denied by an insurance agency or carrier. Schedule
5.20 also sets forth a list of all claims under any Insurance Policy in excess
of $10,000 per occurrence filed by LXL during the immediately preceding
three-year period.
Section 5.21 Accounts Receivable; Payors. Intentionally omitted.
Section 5.22 Accounts Payable; Suppliers. Intentionally omitted.
Section 5.23 Inventory. Intentionally omitted.
Section 5.24 Licenses, Authorization and Provider Programs.
Intentionally omitted.
Section 5.25 Inspections and Investigations. Intentionally
omitted.
Section 5.26 Proprietary Rights and Information. Intentionally
omitted.
Section 5.27 Taxes.
(a) Filing of Tax Returns. LXL 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 LXL for the periods covered thereby.
(b) Payment of Taxes. Except for such items as LXL may
be disputing in good faith by proceedings in compliance with applicable law,
which are described in Schedule 5.27(b), (i) LXL 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) LXL is not delinquent in the
payment of any tax, assessment or governmental charge.
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(c) No Pending Deficiencies, Delinquencies, Assessments
or Audits. Except as set forth in Schedule 5.27(c), LXL has not received any
notice that any tax deficiency or delinquency has been asserted against LXL or
to the best knowledge of LXL, 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 LXL that could be asserted by any taxing
authority. There is no taxing authority audit of LXL pending, or to the actual
knowledge of LXL, threatened within the last five (5) years, and the results of
any completed audits are properly reflected in LXL Financial Statements. LXL
has not violated any applicable federal, state, local or foreign tax law.
There are no security interests or liens on any assets of LXL which have
resulted from any failure to pay (or alleged failure to pay) taxes.
(d) No Extension of Limitation Period. LXL 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 LXL 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 LXL nor any Partner is a
foreign person, as such term is referred to in Section 1445(f)(3) of the Code
and Treasury Regulations Section 1.1445-2.
(g) Safe Harbor Lease. None of the properties or assets
of LXL constitutes property that LXL, 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 LXL 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. Intentionally omitted.
(j) Boycotts. LXL 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 LXL will be characterized as an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code.
(l) S Corporation. Intentionally omitted.
(m) Personal Holding Companies. LXL is not or has been a
personal holding company within the meaning of Section 542 of the Code.
Section 5.28 Banking Relations. Intentionally omitted.
Section 5.29 Fraud and Abuse and Self Referral. Neither LXL nor
any Partner 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 5.30 Restrictions on Business Activities. Except as
disclosed in Schedule 5.30, there is no material agreement, judgment,
injunction, order or decree binding upon LXL or any Partner, which has
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or reasonably could be expected to have the effect of prohibiting or materially
impairing any current or future business practice of LXL, any acquisition of
property by Seller, or the conduct of business by LXL.
Section 5.31 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 5.32 Statements True and Correct. No representation or
warranty made herein by Seller or any Partner, nor any statement, certificate,
exhibit or instrument to be furnished by Seller or any Partner to 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 5.33 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 5.34 Finders' Fees. Except as set forth in Schedule 5.34,
no investment banker, broker, finder or other intermediary has been retained by
or is authorized to act on behalf of any of the Partners 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
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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, 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.
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ARTICLE VIII
PRE-CLOSING COVENANTS OF APP AND BUYER
Intentionally Omitted.
ARTICLE IX
CONDITIONS PRECEDENT OF APP AND BUYER
Intentionally Omitted.
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) Bill of Sale;
(b) all authorizations, consents, approvals, permits and
licenses referenced in Section 5.5;
(c) an assignment to Buyer of (i) each lease for real or
personal property described on Schedule 5.16 (the "Lease Assignments") and (ii)
all contracts described on Schedule 5.7 which can be assigned to Buyer ("Non-
Payor Contract Assignments"); and
(d) 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:
(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) 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,
(d) 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
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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
(e) 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
Partners 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 XIV
REMEDIES
Section 14.1 Indemnification by Seller and the Partners. Subject
to the terms and conditions of this Article XIV, Seller and the Partners
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 indemnitees 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;
(b) any violation (or alleged violation) by Seller 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 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.
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 indemnitees arising out of or resulting from a breach by
APP or Buyer of any
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<PAGE> 20
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
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.
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<PAGE> 21
(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.
(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 Partners, 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
Partners, on the other hand, as a result of such a breach or breaches exceeds
$10,000. Notwithstanding anything to the contrary contained herein, Seller's
aggregate indemnification obligation hereunder and under the Merger Agreement
shall not exceed fifty percent (50%) of the total consideration paid to the
Partners under (i) this Agreement and (ii) the Merger Agreement; and any one
Partner's aggregate indemnification obligation hereunder and as a Stockholder
under the Merger
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<PAGE> 22
Agreement shall not exceed fifty percent (50%) of (i) one-thirteenth of the
total consideration paid to Seller under this Agreement and (ii) the total
consideration paid such Partner as a Stockholder under the Merger Agreement.
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 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 Seller and (b) to counsel
and other advisers to APP and Seller 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.
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<PAGE> 23
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 for a period of two (2) years from the Closing and
all statements contained in any certificate, exhibit or other instrument
delivered by or on behalf of Seller, any Partner, APP or Buyer pursuant to this
Agreement shall be deemed to have been representations and warranties by such
Seller, such Partner, APP or Buyer and, notwithstanding any provision in this
Agreement to the contrary, the representations and warranties contained herein
shall survive the Closing for a period of two (2) years from the Closing.
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<PAGE> 24
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):
20
<PAGE> 25
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: LXL, LTD.
---------------------------
---------------------------
Attn: Stephen S. Teng, M.D.
with a copy to Hoge Fenton Jones & Appel, Inc.
60 S. Market Street, #1400
San Jose, California 95113-2334
Fax No.: (408) 287-2583
Attn: Stephen S. McCray, Esq.
Section 17.13 No Waiver; Remedies. No party hereto shall by any
act (except by written instrument pursuant to Section 17.1 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default in or breach of any of the terms
and conditions hereof. No failure to exercise, nor any delay in exercising, on
the part of any party hereto, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. No remedy set forth in
this Agreement or otherwise conferred upon or reserved to any party shall be
considered exclusive of any other remedy available to any party, but the same
shall be distinct, separate and cumulative and may be exercised from time to
time as often as occasion may arise or as may be deemed expedient.
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.
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<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
APP:
AMERICAN PHYSICIAN PARTNERS, INC.
By:
---------------------------------------------
Gregory L. Solomon, President
Buyer:
VALLEY IMAGING PARTNERS, INC.
By:
--------------------------------------------
Gregory L. Solomon, President
Seller:
LXL, LTD.
By:
---------------------------------------------
Stephen S. Teng, M.D.
Its: President
Partners:
Signature pages for each Partner attached hereto.
22
<PAGE> 1
================================================================================
ASSET PURCHASE AGREEMENT
dated as of
June 1, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.
(a Delaware corporation),
MID ROCKLAND IMAGING PARTNERS, INC.
(a Delaware corporation),
EMPIRE STATE IMAGING ASSOCIATES, INC.
(a New York corporation),
RF MANAGEMENT CORP.
(a New York corporation),
and
MODERN MEDICAL MODALITIES CORPORATION
(a New Jersey corporation)
================================================================================
<PAGE> 2
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of June 1,
1998, is by and among American Physician Partners, Inc., a Delaware corporation
("APPM"), Mid Rockland Imaging Partners, Inc., a Delaware corporation and a
wholly-owned subsidiary of APPM ("Buyer"), Empire State Imaging Associates,
Inc., a New York corporation ("Seller"), and RF Management Corp., a New York
corporation and Modern Medical Modalities Corporation, a New Jersey corporation
(collectively, the "Principal Stockholders").
RECITALS
A. Seller owns and operates one (1) diagnostic imaging center
(the "Business").
B. Buyer is a wholly-owned subsidiary of APPM. APPM is engaged
in the business of owning, operating and acquiring the assets of, and managing
the non-medical aspects of, radiology practices and diagnostic imaging centers.
C. Buyer desires 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 center known as Central Imaging
Associates, located at 1234 Central Park Avenue, Yonkers, New York (the
"Center") (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.
"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.
"Business" shall have the meaning set forth in the Recitals.
<PAGE> 3
"Buyer" shall have the meaning set forth in the preamble to this
Agreement.
"Center" shall have the meaning set forth in the Recitals.
"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.
"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).
2
<PAGE> 4
"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.
"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.
"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.
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"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 the stockholders of Seller, RF
Management Corp. and Modern Medical Modalities Corporation.
"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 Unaudited 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.
"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.
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Unless otherwise indicated "herein," "hereby," "hereunder," "hereof,"
"hereinabove," "hereinafter" and other equivalent words refer to this Agreement
and not solely to the particular Article, Section or subdivision hereof in
which such word is used.
This Agreement occasionally omits the modifying words "all" and "any"
and the articles "the" and "an," but the fact that a modifier or an article is
absent from one statement and appears in another is not intended to affect the
interpretation of either statement.
Unless otherwise indicated, reference herein to an Article number
(e.g., Article IV) or a Section number (e.g., Section 6.2) shall be construed
to be a reference to the designated Article number or Section number of this
Agreement.
ARTICLE II
PURCHASE AND SALE OF ASSETS
Section 2.1 Purchased Assets. 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 Center, 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;
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(ii) All telephone numbers used in connection with
the Business at the Center;
(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, 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 Center 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 Center
(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 Center 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;
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(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 Center, including
all of Seller's books, records, papers, computer tapes, disks or data and
instruments related to the Center or the Purchased Assets or which are required
or necessary in order for Buyer to operate the Center 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 Center;
(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 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 Center, but
specifically excluding all amounts (i) received by Seller from Central Imaging
Associates, P.C. on or before May 31, 1998, and (ii) due to Seller by Central
Imaging Associates, P.C. for money collected by Central Imaging Associates,
P.C. on or before May 31, 1998, pursuant to the License Agreement entered into
between Seller and Central Imaging Associates, P.C. dated January 1, 1996 (the
"License Agreement"); and
(h) Residual Assets. All other assets of Seller related
to the operation of the Business at the Center 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, 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 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.
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ARTICLE III
ASSUMED LIABILITIES
Section 3.1 Assumed Liabilities. As of the Closing, Buyer hereby
agrees to assume, satisfy or perform when due only those liabilities and
obligations of Seller relating to operation of the Center as set forth on
Schedule 3.1 hereto that accrue after the Effective Time (i.e., specifically
excluding any liabilities or obligations relating to the items set forth on
Schedule 3.1 to the extent such liabilities or obligations accrued before the
Effective Time) (the "Assumed Liabilities"). Other than the Assumed
Liabilities, Buyer shall not assume, nor shall APPM, 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
Center), 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 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 Center prior to the Closing; (c) employee related
liabilities (including accrued wages, vacation, sick pay, severance pay,
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 and further specifically including any claim
by Stacy C. Trauglione); (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 Center or any claim,
whether or not asserted and whether or not liquidated or contingent, with
respect to the Center 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, sales or other tax of any kind, whether disputed or not,
attributable to Seller and/or the Center for any period or transaction through
the Closing; (f) trade payables which arise prior to the Closing; (g) claims by
any third party payor (including Medicare) or patient with respect to any
matter or billing occurring prior to the Closing; (h) any other liability or
obligation of Seller; and (i) any liability under the real property lease
between Garson Brothers 1232 L.P., as Landlord, and Seller, as tenant, for
common area maintenance (paid each year in arrears), taxes, etc., through May
31, 1998. 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.
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 consideration set forth on Exhibit A (the "Consideration").
(b) Allocation of Purchase Price. The Purchase Price
shall be allocated by Buyer and Seller in accordance with Schedule 4.1(b)
hereto.
Section 4.2 Closing and Effective Time. The closing of the
transactions contemplated under this Agreement (the "Closing") shall take place
at the offices of American Physician Partners, Inc., Dallas, Texas at 10:00
a.m. local time on June 15, 1998, or such other date as the parties may
mutually agree in writing.
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The transfer of the Purchased Assets by Seller to Buyer and Buyer's
assumption of the Assumed Liabilities shall be deemed effective as of 12:01
a.m. on June 1, 1998 (the "Effective Time"). The obligations and proceeds from
the operations of the Center shall be deemed to be the property of Buyer from
and after the Effective Time, and Buyer and Seller shall take any and all
actions reasonably necessary to carry out the intent of this Section 4.2.
Section 4.3 Closing Deliveries.
(a) Seller. At the Closing, Seller shall execute and
deliver to Buyer: (i) a Bill of Sale ("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 be responsible for paying 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) and
2.1(b).
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(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 APPM and to Buyer to enter into this Agreement,
Seller and each Principal Stockholder represents and warrants to APPM 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 required to be qualified as a
foreign corporation in any other state or jurisdiction.
Section 5.2 Authorization and Validity. Seller and the Principal
Stockholders here 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 and the Principal
Stockholders of this Agreement and the agreements contemplated herein, and the
consummation by Seller and the Principal Stockholders of the transactions
contemplated hereby and thereby are within Seller's and the Principal
Stockholders' respective corporate powers and have been duly authorized by all
necessary action on the part of Seller's and the Principal Stockholders' Board
of Directors. This Agreement has been duly executed by Seller and the
Principal Stockholders, and this Agreement and all other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which Seller and the Principal Stockholders are a party
constitute, or upon execution will constitute, valid and binding agreements of
Seller and the Principal Stockholders, 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, earnout amount, 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 Center as presently conducted and are in conformity in all
material respects with
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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 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 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.
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, 1997 and the related statements of income, stockholders' equity
and statements of cash flows of Seller for the year ended December 31, 1997
(collectively, the "Seller Unaudited Financial Statements") and (ii) the
unaudited consolidated balance sheet of Seller as of April 30, 1998 (the
"Seller Current Balance Sheet") and the related statements of income,
stockholders' equity and statements of cash flows of Seller for the four (4)
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
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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. Seller has made directly all payments to its creditors,
vendors, service providers, etc., and such payments have been reflected on
Seller's books and records.
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 Principal Stockholder, or any employee(s) 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 Center which (i) if
successful, may, individually or in the aggregate, have a Material Adverse
Effect on Seller, the Business or the Center 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 employee 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 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 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 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
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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.
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 Center 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 May 31, 1998, Seller employed a
collective total of fourteen (14) full-time employees. Schedule 5.17 lists
each employee of, or consultant to, Seller who received combined salary,
benefits and bonuses for 1997 in excess of $25,000 or who is expected to
receive combined salary, benefits and bonuses in 1998 in excess of $25,000.
Seller is not delinquent in payment to any of its employees for wages,
salaries, bonuses or other direct compensation for any services performed for
it to the date hereof or amounts required to be reimbursed to such employees.
None of Seller's employees holds or is required to hold a
professional/technical license under federal or state law.
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(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 Center 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), to Seller's
and each Principal Stockholders' knowledge, 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
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.
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(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
APPM 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 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
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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 Principal Stockholder 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 Center 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 Center, 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(b),
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.
Section 5.22 Environmental Matters.
(a) Seller has not, within the three (3) 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.
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(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) To Seller's and each Principal Stockholder's
knowledge, 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.
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.
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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
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 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 each Principal Stockholder, 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 April 30, 1998, which list is
complete, true and accurate in all material respects. All such accounts
receivable arose in the ordinary course of business and have not been
previously written off as bad debts and, are, to the extent still uncollected,
collectible in the ordinary course of business, net of reserves for doubtful
and uncollectible accounts shown in Seller Financial Statements or on the
accounting records of Seller (which reserves are adequate and calculated
consistent with past practice). 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, 1997, or which is reasonably expected to account for more than 5%
of the revenues of Seller for the fiscal year to end December 31, 1998. Except
as set forth in Schedule 5.25(b), Seller has satisfactory relations with such
Payors and 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 May 15, 1998, 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, the
Center, and each other licensed employee or independent contractor of Seller,
other than any physicians providing professional medical services at the
Center, (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 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 the Center as
presently being conducted by it. Except as set forth in Schedule 5.28(a) or
Schedule 5.12 hereof, neither Seller nor Center (i) has had its professional
license or Medicare/Medicaid provider status 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 it in connection with a malpractice or similar action.
(b) Except as set forth in Schedule 5.28(b), neither
Seller nor the Center 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.
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Section 5.29 Inspections and Investigations. Neither the right of
Seller, the Center, 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. To Seller's and each Principal Stockholder's knowledge, no
licensed professional or other individual affiliated with the Center 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 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 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.
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.
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(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.
(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 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.
(j) Boycotts. Seller has not at any time participated in
or cooperated with any international boycott as defined in Section 999 of the
Code.
(k) Parachute Payments. No payment required or
contemplated to be made by Seller will be characterized as an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code.
(l) S Corporation. Seller has not made an election to be
taxed as an "S" corporation under Section 1362(a) of the Code.
(m) Personal Holding Companies. Seller is not or has
been a personal holding company within the meaning of Section 542 of the Code.
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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 Center and any
arrangement or agreement with any such person concerning the provision of goods
or services or other matters pertaining to the Center. 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.
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 Principal Stockholder, nor any statement,
certificate, exhibit or instrument to be furnished by Seller or any 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.
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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 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 and
APPM's Board of Directors. This Agreement has been duly executed by Buyer and
APPM. This Agreement and all other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby 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 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 Intentionally omitted.
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 APPM or any of its respective
properties are bound.
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Section 6.6 Statements True and Correct. No representation or
warranty made herein by Buyer or APPM, nor any statement, certificate or
instrument to be furnished by Buyer or APPM to Seller 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 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 APPM 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 APPM AND BUYER
Intentionally Omitted.
ARTICLE IX
CONDITIONS PRECEDENT OF APPM AND BUYER
Intentionally Omitted.
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 APPM:
(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-Competition Agreement among Buyer and APPM on the one hand and Seller and
the Principal Stockholders on the other hand, in a form satisfactory to APPM in
its sole and absolute
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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 New York, as applicable, for
Seller establishing that Seller is in existence, has paid all franchise or
similar taxes, if any;
(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-Competition 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") 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 APPM. At or prior to the Closing Date,
Buyer 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
Buyer authorizing the execution, delivery and performance of this Agreement,
and all related documents and agreements, certified by Buyer's Secretary as
being true and correct copies of the originals thereof subject to no
modifications or amendments;
(b) the Consideration in accordance with 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 prior to the Closing Date, of
the Secretary of State of Delaware establishing that APPM and Buyer,
respectively, are in existence, have paid all franchise or similar taxes, if
any,
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and, if applicable, otherwise are in good standing to transact business in the
State of Delaware and New York, respectively; and
(g) certificates (or photocopies thereof), dated prior to
the Closing Date, of the Secretaries of State of the states in which Buyer and
APPM are qualified to do business, to the effect that Buyer and APPM are
qualified to do business and, if applicable, are in good standing as foreign
corporations in such state for purposes of completing this transaction.
ARTICLE XII
CERTAIN ADDITIONAL AGREEMENTS OF THE PARTIES
Intentionally omitted.
ARTICLE XIII
POST CLOSING COVENANTS AND OTHER 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.
Section 13.2 Amounts Due to Seller. Following the Closing, at the
request of Buyer, Seller and the Principal Stockholders shall provide promptly
to Buyer documents and information (including in electronic format) requested
by Buyer with respect to the Business including the services rendered by the
Seller and amounts due to Seller by Central Imaging Associates, P.C.
Section 13.3 Form UCC-3 Termination Statements. Following the
Closing, at the request of Buyer, Seller shall use its best efforts to cause
former lienholders to file such Form UCC-3s, Termination Statements, that are
necessary or helpful to show that the Purchased Assets are free and clear of
all liens.
ARTICLE XIV
REMEDIES
Section 14.1 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 APPM and Buyer and their respective directors, officers, members,
managers, employees, agents, attorneys and Affiliates harmless from and against
all losses, claims, obligations, demands, assessments, penalties, liabilities,
costs, damages, reasonable attorneys' fees and expenses (collectively,
"Damages") asserted against or incurred by such 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; 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.
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APPM and Buyer hereby agree to seek indemnification hereunder in the
following priority: (1) Seller and (2) Principal Stockholders.
Section 14.2 Indemnification by APPM and Buyer. Subject to the
terms and conditions of this Article XIV, APPM 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
APPM 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 APPM 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
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
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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.
(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,
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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 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 APPM 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 (specifically excluding however any breach
under Section 5.3 or 5.31 or for fraud or intentional misrepresentation).
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 APPM that is valuable, special and unique assets of APPM's businesses. APPM
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
and the Principal Stockholders that is valuable, special and unique assets of
Seller's business. Seller, and Principal Stockholder and APPM 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 APPM and (b) to counsel and other
advisers to APPM 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 APPM, as the case may be, (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii) Seller or APPM, as the
case
29
<PAGE> 31
may be, shall, if possible, give prior written notice thereof to Seller and
APPM and provide Seller and APPM 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 APPM of the provisions of
this Section, APPM 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
APPM 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, APPM 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 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.
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.
30
<PAGE> 32
Section 17.6 Survival of Representations, Warranties and
Covenants. The representations, warranties and covenants contained herein
shall survive the Closing with respect to the Seller 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 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 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.
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 NEW YORK.
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. 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):
31
<PAGE> 33
If to APPM and Buyer: American Physician Partners, Inc.
901 Main Street, Suite 2301
Dallas, Texas 75202
Attn: Paul M. Jolas, Esq.,
General Counsel and Sr. V.P.
Fax No.: (214) 761-3150
with a copy to: Haynes and Boone, L.L.P.
901 Main Street, Suite 3100
Dallas, Texas 75202
Attn: Kenneth K. Bezozo, Esq.
Fax No.: (214) 200-0365
If to Seller or any RF Management Corp.
Principal Stockholder: 95 Madison Avenue, Suite 301
Morristown, New Jersey 07960
Attn: President
with a copy to Stuart J. Freedman, Esq.
Norris, McLaughlin & Marcus
P.O. Box 1018
Somerville, New Jersey 08876
Fax: (908) 722-0755
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]
32
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
APPM:
AMERICAN PHYSICIAN PARTNERS, INC.
By:
-------------------------------------
Mark L. Wagar, President
BUYER:
MID ROCKLAND IMAGING PARTNERS, INC.
By:
-------------------------------------
Mark L. Wagar, President
SELLER:
EMPIRE STATE IMAGING ASSOCIATES, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
STOCKHOLDERS:
RF MANAGEMENT CORP.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
MODERN MEDICAL MODALITIES CORPORATION
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
33
<PAGE> 1
================================================================================
ASSET PURCHASE AGREEMENT
dated as of
June 23, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.
(a Delaware corporation),
VALLEY IMAGING PARTNERS, INC.
(a California corporation),
BREWSTER IMAGING CENTER, INC.
(a California corporation)
and
EACH PRINCIPAL STOCKHOLDER
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.14 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.15 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.16 No Other Agreements to Sell the Assets of the Seller's Business . . . . . . . . 13
Section 5.17 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<TABLE>
<S> <C>
Section 5.18 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.19 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.20 Lease Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.21 Real and Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.22 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.23 Filing Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.24 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.25 Accounts Receivable; Payors . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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
Section 5.35 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.36 Agreements in Full Force and Effect . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.37 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.38 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.39 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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 . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.3 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.4 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.5 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.6 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII PRE-CLOSING COVENANTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII PRE-CLOSING COVENANTS OF APP AND BUYER . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IX CONDITIONS PRECEDENT OF APP AND BUYER . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE X CONDITIONS PRECEDENT OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XI CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.1 Deliveries of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11.2 Deliveries of APP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XII CERTAIN ADDITIONAL AGREEMENTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XIII POST CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 13.1 Further Instruments of Transfer . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XIV REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 14.1 Indemnification by Seller and the Principal Stockholders . . . . . . . . . . . 26
Section 14.2 Indemnification by APP and Buyer . . . . . . . . . . . . . . . . . . . . . . . 26
Section 14.3 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 14.4 Remedies Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 14.5 Costs, Expenses and Legal Fees . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 14.6 Tax Benefits; Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XV TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XVI NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 29
Section 16.1 Non-Disclosure Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 16.2 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 16.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XVII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.1 Amendment; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.3 Parties in Interest; No Third Party Beneficiaries . . . . . . . . . . . . . . . 30
Section 17.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 17.6 Survival of Representations, Warranties and Covenants . . . . . . . . . . . . . 30
Section 17.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 17.8 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 17.9 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 17.10 Reference to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 17.11 Confidentiality; Publicity and Disclosures . . . . . . . . . . . . . . . . . . 31
Section 17.12 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 17.13 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 17.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 17.15 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Bill of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B - Non-Compete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Exhibit C - Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
Exhibit D - Promissory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
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
</TABLE>
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<TABLE>
<S> <C>
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
Schedule 5.39 Finders' Fees
Schedule 6.3 Governmental Authorizations
Schedule 6.5 Absence of Conflicting Agreements or Required Consents
</TABLE>
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<PAGE> 7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of June 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"), Brewster Imaging Center, Inc., a California
corporation ("Seller") and each Principal Stockholder.
RECITALS
A. Seller owns and operates one (1) diagnostic imaging center
located in the city of Redwood City, California (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 center known as Brewster Imaging
Center (the "Center") (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.
"Center" shall have the meaning set forth in the Recitals.
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"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.
"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).
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<PAGE> 9
"Inventory" shall have the meaning set forth in Section 2.1(a).
"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.
"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.
"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 Michael Washington and Willie
Washington.
"Real Estate" shall have the meaning set forth in Section 2.1(a).
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<PAGE> 10
"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 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<EU. 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.
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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 Center,
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 Center;
(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
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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, 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 Center 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 Center
(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 Center 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 Center, including
all of Seller's books, records, papers, computer tapes, disks or data and
instruments related to the Center or the Purchased Assets or which are required
or necessary in order for Buyer to operate the Center 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 Center;
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<PAGE> 13
(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 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) Intentionally Omitted; and
(h) Residual Assets. All other assets of Seller related
to the operation of the Business at the Center 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 Center 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 or any Principal Stockholder
(whether or not related to the Center), 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 Center prior to the Closing;
(c) employee related liabilities (including accrued wages, vacation,
employee-related insurance or deferred
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<PAGE> 14
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 Center or any claim, whether or not asserted and
whether or not liquidated or contingent, with respect to the Center 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 Center 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.
ARTICLE IV
PURCHASE PRICE AND CLOSING
Section 4.1 Purchase Price.
(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 the
consideration (the "Consideration") set forth in Exhibit C attached hereto.
(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 June 19, 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 June 19, 1998 (the "Effective Time"). The obligations and proceeds from the
operations of the Center shall be deemed to be the property of Buyer from and
after the Effective Time, and Buyer and Seller shall take any and all actions
reasonably necessary to carry out the intent of this Section 4.2.
Section 4.3 Closing Deliveries.
(a) Seller. At the Closing, Seller shall execute and
deliver to Buyer: (i) a Bill of Sale substantially in the form attached as
Exhibit 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.
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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<EU. 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<EU.
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 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<EU. 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
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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 Center 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<EU. 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 ___________, 199__
(collectively, the "Seller Unaudited Financial Statements") and (ii) the
unaudited consolidated balance sheet of Seller as of ___________, 199__ (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<EU. 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<EU. 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 Center which (i) if
successful, may, individually or in the aggregate, have a Material Adverse
Effect on Seller, the Business or the Center or (ii) could adversely affect the
ability of Seller to effect the transactions contemplated hereby, and there is
no basis for any
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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<EU. Seller has not been, nor
shall be as of the Closing Date (by virtue of any action, omission to act,
contract to which it is a party or any occurrence or state of facts
whatsoever), in violation of any applicable local, state or federal law,
ordinance, regulation, order, injunction or decree, or any other requirement of
any governmental body, agency, authority or court binding on it, or relating to
its properties, assets or business or its advertising, sales or pricing
practices, except for violations which reasonably, individually or in the
aggregate, would not have a Material Adverse Effect on Seller.
Section 5.14 Contracts and Commitments.
(a) Schedule 5.14 contains a true, accurate and complete
list, and Seller has delivered to 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
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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.
Section 5.16 No Other Agreements to Sell the Assets of the
Seller's Business<EU. 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 Center 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 the Closing Date, Seller employed a
collective total of three (3) full-time employees. Schedule 5.17 lists each
employee of, or consultant to, Seller who received combined salary, benefits
and bonuses for 1997 in excess of $25,000 or who is expected to receive
combined salary, benefits and bonuses in 1998 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 Center 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;
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(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
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.
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(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.
(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.
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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 Center 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 Center, 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.
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
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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.
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
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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. Schedule 5.25(a) 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 to end
December 31, 1998. Except as set forth in Schedule 5.25(a), 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<EU. 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<EU.
(a) Except as listed in Schedule 5.28(a), Seller, the
Center, and each other licensed employee or independent contractor of Seller,
other than any physicians providing professional medical services at the
Center, (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
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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 Center 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 Center 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<EU. Neither the right
of Seller, the Center, 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 Center 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
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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<EU. 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 Center
and any arrangement or agreement with any such person concerning the provision
of goods or services or other matters pertaining to the Center. 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<EU. 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.
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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.
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<EU.
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.
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Section 6.2 Authorization and Validity<EU. 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, 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 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 6.5 Schedules<EU. 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 6.6 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.
ARTICLE X
CONDITIONS PRECEDENT OF SELLER
Intentionally Omitted.
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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 ("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.
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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:
(a) a copy of resolutions of the Board of Directors of
APP and Buyer authorizing the execution, delivery and performance of this
Agreement, and all related documents and agreements, certified by APP's and
Buyer's Secretary as being true and correct copies of the originals thereof
subject to no modifications or amendments;
(b) the Consideration as set forth on Exhibit C;
(c) Promissory Note in the form set forth in Exhibit D;
(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 and California
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 Secretary of State of
California 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.
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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, 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 persons or entities 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 the
failure to disclose required information in any Schedule or certificate
delivered or Principal Stockholder hereunder;
(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.
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 Seller 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:
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(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
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
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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.
(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 $1,000.
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<PAGE> 35
(g) From the Closing Date to December 31, 1998, APP and
Buyer shall be entitled to offset any and all payment obligations under the
Promissory Note by and against any claim for Damages to which APP and/or Buyer
shall be entitled to indemnification as an Indemnified Party pursuant to this
Article XIV.
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
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.
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<PAGE> 36
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.
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<PAGE> 37
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: Mark L. Wagar, President
Paul M. Jolas, Esq., General
Counsel and Sr. V.P.
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with a copy to: McDermott, Will & Emery
One Newport Place
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: Brewster Imaging Center, Inc.
801 Brewster Avenue, #125
Redwood City, CA 94543
Attn: Mr. Michael Washington
with a copy to: Law Offices of Ronald S. Galasi
1633 Bayshore Blvd., Suite 125
Burlingame, CA 94010
Attn: Ronald S. Galasi, Esq.
Section 17.13 No Waiver; Remedies. No party hereto shall by any act
(except by written instrument pursuant to Section 17.1 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default in or breach of any of the terms
and conditions hereof. No failure to exercise, nor any delay in exercising, on
the part of any party hereto, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. No remedy set forth in
this Agreement or otherwise conferred upon or reserved to any party shall be
considered exclusive of any other remedy available to any party, but the same
shall be distinct, separate and cumulative and may be exercised from time to
time as often as occasion may arise or as may be deemed expedient.
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]
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SIGNATURE PAGE TO
ASSET PURCHASE AGREEMENT
DATED JUNE 23, 1998
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:
-----------------------------------------
Paul M. Jolas
Senior Vice President and General
Counsel
Buyer:
-----
VALLEY IMAGING PARTNERS, INC.
By:
----------------------------------------
Paul M. Jolas
Senior Vice President and General
Counsel
Seller:
------
BREWSTER IMAGING CENTER, INC.
By:
-----------------------------------------
Michael Washington
President
Principal Stockholders:
----------------------
--------------------------------------------
Michael Washington
--------------------------------------------
Willie Washington
<PAGE> 1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of June 29,
1998, is by and among AMERICAN PHYSICIAN PARTNERS, INC., a Delaware corporation
("APPM"), Valley Imaging Partners, Inc., a California corporation and a wholly-
owned subsidiary of APPM ("Buyer") and Bryan M. Shieman, M.D., a sole
proprietorship d/b/a El Camino Center for Osteoporosis and/or ECCO II
("Seller"). For purposes of this Agreement, Bryan M. Shieman, M.D. shall be
referred to personally as Dr. Shieman. References to Dr. Shieman herein shall
include Dr. Shieman's spouse and her community property and separate property
interests in Seller, the Business, and the Center.
RECITALS
A. Seller owns and operates one (1) osteoporosis center (the
"Business").
B. 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 osteoporosis center known as El Camino Center for
Osteoporosis and/or ECCO II (the "Center") 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 PURCHASE AND SALE OF ASSETS
Section 1.1 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 Business at the Center, 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 1.2 below, including, without limitation, the following assets,
rights and interests (collectively, the "Purchased Assets"):
(a) Leasehold Improvements. All fixtures located at 205
South Drive, Suite F, Mountain View, CA 94040;
(b) Personal Property. All tangible personal property
(collectively, the "Personal Property") of every kind and nature, including,
without limitation, all furniture, fixtures, machinery, owned or licensed
computer systems, and equipment, including, without limitation, the Personal
Property listed in Schedule 1.1(b) hereto;
(c) Inventory. All inventories of supplies, drugs,
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 1.1(c);
(d) Intangible Assets. All intangible property
(collectively, the "Intangible Assets") of every kind and nature, including,
without limitation, the following:
(i) All 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, including, without limitation, the items
identified in Schedule 1.1(d)(i) attached hereto;
(ii) All telephone numbers used in connection with
the Business at the Center;
<PAGE> 2
(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 are listed in Schedule 1.1(d)(iii)
attached hereto. If 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
the Seller, including, but not limited to, the right, authority, 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 deposits held by Seller in connection
with future services to be rendered by Seller or delivered under the Leases (as
defined below);
(v) 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 which were made by Seller solely with respect to its
operation of the Business, the current categories and amounts of which are set
forth in Schedule 1.1(d)(v);
(vi) Seller's goodwill associated with the
Purchased Assets; and
(vii) to the extent assignable, all warranties,
guarantees and covenants not to compete with respect to the Center including,
the arrangements identified in Schedule 1.1(d)(viii).
(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 Center
(collectively the "Purchased Contracts"). Schedule 1.1(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 Center;
(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 Center, including
all of Seller's books, records, papers, computer tapes, disks or data and
instruments related to the Center or the Purchased Assets or which are required
or necessary in order for Buyer to operate the Center 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 Center; (ii) patient lists; (iii) employment and personnel
records; (iv) personnel policies and manuals, electronic data processing
materials, books of account, accounting books, financial records, sales
records, sales and payroll tax returns, customer data, journals and ledgers;
and (v) all material, documents, and information relating to the Personal
Property and the Lease Agreements, all title information (including but not
limited to all title insurance policies, commitments, acts of sale, covenants,
conditions, restrictions, leases, licenses, occupancy agreements, easements,
and other items of record), all environmental studies, reports and information,
all property use and operational material, plans and specifications, contracts,
site plans, correspondence, and governmental material (i.e., licenses, permits,
notices, and other matters) information and notices; and
(g) Residual Assets. All other assets of Seller related
to the operation of the Business at the Center other than the Excluded Assets
(as such term is defined in Section 1.2 below).
Section 1.2 Excluded Assets. Notwithstanding Section 1.1, the
definition of "Purchased Assets" shall exclude all assets, rights and interests
identified on Schedule 1.2 (collectively, the "Excluded Assets"). The Excluded
Assets shall not be transferred by Seller to Buyer.
Section 1.3 Subsequent Actions. If, at any time after the
Closing Date, APPM or Buyer shall consider or be advised that any deeds, bills
of sale, assignments, assurances or any other actions or things
2
<PAGE> 3
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 be authorized
to execute and deliver all documents 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 II ASSUMED LIABILITIES
Section 2.1 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 Center as set forth on
Schedule 2.1 hereto (the "Assumed Liabilities"). Other than the Assumed
Liabilities, Buyer shall not assume, nor shall APPM, 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
Center), 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 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 Center 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 Center or any claim, whether or not
asserted and whether or not liquidated or contingent, with respect to the
Center 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 Center
for any period or transaction through the Closing; (f) except as set forth on
Schedule 2.1, 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.
ARTICLE III PURCHASE PRICE AND CLOSING
Section 3.1 (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 consideration set forth on Exhibit A (the
"Consideration"). The Purchase Price shall be allocated by Buyer and Seller in
accordance with Schedule 3.1(b) hereto.
Section 3.2 Closing and Effective Time. 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 June ___, 1998 (the
"Effective Time"). The obligations and proceeds from the operations of the
Center 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 3.2.
Section 3.3 Closing Deliveries. (a) Seller. At the Closing,
Seller shall execute and deliver to Buyer a Bill of Sale and 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
the Consideration and such other instruments as shall be reasonably requested
by Seller to complete the assumption of the Assumed Liabilities by Buyer.
3
<PAGE> 4
At Closing, each party shall pay or credit to the other party all sums
required to effectuate the prorations and adjustments impacted by the Effective
Time.
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. 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 IV REPRESENTATIONS AND WARRANTIES OF SELLER AND DR. SHIEMAN
As an inducement to APPM and to Buyer to enter into this Agreement,
Seller and Dr. Shieman represent and warrant to APPM and to Buyer as of the
Closing Date as follows:
Section 4.1 Authorization and Validity. Seller and Dr. Shieman
have all requisite power to enter into this Agreement and all other agreements
entered into in connection with the transactions contemplated hereby and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by Seller and Dr. Shieman of this Agreement and the agreements
contemplated herein, and the consummation by Seller and Dr. Shieman of the
transactions contemplated hereby and thereby are within Seller's and Dr.
Shieman's respective powers and have been duly authorized by all necessary
action. This Agreement has been duly executed by Seller and Dr. Shieman, and
this Agreement and all other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby to which
Seller and Dr. Shieman are a party constitute, or upon execution will
constitute, valid and binding agreements of Seller and Dr. Shieman, 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 4.2 Title to Purchased Assets.
(a) Schedule 4.2(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 and Dr. Shieman shall immediately prior to the
Closing have good, clear, record and marketable title to, or valid leasehold
interests in, all Purchased Assets, free and clear of all Encumbrances and
Seller and Dr. Shieman shall, at the time of the Closing have full power and
right to sell, assign and deliver the Purchased Assets according to 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. The Purchased
Assets are all the material assets used in the Business.
Section 4.3 Condition of Tangible Assets. Except as set forth on
Schedule 4.3, the tangible Personal Property and any other tangible Purchased
Assets are in reasonable operating condition and are sufficient for the
operation of the Center as presently conducted and are in conformity in all
material respects with all applicable laws, ordinances, orders, regulations and
other requirements currently in effect.
Section 4.4 Consents and Approvals. No consent, approval or
authorization of, notice to, or declaration, filing or registration with, any
governmental entity or any other person or entity is required to be made or
obtained by Seller in connection with the performance of this Agreement and the
consummation of the transactions contemplated hereby.
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Section 4.5 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 4.5
hereto, does not require the consent of any governmental or regulatory body or
authority or any other third party; (ii) will not conflict with 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 Dr. Shieman or by
which Seller or Dr. Shieman or their properties are subject to or bound; (iv)
except as set forth in Schedule 4.5, 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 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 or Dr. Shieman is a party or by which Seller
or Dr. Shieman or any of their properties are subject to or bound; and (v) will
not create any Encumbrance or restriction upon any of the assets or properties
of Seller or Dr. Shieman.
Section 4.6 No Undisclosed Liabilities. Except as listed in
Schedule 4.6 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
disclosed to Buyer.
Section 4.7 Contracts and Commitments. Schedule 4.7 contains a
true, accurate and complete list, and Seller has delivered to APPM true and
complete copies, of each contract, agreement and other instrument (e.g.,
provider contract, payor contract, HMO contact, loans, liens, or acquisitions)
to which Seller is a party or by which it or any of its properties or assets
are bound.
Section 4.8 Employee Matters. (a) Employees. Schedule 4.8
lists each employee of, or consultant to, Seller and their salary, benefits
and bonuses for 1997 and 1998. Seller is not delinquent in payment to any of
its employees for wages, salaries, bonuses or other direct compensation for any
services performed for it to the date hereof or amounts required to be
reimbursed to such employees. 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 4.9 Insurance Policies. Schedule 4.9 lists Seller's
policies of insurance to which Seller or any Affiliate is a party.
Section 4.10 Payors. Schedule 4.10 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 to end December 31, 1998. Except
as set forth in Schedule 4.10 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 4.11 Continuity of Level of Business
At the request of Buyer, Seller will make himself available during
normal business hours to assist Buyer in operating the Business for a two week
period following the Closing, provided that Buyer compensates Seller at the
rate of $30 per patient scan performed on the Business premises during this
period. Seller makes no warranty or representation that the level of referrals
to the Business will be maintained after the Closing. Seller represents that
the increasing level of the Business over the past several years was due to his
best efforts at marketing the Business and that both Buyer and Seller agree
that Buyer will assume responsibility for maintaining the marketing of the
Business after Closing.
ARTICLE V REMEDIES
Section 5.1 Indemnification by Seller and Dr. Shieman. Subject to
the terms and conditions of this Article V, Seller and Dr. Shieman jointly and
severally agree to indemnify, defend and hold APPM and Buyer and their
respective directors, officers, members, managers, employees, agents, attorneys
and Affiliates harmless from and against all losses, claims, obligations,
demands, assessments, penalties, liabilities, costs, damages, reasonable
attorneys' fees and expenses (collectively, "Damages") asserted against or
incurred by such indemnities arising out of or resulting from:
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(i) a breach of any representation, warranty or covenant of
Seller or Dr. Shieman contained herein or in any Schedule or certificate
delivered hereunder; provided, however, that Seller's liability under this
subsection will not exceed the aggregate amount of $50,000; and
(ii) any violation (or alleged violation) by Dr. Shieman or
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 5.2 Arbitration. Any controversy or claim between the
parties arising out of this Agreement shall be submitted to the American
Arbitration Association for binding arbitration in San Francisco, California.
Each party shall bear their own costs of the arbitration, including any
American Arbitration Association fee, the arbitrator's fee, the costs for the
use of the facilities and attorneys' fees and expenses. The arbitrator shall
not have the power to alter, amend, modify or change any of the terms of this
Agreement nor grant any remedy which is either prohibited by the terms of this
Agreement, or not available in a court of law. Judgment on the arbitration
award may be entered in any court having jurisdiction over the subject matter
of the controversy.
ARTICLE VI MISCELLANEOUS
Section 6.1 Survival of Representations, Warranties and
Covenants. No representations or warranties whatever are made by APPM, Seller,
Dr. Shieman and/or Buyer except as specifically set forth in this agreement, or
in any certificate, exhibit or other writing provided for in this Agreement.
The representations, warranties and covenants contained herein shall survive
the Closing with respect to APPM, Seller, Dr. Shieman and Buyer for a period of
one year from the Closing, except that any warranty with regard to the
condition of tangible assets listed under section 4.3 of this Agreement will
expire with, and be terminated and extinguished by, the Closing.
Section 6.2 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 6.3 Entire Agreement. This Agreement constitutes the
entire agreement between the parties pertaining to the subject matter contained
in it and supersedes all prior and contemporaneous agreements, representations,
and understandings of the parties. No supplement, modifications, or amendment
of this Agreement will be binding unless executed in writing by all the
parties. No waiver of any of the provisions of this Agreement will be
considered, or will constitute, a waiver of any other provision, and no wavier
will constitute a continuing waiver. No waiver ill be binding unless executed
in writing by the party making the waiver.
Section 6.4 Severability If any provision of this Agreement is
held invalid or unenforceable by any court of final jurisdiction, it is the
intent of the parties that all other provisions of this agreement be construed
to remain fully valid, enforceable, and binding on the parties.
Section 6.5 Counterparts This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF APPM AND BUYER
Section 7.1 Authorization Buyer is a corporation duly
organized, existing and in good standing under the laws of the State of
California. The execution of and delivery of this Agreement and the
consummation of this transaction by Buyer has been duly authorized, and no
further corporate authorization is necessary on the part of Buyer.
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Section 7.2 Consents and Approvals No consent, approval, or
authorization of, or declaration, filing, or registration with, any United
States federal or state governmental or regulatory authority is required to be
made or obtained by Buyer in connection with the execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated by the Agreement.
Section 7.3 Seller's Access Charts and Records to Collect
Receivables For six months following Closing, Buyer shall provide Seller
access to Medical Charts, Billings and any other documentation required for
Seller to determine and collect the accounts receivable based on the procedures
completed by Seller as of the date of Closing.
Section 7.4 Preservation of Patient Charts The integrity of the
patient charts and files shall be preserved and maintained as required by the
California Medical Board and the State of California. Buyer recognizes that
the referring physicians may request patient charts and that the referring
physician upon receipt of the chart is responsible for storing the chart in
accordance with the rules stated herein.
Section 7.5 Buyer's Indemnity Buyer shall indemnify and hold
harmless Seller against, and in respect of, claims, losses, expenses, costs,
obligations, and liabilities Seller may incur by reason of Buyer's breach of or
failure to perform any of its warranties or commitments in this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
<TABLE>
<S> <C>
APPM: Seller:
- ---- -------
AMERICAN PHYSICIAN PARTNERS, INC. BRYAN M. SHIEMAN, M.D., a sole
proprietorship d/b/a EL CAMINO CENTER
FOR OSTEOPOROSIS and/or ECCO II
By: By:
------------------------------------------------ ------------------------------------------------
Paul M. Jolas Sole Proprietor
General Counsel, Senior Vice President
and Secretary
By:
------------------------------------------------
Bryan M. Shieman, M.D., Individually
Buyer:
VALLEY IMAGING PARTNERS, INC.
By:
------------------------------------------------
Paul M. Jolas
General Counsel, Senior Vice President and
Secretary
</TABLE>
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SPOUSAL CONSENT TO ASSET PURCHASE AGREEMENT
June 29, 1998
Date
- -------------------------------- --------------------------------
Name: Joy L. Shieman --------------------------------
Spouse of Seller Address
I, the above consenting spouse, acknowledge that I have read the foregoing
Asset Purchase Agreement (the "Agreement") and that I know its contents. I am
aware that by its provisions my spouse agrees to sell certain assets of ECCO
II, including my community interest in them, for $50,000 and other
consideration. I hereby consent to the sale, approve of the provisions of the
Agreement, and agree that those assets and my interest in them are subject to
the provisions of the Agreement and that I will take no action at any time to
hinder operation of the Agreement on those assets or my interest in them.
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================================================================================
SERVICE AGREEMENT
Dated as of the 1st day of April, 1998
by and among
AMERICAN PHYSICIAN PARTNERS, INC.,
TREASURE COAST IMAGING PARTNERS, INC.,
and
RADIOLOGY IMAGING ASSOCIATES - BASILICO, GALLAGHER & RAFFA, M.D., P.A.
================================================================================
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<TABLE>
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TABLE OF CONTENTS
Page
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ARTICLE I
Definitions....................................................................................................... 1
Section 1.1 Definitions................................................................................... 1
ARTICLE II
Relationship of the Parties....................................................................................... 7
Section 2.1 Independent Contractors....................................................................... 7
Section 2.2 Practice of Medicine.......................................................................... 7
Section 2.3 No Payment or Other Compensation for Referrals................................................ 7
Section 2.4 Group's Internal Matters...................................................................... 7
ARTICLE III
Services to be Provided by Administrator.......................................................................... 8
Section 3.1 General....................................................................................... 8
Section 3.2 General Administrative Services............................................................... 8
Section 3.3 Facilities.................................................................................... 11
Section 3.4 Acquisition and Assistance.................................................................... 12
Section 3.5 Financial Planning and Budgeting.............................................................. 13
Section 3.6 Personnel..................................................................................... 14
Section 3.7 Inventory and Supplies........................................................................ 14
Section 3.8 Advertising and Public Relations.............................................................. 14
Section 3.9 Quality Assurance............................................................................. 15
Section 3.10 Other Consulting and Advisory Services........................................................ 15
Section 3.11 Events Excusing Performance................................................................... 15
ARTICLE IV
Obligations of the Group.......................................................................................... 15
Section 4.1 Employment of Physician Employees and
Physician Extender Employees.................................................................. 15
Section 4.2 Professional Services......................................................................... 16
Section 4.3 Medical Practice.............................................................................. 16
Section 4.4 Group's Internal Matters...................................................................... 16
Section 4.5 Name.......................................................................................... 16
Section 4.6 Compliance with Laws.......................................................................... 17
Section 4.7 Ancillary Services............................................................................ 17
Section 4.8 Premises and Personal Property................................................................ 18
Section 4.9 Practice Employee Benefit Plans............................................................... 18
Section 4.10 Events Excusing Performance................................................................... 18
ARTICLE V
Joint Planning Board.............................................................................................. 18
Section 5.1 Formation and Operation of the Joint Planning Board........................................... 18
Section 5.2 Duties and Responsibilities of the Joint Planning Board....................................... 19
Section 5.3 Acts of the Joint Planning Board.............................................................. 20
</TABLE>
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<TABLE>
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Section 5.4 Joint Planning Board Meetings................................................................. 20
ARTICLE VI
Restrictive Covenants............................................................................................. 21
Section 6.1 Restrictive Covenants of the Group............................................................ 21
Section 6.2 Restrictive Covenants......................................................................... 24
Section 6.3 Enforcement of Restrictive Covenants and Other Provisions..................................... 25
Section 6.4 Remedies...................................................................................... 25
Section 6.5 Condition Precedent to Release of Obligations................................................. 26
Section 6.6 Service Area Rights and Obligations........................................................... 26
Section 6.7 Survival of Certain Covenants................................................................. 27
Section 6.8 Definition.................................................................................... 28
ARTICLE VII
Financial and Security Arrangements............................................................................... 28
Section 7.1 Service Fee................................................................................... 28
Section 7.2 Payments...................................................................................... 28
Section 7.3 Advances...................................................................................... 28
Section 7.4 Security Agreement............................................................................ 29
Section 7.5 Adjustment of Fees............................................................................ 29
Section 7.6 Priority of Payments.......................................................................... 29
ARTICLE VIII
Records........................................................................................................... 30
Section 8.1 Records....................................................................................... 30
ARTICLE IX
Insurance and Indemnification..................................................................................... 30
Section 9.1 Insurance to be Maintained by the Group....................................................... 30
Section 9.2 Insurance to be Maintained by Administrator................................................... 30
Section 9.3 Continuing Liability Insurance Coverage....................................................... 31
Section 9.4 Additional Insureds........................................................................... 31
Section 9.5 Indemnification............................................................................... 31
ARTICLE X
Term and Termination.............................................................................................. 32
Section 10.1 Term of Agreement............................................................................. 32
Section 10.2 Extended Term................................................................................. 32
Section 10.3 Termination by the Group...................................................................... 32
Section 10.4 Termination by Administrator.................................................................. 33
Section 10.5 Effective Date of Termination................................................................. 34
Section 10.6 Purchase of Assets............................................................................ 34
Section 10.7 Terms of Purchase............................................................................. 35
Section 10.8 Exception to Purchase......................................................................... 36
Section 10.9 Effect Upon Termination....................................................................... 36
ARTICLE XI
Dispute Resolution................................................................................................ 37
</TABLE>
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<TABLE>
<S> <C> <C>
Section 11.1 Informal Dispute Resolution................................................................... 37
ARTICLE XII
General Provisions................................................................................................ 37
Section 12.1 Assignment.................................................................................... 37
Section 12.2 Amendments.................................................................................... 37
Section 12.3 Waiver of Provisions.......................................................................... 37
Section 12.4 Additional Documents.......................................................................... 37
Section 12.5 Attorneys' Fees............................................................................... 37
Section 12.6 Contract Modifications for Prospective Legal Events........................................... 37
Section 12.7 Parties In Interest; No Third Party Beneficiaries............................................. 38
Section 12.8 Entire Agreement.............................................................................. 38
Section 12.9 Severability.................................................................................. 38
Section 12.10 Governing Law................................................................................. 38
Section 12.11 No Waiver; Remedies Cumulative................................................................ 38
Section 12.12 Communications................................................................................ 38
Section 12.13 Captions...................................................................................... 38
Section 12.14 Gender and Number............................................................................. 39
Section 12.15 Reference to Agreement........................................................................ 39
Section 12.16 Notice........................................................................................ 39
Section 12.17 Intentionally Omitted......................................................................... 39
Section 12.18 Counterparts.................................................................................. 39
Section 12.19 Defined Terms................................................................................. 40
Section 12.20 Parent Obligations............................................................................ 40
</TABLE>
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LIST OF EXHIBITS
Exhibit Description
- ------- -----------
1.1 Allocation of Practice Expenses
3.3(a) Premises
7.1 Services Fee
7.4 Security Agreement
4
<PAGE> 6
SERVICE AGREEMENT
This Service Agreement (this "Agreement"), dated effective as of April
1, 1998, is entered into by and among American Physician Partners, Inc., a
Delaware corporation ("Parent"), Treasure Coast Imaging Partners, Inc., a
Delaware corporation ("Administrator") and Radiology Imaging Associates -
Basilico, Gallagher & Raffa, M.D., P.A. , a Florida corporation (the "Group").
R E C I T A L S:
A. The Group owns and operates a radiology medical practice in Florida
and provides professional and technical radiology services to the general public
through individual physicians who are licensed to practice medicine in the State
of Florida 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:
"Acquisition" shall mean the acquisition described in the Acquisition
Agreement.
"Acquisition Agreement" shall mean the Asset Purchase Agreement dated
April 1, 1998, by and among Parent and the Group.
"Acquisition Consideration" shall mean the Parent Common Stock and
other consideration
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<PAGE> 7
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). It is the parties intent not to include the
corporate overhead charges of Administrator in the definition of Practice
Expenses.
"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.
"APPM Group" shall mean Administrator, Parent and their Affiliates and
all professional associations or corporations or other entities to which
Administrator, Parent, or their Affiliates provide management services.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidential and Proprietary Information" shall have the meaning set
forth in Section 6.1(d).
"Deposit Account" shall mean the bank account established for the Group
to deposit any and all payments intended for the payment of global fees,
professional fees and technical fees related to the Practice.
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"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.
"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
3
<PAGE> 9
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.
"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
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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. It is the intent of
the parties not to include the corporate overhead charges of Administrator in
the definition of 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 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 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. Subparagraphs
(v), (viii) and (ix) shall not include borrowings or intangible assets incurred
by Parent or Administrator in connection with the Acquisitions.
"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, calculated on an accrual basis, 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-
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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.
"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.
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"Technical Revenues" shall mean all fees and income of the Practice,
calculated on an accrual basis, as determined pursuant to GAAP applied on a
consistent basis, that are recorded each month (net of Adjustments) by or on
behalf of the Practice, for the use of Administrator's facilities and equipment,
net of any Professional Revenues. Global-fee Practice revenues shall be
allocated between Professional Revenues and Technical Revenues based upon RVUs.
To the extent RVUs or similar measures are no longer established by HCFA,
global-fee Practice revenues shall be allocated between Professional Revenues
and Technical Revenues based upon the last available RVU allocation percentages
on a modality-by-modality basis.
"Termination Date" shall have the meaning set forth in Section 10.5.
"Termination Notice" shall have the meaning set forth in Section
10.5(a).
ARTICLE II
Relationship of the Parties
Section 2.1 Independent Contractors. The Group and Administrator 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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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. 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:
(A) to bill patients, insurance companies, Managed
Care Payors, and other third-party payors in the Group's name and on its behalf;
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<PAGE> 14
(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 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
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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.
(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
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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 Florida
(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.
(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
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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 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,
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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
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 which cost shall constitute an Administrator Expense;
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. In
addition, the principal and interest on any indebtedness incurred by
Administrator, Parent or any Affiliate to finance any acquisition hereunder
shall not be charged to 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:
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(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.
(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 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.
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Section 3.8 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 3.9 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 3.10 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 3.11 Events Excusing Performance. In the event of strikes,
lock-outs, calamities, acts of God, unavailability of supplies or other events
over which Administrator has no control, Administrator shall not be liable to
the Group for failure to perform any of the services required hereunder and the
Group shall not have the right to terminate this Agreement pursuant to Section
10.3(b), for so long as such events continue and for a reasonable period of time
thereafter; provided however that if such events continue and Administrator is
not able to perform any material portion of the services required hereunder for
a period of 120 consecutive days or more, either Administrator or Group may
terminate this Agreement by written notice to the other.
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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.
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
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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 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 reasonable 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;
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(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.
Section 4.8 Premises and Personal Property. The Group shall use its
best efforts to prevent damage, excessive wear and tear, and malfunction or
other breakdown of the Premises and Personal Property or any part thereof by the
Physician Employees and Physician Extender Employees or other employees of the
Group. The Group shall promptly inform Administrator both orally and in writing
of any and all necessary replacements, repairs or maintenance to any of the
Premises or Personal Property and any failures of equipment of which it becomes
aware. The Group shall comply with all covenants and provisions set forth in any
leases or subleases for the Premises entered into or assumed by Administrator
and Administrator agrees to make available to the Group copies of all such
leases to the Group.
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.
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ARTICLE V
Joint Planning Board
Section 5.1 Formation and Operation of the Joint Planning Board.
(a) The parties hereto shall establish the Joint Planning Board which
shall be responsible for developing long-term strategic planning objectives and
management policies for the overall operation of the Practice and shall
facilitate communication and interaction between Administrator and the Practice.
The Joint Planning Board shall consist of no less than three (3) or more than
six (6) members. Administrator shall designate, in its sole discretion, two (2)
members of the Joint Planning Board, who shall serve at the pleasure of
Administrator and who may be removed or replaced by Administrator at any time.
The Group shall designate, in its sole discretion, no less than one (1) or more
than four (4) members of the Joint Planning Board, who shall serve at the
pleasure of the Group and who may be removed and replaced by the Group at any
time. Each member appointed by Administrator shall be entitled to one (1) vote
per member, and each member appointed by the Group shall be entitled to that
number of votes equal to the quotient determined by dividing (x) two (2) votes
by (y) the number of members designated by the Group to the Joint Planning
Board. The act of the members holding a majority of the voting power of the
Joint Planning Board shall be the act of the Joint Planning Board.
(b) Each member of the Joint Planning Board shall have the right to
vote on every matter either in person, by telephone, by written consent or by
one or more agents, who are also members of the Joint Planning Board, authorized
by a written proxy signed by the member and filed with the Joint Planning Board.
A proxy shall state that it either shall be voted for or against a specific
matter or matters identified in the proxy or shall be voted identically to the
vote of the agent specified in the proxy on any and all matters that may come
before and be voted on by the Joint Planning Board. A validly executed proxy
which does not state that it is irrevocable shall continue 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
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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.
(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
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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.
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 APPM Group anywhere within 15
miles of any location at which any member of the APPM Group conducts business.
(b) Covenant Not to Solicit. During the term of this Agreement and
for twenty-four (24) months following the termination of this Agreement, the
Group shall not, without the prior written consent of Administrator: (i) unless
the Group acquires the Practice Assets pursuant to Article X, directly or
indirectly recruit or hire, or induce any party to recruit or hire any person
who is an employee of, or who has entered into an independent contractor
arrangement with, any member of the APPM Group; (ii) directly or indirectly,
whether for itself or for any other person or entity, call upon, solicit, divert
or take away, or attempt to solicit, call upon, divert or take away any
customers, business, or clients of any member of the APPM Group; (iii) directly
or indirectly solicit, or induce any party to solicit, any contractors of any
member of the APPM Group, to enter into the same or a similar type of contract
with any other party; or (iv) disrupt, damage, impair or interfere with the
business of any member of the APPM Group.
(c) Engagement of Administrator. If (i) this Agreement is
terminated pursuant to Section 10.4(a) or (c), and (ii) the Group does not
acquire the Purchase Assets as provided in Article X, then if the Group
establishes, operates or provides professional services at any office, practice,
diagnostic imaging center, hospital or other health care facility providing
services substantially similar to those provided by the Practice pursuant to
this Agreement anywhere within 15 miles of any location of any Practice Site(s),
the Group or any successor thereto shall engage Administrator as the sole and
exclusive manager and administrator of the nonprofessional functions and
services of such other office, practice, hospital or health care facility on the
same terms and conditions as contained herein.
(d) 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
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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 Confidential and Proprietary
Information in strict confidence and not to disclose it to any unauthorized
person or entity. Upon termination of this Agreement for any reason, the
Administrator, Parent and their Affiliates and their employees shall cease all
use of any of the Group's Confidential and Proprietary Information and shall
execute such documents as may be reasonably necessary to evidence their
abandonment of any claim thereto.
(iii) Return of Materials. In the event of any termination of
this Agreement for any reason whatsoever, or at any time upon the request of the
Group, the Administrator, Parent and their Affiliates will promptly deliver or
cause to be delivered to the Group all documents, data and other information in
their possession that contain any Group's Confidential and Proprietary
Information. The Administrator, Parent and their Affiliates shall not take or
retain any documents or other information, or any reproduction or excerpt
thereof, containing any Group's Confidential and Proprietary Information, unless
otherwise authorized in writing by the Group. In the event of termination of
this Agreement,
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Administrator, Parent and their Affiliates will deliver to the Group all
documents and data pertaining to Group's Confidential and Proprietary
Information not otherwise purchased as part of the Acquisition.
(e) Group's Obligations Regarding Proprietary 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.
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(ii) Covenant Not-to-Divulge Confidential and Proprietary
Information. The Group acknowledges and agrees that Administrator, Parent or
their Affiliates are entitled to prevent the disclosure of Confidential and
Proprietary Information. The Group agrees at all times during the term of this
Agreement and thereafter to hold in strictest confidence and not to disclose to
any person, firm or corporation, except as may be necessary for the discharge of
its obligations under this Agreement, and not to use, except in the pursuit of
the business of the Practice, Administrator's Confidential and Proprietary
Information, without the prior written consent of Administrator, Parent and
their Affiliates; unless (i) such information becomes known or available to the
public generally through no wrongful act of the Group or its employees or (ii)
disclosure is required by law or the rule, regulation or order of any
governmental authority under color of law; provided, that prior to disclosing
any Administrator's Confidential and Proprietary Information pursuant to this
clause (iii), the Group shall, if possible, give prior written notice thereof to
Administrator, Parent and their Affiliates and provide such parties with the
opportunity to contest such disclosure. The Group shall take all necessary and
proper precautions against disclosure of any Administrator's Confidential and
Proprietary Information to unauthorized persons by any of its officers,
directors, employees or agents. All officers, directors, employees, and agents
of the Group who will have access to all or any part of the Administrator's
Confidential and Proprietary Information will be required to execute an
agreement upon request, valid under the law of the jurisdiction in which such
agreement is executed, and in a form acceptable to Administrator, Parent and
their Affiliates and its counsel, committing themselves to maintain the
Administrator's Confidential and Proprietary Information in strict confidence
and not to disclose it to any unauthorized person or entity. Upon termination of
this Agreement for any reason, the Group and their employees shall cease all use
of any of the Administrator's Confidential and Proprietary Information and shall
execute such documents as may be reasonably necessary to evidence their
abandonment of any claim thereto.
(iii) Return of Materials. In the event of any termination of
this Agreement for any reason whatsoever, or at any time upon the request of
Administrator, Parent or their Affiliates, the Group will promptly deliver or
cause to be delivered to Administrator, Parent and their Affiliates all
documents, data and other information in their possession that contains any
Administrator's Confidential and Proprietary Information regarding
Administrator, Parent and their Affiliates. The Group shall not take or retain
any documents or other information, or any reproduction or excerpt thereof,
containing any Administrator's Confidential and Proprietary Information, unless
otherwise authorized in writing by the party possessing such Administrator's
Confidential and Proprietary Information. In the event of termination of this
Agreement, the Group will deliver to Administrator, Parent and their Affiliates
all documents and data pertaining to Administrator's Confidential and
Proprietary Information of the other parties not otherwise purchased as part of
the Purchased Assets.
(f) Third Party Beneficiaries. The members of the APPM Group not
party to this Agreement are hereby specifically made third party beneficiaries
of this Section 6.1, with the power to enforce the provisions hereof.
Section 6.2 Restrictive Covenants. The Group shall obtain and enforce
formal agreements with each Physician Employee who is either (i) a Group
Physician Stockholder or (ii), to the extent permitted under applicable law, a
Full-time Physician Employee which each contain certain restrictive covenants
thereof pertaining to covenants not to compete and/or solicit with and not to
divulge the Confidential and Proprietary Information of any member of the APPM
Group or the Practice (the "Restrictive Covenants"). Except as otherwise
approved by the Joint Planning Board, each Group Physician Stockholder or
Full-time Physician Employee shall agree, during the term of his/her employment
or contractor agreement with the Practice and for a period of twenty-four (24)
months after any termination
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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 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
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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 Service Area Rights and Obligations.
(a) Primary Service Area. During the term of this Agreement and within
any Primary Service Area, Parent, Administrator or their Affiliates shall not,
without the prior consent of the Group, (i) acquire or lease the non-medical
assets (through an asset acquisition, merger or other consolidation or
otherwise) of any Radiologist, group of Radiologists or professional corporation
or association (or other professional entity) whose owners are Radiologists,
(ii) acquire any imaging center where, within a reasonable time period following
such acquisition, the Group will not be entitled to provide professional
Radiology services for such imaging center, or (iii) contract to provide
management and administrative services similar to those provided under this
Agreement to any Radiologist, group of Radiologists or professional corporation
or association (or other professional entity) whose owners are Radiologists.
Following a request for consent by Administrator, Parent or their Affiliates
hereunder, the Group shall respond upon the earlier of (i) thirty (30) days from
receipt of such request and all other necessary information related thereto or
(ii) one-half of the time during which Administrator, Parent or their Affiliates
must respond. In the event the Group, Parent, Administrator or their Affiliates
acquire a Professional Service Opportunity, the Group shall accept such
Professional Service Opportunity and shall perform any and all professional
Radiology services that are reasonably required at such location(s) in
accordance with the terms and provisions of this Agreement; provided (x) that
the professional reimbursement for such services is reasonable in relation to
the overall market environment and work effort required and (y) the Group shall
not be required to employ any Radiologist previously associated with such
Professional Service Opportunity.
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(b) Secondary Service Area. During the term of this Agreement and
within any Secondary Service Area, Parent, Administrator or their Affiliates
shall first offer to the Group any New Professional Service Opportunity;
provided, however, that this provision shall not be applicable to any merger of
a Radiologist, group of Radiologists or professional corporation or association
(or other professional entity) whose owners are Radiologists with the Group.
Administrator shall give notice (the "Administrator Notice") to the Group
describing the New Professional Service Opportunity. Within the earlier of (i)
thirty (30) days or (ii) one-half of the time during which the Administrator,
Parent or their Affiliates must respond to an offer described in the
Administrator's Notice, the Group shall provide notice to Administrator notice
stating whether or not the Group elects to accept or reject the New Professional
Service Opportunity, which election shall be binding on the Group. If the Group
does not elect to exercise the right or fails to provide notice to Administrator
within the time frame herein provided, Administrator shall be released from the
right of first offer with respect to that particular New Professional Service
Opportunity.
(c) Determination of Primary and Secondary Service Area. The existence
and location of each of the Group's Primary Service Areas and Secondary Service
Areas shall be determined each time the Group, Parent, Administrator or their
Affiliates propose an acquisition, management relationship, Professional Service
Opportunity or New Professional Service Opportunity as contemplated in
subsections (a) and (b) above.
(d) Dispute Resolution. Any disputes regarding the interpretation of
the provisions of this Section 6.6 shall be referred to and decided by the Joint
Planning Board as provided in Section 5.3 of this Agreement.
(e) Definitions. The definitions utilized in connection with this
Section 6.6 shall have the following meanings:
"New Professional Service Opportunity" shall mean a Professional
Service Opportunity pursuant to which the Group or any other member of an APPM
Group managed by Parent, Administrator or their Affiliates is not currently
providing professional Radiology services.
"Primary Service Area" shall mean that area within a five (5) mile
radius from any imaging center owned, operated or managed by Administrator,
Parent or their Affiliates for which the Group provides professional Radiology
services or any hospital at which on-site professional Radiology services are
then provided by Physician Employee(s) or Physician Extender Employee(s) of the
Group.
"Professional Service Opportunity" shall mean any opportunity to
perform professional Radiology services for any hospital, hospital system or
imaging center under a formal agreement with such entity.
"Radiologist" shall mean and include both radiologists and radiation
oncologists.
"Radiology" shall mean and include diagnostic imaging, interventional
radiology and radiation oncology services.
"Secondary Service Area" shall mean that area which extends five (5)
miles beyond the boundary of any Primary Service Area.
Section 6.7 Survival of Certain Covenants. If this Agreement is
terminated pursuant to
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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 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 6.8 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
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
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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;
(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).
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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.
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.
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Section 9.2 Insurance to be Maintained by Administrator. During the
term of this Agreement, Administrator will provide and maintain (i) as a
Technical Expense, comprehensive professional medical/malpractice liability
insurance for all applicable employees of Administrator and (ii) as a Practice
Expense, comprehensive general liability and property insurance covering the
Practice's premises (including, without limitation, the Premises), personal
property and operations with such limits and coverages as a reasonable business
person under similar circumstances would maintain. All costs, expenses and
liabilities incurred by Administrator in excess of the limits of such policies
identified in subsections (i) and (ii) hereof shall be included in Administrator
Expenses.
Section 9.3 Continuing Liability Insurance Coverage. The Group shall
obtain or require each of its Physician Employees and Physician Extender
Employees to obtain continuing liability insurance coverage under either a "tail
policy" or a "prior acts policy," with the same limits and deductibles as the
insurance coverage provided pursuant to Section 9.1 upon the termination of such
physician's relationship with the Group for any reason, unless such physician
was covered with an occurrence-based policy while employed or retained by the
Group. In the event that the Group, any Physician Employee or Physician Extender
Employees fails to obtain such continuing liability insurance coverage,
Administrator may do so. The cost of such continuing liability insurance
coverage shall be included in Practice Expenses unless such cost is borne by the
Physician Employee.
Section 9.4 Additional Insureds. The Group and Administrator agree to
use their reasonable efforts to have each other named as an additional insured
on the other's respective professional liability insurance programs. The
additional 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.
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(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.
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
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the right, but not the obligation, to cure any Material Administrator Default.
Notwithstanding anything to the contrary in this Agreement, following receipt by
Administrator of the notice of a Material Administrator Default and until such
Material Administrator Default shall be cured, the Group may take such action as
may be reasonably required to cover such Material Administrator Default so as to
maintain for the Group the same level of service as before the Material
Administrator Default, without prejudicing in any way the Group's other rights
and remedies, and may offset all of its costs from the amounts which may
otherwise be due to Administrator under this Agreement.
(c) An independent law firm with nationally recognized expertise in
health care law and acceptable to the parties hereto renders an opinion to the
parties hereto that (i) a material provision of this Agreement is in violation
of applicable law or any court or regulatory agency enters an order finding a
material provision of this Agreement is in violation of applicable law and (ii)
this Agreement can not be amended pursuant to Section 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
34
<PAGE> 40
contrary in this Agreement, following receipt by the Group of the notice of a
Material Group Default, and until such Material Group Default shall be cured,
the Administrator may take such action as may be reasonably required to cover
such Material Group Default so as to maintain for the Administrator the same
level of service at the Premises as before the Material Group Default, without
prejudicing in any way Administrator other rights and remedies, and may offset
all of its costs of cover from amounts which may otherwise due to the Group
under this Agreement.
(b) An independent law firm with nationally recognized expertise in
health care law and acceptable to the parties hereto renders an opinion to the
parties hereto that (i) a material provision of this Agreement is in violation
of applicable law or any court or regulatory agency enters an order finding a
material provision of this Agreement is in violation of applicable law and (ii)
this Agreement can not be amended pursuant to Section 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 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, 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
35
<PAGE> 41
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).
(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
36
<PAGE> 42
the Purchase Closing, Administrator and/or its Affiliates, as the case may be,
shall transfer and assign the Purchase Assets to the Group, and in consideration
therefor, the Group shall (a) pay to Administrator, Parent and/or their
Affiliates an amount in cash or, at the option of the Group (subject to the
conditions set forth below), Parent Common Stock (valued at the fair market
value immediately prior to the Purchase Closing), or some combination of cash
and Parent Common Stock equal to the Purchase Price and (b) assume the Practice
Related Liabilities. Each party shall execute such documents or instruments as
are reasonably necessary, in the opinion of each party and its counsel, to
effect the foregoing transaction. The Group shall, and shall use its best
efforts to cause each shareholder of the Group to, execute such documents or
instruments as may be necessary to cause the Group to assume the Practice
Related Liabilities and to release Administrator, Parent and/or their
Affiliates, as the case may be, from any liability or obligation with respect
thereto. In the event the Group desires to pay all or a portion of the Purchase
Price in shares of Parent Common Stock, such transaction shall be subject to the
satisfaction of each of the following conditions:
(a) The holders of such shares of Parent Common Stock shall transfer to
Administrator, Parent and/or their Affiliates good, valid and marketable title
to the shares of Parent Common Stock, free and clear of all adverse claims,
security interests, liens, claims, proxies, options, stockholders' agreements
and encumbrances (not including any applicable securities restrictions and
lock-up arrangements with the Parent or any underwriter); and
(b) The holders of such shares of Parent Common Stock shall make such
representations and warranties as to title to the stock, absences of security
interests, liens, claims, proxies, options, stockholders' agreements and other
encumbrances and other matters as reasonably requested by Administrator, Parent
and/or their Affiliates.
Section 10.8 Exception to Purchase. Notwithstanding anything contained
herein to the contrary, Administrator, Parent and/or their Affiliates shall not
be obligated to sell the Purchase Assets to the Group as provided in Section
10.6(d)(i) above if the Group is not able to pay the Purchase Price pursuant to
the terms set forth above and assume the Practice Related Liabilities at the
Purchase Closing. In such event, the Group shall surrender the Purchase Assets
to Administrator, Parent and/or their Affiliates as of the Purchase Closing. If
the Practice fails to so surrender the Purchase Assets, Administrator, Parent
and/or their Affiliates may, if permitted by applicable law, without prejudice
to any other remedy which it may have hereunder or otherwise, enter the Premises
and take possession of the Purchase Assets and expel or remove the Group and any
other person who may be occupying the Premises or any part thereof, by force if
necessary, without being liable for prosecution or any claim for damages
therefor.
Section 10.9 Effect Upon Termination. Upon the Termination Date, except
as provided below, this Agreement shall terminate and shall be of no further
force and effect and all further obligations of Administrator, Parent and/or
their Affiliates and the Group under this Agreement shall terminate without
further liability of the Administrator or Parent and/or their Affiliates to the
Group or the Group to the Administrator or Parent and/or their Affiliates
(including, without limitation, any liability for loss of anticipated profits
over the remaining term of this Agreement or from a sale of 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.
37
<PAGE> 43
(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.
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.
38
<PAGE> 44
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.
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 FLORIDA.
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
39
<PAGE> 45
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.
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: McDermott, Will & Emery
One Newport Place
1301 Dove Street, Suite 500
Newport Beach, CA 92660
Fax: (714) 851-9348
Attn: Jonathan F. Atzen, Esq.
40
<PAGE> 46
If to the Group: Radiology Imaging Associates, P.A.
2306 Nebraska Avenue
Fort Pierce, FL 34950
Fax No.: (561) 464-5881
Attn: R.J. Raffa, M.D.
with a copy to: Rogers, Bowers, Dempsey and Paladino
Flagler Center Tower
505 South Flagler Drive, Suite 1330
West Palm Beach, Florida 33401
Fax No.: (561) 655-9480
Attn: Robert D. Rogers, Esq.
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.
41
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have executed this Service
Agreement as of the date first written above.
GROUP:
Radiology Imaging Associates - Basilico,
Gallagher & Raffa, M.D., P.A.
By:
--------------------------------------
Title:
ADMINISTRATOR:
Treasure Coast Imaging Partners, Inc.
By:
--------------------------------------
Title:
PARENT:
American Physician Partners, Inc.
By:
--------------------------------------
Title:
42
<PAGE> 1
FIRST AMENDMENT TO
CREDIT AGREEMENT AND CONSENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT AND CONSENT (this
"AMENDMENT") made and entered into as of May 19, 1998, by and among AMERICAN
PHYSICIAN PARTNERS, INC., a Delaware corporation (the "BORROWER"), GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation for itself, as Lender, and
as Agent for Lenders (the "AGENT"), and the other Lenders signatory from time
to time to the Credit Agreement referred to below (each a "LENDER").
W I T N E S S E T H:
WHEREAS, the Borrower, Lenders and the Agent are parties to a certain
Credit Agreement, dated November 26, 1997 (the "CREDIT AGREEMENT"; capitalized
terms used herein and not otherwise defined herein shall have the meanings
given such terms in the Credit Agreement as amended by this Amendment), whereby
the Lenders have made available certain revolving credit facilities to the
Borrower, subject to the terms, covenants and conditions contained in the
Credit Agreement; and
WHEREAS, the Borrower has requested that the Lenders increase their
Revolving Loan Commitments so that the aggregate Revolving Credit Commitment is
increased to $160,000,000 from the current level of $115,000,000, and that all
of the Lenders consent to amend the Credit Agreement to permit such increase;
and
WHEREAS, certain Lenders have agreed to increase their commitments and
the remaining Lenders have agreed to give their consents to such increase all
upon the terms and conditions specified herein; and
WHEREAS, the Borrower, the Agent and the Lenders have further agreed
to amend the Credit Agreement, as set forth in this Amendment.
NOW THEREFORE, in consideration of the premises and mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT. Effective on the date on
which the Agent shall notify the Borrower that the conditions to the
effectiveness specified in Section 6 hereto have been satisfied, (the
"EFFECTIVE Date"), the Credit Agreement is hereby amended as follows:
(a) By deleting "One Hundred Fifteen Million Dollars
($115,000,000)" where it appears in the second line of the first recital
paragraph of the Credit Agreement and inserting in lieu thereof "One Hundred
Sixty Million Dollars ($160,000,000)";
<PAGE> 2
(b) By deleting the second paragraph (including the chart) of
Section 1.5(a) of the Credit Agreement and inserting in lieu thereof the
following:
The Applicable Revolver Index Margin, Applicable Revolver
LIBOR Margin and the Applicable L/C Margin will be 1.00%, 2.00%
and 2.00% per annum, respectively, as of the Effective Date.
Commencing with the date that the Borrower delivers consolidated
quarterly Financial Statements for the first Fiscal Quarter that
ends at least six (6) months after the Effective Date, the
Applicable Margins will be adjusted (up or down) prospectively on
a quarterly basis based upon the Borrower and its Restricted
Subsidiaries' Total Debt Leverage Ratio for the applicable test
period ended on the last day of such Fiscal Quarter. Adjustments
in Applicable Margins will be determined by reference to the
following grids:
<TABLE>
<CAPTION>
IF TOTAL DEBT LEVEL OF
LEVERAGE RATIO IS: APPLICABLE MARGINS:
----------------- ------------------
<S> <C>
<1.50 Level I
>1.50, but < 2.00 Level II
-
>2.00, but < 2.50 Level III
-
>2.50, but < 3.00 Level IV
-
>3.00 Level V
-
</TABLE>
<TABLE>
<CAPTION>
APPLICABLE MARGINS
------------------
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Applicable Revolver 0.50% 0.75% 1.00% 1.25% 1.50%
Index Margin
Applicable Revolver LIBOR 1.50% 1.75% 2.00% 2.25% 2.50%
Margin
Applicable L/C Margin 1.50% 1.75% 2.00% 2.25% 2.50%
</TABLE>
<PAGE> 3
(c) By deleting the second sentence of Section 6.1(a) of the
Credit Agreement and inserting in lieu thereof the following:
Notwithstanding the foregoing clause (y) of this Section
6.1(a), (1) any Restricted Subsidiary may merge or consolidate with
any other Restricted Subsidiary, (2) any Credit Party or any Permitted
Joint Venture Holding Company may acquire Stock in any Permitted Joint
Venture, subject to the requirements of Section 6.1(b), and (3) any
Credit Party may acquire all or substantially all of the assets or
100% of the Stock of any radiology practice or practice group or
imaging center or other business providing similar services, including
services ancillary to such practice or practice group (provided that
the requirement to acquire all or substantially allof the assets of
any practice or practice group shall not be deemed to require the
acquisition of assets customarily retained by a Managed Practice
following such an acquisition), or of a Person (a "PPM") that owns,
operates or manages such groups or businesses (the "Acquisition
Target") in a transaction that meets each of the following conditions
(each, a "Permitted Acquisition"):
(i) Agent shall receive at least fifteen (15)
days' prior written notice of such proposed Permitted
Acquisition, which notice shall include a reasonably detailed
description of the Acquisition Target and the terms of such
proposed Permitted Acquisition;
(ii) such Permitted Acquisition shall involve an
Acquisition Target operating solely within one or more of the
50 states of the United States of America or the District of
Columbia, shall be consensual, shall have been approved by the
Acquisition Target board of directors or other governing
authority or its authorized legal representative and shall
not, in the case where the Acquisition Target is a PPM,
involve an aggregate consideration (including, without
limitation, but without duplication, cash paid, stock issued
or Indebtedness or liabilities issued or assumed; the "Total
Consideration") in an amount that exceeds $25,000,000;
(iii) the Agent shall have received on or within 10
days following the closing date of any such Permitted
Acquisition: (A)(1) with respect to a Practice Acquisition,
copies of each of the Service Agreements, acquisition or
merger agreements, professional employment and non-competition
agreements and all other agreements executed in connection
with such acquisition, the terms and conditions of which
agreements shall be substantially similar to the terms and
conditions of the Service Agreements, Acquisition
<PAGE> 4
Agreements and other Related Transaction Documents executed in
connection with the Related Transactions (which terms and
conditions shall include, without limitation, the duration of
the Service and Employment Agreements, the termination and
practice repurchase provisions, practice governance provisions
and provisions regarding the assignability as security to the
Agent and which terms and conditions the Borrower shall use
its reasonable best efforts to cause to include limitations on
Managed Practice liabilities), and (2) with respect to other
acquisitions, copies of the acquisition or merger agreements
and all other agreements executed in connection with such
acquisition, and (B) such opinions, certificates, lien search
results and other documents as may be reasonably requested by
Agent;
(iv) at least five (5) Business Days prior to the
closing date of any such proposed Permitted Acquisition for
which the Total Consideration to be paid by the Borrower and
its Restricted Subsidiaries equals or exceeds $3,500,000,
Borrower shall have delivered to Agent, in form and substance
satisfactory to Agent, a certificate of the chief financial
officer of Borrower in the form of Exhibit 6.1(a) to the
effect that: (A) at the time of such Permitted Acquisition and
after giving effect thereto, no Default or Event of Default
will have occurred and be continuing;and (B) on a pro forma
basis Borrower would have been in compliance with the
financial covenants set forth in Annex E as of the most recent
test period for which such covenants were tested, which
covenants shall be calculated (in addition to the assumptions
specified in Annex E) as if: (x) such acquisition and all
other acquisitions closed or to be closed following such test
period and prior to the proposed closing date of the proposed
Permitted Acquisition had occurred at the beginning of such
test period and Borrower had received income attributable to
such Acquisition Target and such other acquired entities based
on the actual performance of such Acquisition Target and such
other acquired entities over such period (adjusted to reflect
the pro forma effect of Borrower's physician compensation
model as appropriate) and had incurred the Indebtedness and
expenses incurred to purchase such Acquisition Target and such
other acquired entity at the beginning of such period and
repaid, retired, disposed of or refinanced any Indebtedness
repaid, retired, disposed of or refinanced or to be repaid,
retired, disposed of or refinanced in such acquisition at the
beginning of such period, and (y) any disposition of Stock or
<PAGE> 5
of all or substantially all of the assets of any Subsidiary or
Permitted Joint Venture by Borrower or any of its Subsidiaries
and any termination of a Service Agreement (which Service
Agreement is not contemporaneously replaced by a Service
Agreement with the same Managed Practice that provides
substantially the same EBITDA to Borrower and its Subsidiaries
as the terminated Service Agreement) that have occurred or are
to occur following such test period and prior to the proposed
closing date of the proposed Permitted Acquisition had
occurred at the beginning of such test period and the Borrower
had not received any EBITDA attributable to such entity
disposed of or to such terminated Service Agreement over such
period and had incurred any Indebtedness or expense incurred
in connection with such disposition or termination at the
beginning of such period and had repaid, retired, disposed of
or refinanced any Indebtedness that was or is to be repaid,
retired or disposed of or refinanced in connection with such
disposition or termination (to the extent that the Borrower
and its Subsidiaries have been, or are to be, released from
all liability with respect thereto) at the beginning of such
period; and
(v) on or prior to the date of such Permitted
Acquisition, Agent shall have received, in form and substance
satisfactory to Agent, such documents and instruments as it
shall require to evidence the joinder of any new Subsidiary,
other than a Permitted Joint Venture, to the Subsidiary
Guaranty and Subsidiary Pledge and Security Agreement and the
perfection of all liens created thereunder (subject, in the
case of an Acquired Permitted Joint Venture, to the provisions
of Subsection 6.1(b)(iv)).
In the case of any proposed Permitted Acquisition under clause (3) of
the immediately preceding sentence where the Borrower's Senior Debt
Leverage Ratio, both before and after giving effect to such
acquisition and the incurrence of any Indebtedness to be incurred in
connection therewith, is greater than or equal to 1.50 to 1.00, in
addition to the requirements set forth in subclauses (i) through (v),
the prior written consent of Requisite Lenders will be required if:
(x) the Total Consideration to be paid in conjunction
with such acquisition equals or exceeds $15,000,000;
or
(y) the Total Consideration to be paid in conjunction
with such acquisition, taken together with the Total
<PAGE> 6
Consideration to be paid in conjunction with all
acquisitions made during the preceding twelve months,
equals or exceeds $50,000,000 (but no such consent
shall be required in the case of any Permitted
Acquisition which involves a Total Consideration of
$3,500,000 or less);
(d) By deleting "One Hundred Fifteen Million Dollars
($115,000,000)" where it appears in the sixth line of the definition of
"Commitments" and inserting in lieu thereof "One Hundred Sixty Million Dollars
($160,000,000)";
(e) By amending the definition of the term "Revolving Credit
Availability" contained in Annex A to the Credit Agreement to read as follows:
"Revolving Credit Availability" shall mean an amount
equal to three (3) times EBITDA of the Borrower and its
Subsidiaries as calculated for the most recently ended twelve
(12) month period for which financial statements are required
to be delivered pursuant to paragraph (a)(i) of Annex D,
provided that EBITDA for purposes of determining the Revolving
Credit Availability will be computed to include, on a pro
forma basis, the EBITDA of the Borrower and its Subsidiaries
attributable to any entity the stock or assets of which were
acquired by the Borrower or any Subsidiary of the Borrower, or
which came under the management of the Borrower or any
Subsidiary of the Borrower, subsequent to the first day of
such twelve (12) month period or are to be acquired with the
proceeds of a Revolving Credit Advance, as if such entity had
been owned and/or managed by the Borrower or such Subsidiary
during such period which computation shall be made for such
period as provided in paragraph (d)(i) of Annex E, and,
provided further that EBITDA for purposes of determining the
Revolving Credit Availability will be computed to exclude the
EBITDA of the Borrower and its Subsidiaries attributable to
any entity 100% of the stock or substantially all of the
assets of which were disposed of by the Borrower or any
Subsidiary of the Borrower or attributable to any Managed
Practice the Service Agreement with respect to which was
terminated and not replaced with a Service Agreement with the
same entity generating substantially the same EBITDA,
subsequent to the first day of such twelve (12) month period.
(f) By deleting "One Hundred Fifteen Million Dollars
($115,000,000)" where it appears in the seventh line of the definition of
"Revolving Loan Commitment" in Annex A to the Credit Agreement and inserting in
lieu thereof "One Hundred Sixty Million Dollars ($160,000,000)";
<PAGE> 7
(g) By deleting the reference to "2.65 to 1.00" contained in the
second column of subsection (a) of Annex E to the Credit Agreement and
substituting in lieu thereof "2.00 to 1.00, unless and until the Borrower
shall have issued at least $100,000,000 in principal amount of Subordinated
Debt in accordance with Section 6.3(a) (iii), whereupon such requirement shall
reduce to 1.75 to 1.00";
(h) By amending subsection (c) of Annex E to the Credit Agreement
to read as follows:
(c) Maximum Senior Debt Leverage Ratio. Each of (i) the
Borrower and its Restricted Subsidiaries and (ii) the Borrower and its
Subsidiaries, on a consolidated basis shall have at the end of each
Fiscal Quarter a Senior Debt Leverage Ratio not in excess of 3.00 to
1.00.; and
(i) By amending the Revolving Loan Commitments of the Lenders and
the Swingline Lenders to read as set forth on the signature pages hereof.
2. CONSENT AND WAIVER. The Agent and the Lenders hereby approve
of and consent to this Amendment and the increases in the Commitments provided
herein.
3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants to the Agent and the Lenders that (a) this Amendment,
the Confirmation of Guaranty attached hereto and each Replacement Note has been
duly authorized, executed and delivered by the Borrower and each Credit Party
signatory thereto, (b) no Default or Event of Default has occurred and is
continuing as of this date, and (c) all of the representations and warranties
made by the Borrower or any Credit Party in the Credit Agreement are true and
correct in all material respects on and as of the date of this Amendment
(except to the extent that any such representations or warranties expressly
referred to a specific prior date).
4. RATIFICATION. The Borrower hereby ratifies and reaffirms each
and every term, covenant and condition set forth in the Credit Agreement and
all other documents delivered by the Borrower in connection therewith
(including without limitation the other Financing Documents to which the
Borrower is a party), effective as of the date hereof.
5. ESTOPPEL. To induce the Agent and the Lenders to enter into
this Amendment, the Borrower hereby acknowledges and agrees that, as of the
date hereof, there exists no right of offset, defense or counterclaim in favor
of the Borrower or any Credit Party as against the Agent or any Lender with
respect to the obligations of the Borrower or such Credit Party to any of such
parties under the Credit Agreement or the other Financing Documents, either
with or without giving effect to this Amendment.
6. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective, upon the Effective Date, subject to the receipt of the following
items, which in the case of documents to be delivered shall be in form and
substance satisfactory to the Agent and the Lenders in their sole discretion:
<PAGE> 8
(a) the Agent shall have received this Amendment, duly executed,
completed and delivered by the Agent, the Lenders and the Borrower and the
attached confirmation of Guaranty, duly executed by each other Credit Party;
(b) the Agent shall have received, for the account of each Lender,
a duly completed and executed Revolving Credit Note for the amount of such
Lender's Revolving Credit Commitment as increased by this Amendment, which Note
shall be in the same form as the Revolving Credit Note previously issued to
such Lender and shall be in replacement thereof (each a "Replacement Note");
(c) the Agent shall have received (i) satisfactory evidence that
the Credit Parties have obtained all required consents and approvals of all
Persons including all requisite Governmental Authorities, to the execution,
delivery and performance of this Amendment, the Confirmation of Guaranty and
the Replacement Notes or (ii) an officer's certificate in form and substance
satisfactory to Agent affirming that no such consents or approvals are
required;
(d) Borrower shall have paid to the Agent for the account of the
Agent and the Lenders the fees required to be paid on the Effective Date in the
respective amounts specified in that certain letter from GE Capital to the
Borrower dated May 8, 1998 setting forth certain fees to be payable to the
Agent and the Lenders in connection with this Amendment;
(e) the Agent shall have received for the Borrower and each of its
Subsidiaries, such Person's (i) charter and all amendments thereto (or evidence
satisfactory to the Agent that there have been no changes to such documents
since the same were delivered to the Agent and the Lenders at the Closing, and
that the same continue in full force and effect), (ii) good standing
certificates (including verification of tax status) in its state of
incorporation and (iii) good standing certificates (including verification of
tax status) and certificates of qualification to conduct business in each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, each dated a recent date prior to the
Effective Date and certified by the applicable Secretary of State or other
authorized Governmental Authority;
(f) the Agent shall have received for Borrower and each of its
Subsidiaries, (i) such Person's bylaws, together with all amendments thereto
(or evidence satisfactory to the Agent that there have been no changes to such
documents since the same were delivered to the Agent and the Lenders at the
Closing), and (ii) resolutions of such Person's Board of Directors (or other
governing body), approving and authorizing the execution, delivery and
performance of this Amendment, the Replacement Notes and/or the Confirmation of
Guaranty attached hereto, to the extent that such Person is a party, each
certified as of the Effective Date by such Person's corporate secretary or an
assistant secretary as being in full force and effect without any modification
or amendment;
(g) the Agent shall have received for Borrower and each of its
Subsidiaries, signature and incumbency certificates of the officers of each
such Person executing this Amendment, any Replacement Note or the Confirmation
of Guaranty and/or any of the other
<PAGE> 9
documents to be delivered in connection herewith, certified as of the Effective
Date by such Person's corporate secretary or an assistant secretary as being
true, accurate, correct and complete;
(h) the Agent shall have received duly executed originals of the
opinion of Haynes and Boone, L.L.P. counsel for Borrower and its Subsidiaries,
together with any local counsel opinions requested by Agent, each in form and
substance satisfactory to the Lenders, dated the Effective Date;
(i) the Agent shall have received duly executed originals of a
certificate of the Chief Executive Officer and Chief Financial Officer of
Borrower, dated the Effective Date, stating that, since December 31, 1997 (i)
no event or condition has occurred or is existing which could reasonably be
expected to have a Material Adverse Effect; (ii) there has been no material
adverse change in the industry in which Borrower operates; (iii) no Litigation
has been commenced which, if successful, would have a Material Adverse Effect
or could challenge any of the transactions contemplated by the Agreement (as
amended by this Amendment) and the other Loan Documents; (iv) there have been
no Restricted Payments made by Borrower or any of its Subsidiaries; and (v)
there has been no material increase in liabilities, liquidated or contingent,
and no material decrease in assets of Borrower or any of its Subsidiaries;
(j) each Lender shall have received (i) prepayment of its portion
of the Revolving Loan to the extent that its share of the outstanding
Revolving Loan on the Effective Date would exceed its Pro Rata Share of the
Revolving Loan as advanced by this Amendment, together with any amounts owing
to such Lender pursuant to Section 1.10(b) of the Credit Agreement and (ii)
each Lender shall have made additional Revolving Credit Advances to the
Borrower (which may be applied to make any repayments required pursuant to
clause (ii) of this paragraph) to the extent necessary to insure its portion of
the Revolving Credit Loan to equal its Pro Rata Share thereof as amended by
this Amendment; and
(k) the Agent shall have received such other certificates,
documents and agreements respecting this Amendment, the Replacement Notes or
the Confirmation of Guaranty or any Credit Party, as Agent may, in its sole
discretion, request.
7. REIMBURSEMENT OF EXPENSES. The Borrower hereby agrees that it
shall reimburse the Agent and the Lenders on demand for all costs and expenses
(including without limitation attorney's fees) incurred by such parties in
connection with the negotiation, documentation and consummation of this
Amendment and the other documents executed in connection herewith and therewith
and the transactions contemplated hereby and thereby.
8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA FOR CONTRACTS TO
BE PERFORMED ENTIRELY WITHIN SAID STATE.
9. SEVERABILITY OF PROVISIONS. Any provision of this Amendment
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to
<PAGE> 10
the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent permitted by Applicable
Law, the Borrower hereby waives any provision of law that renders any provision
hereof prohibited or unenforceable in any respect.
10. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, all of which shall be deemed to constitute but one original and
shall be binding upon all parties, their successors and permitted assigns.
11. ENTIRE AGREEMENT. The Credit Agreement as amended by this
Agreement embodies the entire agreement between the parties hereto relating to
the subject matter hereof and supersedes all prior agreements, representations
and understandings, if any, relating to the subject matter hereof.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed by their respective officers thereunto duly authorized, as of the date
first above written.
AMERICAN PHYSICIAN PARTNERS, INC.
By:
---------------------------------
Name:
-----------------------------
Title:
----------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION,
as Agent and Lender
Revolving Loan Commitment
(including a Swing Line Commitment
of $5,000,000):
$66,000,000 By:
---------------------------------
Title:
------------------------------
<PAGE> 11
BANK ONE, TEXAS, N.A.,
as Lender
Revolving Loan Commitment: By:
$25,000,000 ---------------------------------
Title:
------------------------------
BANQUE PARIBAS,
as Lender
By:
---------------------------------
Title:
------------------------------
Revolving Loan Commitment: By:
$14,500,000 ---------------------------------
Title:
------------------------------
CREDIT LYONNAIS NEW YORK BRANCH,
as Lender
Revolving Loan Commitment: By:---------------------------------
$20,000,000
Title:
------------------------------
TORONTO DOMINION (TEXAS), INC.,
as Lender
Revolving Loan Commitment: By:
$19,500,000 ---------------------------------
Title:
------------------------------
<PAGE> 12
COOPERATIEVE CENTRALE
RAIFFEISEN - BOERENLEENBANK B.A.
"RABOBANK NEDERLAND," NEW YORK
BRANCH,
as Lender
By:
---------------------------------
Title:
------------------------------
Revolving Loan Commitment: By:
$15,000,000 ---------------------------------
Title:
------------------------------
CONFIRMATION OF GUARANTY
Each of the undersigned Guarantors hereby acknowledges, consents and
agrees to the terms of the foregoing First Amendment to Credit Agreement and
Consent and agrees and confirms that its obligations under the Guaranty to
which it is a party will continue in full force and effect and extend to all
Obligations now outstanding or hereafter incurred pursuant to the terms of the
Credit Agreement as amended and modified hereby.
This ___ day of May, 1998.
ADVANCED IMAGING PARTNERS,
INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 13
ADVANCED RADIOLOGY, LLC
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
IDE IMAGING PARTNERS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
M&S IMAGING PARTNERS, L.P.
By: M&S IMAGING PARTNERS, INC.,
as General Partner
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
M&S IMAGING PARTNERS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
MID ROCKLAND IMAGING
PARTNERS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 14
PACIFIC IMAGING PARTNERS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
RADIOLOGY AND NUCLEAR MEDICINE
IMAGING PARTNERS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
TOTAL IMAGING PARTNERS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
VALLEY IMAGING PARTNERS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
M&S IMAGING INVESTMENTS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 15
Location of Execution:
<PAGE> 1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of May 20,
1998 between AMERICAN PHYSICIAN PARTNERS, INC., a Delaware corporation (the
"Company"), and Mark L. Wagar ("Wagar").
In consideration of the mutual covenants and conditions set forth
herein, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Wagar in the capacity of
President and Chief Executive Officer. Wagar accepts such employment and
agrees to perform such services as are customary to such office and as shall
from time to time be assigned to him by the Board of Directors. The Company
and Wagar hereby acknowledge and agree that Wagar shall be required to move to,
and establish his primary residence in, the Dallas, Texas area to perform the
services contemplated by this Agreement.
2. TERM. The employment hereunder shall be for a period of 1 year,
commencing on May 20, 1998 (the "Commencement Date") and shall be automatically
renewed for successive one year periods unless earlier terminated as provided
in Section 5. Wagar's employment will be on a full-time basis requiring the
devotion of such amount of his productive time as is necessary for the
efficient operation of the business of the Company.
3. COMPENSATION AND BENEFITS
3.1 SALARY. For the performance of Wagar's duties hereunder, the
Company shall pay Wagar an annual salary of $350,000, payable (less required
withholdings) no less frequently than twice monthly.
3.2 BONUS. The Company shall also pay Wagar an annual cash bonus
for the first employment year, which bonus shall be payable in a single
installment within 30 days following the end of the employment year for which
it is earned. The annual bonus for the first employment year will be at least
$100,000. During the first employment year the Board of Directors and Wagar
will establish a mutually acceptable bonus plan for the second and subsequent
employment years, which plan (i) will provide Wagar with appropriate incentives
and the opportunity to earn bonus amounts comparable to those available to top
executives officers of similar companies, and (ii) may base the bonus awards on
the amount of earnings per share for the Company as defined by Generally
Accepted Accounting Principals (GAAP).
3.3 STOCK OPTIONS. Upon commencement of Wagar's employment
hereunder, the Company shall grant to Wagar options under the Company's Stock
Option Plan to purchase 500,000 shares of the Company's common stock at an
exercise price of $8.75 per share (which is equal to the closing price of the
Company's Common Stock on May 20, 1998). The options will vest in accordance
with the Company's Stock
1
<PAGE> 2
Option Plan and each option will be exercisable for a period of ten years from
the commencement date. This option shall become exercisable as to one sixtieth
(1.66667%) of the original option shares at the end of each monthly anniversary
of the grant date over a term of five years. Option shares will not vest after
Termination. Wagar shall be considered for participation in plans granting
additional options or stock awards to top executive personnel.
3.4 BENEFITS. Wagar shall be entitled to such medical, disability
and life insurance coverage and such vacation, sick leave and holiday benefits,
if any, and any other benefits as are made available to the Company's top
executive personnel, all in accordance with the Company's benefits program in
effect from time to time.
3.5 REIMBURSEMENT OF EXPENSES. Wagar shall be entitled to be
reimbursed for all reasonable expenses, including but not limited to expenses
for travel, meals and entertainment, incurred by Wagar in connection with and
reasonably related to the furtherance of the Company's business.
3.6 MOVING AND RELOCATION EXPENSES. The Company will reimburse
Wagar for the reasonable out-of-pocket costs incurred by Wagar in connection
with the relocation of his personal property from his primary residence in
Agoura Hills, California ("Primary Residence") to the Dallas, Texas area;
provided, however, that the amount of such moving costs that the Company shall
be obligated to reimburse shall not exceed $25,000. The Company also will
reimburse Wagar up to $50,000 for real estate commissions at customary rates
incurred by Wagar in connection with the sale of his Primary Residence;
provided, however, that Wagar completes his move and establishes a primary
residence in the Dallas, Texas, area on or before July 31, 1998.
3.7 ANNUAL REVIEW. On each anniversary of the Commencement Date,
the Board of Directors will review Wagar's performance and compensation
hereunder (including salary, bonus and stock options and/or other equity
incentives) and will consider whether to increase such compensation, but will
not have authority, as the result of such review, to decrease any portion of
such compensation without the written consent of Wagar.
4. CHANGE OF CONTROL. In the event of a Change of Control of the Company
(as defined below), all options then granted to Wagar which are unvested at the
date of the Change of Control will be immediately vested. In addition,
notwithstanding the provisions of Section 5.2(b), in the event of a termination
of Wagar's employment hereunder by the Company following a Change of Control,
the Company will promptly pay Wagar, in addition to the amounts required under
Section 5.2(a), a lump sum severance amount, payable immediately upon such
termination of employment, equal to two (2) years of salary at the then
current rate, excluding bonus.
2
<PAGE> 3
As used herein, a "Change of Control" of the Company shall be deemed
to have occurred:
(a) Upon the consummation, in one transaction or a series of
related transactions, of the sale or other transfer of voting power (including
voting power exercisable on a contingent or deferred basis as well as
immediately exercisable voting power) representing effective control of the
Company to a person or group of related persons who, on the date of this
Agreement, does not have effective voting control of the Company, whether such
sale or transfer results from a tender offer or otherwise; or
(b) Upon the consummation of a merger or consolidation in which
the Company is a constituent corporation and in which the Company's
shareholders immediately prior thereto will beneficially own, immediately
thereafter, securities of the Company or any surviving or new corporation
resulting therefrom having less than a majority of the voting power of the
Company or any such surviving or new corporation; or
(c) Upon the consummation of a sale, lease, exchange or other
transfer or disposition by the Company of all or substantially all its assets
to any person or group or related persons:
5. TERMINATION
5.1 TERMINATION EVENTS. The employment hereunder will terminate
upon the occurrence of any of the following events:
(a) Wagar dies;
(b) the Company, by written notice to Wagar or his
personal representative, discharges Wagar due to the inability to perform the
duties assigned to him hereunder for a continuous period exceeding 120 days by
reason of injury, physical or mental illness or other disability, which
condition has been certified by a physician; provided, however, that prior to
discharging Wagar due to such disability, the Company shall give a written
statement of findings to Wagar or his personal representative setting forth
specifically the nature of the disability and the resulting performance
failures, and Wagar shall have a period of ten (10) days thereafter to respond
in writing to the Board of Directors' findings:
(c) Wagar is discharged by the Board of Directors of the
Company for cause. As used in this Agreement, the term "cause" shall mean:
(i) Wagar's conviction of (or pleading guilty or
nolo contendere to) a felony or any misdemeanor involving dishonesty or moral
turpitude; provided, however, that prior to discharging Wagar for cause, the
Company shall give a written statement of findings to Wagar setting forth
specifically the grounds on which cause is based, and Wagar shall have a period
of ten (10) days thereafter to respond in writing to the Board of Directors'
findings;
3
<PAGE> 4
(ii) the willful and continued failure of Wagar to
substantially perform his duties with the Company (other than any such failure
resulting from illness or disability) after a written demand for substantial
performance is requested by the Company's Board of Directors, which
specifically identifies the manner in which it is claimed Wagar has not
substantially performed his duties, or (b) Wagar is willfully engaged in
misconduct which has, or can reasonably be expected to have, a direct and
material adverse monetary effect on the Company. For purposes of this Section
no act or failure to act on Wagar's part shall be considered "willful" if done,
or omitted to be done, by Wagar in good faith and with reasonable belief that
Wagar's action or omission was in the best interest of the Company. No
termination shall be effected for Cause unless Wagar has been provided with
specific information as to the acts or omissions which form the basis of the
allegation of Cause, and Wagar has had an opportunity to be heard, with counsel
if he so desired, before the Board of Directors and such Board determines, by
majority vote, in good faith that Wagar was guilty of conduct constituting
"Cause" as herein defined, specifying the particulars thereof in detail.
(d) Wagar is discharged by the Board of Directors of the
Company without cause, which the Company may do at any time, with at least 30
days advance written notice; or
(e) Wagar voluntarily terminates his employment due to
either (i) a default by the Company in the performance of any of its
obligations hereunder, or (ii) an Adverse Change in Duties (as defined below),
which default or Adverse Change in Duties remains unremedied by the Company for
a period of ten days following its receipt of written notice thereof from
Wagar; or
(f) Wagar voluntarily terminates his employment for any
reason other than the Company's' default or an Adverse Change in Duties, which
Wagar may do at any time with at least 30 days advance notice.
As used herein, "Adverse Change in Duties" means an action or series
of actions taken by the Company, without Wagar's prior written consent, which
results in:
(1) A change in Wagar's reporting responsibilities, titles, job
responsibilities or offices which results in a material diminution of his
status, control or authority; or
(2) The assignment to Wagar of any positions, duties or
responsibilities which are materially inconsistent with Wagar's positions,
duties and responsibilities or status with the Company; or
(3) A requirement by the Company that Wagar be based or perform
his duties anywhere other than (i) at the Company's corporate office location
on the date of this Agreement, or (ii) if the Company's corporate office
location is moved after the date of this Agreement, at a new location that is
no more than 60 miles from such prior location; or
4
<PAGE> 5
(4) A failure by the Company to provide for Wagar's participation
in any current or future benefits or plans at a level or to an extent
commensurate with that of other top executives of the Company.
5.2 EFFECTS OF TERMINATION
(a) Upon termination of Wagar's employment hereunder for
any reason, the Company will promptly pay Wagar all compensation owed to Wagar
and unpaid through the date of termination (including, without limitation,
salary and employee expenses reimbursements).
(b) In addition, if the employment is terminated under
Sections 5.1(b), (d) or (e), the Company shall also pay Wagar, immediately upon
such termination of employment, a lump sum severance amount equal to one-half
of the then applicable annual salary, excluding bonus. Wagar shall be entitled
to receive up to an additional six months of his then applicable salary,
excluding bonus, if he is unable to secure a position with (i) reasonably
equivalent duties and (ii) a cash compensation package substantially similar to
his base salary at the time of termination (an "Equivalent Position");
provided, however, that payments pursuant to this sentence would be paid
monthly and only until such time as Wagar secured an Equivalent Position.
(c) Upon termination of Wagar's employment hereunder for
any reason, Wagar agrees that for the one year period following the Termination
Event:
(i) Wagar will not directly or indirectly,
whether as an individual, employee, director, consultant or advisor, or in any
other capacity whatsoever, provide services to any person, firm, corporation or
other business enterprise which is involved in the acquisition or management of
radiology physician practices or other service company that directly provides
management services in the area of radiology, unless he obtains the prior
written consent of the Board of Directors.
(ii) Wagar will not directly or indirectly
encourage or solicit, or attempt to encourage or solicit, any individual to
leave the Company's employ for any reason or interfere in any other manner with
the employment relationships at the time existing between the Company and its
current or prospective employees.
(iii) Wagar will not induce or attempt to induce
any provider, payor, customer, supplier, distributor, licensee or other
business relation of the Company to cease doing business with the Company or in
any way interfere with the existing business relationship between any such
customer, supplier, distributor, licensee or other business relation and the
Company.
Wagar acknowledges that monetary damages may not be sufficient to
compensate the Company for any economic loss which may be incurred by reason of
breach of the foregoing restrictive covenants. Accordingly, in the event of
any such breach, the Company shall, in addition to any remedies available to
the Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding Wagar from continuing to engage in such breach.
5
<PAGE> 6
If any restriction set forth in this paragraph is held to be
unreasonable, then Wagar and the Company agree, and hereby submit, to the
reduction and limitation of such prohibition to such area or period as shall be
deemed reasonable.
6. GENERAL PROVISIONS
6.1 ASSIGNMENT. Neither party may assign or delegate any of his
or its rights or obligations under this Agreement without the prior written
consent of the other party.
6.2 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes any and all prior agreements between the parties relating to such
subject matter.
6.3 MODIFICATIONS. This Agreement may be changed or modified only
by an agreement in writing signed by both parties hereto.
6.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Company and its
successors and permitted assigns and Wagar and Wagar's legal representatives,
heirs, legatees, distributees, assigns and transferees by operation of law,
whether or not any such person shall have become a party to this Agreement and
have agreed in writing to join and be bound by the terms and conditions hereof.
6.5 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas.
6.6 SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect.
6.7 FURTHER ASSURANCES. The parties will execute such further
instruments and take such further actions as may be reasonably necessary to
carry out the intent of this Agreement.
6.8 NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed received by the
recipient when delivered personally or, if mailed, five (5) days after the date
of deposit in the United States mail, certified or registered, postage prepaid
and addressed, in the case of the Company, to 2301 NationsBank Plaza, 901 Main
Street, Dallas, Texas 75202, and in the case of Wagar, to the address shown for
Wagar on the signature page hereof, or to such other address as either party
may later specify by at least ten (10) days advance written notice delivered to
the other party in accordance herewith.
6.9 NO WAIVER. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver of that
provision, nor prevent that party thereafter from enforcing that provision of
any other provision of this Agreement.
6
<PAGE> 7
6.10 LEGAL FEES AND EXPENSES. In the event of any disputes under
this Agreement, each party shall be responsible for their own legal fees and
expenses which it may incur in resolving such dispute, unless otherwise
prohibited by applicable law or a court of competent jurisdiction.
6.11 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
7
<PAGE> 8
IN WITNESS WHEREOF, the Company and Wagar have executed this Agreement,
effective as of the day and year first above written.
COMPANY WAGAR
AMERICAN PHYSICIAN PARTNERS, INC.,
a Delaware corporation
By: By:
------------------------- -------------------------
Lawrence Muroff, M.D. Mark L. Wagar
Chairman of the Board 6110 Heritage Drive
Agoura Hills, CA 91301
8
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------ ------ ------ ------
BASIC
- ------
<S> <C> <C> <C> <C>
Net income (loss) 3,391 (819) 6,464 (1,699)
Weighted average shares outstanding 18,744 2,000 18,401 2,000
Net income (loss) per share $ 0.18 $(0.41) $ 0.35 $(0.85)
DILUTED
- ------
Net income (loss) 3,391 (819) 6,464 (1,699)
Weighted average shares outstanding 18,744 2,000 18,401 2,000
Weighted average common stock equivalents 705 0 747 0
------ ------ ------ ------
Total shares outstanding 19,449 2,000 19,148 2,000
Net income (loss) per share $ 0.17 $(0.41) $ 0.34 $(0.85)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,125
<SECURITIES> 0
<RECEIVABLES> 97,325
<ALLOWANCES> (66,224)
<INVENTORY> 0
<CURRENT-ASSETS> 36,069
<PP&E> 103,474
<DEPRECIATION> (71,890)
<TOTAL-ASSETS> 122,251
<CURRENT-LIABILITIES> 24,599
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> (2,482)
<TOTAL-LIABILITY-AND-EQUITY> 122,251
<SALES> 0
<TOTAL-REVENUES> 63,272
<CGS> 0
<TOTAL-COSTS> 50,616
<OTHER-EXPENSES> (1,024)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,088
<INCOME-PRETAX> 10,592
<INCOME-TAX> 4,128
<INCOME-CONTINUING> 6,464
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,464
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.34
</TABLE>
